Podcast - Alejandro Cremades: Recent Episodes
Alejandro Cremades
David Dorfman’s path to entrepreneurship often begins with a simple observation: something is broken, inefficient, or unnecessarily difficult. His first company is YAPI, a dental software platform and the second is Blue Navy Recovery.
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When Simon Bushell reflects on his journey, it doesn’t start in a boardroom or a lab—it starts outdoors. That early exposure to nature quietly shaped a worldview and a deep conviction that climate change is the most important problem humanity needs to solve.
Yoav Regev’s entrepreneurial path began with 25 years in the military and culminated in the founding of a category-defining cybersecurity company, Sentra. Today, he stands at the crux of resilience, people, and an obsession with solving one of the most basic problems in technology: securing data.
From sleeping on a closet floor in San Francisco to betting his company on a $1M GPU commitment with only $400K in the bank, Isaiah’s journey traces the path of hiring non-traditional talent, adapting to unfavorable capital markets, and operating with urgency when the odds are stacked against you.
Ali Agha is among the rare founders who have bridged the gap between the fascinating world of theoretical robotics and reliable, real-world applications. He has overcome the challenges in the promising field of robotics, which, up until now, has only been impressive in controlled spaces.
Frank Rotman’s journey is one of rare breadth—spanning early artificial intelligence (AI) research, hypergrowth fintech operations, venture investing at scale, and now a return to building from the ground up.
Instead of relying on institutional capital, he bootstrapped his way to building Spendbase into a $40M+ revenue business, guided by a simple but powerful principle: build products that deliver real value, and customers will sell them for you.
Michael Mandel’s entrepreneurial path began inside one of the most relationship-driven and data-fragmented industries in the world: commercial real estate.
What does it really take to move from building a company to backing the next generation of founders? For Bilal Baloch, the journey isn’t just a shift in role—it’s a complete rewiring of perspective.From growing up in immigrant communities in East London to building and exiting a company, and now investing out of Abu Dhabi in some of the most ambitious AI startups globally, Bilal’s story is a masterclass in pattern recognition, discipline, and understanding how the world truly works.
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Steven Galanis, co-founder of Cameo, epitomizes the entrepreneurial spirit. His story, steeped in family tradition, innovation, and grit, is a fascinating tale of navigating life’s twists and turns to build a hyper-growth company in the talent world.
Steven’s latest venture, Cameo, has attracted funding from top-tier investors like Valor Equity Partners, Kleiner Perkins, Morgan Stanley, and Amazon Alexa Fund.
In this episode, you will learn:
- Steven’s upbringing in a business-oriented Greek-American family instilled a strong foundation in entrepreneurship, resilience, and the value of steady progress.
- Leveraging early adoption of Facebook and organizing events at Duke University honed Steven’s skills in networking and branding, which became pivotal in building Cameo.
- A successful stint as an options trader and film financier laid the groundwork for Steven’s pivot into tech and entertainment.
- The idea for personalized celebrity video messages democratized fan interactions, creating a scalable marketplace with a powerful emotional connection.
- Early challenges, including co-founder exits and initial backlash, tested Steven’s resolve but reinforced the importance of perseverance in entrepreneurship.
- Support from mentors like Mike Gamson and connections with investors like Lightspeed Ventures played a crucial role in scaling Cameo.
- Steven emphasizes hiring based on potential and fostering innovation, rather than solely relying on resumes, to cultivate a dynamic team.
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Your email address is 100% safe from spam!**About Steven Galanis:**Steven Galanis is the CEO of Cameo, the world’s leading marketplace for personalized video shoutouts. He launched the company in 2016 with co-founders Martin Blencowe & Devon Townsend after seeing a personalized video message taped by a prominent NFL player congratulating a friend on the birth of his son.
To date, the company has sold over 2,700,000 Cameos and has seen over 45,00 athletes, actors, and influencers join the platform. Steven was named to Chicago Inno’s 2018 “50 on Fire” list.
Steven is a LinkedIn alum who previously worked as a trader on the floor of the Chicago Board Options Exchange. He was the founder of two film investment companies where he produced movies featuring stars such as Bruce Willis and Robert De Niro.
Outside of work, he is an avid Chicago sports fan and serves on the Board of Directors for Habitat for Humanity Chicago. Steven is a 2010 graduate of Duke University, majoring in History.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty. Hello, everyone, and welcome to the Deal Maker Show. So today we have one of those incredible founders. you know I have a huge amount of admiration and respect for what they’ve done, and also for his journey, too. I mean, it’s really remarkable. you know It’s ah a company that has paved the way you know in the talent world you know segment. They’re our first mover. I mean, they have everything you know that you can dream of know when when being an entrepreneur and and quite an inspiration conversation that we’re going to be having. We’re going to be talking about the founding story of the company, you know the different rounds that they did, some of the crazy stories that they encountered with investors, and then also the ups and downs, you know which are involved in ah essentially you know being an entrepreneur and running a hyper growth company. So building, scaling, financing, you name it. and So all in between. So without further ado, let’s welcome our guest today, Steven Galanis. Welcome to the show.
Steven Galanis: Thanks for having me.
Alejandro Cremades: So originally born and raised in the Chicago area. Give us a walk through memory lane. How was life growing up for you?
Steven Galanis: ah Life was amazing. I grew up in Glenview, which is just north of of Chicago. Had a really active childhood, played every sport you could think of, and you know ended up playing hockey, baseball, and and football through high school and hockey in college.
Steven Galanis: um you know, was involved with everything you can imagine, student council, you know, president. I was a debater, you know, like high school and middle school and elementary school were all just absolutely amazing times. One of the, you know, things that really shaped me is is kind of my background and and heritage. My family is Greek. And unlike a lot of Greeks in Chicago, I’ve i’ve kind of I have a dad who came over you know when he was really young. So he came over at four years old to Chicago. But on my mom’s side, our family’s actually been in the US s since the 1890s. So I’m third generation, which is you know very like old for the Greek families here. But that culture ah certainly shaped me. And especially my mom’s side of the family, who are all entrepreneurs and actually all really worked in a space that I think when when I tell a full story, you’ll understand that this is the third generation that my family has been using the camera to make money. ah my My grandfather, my dad, my mom’s dad, Spiro, who was the person I was probably closest to in the world for until he passed was
Steven Galanis: was an only child. And when World War II happened, he didn’t get drafted because he was the last of his family name. So at 18, he ended up going into a factory where he learned how to use photography and x-rays to make sure that the planes that were going overseas were structurally sound. He then took that knowledge and started a wedding studio that is probably still the oldest in Chicago today. It’s been around since 1945. One of my mom’s brothers runs that studio today. But just, you know, being around an entrepreneur like that, you know, at the dinner table, the Wall Street Journal is on the table, CNBC is on the background. and
Steven Galanis: you know, you’re talking shop and you’re talking about the wedding that went another place and that competition and ah competitiveness and the all-in on entrepreneurship. And I learned that, you know, from the earliest ages sitting at the table at at my Yayam Bopu’s house. On my dad’s side, he was the complete opposite. He is an accountant, you know, very steady eddy type of guy, but his story is super inspiring to me. and He came over when he was four at the age 18. His parents wanted him to move back to Sparta. Like I’m a hundred percent Spartan. And my parents wanted ah his parents wanted him to move back to Sparta because he was now a US citizenship and he could go back to the village and get a big dowry. Like they probably would have given. you know his parents a bunch of goats and lambs and and fig trees. um So at 18, my dad decided to stay in the US by himself because he’s like, I have a second grade education in Greece and and he assimilated and and he worked his way up from
Steven Galanis: cutting fries at one of the first McDonald’s to paying his way through college, $91 a quarter back then in 1968, you nineteen sixty eight and um ended up becoming, you know ran finance at a multi-billion dollar company, and and just is such a inspiration to me. And you know while he wasn’t an entrepreneur, he just you know really showed me like the value of kind of compound interest and and improving over time and just being like rock solid steady.
Alejandro Cremades: That’s incredible. Now, in your case, you ended up going to Duke.
Steven Galanis: Yeah.
Alejandro Cremades: And not only that, you ended up being the guy that anyone you know wanted to know when it came to the nightlife. So how did that come about?
Steven Galanis: I think part of it is the timing. So my senior year of high school was right at the beginning of of Facebook, basically. so at that point, you could only be on Facebook if you had it a dot .edu email address. And I remember how crazy this was because, you know, like that first fall break, Facebook had come back and a lot of my friends who were a year older, two years older were coming back and they’re all talking about how awesome Facebook was.
Steven Galanis: So at that point people literally used to apply to certain schools that let you in earlier just so you could like put a deposit down and get an email address and get on Facebook. So I remember like literally putting my deposit down for U of I ah even though I never had an intention of going there just to get a .edu email address to get on Facebook. Now the upshot of that is because I had Facebook starting senior year of high school, every single person I knew from high school and from college, like I got connected with. right So at that point, you know you’d meet someone, you’d you know you’d friend them on Facebook, you’d develop this relationship. And I ended up building this really big network ah early. And because I was the first class to have Facebook like all four years of college, it really was my senior year. And then and then coming in,
Steven Galanis: ah it It just allowed me to do things differently than people even two years older, three years older would have ever done. And it it was a moment in time for those four years where it it continued to just be a network for people that had either graduated college or were in college. So at that point, what we did was we created a Facebook group. Me and and my co-founder, Zach Maridis, who was a senior when I was a freshman, We started a group where we started, it was a Facebook group where we would ah basically throw different events. So it started with one night we went to the big bar on campus. On a night they’re usually closed and said, hey, can we do a drink special here and and we’ll we’ll start throwing beer pong tournaments. And then that blew up. and
Steven Galanis: To this day, if you go to Duke, Wednesday Night Beer Pong is still probably the best thing that happens on campus. But over the years, we ended up aggregating 17,000 college students from Duke, UNC, NC State, Elon, all the surrounding schools in the in the triangle area. And we were throwing you know over a dozen events a week on a recurring basis in all these different campuses. and And once we built that network up, we people trusted us, right? They knew that Spartan Entertainment, our business, it stood for value. it So on top of that, we had a college box moving business. um So at the end of the semester, we would hire a bunch of hockey, football, and wrestlers to come
Steven Galanis: grab your boxes we’d store them for you and when you came back to North Carolina we’d bring them back we had a t-shirt printing company we had a hot dog stand at one point we were even you know looking to start our our own college music festival so it it was an amazing ride and and again that was like one of the first times where I really you know It was very clear to me that aggregating ah these networks and building different businesses on it could be really, really valuable. So I kind of learned about network effect through that, and I learned about the power of social.
Alejandro Cremades: So then in terms of, um you know for you then, you know it was about the the the financial crisis. I mean, it was not a good time to to go out and and secure a job.
Steven Galanis: Yeah.
Alejandro Cremades: So you ended up going back to Chicago. ah You went there, you know you were back home, and eventually you become an option straighter. But But I wonder, you know like how do you eventually get involved with the entertainment world? Because you were doing that on the side, which you know seems to be a complete different direction from maybe like the financial you know ah services you know space that you were you know um going towards.
Steven Galanis: Totally. and Again, this this goes back to my grandfather as well. I mentioned my grandfather was a you know was a ah photographer, but what he really, really loved was the stock market. like He was a broker. he you know He had one of those early handheld computers when nobody had it, like like in the early 90s, watching his tickers every day. and And his son, like he has two sons, so my mom’s the oldest and then he had two sons. One of the sons, Peter, went to take over the family business on photography side. The other son, George, ended up moving out to L.A. after going to USC, and he got into film financing. So he was always on the movie side, but always on the financing side of the movies, and he’s produced
Steven Galanis: ah hundreds of movies, including Rambo, Conan, Lone Survivor, The Irishman, you know, just among lu those are just some of the ones that ah you would know, but you know, ah yeah probably dozens of movies that you’ve seen before. And um I remember when I was ah I was kind of my second or third year in trading, and trading is a very hierarchical business, and I was an open outcry market maker. So when you picture the movie Trading Spaces, and you see the floor of the New York Stock Exchange, the guys with the jackets making the hand signs, like that’s what I was doing.
Steven Galanis: And when you’re young, you’re you’re trying to establish yourself because there’s guys that have been in there, you know, 20, 30 years and and they get all the seniority and the tie will always go to them. but So I was always just trying to way to make make a name for myself down there. And my uncle had a movie called Lone Survivor that came out I think in 2013. And What I ended up doing was renting a movie theater out and inviting all the other guys that traded in the pit with me to do like a mini premiere, like a fake movie premiere for my uncle’s movie. It was during that time where a bunch of the guys that I invited were like, Steven, this is awesome. Why are you here in Chicago trading with us? Why aren’t you in l LA producing movies with your uncle? So I did what any like enterprising, I don’t know, 24 year old at the time would do.
Steven Galanis: I started raising money from those guys to invest alongside my uncle in different movies and television shows. it It was through that that I met my co-founder, Martin Blenko, who had been doing production with my uncle before. And my uncle was like, hey, you guys are both young. I think you guys both bring a lot of capital registry skill sets. And and you know that’s how we started doing business together.
Alejandro Cremades: So it sounds like the entertainment you know side of things was really appealing and really exciting to you. So why didn’t you go like double down on that? and And what happened for you to all of a sudden switch from options to like being at LinkedIn? I mean, that’s quite the the the turnaround of events.
Steven Galanis: Yeah, well, at that time, like options trading, there’s a lot of great things about it. ah But I’ll tell you the biggest thing that I noticed. I remember walking onto the floor of the CVOE, the Chicago Board Options Exchange, for the first time. And this is a trading pit where over 40,000 people used to go to work every day. And I remember walking in as a 21-year-old.
Steven Galanis: And it looked like at the dinosaur graveyard from land before time. ah These trading pits were empty. The monitors were ripped off the screen. Pits where hundreds or thousands of people used to stand suddenly were completely empty. And it had been because of the impact of technology. So I i actually literally remember as a 21 year old,
Steven Galanis: Having the very weird thought in my head that I wanted to be the last great open outcry market maker in Chicago like nobody listen your podcast says says I’m gonna be the last great tech entrepreneur and That’s because when you get to treat when I got to trading at least in that era All the guys that were there, they were talking about how good it used to be, right? Hey, you missed the flash crash. You missed O8. You missed the O1 bubble. you know You should have been here in the 90s. Everybody had the stories about how it was, and you know it was it was very clear that while options trading is still a massive industry, that particular part of it was a dying industry, and we were kind of last of breed.
Steven Galanis: and um You know, very fortunately for me, because I was young, because I had, you know, I had shown an aptitude, especially in social networking, and I had a lot of closer relationships from college, I was able to transfer into tech when LinkedIn wanted to create a team that sold this new enterprise sales product, Sales Navigator, into FINRA and SEC regulated industries. So what they wanted to do, they they were specifically looking for people in finance, that they could bring in their training program and and and teach him teach them how to sell. And and I got recruited to that program by a guy named Arthur Leopold who ah ended up being, um he was he was my little, little brother in my fraternity in college at Duke. And after recruiting me to LinkedIn, when I had the idea for Cameo, he was one of the first investors and then you know joined about eight months later as our founding first employee and COO and eventually became the president of the company.
Alejandro Cremades: so then So then how that does all transition into Cameo, into really pushing Cameo, you know getting going with Cameo? I mean, how was that the founding story like?
Steven Galanis: Yeah. Yeah, so I go back to my grandparents again. My my grandfather died like maybe my sophomore year of of high school. My grandmother was still alive. In 2016, we were celebrating her 89th birthday or 90th birthday. and And then, you know,
Steven Galanis: Everybody’s there was a great birthday party and then like a week later her caretaker was walking and was closing the door and she ended up falling cracking her head and and ended up passing away um and it was at my grandmother’s funeral actually that we had our the idea that would would become cameo kind of the last place in the world ah you would expect to have your big idea and As a backstory my uncle his business partner and Martin my co-founder flew in from l LA for the day that for the funeral And I’d gotten really busy when I was at LinkedIn and my film production stuff just kind of waned off. And Martin, who I’d been doing it with, at that same time decided to become an NFL agent and get certified. And his whole idea was if I could sign a big NFL player with a personality and a cool look, maybe I could find the next Rambo or Conan the Barbarian and and basically sign as a football player, the next rocker, Jason Momoa, and turn him into like an A-list action star.
Steven Galanis: So that was his idea. He signed one guy. His name was Cassius Marsh. Cassius was a backup defensive end on the Seattle Seahawks. But he’s you know he’s got a great look. He’s all tatted up. He’s like like stone jaw. he He literally looks like ah an action hero.
Steven Galanis: And to Martin’s surprise, like despite this guy having a big personality, he just couldn’t get him any type of off-field income. And as an agent, that’s where you make your money. You make your money from getting them endorsement deals. So he was really frustrated by this. um And just to get some time with him, I i agreed to like drive him from the funeral home.
Steven Galanis: to the hotel. He was staying at Trump Tower and then driving back. And if you know Chicago traffic at all, going downtown to O’Hare and back, like that is that is a long time in the car. And while we were in the car, we we really Martin was telling me about this problem and he pulled out his phone and he showed me a video of Cassius Marsh congratulating ah this executive at Nike on becoming a father for the first time. This guy loved the Seattle Seahawks.
Steven Galanis: And this is a player on the Seahawks. And he was congratulating him on becoming a dad. And he shows me this video. And I’m just like, right away, that Eureka moment went off. And I’m like, Martin, we should sell this. And that was kind of the beginning of the idea that would become cameo.
Alejandro Cremades: So I guess for the people that are listening to get it what ended up being the business model cameo. How do you guys make money.
Steven Galanis: Yeah, so on Cameo, we are a marketplace. um we The supply side of our marketplace are famous people. So think athletes, actors, creators, pop culture personalities. Each one of them has a price upon which they will make a video for you. The videos can be any length. It’s not about that. But basically, as a consumer, you have 400 characters you can write in, you select the price that the talent says, the talent have seven days or less to do the video in, and and ah you know they make 70%, we make 30%.
Alejandro Cremades: So I guess the um you know for this too I mean you guys didn’t have the the best lunch. It was saying a little bit disaster you know um involved in the in the lunch. So what happened there.
Steven Galanis: Well, yeah, it was a disaster. So first off, I dropped Martin off at O’Hare after we have the idea. He calls me up immediately after he gets through security. He’s like, you got to get on the next flight to LA. So I took the first flight the next morning to l LA. He comes, picks me up from the airport. We go to Soho House in Santa Monica, and we just start you know we just start like ripping picantes as margaritas that they have.
Steven Galanis: and While at this lunch we have the idea that would become cameo like we really start formalizing it And we wanted to do is to create the marketplace for people’s time for X amount of money You should be able to pay to do Y activity with Z athlete and at the time we were just thinking about athletes um You know, we felt like if we wanted our favorite football player to come to lunch with us like we should be able to do that or if I want to FaceTime them or I want to call them or I want to buy their merch like there should be a place where you could do all of those things. ah The personalized video message was one of the many why activities, but ultimately we decided to focus on that first because we felt like it was requiring the least out of them. You weren’t making them move. It could be asynchronous. Like there were just a lot of, you’re on their phone, you’re not on their agent’s phone or your manager’s phone. So there’s a lot of reasons we picked that. And the other thing too is like every time we kept showing people these videos, they’d be like, whoa, like that’s so cool.
Steven Galanis: So we started dreaming up this marketplace. And you know for any marketplace founders listening, you guys will totally ah you know empathize with the chicken and the egg that happens every every entrepreneur that’s trying to build a marketplace. You got the supply side and and the demand side. I remember going around telling people about the idea that it would become Cameo. and And they’d be like, so what’s your business? I’m like, wouldn’t it be cool if Michael Jordan could wish you a happy birthday and a video message like, Oh my God, that’d be awesome. How much is he? Well, we don’t have it. Well, who do you have? We don’t have anybody yet. But like, that’s what we’re going to build. And then on the, when we’re talking about the talent, you know, they’re like, who’s on this and nobody’s on it. How, who’s made money and nobody’s made any money. So it just, you have this chicken in the egg. And very fortunately, Martin and I were able to use our personal networks to like, get a couple of people to say yes before that.
Steven Galanis: Now that said, Martin and I are both non-technical, right? So we have we have no ability. We’re just two guys with an idea. And I ended up calling upon Devin, who was a classmate of mine a duke at Duke and a brilliant engineer. He had been at Microsoft. But most interestingly for Devin was he was one of the original stars on Vine. So he had over a billion loops on Vine. His roommate Cody Ko, another one of my classmates from Duke, ended up having four billion loops on Vine. So these guys were like really, really famous, but they never were able to make money from it because there was no monetization on Vine at that time.
Steven Galanis: And, um, one of the striking memories I have in this period was I remember going to Las Vegas with, uh, Devin, uh, Cody, our friend, Adam Q and, and myself, and we were at the Mayweather Pacquiao fight. And I remember Cody code took a picture of us and posted on Instagram. And at this point, I didn’t know to turn my notifications off for all the things that happen now. And my phone, which was fully charged, overheated and died in my pocket because there were so there was such a high velocity of likes, comments on this picture I was tagged in that my phone literally like it was a big night out in Vegas. My phone died in my pocket.
Steven Galanis: And that was a moment where I’m like, whoa, there’s something if interesting and different about creators. And Devon was really, really motivated at this point to to kind of build this this marketplace. So as we think forward to you know kind of the MVP,
Steven Galanis: You know, Devin builds a simple website. Martin gets Cassius Marsh, the first talent to join. When we launched Cameo, it was with one person, Cassius Marsh. And we always had the idea that in our marketplace, supply was more important to aggregate first because the supply are famous. They have hundreds of thousands of millions of followers on TikTok, on Instagram, on Twitter, and they could turn their followers into our customers for free. So that was always our belief. So I’ll never forget. It was like May 17th, 2017.
Steven Galanis: I’m in Scottsdale, Arizona, trying to close the second person on Cameo, a guy that ah went to my rival high school that was playing for the Cleveland Indians at the time. I literally had dinner with him during launch night. Devon, Martin, and Cassius are in Devon’s apartment in Venice, California. I’m at a steakhouse in in Scottsdale, Arizona. I have Google Analytics up on the table, you know, kind of like I’m still having the conversation, but I had it up so I could see what was going on.
Steven Galanis: And there were two dots. There was one in Scottsdale, one in Venice Beach. Cassius sends the tweet out with that video, the first one that gave us the idea. And he’s like, hey, fans, like I’ll make one of these for you for 20 bucks. He sends that video out. And you know he’s got 100,000 followers at the time. And we’re just expecting all the people to come to the site and to just get going. And crickets, nobody came to the site.
Steven Galanis: It was so bad that we’re texting each other on the side and we’re like, I think Google Analytics might be broken. So I’m like, how about this guys? I’ll sign off and then tell me if the doc goes away. And then if I sign back on, so I sign off the dot and Scottsdale goes away. I go back on the dot and Scottsdale comes back and it’s like, no, no, no, it’s not broken. Nobody’s coming to the site.
Steven Galanis: And on top of that, a bunch of trolls started talking shit to Cassius Marsh. You’re a professional football player. You make a million dollars a year. Why are you charging 20 bucks for your fans? Like this should be free. Like shame on you. So all these people start kind of like trolling them online. Cassius gets like frustrated. He’s like, fuck this. I’m out. And by the way, he put the first $25,000 into the company. So now we just lost our first investor. We lost our first talent.
Steven Galanis: Martin, my co-founder, was his agent. So now he’s got this problem on his hands where he’s like, did I just lose my only client money? So he basically is like, fuck you guys, he’s out. So now I’m down a co-founder. I’m down the only talent I have. I’m done with my only investor. And Devin and I are sitting there and being like, well, you know, I guess maybe we should I should have left my job elected before we do that. There was demand for it.
Steven Galanis: ah So we’re we’re kind of texting and by the way, I’m in the middle of pitching this guy at dinner while this is going on. So I couldn’t have felt lower, but I’ve got project to project like confidence and and show the vision that that I had conviction would be would work.
Steven Galanis: and And all of a sudden, a dot popped up in Renton, Washington, which is up near Seattle. And this dot was just on the site for what seemed like an hour, right? And by the way, you got a cameo today. There is like hours and hours of videos you can watch and people you can browse. You can window shop all day there. At this point, it was like going to a Google Form. What’s your name? you know What’s the message? And like put your credit card in. That’s it.
Steven Galanis: There was one person, there were no videos. It was like, it was as simple and MVP as it got. And, you know, I remember just being like, my elbows on the edge of the table. Is this guy gonna buy? What’s gonna happen? What’s gonna happen? And then the dot just like disappeared. And I had this just sinking, feeling my stomach. I’m like, God, we even got someone on and they didn’t want it. Like, I was dejected. And then,
Steven Galanis: About five minutes later, my phone starts vibrating. And I see that I get a DM on Twitter from this guy who goes, hey, Stephen. Or he goes, hey, Power Move, which is what we were calling ourselves before we you know named ourselves Cameo. He’s like, Cassius Marsh is my daughter’s favorite place player on the Seahawks. It’s her birthday on Thursday. This was a Tuesday night.
Steven Galanis: I’m trying to book, but your payment processor is not working. So I’m like, tell me the message. like We’ll take care of it. And then, of course, Cassius and Martin were so mad at me and Devin that you know they weren’t responding to our texts. Two weeks go by. We don’t get the video. Finally, Cassius turns the video around. It’s honestly the worst video I’ve ever seen. ah you know He’s like, hey, Reese, sorry for missing your birthday. Thanks for being a fan. It was so bad I didn’t even really want to send it. I ended up sending the video to the dad. And about an hour later, I get a ah message back from him. And it’s a video of his daughter watching the cameo. And she gets so excited. She literally starts crying. She’s got half her hair is green, half her hair is blue. She’s in a Seahawks, a Cassius Marsh jersey. She’s watching the video. And and like she cries. And at she ends by by saying,
Steven Galanis: Daddy, how she goes, how did you do that? And he goes, daddy’s awesome, that’s how. And if you watch this video, it’s better than any Super Bowl commercial that we ever could have made. And I’m so grateful for the fact that this guy, like,
Steven Galanis: When it felt like we didn’t have product market fit, that was a very strong sign to say, hey, the website didn’t work and they wanted it so bad that they got in my DMs and we made it happen. And even if it wasn’t, even though it wasn’t the best video ever, like the emotion that it elicited gave me absolute conviction that if we could make one person feel like that, we could make millions and hopefully billions feel like that at scale.
Alejandro Cremades: and and Obviously, the rest is history. you know Now, in your guy’s case, obviously, to build a marketplace, it takes money right to build that supply demand. How much capital have you guys raised to date?
Steven Galanis: The business has raised over $200 million dollars since since we started. Yeah.
Alejandro Cremades: and I know that there have been some really incredible stories. ah you know One, you know at the Series A level, and then with Masa. Not pitching him, but getting pitched back. so Walk us through those particular stories that happened on the fundraising.
Steven Galanis: Yeah, I’m going to tell a few, and I’ll even tell one before before the Series A that I just think is is so important. so One thing i didn’t we didn’t get too deep on is LinkedIn was really the formative experience of my professional career. I remember walking into LinkedIn on my first day, and this guy named Mike Gamsen, who is the global head of sales at LinkedIn at the time, he’s in Chicago where I am, and all the new hires are there, and then those that aren’t in Chicago are are kind of like blue-jeaning in, this is before Zoom, blue-jeaning in at the time. And the first thing he says when he gets on stage, he goes, welcome to LinkedIn.
Steven Galanis: Two years from today, none of you will have the job we just hired you for. We know that, we support that, and at LinkedIn, we literally have the profile data to prove that that’s true. So our job in the next two years is to make sure that we work with you to get the skills you need for your next job, whether it’s internal or external.
Steven Galanis: And oh, by the way, all we ask is crush your job. And when you’re ready for the next thing, whether it’s here or somewhere else, recruit someone better than yourself to take your place. And that was like that was such a huge change. I mentioned when I was trading, it was such a fixed mindset. You missed this. And then at LinkedIn, they’re talking about the economic graph and providing, you know helping the world’s professionals become more productive and successful. And it was like mission-driven growth mindset. it was just I just sucked it all in. I couldn’t get enough of it. And you know the really interesting thing that happened was my last day at LinkedIn, like so I have this idea for Cameo. My last quarter there was probably the worst employee at the company. you know like My mind was somewhere else. All the guys at work and gals around me, like when we were on calls, we’d be talking about what this thing could be. And you know we wanted to almost build this company while working at LinkedIn. And one guy wanted to run sales and one wanted to run marketing. and
Steven Galanis: and And frankly, like you know if you look in the next four years, almost all of those people ended up coming to work for us ah you know over the years. So we ended up having a lot of LinkedIn people leave. but I the and remember being, it was New Year’s Eve, New Year’s Day, 2017. I’m still at LinkedIn. And this guy, Will Hearn, who I worked with at the time, we’re in a hot tub in Nicaragua with a bunch of our coworkers that are there. And he’s like, Steven, this idea is too good. If you don’t leave to go start it and somebody else builds it and becomes a billionaire, could you live with yourself? And nobody had ever asked me that question before.
Steven Galanis: But it was so obvious the answer was no. like my I remember my brain chemistry just changing instantly. So I remember I left Nicaragua. I go tell my parents that I have something to show them. And it was the letter that I’d sent to my team letting them know I was going to start Cameo.
Steven Galanis: But the craziest part of it was the day I left was my exact two-year anniversary of my first date there. So in this case, Mike Gamsen’s prophecy at least ended up being true for me. Like two years to the day is when I left to go do that. And and you know I wrote about this to my team. I published that post on LinkedIn. If you guys go to my LinkedIn, you can literally see the the the note that I wrote telling the story I just told.
Steven Galanis: And a quarter into it, when we were we had sold maybe 100 videos, I get a cold call from Mike Gamson out of nowhere. And he just wanted to check in on how the business was doing. I pitched him on it. And you know to my surprise, he’s like, Steven, I like this business. I’d like to make a small investment in it. And at this time, we’d now raised $150K of friends and family. And you know I think he’s going to say $25K, $50K.
Steven Galanis: And I’m like, Mike, we don’t really need more money. we We’re burning $500 a month. We have 150K in the bank. He’s like, Steven, you don’t understand what you’re building. If you’re gonna build this thing and it’s gonna be what I think it could be, you’re gonna need a lot more capital. So I’d like to make a small investment in your business. I’m like, all right, well, and he’s this huge mentor and someone I really liked up to. So I’m like, what are you thinking? And he goes, I’d like to put a half a million dollars into the business. And you know this is like on the phone. I remember like those words came and I just like,
Steven Galanis: It was just unbelievable. And you know he was excited about Cameo. He’s excited that we were building it in Chicago. um And that was the investment that like changed everything for us. I don’t think I could have built this business in Chicago. I would have had to be in l LA or New York.
Steven Galanis: So that that was huge. And then you know for a while, we were just kind of this thing in Chicago that people knew about, but it was under the radar. And you know the VCs right away like got excited about it. um I remember one of our investors, like right after that round got done, Chicago Ventures, which was a firm that was in the same building as us,
Steven Galanis: um this guy named Jackson Jin, who was on his second day of work, like got locked out into the office. And he ended up knocking on the door to see what was going on. ah you know He spent three hours with us the next morning on his, he was literally working in venture for two days, fresh out of undergrad. He walks into his partner’s office and he goes, the next Snapchat is a hundred feet away from us. If we don’t invest in this company, I’m leaving. And they’re just like, kid, like you just got charmed by the first entrepreneur you ever met. That’s not Snapchat, no fucking way.
Steven Galanis: e And he’s like, trust me, take a meeting. So I end up taking a meeting with a guy named Ezra Golston, who would go on to lead my seat around. And, you know, on the spot, he’s like, we want to put a million dollars in after I ran him through everything. And, you know, we didn’t need the money. So we took 100K and then they wanted to get ready to lead our next round. And ultimately, ah you know, that that kind of set the tone of like all the good early stage investors in Chicago.
Steven Galanis: backing the business i remember our seed round was a very competitive round among amongst these firms, the guy from Chicago Ventures that wrote my check, you know he was like, hey, I’m going to leave to start my own fund. Can I lead this? And Chicago Ventures, we’d had the relationship with. And Origin, another firm that we loved, like they literally were like, we will do anything. Here’s a you know here’s a b blank check. ah You put any number you want. like we got We got you. We’ve got great conviction. And luckily, we were able to get all three on the cap table. So so now we’re kind of this hot thing in Chicago, but like the world doesn’t know about it yet.
Steven Galanis: ah And that all changed about six months later when I get a call from this woman, Jana Mastershmitt. Jana is kind of a legendary ah operator. She was early exec at Twitter through the IPO. And she’s part of a syndicate called Hashtag Angels, which was all the female execs at Twitter. and And they invest in in different startups.
Steven Galanis: And she she had like discovered Cameo that summer. She literally DM me every day for 30 days till I responded. And she’s like, you need me on your cap table, trust me. So I ended up talking to her. There’s a bunch of family connections. She randomly ended up in college at U of I. She worked at my uncle’s bar it was like she’s from the midwest there were just so many things so i end up letting her put some money in and that was one of the best decisions i ever made because uh that uh that labor day weekend right before labor day weekend i get a call from her and she goes
Steven Galanis: Steven, Jeremy Liu from Lightspeed would like to meet you. um you know he i just showed him i I just showed him Cameo, and he he thinks it’s awesome. Can I give him your email? So I’m like, absolutely. And by the way, my early stage investors had put together a list for Cameo of like every firm in the world and every partner. And the firms were kind of ranked five to one, five being the best. And then the and then each partner was ranked A to F on their fit.
Steven Galanis: And there were only like four or five 5A people that like we had on our on our metric. And it was Reid Hoffman. He had founded LinkedIn. It was um you know it was it was Matt Kohler at Benchmark. you know He had done like Instagram, a WhatsApp. like So it’s it’s like that level. people would in Jeremy, of course, you know Snapchat had just IPO’d around that time. So you know he was very clearly there. And I get an email from Jeremy. And he goes, I just heard about Cameo. It’s brilliant.
Steven Galanis: Where are you in the world? We’re having breakfast tomorrow. And I happened to be in San Francisco because I was, we were working on this deal with YouTube. So I ended up meeting him at the battery for what I thought was going to be like a 15 minute coffee. I have to fly to l LA to go to a wedding. And I’ll never forget this. Like I get in, I start getting into my pitch and Jeremy like cuts me off in the first 30 seconds. He’s like, no, no, no, Steven.
Steven Galanis: I get it. I know what this is. I’ve been looking for a business like this for 10 years. ah Let me tell you why we’d be the best partner for you. And we end up having this two-hour conversation. I’m watching my like flight because I’m about to miss my plane at this point. I got to get to my buddy’s wedding in l LA. and And it’s time to go, but Jeremy’s not done. So he goes, Stephen, here’s what’s going to happen. When you land in l LA, you’re on the you’re on the American flight. ah You’re going to walk to the United Terminal and go meet my partner, Nicole Quinn. outside of gate 70 in the United Terminal at LAX. She wants to meet you. So I end up landing in l LA. I walk from terminal four to terminal seven and I meet Nicole Quinn there who ended up becoming, um you know, a long time board member, led my series A. Nicole ah just absolutely like gets it. You know, she she was on the board of, she was on Lady Gaga’s board and Gwyneth Peltra’s board. She’d become like the Silicon Valley meets Hollywood.
Steven Galanis: you know, a person and we had some good like friends in common and, uh, you know, we have this great conversation that I’m like, Hey, I gotta get to the rehearsal dinner. She’s like, all right. And this is Labor Day weekend. She’s like, Steven, I’m going to be in Chicago Tuesday morning to come see you. And.
Steven Galanis: You know, sure enough, Tuesday morning, she’s in our office, spends the day with the team. She then invites me to San Hill Road to go pitch the partnership the next week. And after that meeting, I’ll never forget, Jeremy and Nicole walked in. And by the way, we didn’t have a pitch deck. I didn’t have finance. Like, there was nothing. You know, there was nothing. I remember somebody asked, what’s your five-year plan in the meeting? And Jeremy’s like, we’re not pitching. They’re not pitching us. We’re pitching them.
Steven Galanis: And Jeremy came in with Nicole and he said, Steven, the partners are unanimous. We’re excited to lead Cameo Series A. We think this could be Snapchat, but bigger than Instagram can’t copy. And we want to be the partner to help you build that. And like coming from him, like that was just, it meant the world. And once we got that Series A from Lightspeed, it totally changed our standing among any of the other kind of firms in Chicago that were startups. And we were just on a it was just a different level. like you know Tier 1 investors weren’t investing. yeah i don’t I don’t think Lightspeed had invested in in Chicago like that since Grubhub’s like Series A and Benchmark. Sequoia had never backed a business in Chicago early stage like that until one of our alums ended up coming and and and starting his business. so
Steven Galanis: it It was something that like kind of changed the ecosystem. And we were talking about Endeavor earlier. And one of the things that we love at Endeavor is like coming in, building these tentpole companies. And then some of those people are going to you know take the experience they got and go start their own. and And I’ve just been really proud and gratified that we’ve been able to do this in my hometown. And so many amazing people have come through our program, ah hopefully taking a lot of value. And and now some of them are are you know running their own really cool companies.
Alejandro Cremades: Now, obviously, you’ve been running the business for over eight years ah and you know with the ups, with the downs, you know everything in between. But if I was to put you back you know in in time, and I put you into a time machine, and I bring you, let’s say, to 2016, where you guys were getting started with the business, and you could give one piece of advice to that younger self, to that younger Steven, what would that be and why, given what you know now?
Steven Galanis: Yeah.
Steven Galanis: That’s a good question. Look, there’s so many different There’s so many different things there, but in my experience, the one thing I’ve seen over and over again um is hire for ceiling, not for a resume, right? I’ve just seen that a million times, right? There’s so many of the best hires we ever made were, you know,
Steven Galanis: someone starts as a, you know, they’re a PR intern and, you know, six years later, they’re the chief of staff of the company, right? Or, you know, one of the best people we ever had on our talent relation side was a bottle service girl bartender that had never worked in Tacker, had a corporate job, and we brought her in and now she ah leads all creators at another big company.
Steven Galanis: you know probably my one of my all-time favorites that we hired was supposed to be a one-year study abroad intern when it was just me at a desk in Chicago. and you know She loved it so much that when she had to go back after a year, she dropped out of school, ended up opening up our UK office, and eventually would come to run the talent team for us. and you know i’ve i’ve I had totally appreciate the what experience gives. ah But when you’re doing like really innovative things, sometimes that can be overrated. And and you know while I’ve learned a lot from some of the leaders that I brought in, um I would have just, you know if I look back on it, there’s probably times where I took people out of the game too early because we were in position to go make that big hire. And um in some cases, like that caused you know really foundational building blocks to like not have a place at the company anymore.
Steven Galanis: So that’s that’s really what you know what I continue to remind myself about.
Alejandro Cremades: I love it. So Stephen for the people that are listening that would love to reach out and say hi and learn more about Cameo. What can you tell them.
Steven Galanis: Yeah, you can find me on LinkedIn, you can follow me on Instagram or Twitter, on Twitter or X I guess now. Mr. 312, that’s the Chicago area code, or just my name on on Instagram.
Alejandro Cremades: Amazing. Well Stephen thank you so much for being on the deal maker show today. It has been an absolute honor to have you with us.
Steven Galanis: Thank you for having me.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at al*@pa**.com“>al*@pa**.com
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Zach Dunn’s entrepreneurial story is unique and intertwined with his twin brother, Sam. This blog explores their journey from starting a blog, scaling an agency, pivoting to product development, raising millions, and thriving through a pandemic—all while doing it together as twins.
Zach and Sam’s company, Robin, attracted funding from top-tier investors like Atlassian Ventures, Tola Capital, Allegion Ventures, and Accomplice. They are also building Rally.
In this episode, you will learn:
- Building a company with a sibling can be challenging yet rewarding, leveraging complementary strengths like vision and execution.
- Transitioning from a service-based agency to a scalable product business requires identifying reusable solutions and pivoting strategically.
- Success often hinges on timing, as Zach and his brother capitalized on the early days of social media and tech innovations.
- Overcoming biases against service-to-product founders, they raised $60M across four funding rounds by demonstrating adaptability and vision.
- Pivoting their office software business during COVID-19 turned a crisis into an opportunity, leading to rapid growth in desk-booking solutions.
- Each venture, including their latest company, Rally, builds on lessons learned from solving pain points in previous businesses.
- Balancing short-term execution with long-term vision is crucial for convincing investors and achieving sustainable growth.
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Your email address is 100% safe from spam!**About Zach Dunn:**Zach Dunn is the co-founder and VP of Customer Experience at Robin, the first workplace platform to put people before places. Prior to Robin, Dunn co-founded and led product development as Chief Product Officer at One Mighty Roar.
Dunn has served as an Adjunct Professor of Computer Science at the University of Massachusetts and graduated with a B.A. cum laude in Multimedia Web Design and Development from the University of Hartford.
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Read the Full Transcription of the Interview:Alejandro Cremades: All right. Hello, everyone, and welcome to The Deal Maker Show. So today we have a really amazing founder, a founder that has done it also a couple of times. you know We’re going to be talking about how it’s like to start a company with your twin brother.
Alejandro Cremades: Also transitioning from doing something in the service space to then maybe like thinking about productizing it and launching a product, rolling something out of that that is more repeatable and scalable. And then also about weathering the storm via the pandemic or raising money you know through different rounds. Again, the episode today is going to be packed with very inspiring stuff. So without further ado, let’s welcome our guest today, Sak, Dan, welcome to the show.
Zach Dunn: Thank you, Alejandra. Happy to be here.
Alejandro Cremades: So originally born in Connecticut and then raised in Western Massachusetts, which is a very important distinction from Massachusetts. So tell us about growing up.
Zach Dunn: Yes.
Alejandro Cremades: How was life for you?
Zach Dunn: Oh, fantastic. um the you know Like most folks, I spent a brief time in Connecticut. Didn’t actually stay there. And Western Massachusetts is, for those of you from Massachusetts, know the distinction.
Zach Dunn: It’s very rural. I had an alpaca farm in my hometown, and it was a very different experience than Boston, which is now ah where I’ve lived and worked for the last 12 years.
Alejandro Cremades: So how did you get into the whole thing of, let’s say, design and and and development? Because that’s in the end when you ended up studying.
Zach Dunn: Yeah, so ah my twin brother and I, ah have, despite but the odds, we’ve managed to do just about everything together over the last 35 years. You can’t get quite get the hint. It’s the weirdest thing, you know? But we both went to University of Hartford down in Connecticut I went for web design and development, which was basically ah graphic design meets computer science. And then he went for marketing. And so as a result of that, we figured out that, hey, there’s maybe some some work we could do there together. And while we were down studying there, we started what would later become one of the top 10 blogs on the internet for web design and development called
Zach Dunn: built internet. And ah through that, we were able to jump out of school and into the wonderful world of client services agency work, right?
Zach Dunn: You want a website?
Alejandro Cremades: and well And we’ll talk about that in just a little, I guess with with your twin brother, because as you were alluding to it, you know you guys do everything together.
Zach Dunn: We’ll make you a website.
Alejandro Cremades: How do you guys complement each other?
Zach Dunn: um So I am what people would call the rational one now. So he and I ah have learned how to how to work together obviously over the years. I would say he is probably the big picture guy and I am more the how, the execution side of it. and that ends up working very well. And ah those that we’ve been fortunate to work with over the years have learned that distinction, i’ sometimes trial by fire, but ah we’ve been able to to balance each other.
Alejandro Cremades: So that’s pretty cool, actually. you know I think I mentioned that I have twin girls too, so it’s amazing to see what it could look like in the future. Now, in your guy’s case, you know you were in university, and then and eventually you design, I mean, you you build up this block that started to get ah quite a bit of attention, and that, the way that you kind of like thought about monetizing it was via the service-based type of approach. So I guess,
Alejandro Cremades: How big did the blog get? And what was that the thought process of, hey, how do we make money from this?
Zach Dunn: So we lucked out on timing in a big way because this was right around the cusp of um social media really becoming a thing. So this was probably within the first couple years of Twitter and ah but also back in the day.
Zach Dunn: I don’t know. Do you remember when Facebook had like a Farmville in a tab?
Alejandro Cremades: Oh, yeah.
Zach Dunn: Yeah.
Alejandro Cremades: Oh, yeah.
Zach Dunn: Oh yeah. The golden age, right?
Alejandro Cremades: Yeah.
Zach Dunn: So, um, On the blog, a lot of the work that we were doing was writing tutorials on how to get into some of that sort of design, and we would have people reach out to us and say, hey, that thing that you talked about, can you do that for our company? And that was a new idea it to us.
Zach Dunn: But ah we were able to turn that into a handful of first $1,500 clients, $3,000 clients. And then I think it grew from there to 30, 50K projects. And so at a certain point, I think our senior year of college, we were like, I am pretty sure we can employ ourselves now. um So let’s just do this full time.
Alejandro Cremades: So how do you land into the, um let’s say, service-based agency type of work?
Zach Dunn: agency, digital agency. Yeah, so um at the time, that was it that was pretty big, ah where there were a handful of so-called digital agencies out there that were really helping shape a lot of the um consumer brands out there, for example, ah how they used social for the first time.
Zach Dunn: um because nobody had really figured it out. ye ah like What is a Twitter account actually um for ah for a business? And so one of the niches that we fell into was um helping these brands build in-person ah digital experiences um for their events. So an example of that would be if you go to a music festival and they would give you RFID wristbands as the ticket. We made ah work We made things that when you walked up to kiosks, tagged that in, things around you would change. Like the screen could change to something. It would take a photo, send it to you, that sort of stuff. Gimmicky in retrospect. But at the time, that was like a goddamn revolution, right? Like, cool. And so ah we were able to to build some interest and visibility through that.
Alejandro Cremades: So then eventually you go into um productizing, right? So you guys are you know doing the this whole agency thing, but that doesn’t scale. You have certain amount of hours in the day, and and I’m sure that at one point you were like, hey, maybe we can do something where we can make money when we sleep.
Zach Dunn: The dream. ah yeah One of the things that I think you you learn in a hurry if you’ve done the services business is it’s hard because a lot of your work um is temporary. That is to say like your portfolio is only as good as the last two to three things that you’ve done. And a lot of the earliest stuff that you’ve done is no longer anywhere on the internet. And um you’re constantly in a state of finding your next thing. And sometimes you get long-term customers, but more often than not, you’re constantly hunting.
Zach Dunn: And so while we were working with these these clients, we started to build stuff that we could reuse across clients. And that ultimately led us to what would later in 2014 spin off into our first venture backed company, Robin. Robin came out of an idea that we had a conference room table in our, ah ah conference well in our conference room, which um we made it so that when you sat down at it, it booked the room using using like motion sensors and other stuff. And this was like ah just a fun thing that we had built using some of the tech that we were developing.
Zach Dunn: And that it went viral at the time. And we were invited to go present it at NIACON, which despite the name is actually a furniture and architecture and design conference in Chicago. And that was really the first time where we were able to like springboard this idea of client work into, oh, maybe this is a product. And so Robin was ah over the but from on.
Zach Dunn: Basically, whenever you see an iPad outside of a conference room, ah that was probably us. If not, we would fix it and become the one who did it. And that really over the next 10 years, it became a full body workplace ah scheduling system.
Alejandro Cremades: So I guess saying, how are you guys making money there for the people listening to to get it?
Zach Dunn: Yeah, so a lot of the times in the early days, what people would come to us for is a problem of like, hey, there’s you have an office, you have dozens, if not hundreds of conference rooms. How do you make sure ah that you’re you’re able to ah book the right rooms, cancel meetings if people don’t show up to them? Everyone hates it when you show up to a, when you can’t find a conference room and they’re booked.
Zach Dunn: there’s nobody in and there. So there’s a lot of that sort of of air traffic control that we were able to do. And over the years that evolved into supporting a thing called activity-based work, which is a way of designing your office ah to support the type of work that you’re doing instead of ah just a number of people.
Zach Dunn: So like you might have an area that’s for brainstorming breakout space. You might have another area that’s for different types of work. And when you do that sort of thing, it has a profound impact on how you actually have to schedule and ah coordinate everybody.
Zach Dunn: so
Alejandro Cremades: So how was that the moment like as well when you guys decide, hey, maybe we got to scale this thing faster. Maybe we should take a look at the raising money.
Zach Dunn: Yeah. So the, it was, it was probably one of the best slash worst years of my life. The, the year that we decided to raise, um, the, the seed round, which ultimately ended up being around 3 million or so. And one of the the things that we decided was, hey, we’re going to start trying to fund this ourselves. Because that was just in our DNA. And we had a little bit of a war chest from the agency um that we had started. And so we were like, OK, we have people that are very good. We have an idea. There’s some interest. Let’s see how far we can get this thing on our own.
Zach Dunn: And we put in the first million, probably, out of that funding. And what we quickly realized is it’s just a different beast when you’re building a product. um And a lot of the growth that you want to have happen really comes from being able to like not just identify the opportunities, but also act on them. And I think identifying opportunities is often the sexy, easy part, but actually acting on them, seizing them. A lot of times, that’s where the constraint comes in. And you know when you only have about a dozen people, ah you got to move a little bit faster than just bootstrapping it allows. So we decided to go out, fundraise.
Alejandro Cremades: So how was the journey of raising money? Because all you know, you guys raised about 60 million bucks. So that was four different rounds.
Zach Dunn: yeah Across all the rounds. yep
Alejandro Cremades: yeah so So during those different four rounds, what did you see changing and shifting when it came to strategies or expectations to to be effective and to get it to to happen?
Zach Dunn: So a lot, I’ll go round by round. So with the seed round, a lot of it was ah around Sam, my twin brother and I’s ability to actually navigate ah the transition from a services business to a product. Because one of the things that we weren’t expecting as we were going out fundraising was ah how little ah
Zach Dunn: interest people had in our backgrounds. It almost was like a ah black mark, so to speak, because you know we had a number of VCs where we would ah seemingly have a great conversation. and But at the end of the day, what it came down to for them was like there’s two types of people in the world, people who do services business, people who do product business. When you choose one, you can’t go to the other.
Zach Dunn: And I don’t believe that, still don’t. But that was, I think, a pattern that had emerged in the fundraising environment at the time, around 2014. And so a lot of it was convincing folks that we could ah actually build a product and not just a services-client relationship.
Zach Dunn: And we were able to find a handful of folks that fortunately believed in that and us and ah go from there.
Alejandro Cremades: Okay, and then and then what would you say was the toughest thing or the biggest lesson that you got from from capital raising?
Zach Dunn: I think the the may it’s important to balance the aspiration that you have, like where it could go with short-term goals, even. Because like it’s really easy to look from the outside, I think, with a venture and think, OK, the type of people that get funded in tech are the people who go into a room and all right you know there’s this amazing opportunity and here it is and let’s do this. And you can get people excited about an idea um and that’s enough. But the fact of the matter is most of the people that you’re meeting with, ah they are partners war ah in the the firms and they are only funding maybe like three, four companies a year.
Zach Dunn: conservatively and sometimes more in earlier stage but really the question that you’re not just competing against other people trying to do the product you’re trying to build you’re basically you basically got to convince the person you’re talking to is this worth one of my four or five for the year and um so in that way you’re competing against anything that could raise money and ah that was not something that ah we really fully appreciate it until maybe midway through the process. um Because there’s a lot of folks who would, with unlimited budget, sure, invest, but that’s not the criteria. It has to be, you know of all of the ones I’m likely to see this year, is this is this one that I’m into.
Alejandro Cremades: I know as well that the um COVID a period was a little bit rough um when it came to um to scaling and pushing Robin. ah so So I guess, say what what do you i actually not Robin, one mighty run.
Zach Dunn: One mighty roar was the agency you were right the first time, Robin.
Alejandro Cremades: yeah Yeah, so you’re right. So so then basically Robin. so So with Robin going through the pandemic, you know after you guys had raised this money and everything, how was how was that like for you guys? I mean, that sounds like a crazy, crazy you know murky waters to go through.
Zach Dunn: I definitely wouldn’t recommend selling office software during a pandemic, especially when offices are closed. ah Not so fun, at least, you know, compared to other things. So we had, for some context, right before the pandemic, we had just closed a series B, I believe that was about 20, 20 million. So at the time we had ah basically closed 30 million across the first few rounds. And so we were really ramping up and starting to develop our second
Zach Dunn: ah product line. So the first one being conference rooms. And then the second one, we were getting into hot desking, hoteling, that’s like where you can book desks instead of just rooms, right? So you don’t have assigned seats in an office. And that was early days. And we, we knew that it would be probably a couple years before that really took hold, but we were making the investment. And then the pandemic happened.
Zach Dunn: And ah at first, it was awful because 100% of our customers were not able to actually use the product that they had purchased from us. But as more people started shifting into the how do you return to the office, that actually became a major ah driver for us. and We saw over that ah time period, we grew three to four times over and what we thought would be multiple years ah ended up happening in a matter of like six to 12 months as far as growth goes because at hot desking solution,
Zach Dunn: at like desk booking thing, turns out that that actually was a pretty critical thing for returning to the office. So it ended up being a fascinating turn of events.
Alejandro Cremades: Love it. so um So then for you guys, you know at what point does it become evident that maybe it’s time to um to shift gears and and turn page and and get going with something new, which would end up becoming rally?
Zach Dunn: Yeah, so um we, so I, we did, Robin for about 10 years. It’s still going. And, you know, attend the board meetings. Love it. And really ah continuing to see that move forward. But about a year or so ago, um we started a another company and decided, hey, this is this is a good opportunity to take some of what we learned with um our time at rally er Robin and start another company, ah Rally, which ah now targets ah some of the storytelling and team communication around product marketing and like how people actually announce and present product-related demos, updates to their customers, those sorts of things. ah It was a direct pain point, felt at Robin, and it was one that I think
Zach Dunn: we had a ah perspective on ah that we could bring. So that’s where we’re now.
Alejandro Cremades: So Riley, what’s the business model there?
Zach Dunn: So you know typical SAS until it isn’t. um Of course, I feel like the right answer at this point is everything has to be AI. right you know Otherwise, what are you doing? um The business model is basically per seat with a ah secondary business model of ah AI credits. That part’s in the work still. But it just as we sell into go-to-market teams, so think people who are on the front lines talking to customers, prospects, and the people who support them. So think product marketing, sales enablement. And the motion here is actually,
Zach Dunn: Unsurprisingly, very different than selling workplace scheduling software where you’re talking to facilities and IT teams. Here, you’re actually talking to people whose job it is to explain and present the product to not just prospects, but also an existing and growing customer base. And a large part of that has to do with is the product that you have actually the product that you’re selling and the product that your customers know you have. And it turns out that there’s a pretty big lag in um building the product versus letting people actually experience the most cutting edge version of the product that you have. And that’s what we’re we’re trying to close.
Alejandro Cremades: Was it a little bit the easier to raise money this time around or not?
Zach Dunn: Oh yeah, yeah. I think that the for a second time around founder, there’s certain um credit, and I think you can, in good will, that you’re able to leverage, especially with the early days. um So I think it was much more of a, hu which folks do we wanna work with again, um conversation?
Zach Dunn: and ah you know Fortunately, we were able to to pull together almost exclusively previous investors from Robin, and then we involved you typical angels. and you know It was, all things considered, very smooth.
Zach Dunn: um and You know, in some ways that’s a relief, but ah you know for those of you out there who have done it one time around and you’re worried about round two, if you’ve had a decent outcome, it’s a very different experience the second time through.
Alejandro Cremades: That’s how amazing. like ah Obviously, investors, they bet on a vision. So when it comes to a vision, if you were to go to sleep tonight and you wake up in a world where the vision of Raleigh is fully realized, what does that world look like?
Zach Dunn: I think that ah the experience that a customer has in and ah learning about your product, using your product, they it’s consistent from start to finish. like The way that your sales team talks about the product and presents your product is the same as the way your customer team is able to present your product. there’s this um There’s this real challenge with ah the product that you have is not often the product that your customers think you have. And ah the better that we can do at helping people present and display their latest product updates,
Zach Dunn: the more ah we can help people ah get that feedback loop needed to build ah a great product faster. Which is, if you think about some of that AI coding stuff, the rate of change is going to go up. And so it’s not really practical to expect that it’s going to take three to six months once you ship a feature for your customer base to actually realize that it’s there.
Alejandro Cremades: So, we’re talking about the future here. I want to talk about the past, but doing so with a lens of reflection. If I was to put you into a time machine, and I bring you back, you know let’s say, to around 2011, where you and your brother were starting to play with having a blog and you know maybe think about a world where you could do something of your own,
Alejandro Cremades: And if you could go back in time and have a sit down with but your younger self and your brother to win, you were able to give your younger selves one piece of advice before launching a company. What would that be and why, given what you know now?
Zach Dunn: I think the, well, first of all, if I had a time machine and specifically for 2011, I would buy as much Bitcoin as possible and just get that out of the way. But you know once I’ve made the correct financial decision there,
Zach Dunn: um the when you’re going through this for the first time, it’s really easy to over index for people who have to hire people who have skills that you don’t. And when when you’re hiring somebody for the first time who has financial accounting background or operations, um everything that they do will feel like magic.
Zach Dunn: Like, oh my gosh, I had no idea how the Microsoft Excel worked that way. And so you can end up hiring people that may not be the, um that may be better than you, but may not be the best pick for the stage. And ah this is, I think over the years, being able to hire people who know how to do things that you don’t, but also ah are able to have that lasting impact over a number of years and scale with the company. ah that’s That’s a process to learn. And I think that’s where a lot of the wisdom I would share is. Also, ad revenue is probably not a good source of income. That was mostly how we funded the blog days early on. And there’s some you know banner ads. or
Zach Dunn: A few thousand dollars a month at the time, which was college years. Oh, amazing. But, you know, there’s some other opportunities too.
Alejandro Cremades: Yeah, no kidding. Well, hey, it’s a trial and error, like everything in life, eh, SAC? But that’s right.
Zach Dunn: Life is risk. Yes.
Alejandro Cremades: That’s right. So um so hey, so really amazing. you know I got to really thank you on behalf of everyone that is listening. Also, on my end, you know for really taking the time to come on to the Dealmaker Show today and and share your super inspiring journey, SAC.
Alejandro Cremades: So thank you so much.
Zach Dunn: Thank you, Alejandra.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at al*@pa**.com“>al*@pa**.com
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Dominik Senn’s story is one of reinvention and relentless ambition. Born in Zurich, Switzerland, in 1967, Dominik began his career as a competitive skier at just 16 years old. His experiences on the slopes defined his youth and laid the foundation for his entrepreneurial spirit.
Dominik’s latest project has attracted funding from top-tier investors like Southern Realty Trust.
In this episode, you will learn:
- Dominik Senn transitioned from professional skiing to entrepreneurship, building a global sports management agency representing icons like Roger Federer.
- Identifying gaps in Florida’s golf communities, Dominik envisioned Panther National, blending European elegance with American luxury.
- Despite no real estate experience, Dominik raised $250M through equity and debt, navigating skepticism and leveraging his vision.
- The COVID-19 pandemic, initially a challenge, became an opportunity as demand for outdoor and remote-work-friendly lifestyles surged.
- Panther National combines world-class golf facilities with luxury amenities, setting a new standard for gated lifestyle communities.
- Dominik’s leadership philosophy emphasizes trust, autonomy, and fostering a culture of accountability and innovation.
- His journey highlights the value of dreaming big, embracing risk, and learning quickly, with the U.S. offering fertile ground for entrepreneurial ambitions.
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Your email address is 100% safe from spam!**About Dominik Senn:**Dominik Senn (born 1967 in Zurich) is a former professional alpine ski racer from Switzerland. Senn is the founder of 4SENN, 4sports & Entertainment AG, and Centaur Golf International AG—and acts as their CEO and Chairman.
4sports is one of the world’s leading integrated sports marketing agencies and talent representation companies.
Since 1995, Dominik Senn’s companies have represented world-class athletes in Skiing, Tennis, Hockey, Soccer, and Golf. As a sports agent, Senn represents numerous PGA Tour golfers; among them are major champions and multiple PGA Tour winners.
Senn is notably the founder and visionary behind Panther National, the first ultra-modern contemporary golf, lifestyle, and country club in North America.
Located in Palm Beach Gardens, this Centaur Golf International AG project is underway, proving to be an epic development reshaping the real estate market in Florida.
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Connect with Dominik Senn:* LinkedIn * Crunchbase * RocketReach * Facebook
Read the Full Transcription of the Interview:Alejandro Cremades: All righty. Hello, everyone, and welcome to the Deal Maker Show. So today we have a really exciting guest, and today I think that you guys are going to find this interview quite inspiring.
Dominik Senn: everyone
Alejandro Cremades: you know He was ah quite a competitive athlete, you know in this case a skier, and then he’s gone from that into becoming an entrepreneur. So again, very, very exciting conversation, incredible story.
Alejandro Cremades: We’re going to be learning about building, scaling, financing, you name it, and I think that you’ll love this episode. So without further ado, let’s welcome our guest today, Dominic Sen. Welcome to the show.
Dominik Senn: Thank you for having me.
Alejandro Cremades: So originally, Dominic, you were from Switzerland. So give us a walk through memory lane. How was life growing up for you?
Dominik Senn: Yeah, I’m Maurizio from Switzerland and I was born 1967 in Zurich and became a professional skier at a very young age, around 17 years old, 16 years old, and where made m my steps through the the skiing career and founded 1995, a management company to management manage myself, actually.
Dominik Senn: and And after my career in 2001, I became a global sports marketing agency. and We represented hockey.
Alejandro Cremades: And what do you think what do you think that the you know before you actually got going with that, you know with the the competitive spirit you know that that you really had in in in and that you were driving you know when you were a ah professional skier, um what do you think that you’ve carried from that when it comes to the world of business?
Dominik Senn: um I think I’m very competitive. First of all, I like to win and I’m also willing to prove the hard work and I think I’m very disciplined as well. as That’s four attributes, I think, that helped me to become a competitor. So when I saw as a skier that the sports world was very young, that the first people who tried to make our skis or were waxing our skis became like a sports agent successfully. So I thought myself I can do that even better. So I think it was very competitive and I brought enough patient and and will and willingness and also ah ah termination in determination into really yeah become an entrepreneur.
Alejandro Cremades: And in your case, no university, no studies, no nothing. You just went right at it. You know, when he came to our business and you went at it because you saw a need, something that you were essentially seeing with you and with your peers, which was essentially lack of representation.
Dominik Senn: Yeah, I mean, I mean, I did the high high school, a very high-end high school, and I was one of the best in the high school, I can say. So school was always easy for me. And I studied public relations and advertising on the side of skiing. But other than this, yes, everything is handmade, everything is learning by doing, and that’s true.
Alejandro Cremades: So then you were building the firm of representing other athletes for many years. um I guess what was that journey of building and scaling you know that business and and then also going from skiing to hockey and to other other other sports as well.
Dominik Senn: Absolutely.
Dominik Senn: yeah It was but very organically, I think it was never my goal at the very beginning to have a global sports management agency. Of course I was dreaming to become but one of the most influential sports agents.
Dominik Senn: He came very naturally to me and organically. So from skiing, we went to hockey, which is another winter to sport and very popular in Switzerland. And I started representing also other skiers, of course, at the very beginning. Then I started working for IMG, the American company. And because they they had problems at that time in the German speaking market, so I started representing them in Germany, Austria and Switzerland. But I did not.
Dominik Senn: agreed that they could purchase my little company, because I had not, not any assets in my in my company, which I could sell for a lot of money. So I, I told them they have to agree on a entrepreneurial spirit and split. So I told them you don’t have to pay me a salary. But whatever we make, we split. So they thought at the very beginning that that’s a smart deal for them. But it’d be I became the most successful agent in Europe. So I did tennis tournaments, Rocha Federer brought into the company. I yeah and managed a lot of assets, purchased the hockey rights in Switzerland for over 70 million. So um and and and we we became really a successful partnership at the end. And then I split again and went on my own.
Alejandro Cremades: so So then you split again, you go on your own, and then eventually, what does a skier do in Florida? how How do you land in Florida?
Dominik Senn: Yeah, I was very passionate with golf at the at a ah very young age. At the early twenties, I started playing golf and I thought, okay, I have to go in that golf business because my dream was like to be ah to play a part in the golf business because I liked that sport so much. And I started 2006, the golf division, i and moved my golf division to London and then from London,
Dominik Senn: finally to Jupiter in 2013, because we figured out that all our top players from Europe, they’re going to play on the PGA tour. They went to play there because that’s where the money is. And I started looking around for homes, renting a home for me, because I was at that time traveling back and forth a lot between Switzerland and Florida. And also in 2013, I came over with my family to implement my office here in ah in Florida. And we could not find the modern home. We thought all of the clubhouses are very dated. And also my young players, they told me the golf courses, they are suck. Normally they all look the same. We like the weather and the tax situation in Florida, but not so much the golf. And I also thought they’re all flat, they’re surrounded by houses. So I started creating a dream to build the first modern
Dominik Senn: gated golf community or I call it the golf and and a Golf and the Lifestyle Club and try to integrate the best elements from Europe with the best elements from the US.
Alejandro Cremades: So then let’s talk about that. Panther International you know is what they eventually you came up with, you know which was, as as you were alluding to, now with seeing everything outdated in Florida, even though like a lot of money, a lot of wealth, quite outdated. I guess for the people that are listening, what ended up becoming Panther International, what’s the business model, and how do you guys make money?
Dominik Senn: Your very first, like also when I started my agency, it was actually a natural reason. So when I started my agency, I wanted to represent myself better. And then when I came to Florida, I wanted to build something for me and my family, which suits to my interest, which suits very well to my lifestyle. So that was the really original reason. And then of course, I figured out quite quickly that if you want to build a one of the best golf courses in the world. It needs a lot of money and how can you finance it? So I came up with a plan to build a residential community, but just a gator community like they have a lot in Florida, but with completely and different lifestyle around and also different architecture for the homes and for the golf course. I started creating a business plan and that was before Corona.
Dominik Senn: Everybody in my agency, actually, especially from the Golf Division, they tried to convince me not doing it, because at that time, golf was decreasing. and And a lot of people burned money with golf courses. And they said, don’t do it. don’t don’t Don’t invest your money. You have never done this, and you’re not a developer. Like, stay to what you are good managing athletes.
Dominik Senn: And um that’s a little bit of my personality. if People try to convince me more and more and more because that something is done. The last home of the year is always the same way. That convinced me actually to start thinking outside the box and also try. And then Corona hit us. The first couple of leagues, we really didn’t know what that means to us. is that now ah Is that now the end of the project? Because we already purchased the at the land.
Dominik Senn: Or is that even a chance? And and and soon ah soon we figured out that this is actually the biggest chance for us because golf started increasing again because people found out that they want to spend more time in the outside. Florida became even more popular, not only because of the tax, because also people wanted to found out they can work from home remotely and they want to spend their time in the outdoors. And all these together are created actually an environment which was very helpful for us with Pantanational. And the project became really, really a big support. Also financially at the beginning, there was only European money, friends of mine and my money. And then we had two big investors from from Germany.
Dominik Senn: who believed in me at the very beginning. And then we also could find lenders in America, actually. Then it was quite easy. We had a lot of financial groups that stand in line that they stood in line and made us an offer.
Alejandro Cremades: So let’s talk about then the capital raise in this case. So you guys have raised about 300 million and that’s a combination of the equity and the debt. So how has it been through the experience of raising the money and what’s the difference here between raising the equity and raising the debt for Panther International?
Dominik Senn: Yeah, you know, I was not in the and I’m not still not in the business of raising money. So I have a friend, very close friend of mine, Michael Lauper, he’s, he is my business partner in this venture. And he was also a business partner in my other companies. And he actually yeah and comes from the financial world, he understands the financial world, and he creates the concept that I really have to give all credits to him. But I think I was setting the dream and he made He made the concept behind it. That’s how we yeah we went on a roadshow and we had some some specialists in Miami who helped us to to find the to find the loans, like because our project is also leveraged. But the equity we found in Europe and there were people that knew me before and they trusted me. yeah I could not find one single dollar equity at the very beginning because everybody was saying, okay, this is something completely new.
Dominik Senn: And people were telling me, you have never done it. You’re not a developer. And so they were very skeptical. The rhetoric go with someone who or with a company who has done that for 50 years.
Alejandro Cremades: So obviously, you know like when the investors you know are investing in a business, they invest in a vision as well. And and and in this case, you know I want to ask you, if you were to go to sleep tonight and you were to wake up in a world where the vision of Panther International is fully realized, what does that world look like?
Dominik Senn: You’re right about investors, but at the end, it comes down to two cents and dollars. They like to say that vision and people, but at the end, it’s all about the money game. But yeah, a world looks like, in my opinion, it looks like really that we are a lifestyle club there. You can come in through the gates as soon as you are allowed to go through the games, either as a member or as a as a friend or a guest of a member. I think a beautiful lifestyle world opens. You can come here and go to the gym. We have different gyms available. and There you can work out. After the gym, you shower and you go maybe to a Zoom room. We have different Zoom lounges where you can do your business calls, you can work, you can have a talk with your clients or with your business. Then after this, you go for a smooth scene in the cafeteria, read some newspapers on your iPad and maybe
Dominik Senn: Then you go back for business call, you’re heading out for a couple of holes for golf, play golf, coming back, eat something in the restaurant. And then maybe in the evening you go for a, um, you go for a a tennis match or for a pickle ball or paddle match or for a swim. If your family come back, order from food from a, uh, three Michelin inspired fine dining restaurants for your home.
Dominik Senn: and have just a great lifestyle in a very healthy and wealthy environment. But if if you then in the evening think, and I have to celebrate something, you go to our wine lounge, we have a wine tower so inspired by the Matterhorn Mountains from Switzerland and you sit in one of the lounges there with your wife or your friends and have a great glass of wine served by our sommelier.
Alejandro Cremades: That sounds absolutely spectacular. ah So Dominic, I want to talk about the um and want to talk about the past, because we’re talking about the future. I want to talk about the past, but doing so with a lens of reflection.
Alejandro Cremades: if I was to put you into a time machine and I bring you back in time, let’s say I bring you back in time to that moment where you were a skier, you know still you know competing professionally, and at that moment where you were starting to realize that there had to be a better way to do things and a way in which you would venture into the unknown, where you would be able to also control your own destiny. If you were to be in front of that younger Dominic,
Alejandro Cremades: and be able to give that younger Dominic one piece of advice before launching a business. What would that be and why, given what you know now?
Dominik Senn: That’s a very good question because I was always a dreamer. I call myself a professional dreamer because I think I know how to put dreams in reality because I think I dream my dream so hard and so many times that I program myself, my body, my brain, everything is programmed to achieve that goal. So it’s almost an automatic right from A to Z where I go. And on the way, I think And what I would do better is probably I will probably invest more money in professional advice in some areas where I will be new for me, make sure that they’re really high the best people I think sometimes because of a lack of
Dominik Senn: have enough money available for a new project. I mean, maybe I have chosen a way where we save some money and try to to go with maybe and a cheaper solution and that costs me money at the end. I would say that’s that’s probably where the most mistake happens. Other than that, I think, yeah. and As long as you can dream, you should start doing it because if you know too much about it at the very beginning, you see too many hurdles to overcome and you don’t start and the business. so and In some way, I started a lot of my business quite naive, thinking I can do that easily.
Dominik Senn: even if I was not a professional in this area or not experience or knowledge enough. But at the end, I was a quick learner and I was able to think about myself all the time and readjust quickly. But I think if you know everything at the very beginning, you probably would not have started it. If that makes sense to you.
Alejandro Cremades: and talking about And talking about lessons learned here at Dominique, um you have 120 employees. What have you learned too about team building? And then also building a really um great solid culture um underneath it to really drive that level of growth on the on the human capital.
Dominik Senn: Yeah, I am well known for a style of managing people that they give them a lot of freedom. They actually, if I choose someone and I trust him, they actually have quite a acquired ah lot of space to do it the way they think they that they should do it. I give them goals, I control the goals, and we have regular meetings, but I’m not um not a guy who who is too much controlling them all the time. But if I think the trust is not there, I’m a black and white guy. I think either trust it this employee, especially the the key people, the leaders, or not. If I don’t trust anymore someone, then I’m actually like to do a hard cut. But I’m a guy who tries to motivate people a lot. to um I see myself like a locomotive, like a train.
Dominik Senn: goes ahead and motivates them and gives give them the instrument and and the belief or that we can achieve the goals.
Alejandro Cremades: And in this case, too, I mean, you’re from from Switzerland. Right now, you’re in Florida. You’re building a business in the US. I guess there’s a lot of people that are outside of the US s that are listening to us. There’s probably a lot of people in Europe. And maybe you know a bunch of people in Switzerland, too. How has it been different to when it comes to the dynamics of the world of business and also building a company how thats that How does that, you know, how have you seen it differently from perhaps doing business or building companies in Europe?
Dominik Senn: The culture, the difference is big. I have to say, i’m I’m very, very thankful for the opportunity I have here in and in north ah North America, especially in in America. ah Because I think the people in America are much more open to people with new ideas, thinking outside the box and entrepreneurs.
Dominik Senn: As long as you have the money and you have the willingness and the power to do so, they doing don’t charge you what you have, what kind of background you have, where you come from, what family you come from, what kind of education you have. They just want to see that you are going to succeed and they look more at you as your success story than what kind of education do you have or where you come from. I would say if Switzerland had their ability or the If Sweden had enough land that they could do such a big project in Switzerland, I would not have the chance to do it. There were too many people thinking skeptical about everything. They always see an Indian behind every stone hiding. And I think in America, they are much more open. So I think that’s the great quality still of this country. A lot of people think the American dream is not existing anymore. I think what had the way they welcomed me
Dominik Senn: And the way I had the chance and the opportunity to to build that project was was unbelievable. And it has something to do with this mentality of a lot of immigration people who all come to this place to actually fulfill their own dreams. And I think that that helped me a lot. There are other and other things in Switzerland that are great, and they’re not so great here. But in terms of entrepreneurship and and creating a company or or fulfill a dream in reality or bring a dream in reality, America or or the United States is a great territory.
Alejandro Cremades: So for those people that are listening that would love to hear about Panther National, also to get in touch with you as well to say hello, what is the best way for them to do so?
Dominik Senn: The best ah way is that they they visit the website and on the website there is an email address and they can always reach me through the email address and I’m very open to connect with people.
Alejandro Cremades: Amazing. Well, Dominic, thank you so much. It has been an absolute honor to have you in the Dealmaker Show today.
Dominik Senn: Thank you for having me and I wish you a merry Christmas and happy holidays.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at al*@pa**.com“>al*@pa**.com
The post Dominik Senn On Raising $250 Million To Build A Gated Luxury Golf And Lifestyle Club appeared first on Alejandro Cremades.
Alexi Suvacioglu’s entrepreneurial story is about passion, resilience, and calculated risk-taking. Having successfully founded and exited multiple ventures, his journey is a testament to the transformative power of adaptability, teamwork, and vision.
Alexi’s latest venture, Because, has attracted funding from top-tier investors like 7GC & Co, Khosla Ventures, Almoayed Ventures, and Sprint VC.
In this episode, you will learn:
- Entrepreneurs must clearly articulate their solution’s value proposition to potential investors.
- Transitioning from a private to a public company demands transparency, scalability, and adaptability.
- Building investor confidence hinges on leadership’s track record and vision alignment.
- Tailor pitches to investor priorities, focusing on long-term growth potential and clear ROI.
- Insights from industry veterans like Alfred Mann can shape entrepreneurial success.
- Deep technical knowledge is vital for innovating in complex fields like healthcare.
- Effective leadership requires perseverance through the rigorous demands of scaling and fundraising.
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Your email address is 100% safe from spam!**About Alexi Suvacioglu:**Alexi Suvacioglu has diverse work experience spanning various companies and roles. In 2001, they started their career as a Consultant at Accenture, focusing on Marketing and Finance solutions for top-tier CPG clients.
Alexi then joined eBay in 2008 and 2009, holding positions as a Manager and Senior Manager in Internet Marketing. During their time at eBay, they led AdCommerce and managed the full P&L for eBay’s Product Ads business in the US.
In 2010, Alexi co-founded Oohilove, an entertainment eCommerce company focused on designer accessories. The company was later acquired by Entertainment Shopping AG in 2011.
Alexi then co-founded ZenDeals in 2011, serving as the Chief Product Officer and a Board Member. ZenDeals utilized machine learning and automation to generate high-quality eCommerce coupon data on the web.
Alexi also worked at RetailMeNot as a Director from 2013 to 2015 before becoming an Advisor at Theneeds, Inc. from 2013 to 2016. In 2015, they joined Yewno, Inc. as the Chief Product Officer.
Yewno is a knowledge engine that helps overcome information overload by using Computational Linguistics, Network Theory, and Machine Learning to mimic the human mind’s ability to understand concepts.
In 2017, Alexi became the CEO, Co-Founder, and Board Member of Because, a health and wellness brand focused on older adults. The company aims to become the #1 trusted brand for older adults and help them lead vibrant, independent lives.
Additionally, Alexi served as an Advisor at Innovation Endeavors, a venture capital firm, during various periods in their career, demonstrating their expertise and influence in the tech and entrepreneurial space.
Alexi Suvacioglu holds a BA degree in Geography from King’s College London. Furthermore, Alexi has pursued a Masters in Business Administration (MBA) at Stanford University Graduate School of Business.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty. Hello, everyone, and welcome to the Deal Maker Show. So today we have a really exciting guest joining us. He’s an amazing founder. He’s done it multiple times. The last company is a rocket ship you know that he’s building with actually someone that I know, an amazing guy, a friend. ah And they again, you know very inspiring combo. We’re going to be talking about the building, the scaling, financing, exiting, also how they got started with their current business. Even though at the beginning they had no money, how to really push you know on the e-commerce side of things without really having the cash or the or the or the bulletproof a war chest you know that people would need. ah But again, you know we’re going to be really having an enlightening conversation, quite inspiring. So without further ado, let’s welcome our guest today, Alexei Shubachoglu. Welcome to the show.
Alexi Suvacioglu: Thanks, Akan, for great to be here.
Alejandro Cremades: so Originally born in, let me get this right, in Australia, but you went to Italy ah quite early in your life. so How was life growing up for you?
Alexi Suvacioglu: Oh, it was ah it was awesome. So, yeah, I was ah born in Sydney, Australia, and I grew up in in Milan, Italy, where I spent most of my my childhood. You know, it’s it’s fascinating. The the experience of growing up in such a passionate and rich ah culture that is immersed in in food and sense of community as well, I would say profoundly shaped me. I was fortunate growing up in Italy that I got to play a lot of soccer.
Alexi Suvacioglu: including playing for AC Milan, which was a super fun experience. After college, went into consulting, did six years of that, focused on large CPG brands, worked a ton with Coke and Kraft Foods, for example, and then…
Alejandro Cremades: and how ah how was that How was that when it came to problem solving?
Alexi Suvacioglu: proceed
Alejandro Cremades: you know what did What did you learn about grabbing big problems and breaking them down into small problems and and going one after the other?
Alexi Suvacioglu: Yeah, I mean, you you nailed it. Consulting is ah is all about that. It’s ah um small teams with very aggressive timelines. So a lot of prioritizing and a lot of chunking. And it’s really about that roadmap, that Gantt chart. Right. I think starting your career in consulting is something that I actually highly recommend.
Alexi Suvacioglu: If I were to do it again, I’d probably do it because it’s it’s truly formative. You learn a lot and you learn also across different companies and across different cultures and different realities. And it’s really sort of, it’s like a mini ah life lesson crammed into a couple of years.
Alejandro Cremades: And what about, you you were talking about AC Milan, you know what I mean?
Alexi Suvacioglu: Yeah.
Alejandro Cremades: Obviously see playing soccer and then at a competitive level is is pretty remarkable. I know that Luca, for example, he was also your co-founder, a water polo professional.
Alexi Suvacioglu: Yeah, more hardcore.
Alejandro Cremades: I mean, really, really amazing. I mean, he’s a big guy.
Alexi Suvacioglu: Yeah.
Alejandro Cremades: You don’t want any problems with Luca, right? I mean, he’s an amazing guy too. But the I guess the the the competitiveness, that competitive spirit, how do you think, you know, it has a helped you you know in your professional career and perhaps being an entrepreneur too?
Alexi Suvacioglu: Yeah.
Alexi Suvacioglu: Yeah, it’s a wonderful question. So for me, and I still to this day, when I talk to the team, there’s a ton of similarities between playing professional sports or playing competitive sports and the business side, right? Especially when it’s involves the team, because there’s only a certain amount of things that you can do on your own to succeed, right? So it’s really about how do you best work and how do you best leverage each other’s strengths to fulfill a certain mission. um In soccer specifically, it’s ah it’s about bringing you know your A-game every day. It’s about training. So if you don’t train, it’s very hard that as a team and as an individual, you will grow. And the same thing applies to the business world. like Very rare things that we do are sprints.
Alexi Suvacioglu: It’s a marathon, right? It’s a championship, right? And the way you win is by you know doing your best every day and having people and surrounding yourselves with people that can challenge you and can stretch you every day to accomplish you know that goal.
Alejandro Cremades: So, for you after the consulting years, you decided to shift gears and you went to Stanford. And one thing that is really surprising to me was that instead of, you know, you’re obviously there, land of innovation, opportunity. I’m sure that was quite impressive for you coming from Europe because in Europe, at that point, you know, the whole startup ecosystem was almost non-existent. But I’m wondering,
Alejandro Cremades: Why? After being exposed to that, you decide to choose the corporate route or working for somebody else versus starting something of your own.
Alexi Suvacioglu: Yeah. i I felt I personally wasn’t ready at the time, right? And I wanted to learn, and this is, you know, the period in ah late 2000s from at the time amongst the best players in the ecosystem. And that’s what effectively led me to eBay, right? For me, it was, they’re clearly doing something right. It’s a juggernaut growing, you know.
Alexi Suvacioglu: triple digits year over year. So let me immerse myself in that culture and ah learn. And that’s what effectively led me there. And that seeing the inside of a company with obviously its advantages and disadvantages is what led me then to have full confidence that I could do something on my own.
Alejandro Cremades: I mean, talking about doing something of your own, at that point, all you knew was working for somebody else. Obviously, coming and being raised from Italy is a different mindset. It’s similar to the mindset in Spain, where I’m from, where it’s all about you know either becoming a banker, a doctor, or a lawyer. and I’m sure that back then, you know the whole startup thing you know was was kind of like still new.
Alejandro Cremades: ah so How did you rewire the way that you were thinking, you know the culture that where you were coming from, in order to really be okay with the idea of jumping into the unknown?
Alexi Suvacioglu: All right.
Alexi Suvacioglu: So the the leap you know from employee to entrepreneur, for me, is less about ah skill set and more about identity. right As an employee, your job is to excel within a defined set of parameters. right And those parameters are typically set you know by the person you report to or by the org in which you work in. right Whereas an entrepreneur, you need to define the parameters yourself, right? There is no one telling you how hard to push, how big to dream, and how to literally prioritize ah many things, right? um And that sort of requires a radical shift in mindset, in ownership, right? And in a lot of doubts along the way, right? And that’s something that ah
Alexi Suvacioglu: is hard, right? And that’s why when you talk to our entrepreneurs, right, they talk about this emotional roller coaster that they experience because it can be a very lonely journey and there’s up and downs. And this is where, you know, for example, you mentioned Luca, why it’s so awesome to have a co-founder. And that was also sort of a choice that conscious choice that I made in the journey in terms of like, okay, there’s only a certain amount of things that you can control and what you can control is who you work with right on what you work with, on what you work on, and where you work on.
Alejandro Cremades: So All High Love ended up becoming the first rodeo. And then you know obviously first first company, first exit.
Alexi Suvacioglu: Yeah.
Alejandro Cremades: So not bad. So what were you guys doing there? How did you get started with All High Love and and how was that journey, that first rodeo?
Alexi Suvacioglu: it was ah It was awesome. It came at the right time with the right right ah set of folks. What we did there was we built we saw that eBay was not present within or weaker in the and the segment of designer and luxury goods, especially around handbags. So we built an innovative marketplace ah focused on a very specific niche of super high-end luxury bags, so a lot of Chanel and Dior, and it was an auction model, right? And as you probably know, growing up in in in Spain and in Europe, the
Alexi Suvacioglu: Check size of these items is extremely high. So you’re talking about very high AOV, right? And therefore, sort of ah we were able to get the flywheel going super, super fast.
Alexi Suvacioglu: And within you know a year and a half, two years, ah we got a very good offer to get acquired, and we ended up taking it. So that was a little bite.
Alejandro Cremades: but was What was that like, you know the first day you know time that you were finally exposed to the full cycle as an entrepreneur? like Being able to see the build-up, the scale-up, and then finally you know reaching that finish line. how How was that? What kind of perspective do you think that gave you?
Alexi Suvacioglu: I could probably talk for hours about this. ah I mean, fortunate and lucky that you get to see the whole life cycle because every step of that poses very different and radical questions, right? ah From, you know, how fast do you go? Where do you push? Is this the right time to yeah ah let go of your baby and you know join forces and get acquired, all of that, right? So incredible lessons learned.
Alexi Suvacioglu: um very hard for me to say if I were to go back would I do it the same way because you make the best decisions at that point in time in your career right in your journey but it’s ah super fortunate because I am aware that you know the odds against any entrepreneur are you know super super thin so being able to see that whole life cycle and then being able to see that life cycle again and getting the opportunity now with a current venture to see it a third time I feel you know super super fortunate.
Alejandro Cremades: So then, as they say, once an entrepreneur, always an entrepreneur. So send deals, you know comes knocking as the next opportunity.
Alexi Suvacioglu: Yeah, I guess once addicted, always addicted, right?
Alejandro Cremades: That’s right. So what what what what what was that journey like? and And again, another exit, so quite amazing.
Alexi Suvacioglu: Yeah, always stayed true to sort of ah and the that sort of the consistency and trend across all of those is, you know, I love consumer internet and sort of spent the past 15 years focused on e-commerce. And the progression from where I loved the Zen deals was effectively with the same or very similar teams, almost same team, right? We decided to form as a group together and tackle the discount saving side of the equation. The the interesting, the first one was um a marketplace, so it’s a ah lot about ah making sure that the flywheels work. The second ones and deals was a machine learning play on coupons. So technology was actually the differentiating factor there. Right. So I got to ah get exposed to the importance of building a high engineering ah leadership culture.
Alexi Suvacioglu: to get that ah right. But again, super fortunate that you know within a couple of years, RetailMeNot at the time publicly traded, ah the largest sort of coupon player in the world came ah reached out to us and were very interested in what we were building as a technology. And ah we felt that it was the right opportunity, the right time to generate some pretty significant um exit opportunities for everybody, so and and to return quite a bit of capital for everybody. So we did that.
Alejandro Cremades: So, second transaction that you do here, obviously there’s a lot of founders that they are listening to us that are dreaming with that moment or of of reaching the finish line, know as ah of of the vision and everything that they’ve done you know with their business.
Alejandro Cremades: what What would you say are the three biggest lessons that you’ve taken away from from going through two M and&A transactions, and and and maybe what would you do differently? you know If you were to tackle another M and&A you know a third time around, let’s say now with a with because?
Alexi Suvacioglu: So the first, which is outside of ah anybody’s control is luck, right? ah In both of those transactions, we did not sort of seek the exit, but the acquirer came sort of to us, right? And that’s just sort of pure luck. What led to that? Super hard for me to sort of pinpoint my finger. Was it, you know, an article in TechCrunch? Was it, you know, or the the network, something that we posted on LinkedIn or our growth rates?
Alexi Suvacioglu: who knows, and maybe probably a factor of all of those. So I think one thing we can’t control is luck, right? But you can’t control how you show up. I think that’s a nested with within that. the The second one is to really know where you stand and who you’re competing against, right? So at at the early days, and this is with ZenDeals, we actually perceived retail muon as a competitor. So we were even, you know,
Alexi Suvacioglu: shying away from them so when they came knocking on our door we’re like okay this is like are they fishing for information right so the the lesson learned there is keep an open mind because where you may see a threat it may actually be an opportunity right and um that the end within that and this is a cross having worked there across both you know publicly traded companies and and and and smaller companies, you tend to, or at least so far, you tend to overestimate
Alexi Suvacioglu: the sophistication of companies, right? So when I’ve when i’ve you know worked for these larger organizations, several times I was underwhelmed by, oh, is that all they do? You expect them to have you know super sophisticated algorithms or super sophisticated dashboards, but it’s pretty rudimentary once you’re on the inside. So um this is sort of what led us in that particular instance to, like Technology can be a heavy differentiator, right? And we actually underestimated how much of a differentiator it can be because post-acquisition we realized, oh, wow, you know we were pretty far ahead. So the lesson learned there is there’s always a good moment to sell, right? And you could either sell too early and you know leave money on the table, or you could try to sell too late. But as the company grows, there’s always a smaller pool of acquirers, typically, right?
Alexi Suvacioglu: So that is something that any entrepreneur should keep in mind. You know, if you want to sell your company and want to make numbers up for a million, there’s a lot, a lot of acquires. Ten, less so. A hundred, it starts to be maybe, you know, 10 or 20. And then if you go past that, you’re really talking about two or three. So just be mindful of of that. ah The last thing I’ll add is you always know the entrepreneur You will know more than the acquirer as to where the business is at and the opportunities to you know accelerate whatever you’re doing through the acquirer. So I think a key point and the last thing I’ll mention here is
Alexi Suvacioglu: for the acquire it’s they’re just starting the relationship right so and it really is a a relationship because an entrepreneur is like oh i’m gonna exit it’s like no they’re acquiring an asset a team a technology right a business uh and for them they want to know you know how is this business going to grow over the next you know two four years so whereas an entrepreneur thinks about the end of that journey the acquire look at the beginning and there’s also seeing middle ground with besting and all that stuff as they try to sort of maximize the returns for everybody. But ah it’s it’s that lens that leads to the greatest upside for everybody.
Alejandro Cremades: So after send deals, which was the um the the last exit, basically you helped in obviously doing the vesting and resting, as they would say, with RetailMeNot, which was the acquire. But then after that, you helped other founders you know in building their business. And eventually, Luca comes knocking, and you guys come up with the idea of because. So how did because come about? and And yeah, what were the sequences of events to bring it to life?
Alexi Suvacioglu: So in interesting, Luca and I are culturally pretty aligned, both grew up in Italy, actually with ah grandparents in the room next door. right And this is sort of pivotal. um The current venture called because it was actually born out of a desire to create meaningful solutions for older adults. right um This is a very unsexy demographic, and that’s what attracted us to it. I mean, if you look at the trends,
Alexi Suvacioglu: The world is aging. We’re aging every day. As we’re talking, religion is getting older. ah And if you just take a step back in the US, 10,000 people every day turn 65 years old. right And this is not only a US issue. right It’s a European issue. Look at Spain. Look at Italy. Look at Japan, Asia. There’s massively aging demographics and very few, if almost not nobody is myopically and or rentlessly focused on ah this demographic. So when you take a step back, what attracted Luca and I to this opportunity is that we felt growing up with aging grandparents, we saw the challenges that they had in their lives. And we felt that it was at the right moment in time to start building a company, a brand, a platform.
Alexi Suvacioglu: that can help them in the aging ah process, right? And the the aging of populations is one of the most profound societal changes that will happen in the next couple of decades. And to this date, we are still wildly ah unprepared unprepared for that.
Alejandro Cremades: So for the people that are listening to um get it, what ended up being the business model of because? How do you guys make money?
Alexi Suvacioglu: the We went on a pretty wild exploration. Once we locked in the demographic, we started thinking, as like how can we best you know build a company and a business that does well and does also good good financially. We spent a ton of time interviewing ah older adults and trying to uncover you know their needs, their desires, which went into their homes, there’s a lot of sort of ethnographic ah user research. And ah what emerged was the probably most unsexy category, which is that of incontinence. So bladder protection products, right? um We didn’t know much about that time. And the more we we looked into it, the more we realized that it’s a
Alexi Suvacioglu: highly recurring purchase. It’s a need, right? And if you take a step back, it impacts 40% of older adults in the US, and it’s a multi-decade need. You know, talk about baby diapers. It’s something that many of us are familiar with, right? um Typically, you want your kids to graduate from a baby diaper after three years.
Alexi Suvacioglu: With older adults, right it typically starts impacting. Butter lakes start to happen in mid to late 60s. And it lasts for the entirety of of of of the life of older adults. There’s a lot of stigma, so it’s one of those taboo topics. right And if you see the changes that have happened in so other verticals, whether it’s you know shaving, even your sensitive parts, whether it’s menstrual products that now are out in the wild and you know the conversation is starting to change. So we thought that there was an opportunity to innovate with and for older adults, starting with this very myopic set of products.
Alejandro Cremades: So in this case, I mean, you guys didn’t start with much cash. So how did you weather you know the challenges you know without having you know that much capital at the beginning?
Alexi Suvacioglu: Yeah, we we we purposely decided to put some of our money, but not a lot because we wanted to fail fast and cheap. right And we wanted to get an understanding of the most important questions as quickly ah as as possible. So you know there’s this adage. Some people call it fake it before you make it. right Some people call it the painted door test. But literally for the first, I would argue, nine months.
Alexi Suvacioglu: right We came up with a list and said, okay, these are the most important questions from, you know, customer acquisition costs, to retention, to cross-sell, to, you know, unit economics, you name it, that will dictate our ability to to grow or not. And all of the rest is just execution. So let’s just focus on this and concretely we didn’t even have any manufacturing relationships. So we found we went to Malibaba, we found the most random older adult product, and we said, this is it. We’re going to sell this. It’s less about the product. We want to know, are older adults willing to buy these items? Are they willing to keep buying these types of items? And let’s but start getting feedback.
Alexi Suvacioglu: ah we don’t You don’t need a 3PL. You don’t need a fancy website to do it. All you need is you know a phone number and our iPhone. So literally for the first couple of months, Luca and I in my garage were you know Packing boxes, running the ads, ah picking up the phone when it was ringing, delivering the boxes to you as to UPS. So I think it’s very important for any founding team to have a 360 degree visibility into the business, because once you do that, it helps you understand
Alexi Suvacioglu: some of the friction points, where you can double down what’s working, what’s not working, right? So over time you have different challenges where you need to let go, but at the beginning you need to be, you know, relentless and myopic in owning the full customer experience and trying to get those questions early on. We knew we could get manufacturing relationships if the business was there. We knew we could scale customer support if the business was there. So those were not the most important questions to answer.
Alejandro Cremades: I know you guys have also raised over $70 million, bucks um which is public. um But I want to ask, how has it been through the journey of raising that kind of money for a company like this? What have been the life cycles and the financing cycles you know um like to to to raise this kind of money?
Alexi Suvacioglu: Our journey has been ah you know both challenging ah and rewarding, right? As a VC-backed company, ah super proud that we’re working with incredible investors who share the same vision of addressing this underserved yet vital demographic, right? So fortunate to ah work with the likes of Mike Volpe at Index Ventures and David Wyden at CoSLA. You know, those are sort of one of the largest investors on our cap table.
Alexi Suvacioglu: But if you take a step back, it’s actually outside a small pool of folks that get it. It’s shocking how many investors, even to this day, don’t care about this slice of the population, right? Or just don’t focus on it, right? So many VCs overlook the senior demographic, ah failing to recognize what is becoming an immense potential, right? ah So the challenge is investors always chasing the next hot thing, right? The older market hasn’t yet become that hot thing, right? Even though now with some of the healthcare care initiatives, they they’re starting to ah to to wake up. So
Alexi Suvacioglu: What we did to overcome this is you know numbers and metrics in a nutshell. right um so A key focus during all our fundraising efforts has been demonstrating the scalability of our of our model and the deep connection that we built with our customers.
Alejandro Cremades: So, as you were saying, I mean, those those investors are like big time investors, right?
Alexi Suvacioglu: so
Alejandro Cremades: And and you know obviously, when when investors like that, ah employees or even customers, now that are getting really excited about the future that you’re living into, they’re betting on a vision.
Alejandro Cremades: So, I can say, when it comes to the vision, if you were to go to sleep tonight and you wake up in a world where the vision of because is fully realized, what does that world it look like?
Alexi Suvacioglu: Yeah. For us, it’s becoming the most trusted brand for this demographic. So when you say you know vacuum cleaner, you think Hoover. When you think tissues, you think Kleenex. For us, it’s when you think of a brand that can help our parents, grandparents. You think of because this demographic has a variety of of of of needs and desires, right?
Alexi Suvacioglu: ah they do not want to age in a skilled nursing or memory care facility. It actually, once they go to these types of places, it shaves years of their lives. So the dream for us is to enable older adults to live the life that they want to live and help in the background by delivering products and services that they need. Because in many cases, they can’t ask their next door neighbor because they don’t know. They can’t ask their children, right? So they’re literally left to their own devices. And the solutions and products and platforms that are out there today fail, this demographic.
Alejandro Cremades: So we’re talking about the future here, but I want to talk about the past and doing so with a lens of reflection. So imagine I was to put you into a time machine. and I bring you back in time. I bring you back to 2010. That moment where you are thinking, hey, I think i I have a good understanding of what I could be doing you know on my own as an entrepreneur, and and maybe it’s time to go at it. Imagine you’re able to be right there with that younger Alexia, and you’re able to give your younger self one piece of advice before launching a business. What would that be and why, given what you know now?
Alexi Suvacioglu: For me, it would be just just do it, honestly, right? ah just do it and dream big. ah It’s really about the the journey. And unless you know you can have a million business plans, but it’s when the rubber hit hits the road that things get real. right Many folks, and I was also partly tempted to like, oh, can I still do corporate life and do something on the side? right And in many cases, you need to like cut those ropes and fully launch yourself
Alexi Suvacioglu: ah wholeheartedly into your next endeavor. right which um you know That’s something that I would recommend everybody consider. ah Very hard to do multiple things at the same time. and to yeah If you do it, do it well. Do it wholeheartedly. Put your A-game out there, um as we touched on before.
Alejandro Cremades: Love it. For the people that are listening that would love to reach out and say hi, or for those that would like to learn more about because what is the best way for them to do so?
Alexi Suvacioglu: It would be on ah on on LinkedIn. We’re very active there through our company page as well as through my personal page there. yeah
Alejandro Cremades: Amazing. Well, Alexei, thank you so much for being on the Dealmaker show today. It has been an absolute honor to have you with us.
Alexi Suvacioglu: Thank you, Alejandro. Awesome.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at al*@pa**.com“>al*@pa**.com
The post Alexi Suvacioglu On Raising $70 Million To Help Older Adults Live Independent Lifestyles By Delivering Essential Products appeared first on Alejandro Cremades.
When Sami Khoreibi took his first company public at just 26 years old, he marked the beginning of an extraordinary entrepreneurial journey. His story spans industries, continents, and cultures, offering valuable insights into building, scaling, and innovating businesses in dynamic global markets.
Sami’s latest venture, Wisewell, has attracted funding from top-tier investors like BECO Capital and Digital Rain Venture.
In this episode, you will learn:
- Sami Khoreibi’s diverse background helped him embrace open-mindedness and creativity in his entrepreneurial pursuits.
- At 26, Sami took Candax Energy public, showcasing the value of learning quickly and taking bold risks.
- Founding Enviromena, Sami identified opportunities in the nascent solar energy market in the Middle East.
- Breaking into new industries requires fluidity, as seen in Sami’s pivot from oil to renewable energy.
- By securing international venture capital, Sami bridged regional startups with global funding opportunities.
- Success at both Candax and Enviromena stemmed from assembling skilled, complementary teams.
- Sami’s bold moves, like launching the Middle East’s first solar company, demonstrate the importance of taking calculated risks.
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iTunesGoogle PlayStitcherTuneInRSSSoundCloudSpotify For a winning deck, see the commentary on a pitch deck from an Uber competitor that has raised over $400M (see it here). FREE DOWNLOADThe Ultimate Guide To Pitch Decks Remember to unlock for free the pitch deck template that founders worldwide are using to raise millions below.
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Your email address is 100% safe from spam!**About Sami Khoreibi:**Sami Khoreibi has been an entrepreneur, investor, and leader in the sustainability and technology sectors for over 18 years, driven by a passion for creating positive impact and value through innovative solutions and partnerships.
Sami is the Founding Partner of Incubayt Investments Ltd, a platform that supports and invests in startups at the intersection of sustainability and technology. Incubayt has made over 25 investments and provides 360-degree in-house support to help founders scale their ideas.
Through his work at Incubayt, Sami is the Co-Founder and Executive Chairman of Wisewell, a sustainable technology company disrupting how we drink and deliver water by transforming tap water into pure, fresh, and mineralized water while utilizing data to optimize water quality water and user retention.
Previous to Incubayt, Khoreibi was the Founder and CEO of Enviromena from 2007-2018, scaling the company to become the largest builder and operator of solar plants in the MENA region.
During his tenure as CEO, Sami took the company from an idea to operations in nine countries, with gross revenues of over $750 million, and led the acquisition of the business to a UK-based pension fund.
Sami has received multiple awards and recognitions for his leadership in sustainability, including being named a Young Global Leader by the World Economic Forum and a Top 5 Mid-East Innovator by MIT.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty. Hello, everyone, and welcome to The Deal Maker Show. So today, we have a really exciting founder, a founder that has done it you know a bunch of times. um you know We’re going to be talking about the building, scaling, financing, exiting you know as well. um you know In this case, he was ringing the bill, the bill you know IPOing his company at just 23 years old. And again, we’ll talk about you know how to think about ah getting you started, how to you know sch switch perhaps you know like a little bit more like the the the the problem that you’re tackling, ah how to deal with projects in the Middle East, ah also how to deal with projects also in North America. So in this case, you know there’s all types of geographic locations that our founder you know really covered. um But again, you know brace yourself for a very inspiring conversation. And without further ado, let’s welcome our guest today, Sami Kurebi. Welcome to the show.
Sami Khoreibi: Thank you, Alejandro. It’s a pleasure to be on.
Alejandro Cremades: So originally born in Saudi Arabia, but you came to Toronto quite early. So give us a walk through memory lane. How is life growing up for you?
Sami Khoreibi: ah You know, it was a very pleasant life, and you know I’m very thankful for it. So I’m born in Saudi Arabia. I’m of Palestinian descent. And at the age of three, I moved to Toronto, where I spent my formative years.
Sami Khoreibi: grew up in Toronto and in in the 80s and 90s, very safe, very comfortable city, extremely multicultural. And I think all of those different factors really did ah play a role in in my development, um getting the exposure to ah many different cultures being kind of in an education ah system and environment that ah really did promote entrepreneurship in many ways. And to be honest, it’s actually growing up in a household that really promoted entrepreneurship um
Sami Khoreibi: allowed for me not to look at it as a big deal to try to start something. um There was always that you know that enthusiasm and that support ah within my house for my parents um and then actually from the broader system to to allow to to to really take on things from a very young age.
Sami Khoreibi: in terms of trying new things, trying new companies or you know selling books on the street corner or doing those kinds of things from a very young age and and and realizing that part of it really is within kind of your DNA and and and the nurture that occurs as well.
Alejandro Cremades: What about a you know the entrepreneurship path that you took you know really early on? i mean Literally, like right after university, you got started right away. i mean where Where would you say that that entrepreneurial drive comes from for you?
Sami Khoreibi: You know, I think it was, um we call it entrepreneurial drive, but to me it was just the baseline. I grew up in, my father was an entrepreneur, um you know, on my mother’s side, my uncles, my grandparents, all ah had the entrepreneurial gene as well. And I think a lot of that was also, they moved around a lot in their life, I think based kind of on um you know their their history. And they had to start new ah a few times. And in order to do so, ah you really had to kind of build something yourself. And it was just all around me. And and and for me, entrepreneurship was just that that that expected path almost. um And you know I really did embrace it. And where it’s often viewed as a challenge or something that’s very different, for me, it seemed to be the the path that was almost written.
Alejandro Cremades: So let’s talk about that moment you know when you got started you know with the first company right out of after university. How did that happen?
Sami Khoreibi: So you know I think it was the right time and and and the right place. I graduated from university and in Ontario. um And ah shortly after, I was having a coffee with with a gentleman who ah was an old friend of of the family’s who was involved and in an incubator focused on building resource companies.
Sami Khoreibi: um We had a conversation and I was just very keen to to get involved. I thought that that that that office itself was a very entrepreneurial environment. And that um allowed for for for me to, from very early days, look at the opportunity set that was out there in terms of the resource market. ah Toronto um has always been a ah market that’s very focused on resources, the capital markets, whether it’s early stage exploration for mining, all the way through to oil and gas production,
Sami Khoreibi: Typically, within Canada, we had a very, very mature market in terms of the capital structures and and the capital flows. um And i so I said, you know, I like come from a Middle Eastern background, let’s look at some opportunities of assets in the Middle East. And through our network, we’ve identified some gas licenses in Tunisia. um And it was a very, very obvious arbitrage. The capital markets in Canada were willing to um buy these assets at a multiple than what we could acquire them for in and in in Tunisia at the time. And that was really the catalyst for the company. So my myself and a few of the co-founders, two other co-founders I should say, decided to start Candax in 2004.
Sami Khoreibi: At that point, oil was trading at around $25 a barrel. um The capital markets for resources were very active and quite hot, specifically within Toronto. And I was fresh out of university, as you said, right? A 26-year-old bright-eyed and bushy-tailed and thought, I’m going to get myself involved and into this this journey, not really knowing what was going to be ahead of me.
Sami Khoreibi: where I was very fortunate was my two partners were um well into their careers, ah very experienced entrepreneurs and within the capital markets. And that allowed for me to learn and very often be a fly on the wall, just absorbing what was being said in the room. And to be frank, very often learning on the go, you know, sit down, have a meeting, take notes, and then go actually translate what those notes meant for myself to really understand what was going on. And it was,
Sami Khoreibi: The quickest and the most in-depth, I could say, and MBA one could possibly get is is is to really get involved in that sector. and From 2004, from when we founded the company until 2006, when we IPO’d, we had a real convergence of events that really benefited what we were doing.
Sami Khoreibi: First of all, we were in a market where oil had gone from $25 a barrel to inching on $100 a barrel. um Second of all, the capital markets were getting hotter and hotter in terms of investments within resources. And and third, we were very able to build an ideal team around everything based on the experience and the network that was around ah the other founders and and myself.
Sami Khoreibi: um And that was very unique. you know I don’t think that happens every day. And so going kind of from 2004 idea, 2006 IPO, that was my first experience in in in entrepreneurship and founding a company. um And it was you know I think it was quite surreal because it all happened so fast. It kind of felt like I was taken by a tornado and then landed in in this kind of incredible experience of of of of listing a company.
Alejandro Cremades: Now, in your case, I mean, listing the company, you were 23. So ringing the bell you know around that age is quite remarkable. you know Being able to see something that at the peak you know was about 250 million of a business is really spectacular. But I guess that you know it also gives you that thing thinking of maybe like feeling out of place. no i mean how how How was that experience you know in that regard as well?
Sami Khoreibi: Look, I think you you you touched on it perfectly, Alejandro. I think yeah throughout the process, even even before the listing, in in many occasions you do have a bit of an an imposter syndrome, right? so you’re not not realizing or not Not knowing really what’s going on around you perfectly at the time and having to go back and learn. um Always being the youngest guy in the room.
Sami Khoreibi: and and and and very often ah feeling out of place because of that, right? I think the specifically the oil sector and and and the energy business at that time was kind of an an older business for lack of a better term as well in terms of who was working in it and and and and kind of the ah gates that were around it. um And you know that made me feel out of place to some extent. But at the same time, it allowed me to be this kind of unique individual in the room that was very differentiated from from my peers and my colleagues around me, which allowed me to to learn so much from each of them, whether it was on the legal side, on the capital market side, um on the general deal structures. It was just such an intense learning experience. And coming to ringing the bell and being surrounded by the bankers, the lawyers, my co-founders,
Sami Khoreibi: ah partners and investors within the deal. I did feel like I’m here, maybe I shouldn’t be here, but I am here and I was so grateful to be there and I think it really shaped how I started building things and approaching things in in future companies as well.
Alejandro Cremades: So talking about future companies eventually, you know as they say, once an entrepreneur, always an entrepreneur. So eventually the next chapter came knocking and that was with Enviromina. So how did that you know unfold?
Alejandro Cremades: Because obviously you’re coming out from the first chapter. It sounds like it was the perfect storm, you know young, you know hungry still.
Sami Khoreibi: Mm.
Alejandro Cremades: How did the whole idea of Enviromina come to mind and and why did you think it made sense to to take that one on?
Sami Khoreibi: So in 2006, I was on um one of my business trips um for business development specifically. Our company, as I mentioned before, was was looking for assets in the Middle East, North Africa um under this i and under this the thesis of the arbitrage, being able to pick them up at lower cost than the capital markets were were giving us for them.
Sami Khoreibi: um And in 2006, I traveled to Abu Dhabi and met with what was, ah you know at that point, still a nascent mobadilla, which was the sovereign wealth fund.
Sami Khoreibi: and um When meeting with them, I was meeting specifically with their energies and utility team. I ah had a conversation with that team about understanding if they had any assets that were too small for them, or they had seen any assets that were too small for them, but would really make sense for for a company like Candax to acquire or to at least you know do some further diligence on. And they didn’t have assets of the sort, but they said, look, we are um in search of some energy entrepreneurs right now.
Sami Khoreibi: because we want to make Abu Dhabi a global epicenter for renewable energy. And at that time, there was zero renewable energy across the Middle East and North Africa. It was a very foreign concept to to have that. And as I mentioned before, I was coming from an oil and gas background. And typically, that was a kind of older market. It was less emphasis on technology and innovation and more emphasis on transactions and growth and scale. But it was ah it wasn’t a tech industry per se. And I grew up
Sami Khoreibi: obsessed with technology. I was always kind of a bit of ah a tech nerd at heart. um And I started looking into renewable energy and and solar energy specifically. And it was this beautiful marriage of technology and energy. And it was changing at such a rapid pace. So I had the conversation with with with the folks in Abu Dhabi and said, you know thank you for for the opportunity. i’m I’m going to go back to Toronto, it was January of 2006. And I’m going to think about this more. I landed in Toronto, it was 25 degrees in Abu Dhabi, minus 25 degrees when I landed in Toronto. And I thought, you know, maybe it’s an opportunity to to move to a sunny, warm place to start a solar company. And I was fortunate that my roommate and very good friend ah to this day,
Sami Khoreibi: was a solar engineer. So I asked him, you know, would you be interested in moving to Abu Dhabi where he’s never been and starting a solar company? He said, sure. We brought on board one more co-founder who is a good friend of of both of us too. And we had a great dynamic. Each one of us really had our um our talent and our approach to things, which was incredibly symbiotic.
Sami Khoreibi: and by two thousand seven By July 2007, I co-founded andviroramina We raised around $5 million dollars of seed funding at the time. we weren’t Funding was not labeled in seed or Series A or and anything along those times. we just We were able to raise some capital at a price round from from the get-go and started the first solar company in the Middle East, North Africa in 2007 in Abu Dhabi, which was you know an incredibly exciting yet incredibly daunting task.
Alejandro Cremades: So then, let’s talk about the um you know what ended up being the business model there. you know How are you guys making money with Enviromina?
Sami Khoreibi: So you know for starters, we we went there and said we want to be a solar company ah based out of Abu Dhabi focused on the Middle East region. um And to be perfectly honest with you Alejandro, we didn’t have an incredibly defined business plan because the market itself was so nascent that we had to be fluid with the direction it took.
Sami Khoreibi: So we started actually with the idea that solar lighting could be the the the correct approach to entering and and getting a foothold into the market while the policies and the larger solar projects came into play.
Sami Khoreibi: um and ah We moved and we you know brought in some demo units and hired a small team around that. And um in less than a year, we ended up receiving a ah tender to bid on the first solar plant in the Middle East, North Africa. And that was much larger than anything we had put in our predictions. And you know we were, as an internal core team,
Sami Khoreibi: um definitely going to be biting off more than we thought we could chew by going after this project. But again, being, I think, 27, and again, very new to the market and everything, we decided, you know what, let’s just do it. Let’s just go for it. Let’s bite off more than we think we can chew and make it happen. And we bid on the project. We were able to bring on board a partner that brought um a lot of the relevant experience. They were, at the time, the largest solar manufacturer in the world based out of China, accompanied by the name of SENTEC. And together in consortium, we bid on the project and we won it. And it was just, you know I think, probably one of the most exciting days of our journey and our lives being going from kind of zero and three guys and an idea to
Sami Khoreibi: um having being the signatory on a $50 million dollars contract ah to build the first solar plant in the Middle East, North Africa. But at the same time, it was also an incredibly scary thing to sign that contract because we had 10 months to figure it out. um And by figuring that out, that means build a team.
Sami Khoreibi: ensure that you could do all the financing and bonding and funding and get the first solar plant in the region delivered and installed. In a time and in Abu Dhabi in 2009 was booming on all fronts. So access to resources, contracting, housing, you name it was very, very challenging to to to do. So it was it was a real Convergence of challenges and opportunities that were, I would say to this day, the real company builder. um That’s how we established the core team. and And that’s what kind of took us to the next level as an organization. And um in 2010,
Sami Khoreibi: um We were the first recipient, I would say, of venture capital as a company out of the UAE of international venture capital. So there was no such thing as a VC ecosystem in the Middle East and the Gulf at that point, which seems like a very strange thing now because Virtually all companies and capital allocators come to the region to to try to raise capital. Back then, there was there was our backyard did not have any available capital. We as a UAE company had to go abroad to try to raise funding for our business. And so ended up with multiple road shows in the US, Canada, throughout Europe, and ended up attracting at the time the largest clean tech fund out of Europe.
Sami Khoreibi: and the largest clean tech fund out of the US. And both became significant minorities in the business. And that itself, again, we kind of went from I went from an experience of very quickly going from idea to IPO,
Sami Khoreibi: This was 2009. The capital markets had just gone through the crash. The amount of time it took to raise, um the challenges it was to to raise a much smaller amount of capital ah took almost the amount of time it took us from idea to IPO in the previous cycle. um And that was kind of my first lesson of the importance of timing and the importance of understanding when you do and you can’t have a bird in hand, make sure you do it.
Sami Khoreibi: and and you know ensure that you you you have the necessary funding to be comfortable, to to really have continuity within your business and deliver on operational success as well.
Alejandro Cremades: I mean, in this case, it ended up being you know being quite a success with Evar Amina. I mean, the company got acquired, and there was like a multiples there you know on return to the investors.
Alejandro Cremades: I guess, what was that process like? Because the last company, you did the IPO, so it was a different type of liquidity event. you know On this one, essentially, it went it went through an acquisition.
Alejandro Cremades: How was that first time you know acquisition experience for you? ah did that How did that come about?
Sami Khoreibi: you know it it was ah It was a very unique experience. So you know I think first and foremost, when we when we made our initial business plan, we had a three-year idea to get to exit. Again, so the the expectation, we were I was kind of spoiled from the first experience and in the context of expectations. Second time around, it took 11 years. um And I was the CEO of that business. So it really was myself and my co-founder’s baby.
Sami Khoreibi: um we would live, breathe, eat, sleep in Vyromina on a daily basis. And and in any ways, I felt like I was almost defining my character. um right And it was a very exciting journey as well. We built the first solar project in seven countries across the region. And and so you know pioneering time and time again in terms of enabling and and and and being really part of the the seeds of creation of multiple markets that now are very mature, that are doing gigawatts of scale um and and you know kind of being part of that foundation of it and proving with technology
Sami Khoreibi: um regulation and and coordinating with all the different bodies to get the projects over the line was was a fascinating experience. And um we were able to bring on ah Mustar, which is wholly owned by the sovereign wealth fund of Abu Dhabi at the time, as our as our largest minority shareholder as well. So we really had a dream team of shareholders in the business. And despite it taking 11 years, they sat on our board, they provided incredible advice um And they really were also a critical part of our success as an organization because we were able to go to, um you know investors that had experience in sustainability and investors that truly had in-depth understanding of our region. um And they all respected each other in a way which was extremely cohesive and also really respected the autonomy of us as the management team to go deliver and do and our thing and do our thing. They
Sami Khoreibi: There were checks and balances and all the structures that required to get things done. But ultimately, as long as we worked within those parameters, um we were able to run through walls and get projects done. And and and by the time we were acquired in 2017 by a pension fund out of the UK.
Sami Khoreibi: um We had operations in nine countries. um We had around $750 million dollars in revenue. And we were a business at scale. um and And being part of that ah from from day zero was was was incredible. um But then selling that, as you just asked, what was it like to to be acquired? Very different feelings than the listing. I think probably a function of two things. One was my time and involvement in this one was
Sami Khoreibi: with so much more depth. ah And the second thing was, once you’re acquired and you have a single shareholder, you really need to kind of answer to another strategy. Or you need to, you know, I think you’re you’re your beholden to um whatever the kind of you know investor or or acquirer really wants as their strategy, whether it’s something that you’re aligned with or not. um and I had one year of of kind of having to run the business that you know that was my baby but now had grown and and and had gone on to its own.
Sami Khoreibi: and that was ah you know I think that was a very unique experience as well. Interesting because again, as I mentioned, we went from venture capital to pension capital and understanding the ah different expectations and um attitudes of all the different kinds of investors. I knew ah at that point that um it was it was know my my core expertise and and where I want to sit again is going back to day zero and going back to day one. um So a year after the ah year after the acquisition of the business, myself and the co-founders all stepped away from business and and and I started incubating investments. um The reason I started incubating and I think one of the things I told myself right away when I started incubate was
Sami Khoreibi: I want to be an investor. I was very fortunate to have had two successful exits under my belt at that point, which enabled me to really um take a look at the opportunity of interesting early stage businesses with a focus on the region, with a focus on sustainability and technology, try to seed bright young people with big ideas um and and provide my experience to the extent that I can to help them turn their ideas into businesses and hopefully into scale-ups as well. ah And through Incubate, I’ve made around 30 investments, um have been a very active investor in many of those businesses. and
Sami Khoreibi: have really tried to to support them across multiple fronts. Seen a few exits already. We’ve seen you know some some very interesting additional funding rounds and some big successes within the portfolio since starting it in 2019.
Sami Khoreibi: um bye
Sami Khoreibi: I would invest in these businesses. I would sometimes be a bit jealous of the entrepreneurs as they were telling me about their day-to-day and about their journeys. And I couldn’t scratch the edge by just being an investor anymore. And that got me back into venture building. and in two thousand and one um We built a venture out of Incubate, which I’m effectively founding and and and being a very, very active part of the team, ah named Wisewell, which is a company that is really trying to disrupt the way we drink and deliver water. um Today, 600 billion plastic bottles are thrown out for the bottled water industry. um It is a $400 billion dollars sector growing at a 6% CAGR.
Sami Khoreibi: um And we’ve learned that it’s bad for the environment. It’s bad for our wallets because it’s expensive to drink bottled water. And over the past couple of years, we’re realizing that that’s actually bad for our health as well. um So it reminded me of kind of that perfect storm that was happening within solar energy.
Sami Khoreibi: The cost of solar went down, carbon emissions were a real issue, and people realized that, hold on, there’s a better way to build energy. um And that’s what we’re trying to do now. There’s a better way for people to drink and deliver water ah through incredibly intelligent purification systems.
Sami Khoreibi: And we’re going after a very fragmented market and trying to build something from day one, which is a scalable technology business that’s kind of a marriage of venture capital with a private equity mindset to scale and create yield and in very short order.
Alejandro Cremades: So if you were to go to sleep tonight and you wake up in a world where the vision of why Israel is fully realized, what does that world look like?
Sami Khoreibi: um There’d be a lot less plastic in landfills in the ocean, um and I’d say equally, if not more importantly, in our bodies. um People would be spending less on bottled water. There are parts of the world where ah people are spending a significant percentage of their disposable income on hydration.
Sami Khoreibi: where what is coming out of the tap in virtually every country in the world is 95% there. We need that 5% refinement at the point of consumption, at the point of use, to turn any kind of tap water into the highest quality mineralized water. And today’s technology exists. It’s a function of packaging it and you know, by effectively selling it correctly. And for whatever reason, you know, we haven’t seen many examples of that in most parts of the world. And we think yeah where this problem lies is a tremendous opportunity. um So that world would see, you know, a $200 billion dollars purification market and a much smaller bottled water market as ultimately the the use case for it declines ah further and further.
Alejandro Cremades: So now I put you into a time machine, Sami, and I bring you back in time to Canada, to Ontario, to that moment where you were graduating, let’s say, May 2003. And you’re able to have a chat with that younger self, that younger Sami that, you know, saying that, thing you know, thinking, hey, i’m I’m thinking about maybe doing something you know of my own.
Alejandro Cremades: and you’re able to show up and have a chat with that younger self, and you’re able to give that younger self one piece of advice before launching a business. What would that be and why, given what you know now?
Sami Khoreibi: I would tell my younger self that it’s absolutely critical to take a step back sometimes and breathe and and look at things from outside looking in. um Very often when you’re a founder and you’re with your co-founders and you’re really in the weeds within a business, you will make assumptions on behalf of other people because you’ve convinced yourself so much. You think that’s actually what the whole world thinks. And very often you need to be critical of your own views.
Sami Khoreibi: um and really ensure that you don’t get so caught up and in in the weeds of what you’re doing that you’re missing some of the other things that are going on out there. um And although we are very fortunate and we built scalable businesses across geographies and sectors, um you know the scale of that opportunity could have been bigger had my younger self-known ah that you know you don’t just want to look at what you’re doing and be the best at that. There could be some broader opportunities to go from millions to hundreds of millions or hundreds of millions to billions in terms of revenue, market cap, whatever the case may be.
Alejandro Cremades: So, Sammy, for the people that are listening, I would love to reach out and say hi. What is the best way for them to do so?
Sami Khoreibi: So I am quite active on LinkedIn. My name is right there, so please add me. i I accept every single invitation. And then drop me a note, and I’d always be more than happy to to chat with aspiring entrepreneurs, interested investors, or people who just want to have an interesting conversation.
Alejandro Cremades: Amazing. Well, hey, well, Sammy, thank you so much for being on the Dealmaker show today. It has been an absolute honor to have you with us.
Sami Khoreibi: The honor was mine. Alejandro, I appreciate your time.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at al*@pa**.com“>al*@pa**.com
The post Sami Khoreibi On Taking An Energy Company Public At 26, Building A Renewable Energy Business, And Developing Tech For Sustainable Drinking Water appeared first on Alejandro Cremades.
In the ever-evolving world of entrepreneurship, few journeys are as captivating as that of Lárus Ásgeirsson. Born in a small Icelandic fishing community, Lárus has transitioned from a mechanical engineer specializing in geothermal energy to a global business leader.
His latest venture, Laxey, has attracted funding from top-tier investors like Blue Future Holding, Farvatn, Kjartan Olafsson, and Kontrari.
In this episode, you will learn:
- Your startup fundraising pitch must succinctly articulate your vision, value proposition, and market opportunity.
- Tailor your pitch to align with each investor’s expertise, interests, and investment thesis.
- Craft a narrative that conveys passion, credibility, and the problem-solving journey behind your startup.
- Use metrics and financial projections to build trust and demonstrate growth potential.
- Investors bet on exceptional teams with the skills, experience, and resilience to execute.
- Address potential concerns with clear answers on risks, competition, and scalability.
- Rehearse your pitch to deliver it confidently and adapt to live feedback during presentations.
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iTunesGoogle PlayStitcherTuneInRSSSoundCloudSpotify For a winning deck, see the commentary on a pitch deck from an Uber competitor that has raised over $400M (see it here). FREE DOWNLOADThe Ultimate Guide To Pitch Decks Remember to unlock for free the pitch deck template that founders worldwide are using to raise millions below.
Access The Pitch Deck TemplateUnlock the pitch deck template used by founders to raise millions. Just enter your email below.
Your email address is 100% safe from spam!**About Lárus Ásgeirsson:**Lárus Ásgeirsson brings over 30 years of diverse leadership experience in aquaculture, agriculture, and food production.
He currently serves as Chairman of the Board at LAXEY, where he is dedicated to advancing sustainable land-based salmon farming. Laxey plans to produce 30 thousand tons of land-farmed salmon.
Throughout his career, Lárus has held several important roles, including General Manager of the Shrimp Business Unit at National Aquaculture Group (NAQUA, one of the largest integrated shrimp companies) and General Manager of the Poultry Division at Almarai (the largest food company in the Middle East).
He has also served as CEO of both Icelandic Group hf and Sjova Almennar tryggingar hf and has held senior leadership positions at Marel hf.( a leading food technology company in the world)
Lárus holds an MS in Mechanical Engineering from Oklahoma State University and a BS in Mechanical Engineering from the University of Iceland. With a focus on sustainable practices and business development, he continues contributing his knowledge and experience to the industry.
See How I Can Help You With Your Fundraising Or Acquisition Efforts
- Fundraising or Acquisition Process: get guidance from A to Z.
- Materials: our team creates epic pitch decks and financial models.
- Investor and Buyer Access: connect with the right investors or buyers for your business and close them.
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Connect with Lárus Ásgeirsson:* LinkedIn * RocketReach * Seafood.media
Read the Full Transcription of the Interview:Alejandro Cremades: All righty. Hello, everyone, and welcome to the Deal Maker Show. So today we have a really amazing, amazing founder that was an operator, now turned founder, and then his company is saying is really remarkable. And and we’re going to be going into detail about it. We’re going to be talking about the the good stuff that we like to hear when it comes to building a hypergrowth company, you know, a company where you’re going through all the cycles ah so as a founder, as an operator.
Alejandro Cremades: And again, brace yourself for a very ah inspiring conversation today. So without further ado, let’s welcome our guest today, Lárus Ásgeirsson. Welcome to the show.
Lárus Ásgeirsson: Thank you. Thank you.
Alejandro Cremades: So originally born, you know, there in, let me see if I get it right, Iceland, which is unbelievable.
Lárus Ásgeirsson: yep
Alejandro Cremades: So give us a walk through memory lane. How was life growing up for you?
Lárus Ásgeirsson: Well, that was a long time ago, last ten century. I grew up in a small fishing community. where seafood and fishing was really the the name of the game. Most people worked and supported the industry in these small small communities in Iceland where seafood and fishing was the main, ah ah was the the the only column of to support the economy of of the country.
Alejandro Cremades: And what got you interested into physics and and math?
Lárus Ásgeirsson: Well, that was ah just, I realized that to my skills were more into that direction. And so I went into engineering and mechanical engineering and gradually moved into a specialized in heat transfer and thermodynamics to because we have a lot of ah geothermal energy in Iceland. So I thought early on I would become heavily involved in utilizing geothermal energy in Iceland for
Alejandro Cremades: and and And one thing that is pretty unique too is obviously technical background initially, but then the way that you combine that with operations, with marketing, you know that that makes you quite a complete operator. So how did you go about combining all these different skill sets too?
Lárus Ásgeirsson: Yeah, it happened. ah I was early on, I was working as a mechanical engineer in a start-up business in Iceland to support ah the white face industry in Iceland. and icelander then this company that I really put almost 25 years into was the company Marelle that was about to be founded around that time.
Lárus Ásgeirsson: And I, with my technical background and industry know how I got involved in sales and marketing very early.
Lárus Ásgeirsson: And and but and then I become more and more involved in that part and developed into running the the sales and marketing operation and and and and and became one of the senior leaders of that company.
Alejandro Cremades: how was How was that journey like? Because, I mean, Mar-El did pretty well. You know, he became a giant. I mean, for the people listening, how big did Mar-El become and and and what was that journey? What was what what was that for you?
Lárus Ásgeirsson: That was one of the looking back was I’m extremely proud of that journey because you you were using ah it came out of University of Iceland using then at that time a new technology computer technology and integrate that into fish processing machines weighing and data registration.
Lárus Ásgeirsson: and but Using that, and and we were the first movers to to implement the computerized weighing and and a data collection and that laid out the the foundation of morale and changed the whole industry because seafood became more and more valuable.
Lárus Ásgeirsson: and ah making sure that you would achieve high yield and and and high product productivity. That was the name of the of the game and and that was what Marles stood for.
Lárus Ásgeirsson: and the and
Alejandro Cremades: Well, without distribution, there’s nothing, right? I mean, there’s some people build it and they will come.
Lárus Ásgeirsson: yeah yeah
Alejandro Cremades: you know That’s what they hope for. And then there’s crickets. I mean, in your case, one thing that you pushed as part of this experience was building distribution networks. So I guess for the people that are listening to that, you know they’re thinking about their go-to-market and acquisition channels and distribution.
Alejandro Cremades: I mean, what could you tell them that perhaps you know you got us a key takeaway from the experience at Madel?
Lárus Ásgeirsson: I think the key takeaway in the early on was our most successful product was the the weighing at sea using a scale that could accurately weigh seafood on board the rolling vessel. And this was a unique product, but its market was relatively small and you would saturate that market very easily. So you had to think globally. You had to find all the ah markets in the world and organize your structure to to attack all these markets.
Lárus Ásgeirsson: And and and we over a period of few years, we managed to penetrate almost every every market in the world that had need for this type of product. So it by understanding the market and and and and and really understanding the key and a core ah value of the product,
Lárus Ásgeirsson: you could go very aggressively B2B. It’s not a retail, it’s a be business to business and with ah well-selected salespeople and and and but local support, we capture this market in ah in yeah globally in in a relatively short period of time.
Alejandro Cremades: How was also the jump? Because i mean here you were pushing for sales, you were doing marketing. You also did some corporate development, which I thought that that gave you some good idea into the transactional side of things, especially when it comes to integration. But how was that jump to all of a sudden becoming a CEO? you know And that’s something that you experienced a couple of times before you actually went at it on your own as an entrepreneur. what What was that journey like transitioning and taking a step up into leadership?
Lárus Ásgeirsson: yeah that was The journey was really related to our success with Morrell going into seafood and then we could so we could use the technology going into poultry and red meat industry. And our core know-how was the seafood industry. So we realized to ah to take the company further, we had to go into acquisition. So we made a lot of acquisition.
Lárus Ásgeirsson: Three of them were with businesses in and mainly and in Europe where we were buying companies that were far bigger than we were. We did it not once, we did it three times.
Lárus Ásgeirsson: ah two times with Danish companies and the one Dutch companies and that allowed us to capture globally the or or or become a ah key player but and and the in poultry and red meat but with this M&A work and and taking over companies you You gradually, or you had to learn very quickly to jump into a a much deeper pool than than you had you were operating in the before the acquisition. So that accelerated your development ah because we did this in in a period of 10 years.
Alejandro Cremades: So eventually, how does that all crystallize into you becoming an entrepreneur? you know What was the segue and the sequence of events that needed to happen for you to get there?
Lárus Ásgeirsson: I think the the ah i think the the this developed in, ah in ah there were other steps along the way because I was asked to become a CEO of of insurance business that was had been taken over by by the state of Iceland after the economy collapsed in 2008 and that was sold and then I was running, I was a CEO of one of the the biggest seafood trading company in the world for a couple of years. then And then I got an opportunity to move to Middle East and run ah a greenfield project in and and starting up a poultry operation for the eating food producer in the Middle East.
Lárus Ásgeirsson: And so I was there mainly to execute for others. I was not a part of the… of I was not a shareholder, I was not really… founding any of these companies. So on my when I returned back to Iceland and and I thought I would be slowing down, then I saw this opportunity to join this ah ah company Laxey, which is developing land-based salmon farming in in Iceland.
Lárus Ásgeirsson: And I became one of the founders of that business. And then then I became a true entrepreneur because in my whole professional career, I’ve been working for others.
Alejandro Cremades: That’s amazing.
Alejandro Cremades: I mean, how was that? Because I mean, that sounds that sounds ah frightening. No, I mean, you are all your life being an operator, working for someone else. And then all of a sudden you find yourself really controlling and leading your own destiny. I mean, that’s quite the change.
Lárus Ásgeirsson: Yeah, I agree with you and I was so fortunate to the other two co-founders are extremely talented people and and they managed day-to-day operation of Laxey and I think in a way both the the project itself ah
Lárus Ásgeirsson: producing salmon in a very sustainable way with green energy and and and with these other fountains and I could contribute with my experience to what and compliment the drive and and they they ah the-how they could bring to the project, yeah I think that was ah that was very amazing at least to for me to to come in as so as a founder in and in a team like that.
Alejandro Cremades: What were the, and I guess before even that, you know for the people that are listening to really get it, what ended up being the business model of like, say, how are you guys making money?
Lárus Ásgeirsson: Well, it’s ah at ah first we have to the the plan is to produce more than 30,000 tons of salmon and and ah so this will become $300 to $350 million ah ah dollar operation in in four to five years from now. So we are we are building on the island of Westman Air. It’s on the south most southant on the south coast of Iceland. And we are we need to raise equity of 200 million
Lárus Ásgeirsson: euros and and and we will invest around 500 million eu euros in this project. to ah So it’s a it’s a huge it’s ah it’s it quite challenging to start up ah or with a project like this because the campus is very, very high.
Lárus Ásgeirsson: But with a good story, with there’s a very, very strong demand for salmon around the world. And the all analysts, they report that the the market will outperform the the supply. So this is a ah extremely, extremely interesting ah area to operate in.
Lárus Ásgeirsson: And ah so it’s a root to market or or or when we pitch a project to investors, they never ask. how How will you market it? What is your markets here, et cetera? it’s ah There’s ah such a huge demand. So it’s more for us, a challenge to execute the project, to build the all the all the ah infrastructure that is needed to raise 30,000 tons of salmon every year.
Alejandro Cremades: what what What were the early days like? you know The early days where you guys got started with this and and when you finally you know found yourselves turning around a corner and and really understanding that the that there was something big here going on.
Lárus Ásgeirsson: yeah the we We realized in the beginning that it would be a big project and but we decided to bring it up into six phases. So focus on only one phase and raise capital to to execute the first phase and the necessary infrastructure. and But still giving the investor the ah the view of the journey that it will take us to this more than 30,000 ton of salmon that to produce.
Lárus Ásgeirsson: And by having this scalable, it was easier to convince the the first investors to join in. But that was not easy. and and and And we didn’t have any banks in the beginning to support us. It was all equity, our own equity. And ah one of the founders were quite successful. ah and
Lárus Ásgeirsson: seafood that was operating fishing vessels and and and and sold that and and diverted the the money into this project. So we were pretty much had to rely on ourself and hard work in the beginning and and then gradually we started to get more and more people to to join us. Key to that was that we made the plan a time plan, we have we have been able to stick to that plan. We have been successfully successfully but been able to raise enough money to support the plan. So we are at the point that there are more people that would like to invest in this project than we need. And also ah eight months ago, we didn’t have a bank. Now the banks are chasing us.
Lárus Ásgeirsson: So we have ah managed to come and and and so it it as always there is a sweet point you or you need to pivot point where it is uphill and then suddenly you you you pass ah some milestones that are critical and then things start to go downhill again. So we feel we are we are that It will be much, much easier to to raise capital, get the bank support. And early on, it was mainly Icelandic investors, but now we have international ah international companies that are among investors.
Lárus Ásgeirsson: and
Alejandro Cremades: And and how much how much how much money has the company raised to date and what has been the journey of of raising that money?
Lárus Ásgeirsson: yeah yeah We have raised ah ah around 100 million euros. ah That was the main, the most critical one round was in in April and June earlier this year, where we raised 46 million. ah and That was when we got on board many strategic investors. We were looking for Not just investors, we were looking for ah people that could like the money, but we needed desperately to get ah start strategic investors or people that could or investors that could bring more to the table than the money.
Alejandro Cremades: I hear you. so So what would that look like? Or what does that look like? You know, that level of value that you guys are extracting from from those investors.
Lárus Ásgeirsson: the, ah beyond the, the, the, the money, you mean, or?
Alejandro Cremades: So basically, it’s beyond the money, right?
Lárus Ásgeirsson: Yes, yes.
Alejandro Cremades: So whether it is a strategic advice, guidance, connections, what what what what are you guys extracting from that?
Lárus Ásgeirsson: and i ah yeah Yes, absolutely. So so we got the Strategic Guidance Network ah networking. A lot of experience that are brought on board allow us to recruit the the right people because they they they they They know what kind of people are out there and also we have managed to fill with the board of directors with very experienced people that have brought as well
Lárus Ásgeirsson: guidance and giving credibility to the the business that having those board members with us, oh then that that’s a strong dedication. We are on the right track and and ah and we have the yeah and and the confidence in our strategy and and execution of the strategy is is is high.
Alejandro Cremades: So in that in that regard too, I mean, now you’re serving as the chairman of the board. So talk to us about board dynamics and being able to to get those investors to the table and and and and to push the strategic direction of the business. What what does it look when a board is effective?
Lárus Ásgeirsson: I think we ah you need the active board members. You need to have people with the diverse background and and and experience.
Lárus Ásgeirsson: And like in in our case, because we are on this island with ah it is with a population of 5,000 people, we are yeah are very dependent on on ah good relationship with the community, with ah with the with ah ah town council etc. So we have one board member from from the community and then we have ah three international salmon or people with with the international experience in operating salmon companies around the world.
Lárus Ásgeirsson: And I bring to the table a lot of management experience from other, not necessarily from salmon, but from poultry farming, shrimp farming, and and and also seafood experience. So we we have a good combination of people that can contribute from with this diverse experience and and and and and different background.
Alejandro Cremades: So now let’s talk about vision, because obviously when these investors are investing, they’re investing in the future right and into what’s possible. So if you were to go to sleep tonight and let’s say you are all waking up to a world where the vision of LaxA is fully realized, what does that world look like?
Lárus Ásgeirsson: that’s ah that’s ah so ah So our vision today is is really to we see o ourselves being one our leading supplier of salmon ah produced in ah the most sustainable way. Among other things, we plan to ship all the ah salmon by ocean freight from Iceland. We can reach Europe and we can reach North America. So when with ah green energy and from hydropower plants and in Iceland.
Lárus Ásgeirsson: So we believe we are, so we we can, we see this and and and this vision to an and ah ah to be ah become one ah one of the leaders in and and and and and and producing sustainable land-based salmon and and and and I think beyond this project I would expect that shareholders will be interested to to use that experience to go beyond this project because of having built up the team to execute the project and and run the farm and and overcome all the these challenges it will be and
Lárus Ásgeirsson: Here in Iceland there are a the key why it’s so important, you can only do this in certain places in the world because the sea water temperature needs to be perfect for salmon and it’s it’s really, Iceland is very close to that optimal temperature.
Lárus Ásgeirsson: But also we we can we are using fisted seawater, we made portholes and we extract seawater from the portholes and that’s fisted, so there are no parasites at all in the seawater.
Lárus Ásgeirsson: stable, and the risk of diseases, etc., is is brought down to minimal. ah and Whereas in in the sea pants, we have seen a lot of challenges with with sea licenses and and and sea lice and other diseases. So so we believe we would our vision would be to expand this project beyond and capture or use the the their experience we have gained and and and the and and the team to continue to to
Lárus Ásgeirsson: build some other projects and continue the journey.
Alejandro Cremades: I love it. So, Laros, imagine if I was to put you into a time machine and I bring you back in time. you know Let’s say when you guys were starting out with Axay and you’re able to stop that younger self on the tracks and be able to give that younger self one piece of advice before launching a business. What would that be and why, given what you know now?
Lárus Ásgeirsson: don’t have to go that far. It’s it’s five, six years back and and I think we we, in a way, we didn’t realize what we were going into. We when we could have studied it further and and and and and it was my my partners or co-founders, they are more into the execution and and I think we we we would We should have spent a little bit more time for preparation, but that I think applies to all projects. But the main, the core fundamentals were there. There was a market there at and at the right price and we could ah produce the the salmon nut at the competitive price. So I think the the fundamentals were there, it was more
Lárus Ásgeirsson: preparation and and and and and like we ah have where we look back and say, you should think slowly and act and and act quickly. So maybe we should have thought things through, but that has not, we might have done it differently, but ah not really, I think we we have the technology that we are applying. I think this is the the the best one available. ah That is water management and recycling ah ah the seawater in certain ratios.
Lárus Ásgeirsson: so yeah so
Lárus Ásgeirsson: To make it easy, I think we should have prepared it a little bit more before we end. But that sometimes you spend too much time on preparation and maybe then you are preparing a journey that you will never start.
Alejandro Cremades: That’s right. Nothing like getting into action. That first step is ultimately what makes a difference.
Lárus Ásgeirsson: yep yeah and And then and early on we got small wins and we saw success and that of course gave gave us the confidence that we were on the right track and and and and for and we got early on good support from a lot of people.
Alejandro Cremades: Amazing. So, Larus, for the people that are listening, I would love to reach out ah to you to say hi, and then also I would love to learn more about Laxey. What is the best way for them to do so?
Lárus Ásgeirsson: Well, we have a homepage where you can find information on on on the business and as well as reach reaching me or any other members, the the co the other founders and the management team.
Alejandro Cremades: Amazing well I was thank you so much for being on the deal maker show today it has been an absolute honor to have you with us.
Lárus Ásgeirsson: Thank you.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at al*@pa**.com“>al*@pa**.com
The post Lárus Ásgeirsson On Raising Over $100 Million To Farm Salmon And Other Seafood Sustainably appeared first on Alejandro Cremades.
In the heart of a quiet French village, a young girl stared at the night sky, dreaming of the stars and the mysteries of space. That girl, Eloa Guillotin, would grow up to co-found Beyond Aero, a groundbreaking company building hydrogen-electric planes, redefining the future of aviation.
Beyond Aero has attracted funding from top-tier investors like Bpifrance, Y Combinator, Initialized Capital, and Female Funders Found.
In this episode, you will learn:
- Eloa Guillotin’s fascination with aerospace began in a small French village, proving that ambition can thrive anywhere.
- Beyond Aero combines innovation with sustainability, tackling aviation’s environmental challenges through hydrogen-electric planes.
- Structured feedback and clear roles among co-founders ensure a harmonious and effective collaboration.
- Pivoting during the pandemic led to the creation of Beyond Aero, showing resilience in the face of adversity.
- Using mature technologies adapted for aviation helps Beyond Aero balance innovation with safety and feasibility.
- Securing almost $1B in LOIs early validated Beyond Aero’s market opportunity and potential.
- Eloa’s ultimate dream of an all-electric sky showcases the transformative power of long-term goals.
SUBSCRIBE ON:
iTunesGoogle PlayStitcherTuneInRSSSoundCloudSpotify For a winning deck, see the commentary on a pitch deck from an Uber competitor that has raised over $400M (see it here). FREE DOWNLOADThe Ultimate Guide To Pitch Decks Remember to unlock for free the pitch deck template that founders worldwide are using to raise millions below.
Access The Pitch Deck TemplateUnlock the pitch deck template used by founders to raise millions. Just enter your email below.
Your email address is 100% safe from spam!**About Eloa Guillotin:**Eloa Guillotin, 27, has dedicated her life to making aviation electric. After graduating from the world’s best aerospace universities (UC Berkeley, Polytechnique, Supaero & HEC), she launched her third venture, Beyond Aero, to build the first hydrogen-electric business aircraft.
Starting with a 6-passenger private aircraft at the crossroads where the need is strong with a CO2 emission of 2T/hour per jet and the fastest certification timeline.
Beyond went through YCombinator, gathered 10 million euros, built an 85kW prototype, and was selected Top 20 FrenchTech Green. With an engineering team of over 30 people, Eloa has received multiple awards, including the French Academy of Technologies and Forbes 30Under30 France.
She regrouped the best talents in the world from top-tier Airbus and Lilium’s Managers. She is a people-driven, passionate entrepreneur, bold in her actions, and ready to fight to make the world a better place.
See How I Can Help You With Your Fundraising Or Acquisition Efforts
- Fundraising or Acquisition Process: get guidance from A to Z.
- Materials: our team creates epic pitch decks and financial models.
- Investor and Buyer Access: connect with the right investors or buyers for your business and close them.
Book a Call
Connect with Eloa Guillotin:* LinkedIn * Crunchbase * TheOrg * Instagram
Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty, hello everyone and welcome to the Dealmaker show. So today we have an amazing founder joining us. She’s a ah powerhouse. you know We’re going to be really talking about a lot of the good stuff that we like to hear, like building, scaling, financing. i mean in the in there In their end, you know they’re in in innovating in aerospace. It’s not a really easy ah industry to really operate on, but they they’ve done quite well. They’re writing a rocket ship you know and and really getting a lot of momentum, especially given their last round that they did too. And we’re going to be talking about co-founder relationships. They’re also athletes. So how to think about that too when you’re building a business, how to think about two building an engineering driven team. It took them on their end to get to prototype about two years. So talking about that journey is going to be quite an incredible as well as
Alejandro Cremades: thinking about accelerator programs when you’re a deep tech company and other really good stuff. So again, brace yourself for a very inspiring conversation today. And without further ado, let’s welcome our guest today. And that is Elua Guillotin. Welcome to the show.
Eloa Guillotin: Thank you very much. My pleasure to share this moment with you.
Alejandro Cremades: So originally born in France, so out of a small town there, give us a walk through memory lane. How is life growing up for you?
Eloa Guillotin: That’s a big question i will ah I will summarize very shortly. I was born and raised in ah St. Juliet, a very, very small town, farm and village with nothing to do. And I was born for most of my childhood. So I was doing two things, looking at the stars and doing sports.
Eloa Guillotin: And so from day one, I was ah dreaming to be an astronaut. And my neighbor was a former um test pilot. So I was just speaking ah with him hours and hours about, OK, what is a plane? How do we go to the stars? What is a lunches? And that was my passion from day one.
Eloa Guillotin: So then I left home at 17 as soon as I could to go study in aerospace in Toulouse. So I’m an aerospace engineer. And now I’m the co-founder and CEO of the company building a hydrogen electric plane.
Alejandro Cremades: And we’ll talk about that in just a little bit. Now, one thing that is really amazing is how you develop that love so early on. I mean, how how how did that really happen? so I mean, it’s quite inspiring, like, so early in your life to really have that determination and a really good idea of what your path is going to be when you’re older.
Eloa Guillotin: Honestly, I don’t exactly know where it’s coming from. Because like you said, it was early, early years. So I don’t have memories. But like back at the time, I just remember some books that I had on my ah next to my ah bed. And I was just reading that at night. So just feeding my imaginary imagination with planets, stars, rockets, lunches. And I even started to learn Russian at what at one point. Because ah back at the time, we could only go to the through the moon with a and with ah as a national if we speak version. So yeah, no, I would not really be able about to explain the detail of how. What I know for sure is that my family is not from the aerospace industry. ah They are neither entrepreneur or neither engineers from an even less aerospace. So I guess I would just explain it by saying,
Eloa Guillotin: that I was really, really bored in this little village and that I think I reacted by doing exactly the opposite. Of course, I wanted to build something big, something within parks, something that people would dream of and make, however, yeah, do something exactly the opposite of this little village.
Alejandro Cremades: That’s amazing. Now, here here you are. You have a clear idea of what’s the path that you want to um ah follow. You go to Toulouse. You’re now involved into the aerospace say and you know community and and and and field. And how do you start to think about, because i mean that’s something that you started to really push on when you graduated and then you started to do your master’s degree.
Alejandro Cremades: ah And you combine there, again, a master’s degree on aerospace and another one in business. So how did the idea of really getting that combination and bringing business in the mix, you know, also kick in?
Eloa Guillotin: Mm hmm. I’ve realized during my studies that at first I thought I wanted to be the engineer and I realized being an engineer is not just inventing the product but more about building the how one subsystem of the product would work and I was more the one who wanted to invent the product.
Eloa Guillotin: So during the engineering studies, I’ve worked on a lot of different, I would not call them starter, but let’s say big projects about let’s try to invent a super capacity for smartphones, or let’s build a ah but a solar backpack for hiking. So, you know,
Eloa Guillotin: Now I realize it was the beginning of an entrepreneur mindset, but um that’s how it’s swift. My engineering studies switched to actually I want to be able to invent the project, sell it and have an impact on um on the market. ah But with a more a bit more deeper reflection at eight years old, I was ah selling chocolate lights on the Christmas market of my village.
Eloa Guillotin: And then at 13 years old, I was going to the golf court, taking the golf that was in the bushes, cleaning them and selling them again to the golfers.
Eloa Guillotin: so Yeah, I think this entrepreneur mindset was more in my DNA from day one, but then it got combined with aerospace, a passion that I have. And then we will talk about the market and the product, but then with a market opportunity arise, then I’m like, sure, let’s go. That’s my dream.
Alejandro Cremades: Amazing. now Now, for you, the the company that you’re leading right now, which which you are one of the co-founders, Beyond Iero, is ultimately the product of also you testing things out, doing several projects, and it was kind of like more like doing six projects, ultimately what led to Beyond Iero to be born. So walk us through how that journey was and how things were taking shape, leading you all the way to landing on the idea of Beyond Iero.
Eloa Guillotin: Like you said, I’ve done ah different projects with one of my co-founders, Hugo. And we’ll talk about co-founders, but that’s key for me, because being an aro was not born just by me, but within the three co-founders’ ideas. So we’ve done a ah few projects together. And then ah at the end of the studies, you know we had this American dream to to to fit to stay in California,
Eloa Guillotin: to build the company and go big. And then COVID happened. COVID happened means um I’ve been called by ah by uni, hello, you need to be back in France, and and you’re gonna have the graduation on Zoom. Okay, sure. So the only house I had was in Saint-Suliac, my little village. And so this big dream was completely concerned. And I was just stuck in St. Suliac in this little village. age And that frustration raised again. And so we’ve discussed a lot, a lot, a lot doing with the three co-founders, right? Lugo and Valentin during those time this time. And we sat down and we discussed about what is our definition of success. What do we want to do in life? Why the six different projects we’ve done did not really work.
Eloa Guillotin: And so we sat down about, okay, what is a successful company for us? Sure, people and fundraising is a KPI, but that’s not our success. What do we really care about? And then that means personally, how do you want to lead to that success?
Eloa Guillotin: And so that’s how Beyond Arrow came up, is that actually we said, for sure, one market opportunity and relying on existing technology. Second, passion. We’re going to spend hours and hours on that. We need to love the subject. And third, people. I’m not saying in order, right? Some people would, yeah, it could be people and then passion and then market, whatever. That was the three pillars.
Eloa Guillotin: And by that time, Valentin was working on electric engine, only the engine. And he was working on the certification path for the engine. Hugo, he worked on fuel cells and hydrogen propulsion before.
Eloa Guillotin: I mean more the market and entrepreneur side. And we’re like, okay, let’s combine those three. And we have this clique of, we love aviation. We know electric electric engines are getting certified. We know that aircraft are polluting too much. Aviation will be electric. And now that’s the vision. So that’s the baseline of the company. And that happens during COVID.
Eloa Guillotin: Aviation will be electric the question is when is it gonna take a thousand years? 300 years a hundred years or 20 years one day My my dream will be just to look at the stars and look at the sky and see only electric plane It’s not just a dream. I’m pretty sure it will happen and then you know, that’s the dream and now we are a dream without um like a vision without a an action plan stays a dream.
Eloa Guillotin: So then we just roll our sleeves and say, okay, where do we start? And now we focus on the project.
Alejandro Cremades: so So you were talking about the co-founders earlier in the team and and and how you guys also knew each other.
Eloa Guillotin: Yeah.
Alejandro Cremades: I guess talk to us about co-founder relationships, co-founder management, ah and then also how would you say that the fact that the three of you are athletes have helped you into really developing that competitive nature in the culture of the business?
Eloa Guillotin: and Very deep subject and very interesting. We’ve known each other for eight years and we’ve built so many projects together. So we know, first of all, I would say it’s important to know personally where are you good at and where are you bad at and to be able to share that with others. So that took us, I would say four years to honestly be able to say, okay, I’m good at that and plus I love it.
Eloa Guillotin: I’m a mediocre at that and I don’t love it or I love it. And I’m not good at that and I need you. And so we were lucky enough to find our definition of success that we’re not overlapping with each other.
Eloa Guillotin: That means Hugo’s definition of success is absolutely complimentary to mine. Mine is linked to our people, culture, product, and clients. Hugo is linked to manufacturing, certification. So it’s absolutely complimentary. So going is hard to maintain. It’s like, it’s even harder sometimes than ah than a wedding because ah you don’t have love. For wedding, you have love. Confund a relationship, it’s even,
Eloa Guillotin: yeah I would say even harder sometimes. um Then it’s hard to keep this dialogue and relationship healthy. And so we have created this feedback session moment. So every quarter we do a retreat in the Alps. So basically we just rent an old farm and and we go and on hiking or running and different things. And we just do this feedback session.
Eloa Guillotin: so You have two rules. First, you should not cut the parallel the speak of someone. You just let the the person speak as much as they want. this person should and And third is you should not react at the end. Just say thank you, and you go running. So it’s active listening, right? And the rule is to say all the positive you love about the other, all those things to improve, and concrete solution how to improve those things.
Eloa Guillotin: And so we have been doing that now for four years. We did not do that the first four years, but now we have been doing that. The first feedback session were really insane and very intense, sometimes even personal. But now that we are used to it, we keep this very balanced, healthy moment. You just rely on each other and open and be vulnerable. That’s the thing you can’t do on a daily basis of the business.
Eloa Guillotin: And to answer so your question about sports, um, like you said, yeah, we are, uh, at least we, you go was doing track and field violence, uh, swimming and, and me gymnastics and today three Atlas. And we love to compare our relationship to athletes, relationship in a team, for example, rugby or soccer. You have the captain, you have the coach, everyone has one clear defined role.
Eloa Guillotin: but you don’t want, you all want the same success. You all want to win the championship. But you should respect everyone’s lines and and you should also know when the person is strong or weak or you know each other. And sometimes you don’t have to speak out loud. You just know because you know you know them so deeply. And so we compare a lot of that of the three founders but also inside the team. And I love the sports analogy because sometimes you know the cliche of startup is, yeah, we are family, and I hate that. We are not family. It’s a professional environment. But it’s not either Airbus or very traditional way. So I like this middle ground of it’s exactly like a sport team. We are in a professional environment. We can share, have a beer afterwards. We can share very intense moments. But we are not family.
Eloa Guillotin: And so, the sport and analogy inside a startup, for me, makes a lot of sense. And also, we hire people that have a very sensitive high standard out of sports, because that means that they can also balance themselves. They know when they need to accelerate at work, they know when they need to relax, they have ups and downs, but they know themselves. They know their body, they know their mindset, and they can be autonomous. they so Yeah, I could speak for about that for hours, but that’s something that I deeply care about, and I’m applying that in the daily life of the company.
Alejandro Cremades: So I guess saying about Beyond Diara, what ended up being the business of Beyond Diara? And also, how do you guys you know think about making money here?
Eloa Guillotin: Well, we build plane. We are building a plane. It’s an electric plane. It’s a private jet, so six-seater, fully electric. running on 800 nautical miles, so that’s 1,000 miles. But it’s not lithium batteries electric, it’s hydrogen. I don’t know how how deep you want to go in technology, but lithium batteries are too heavy for a plane. So the only way to have a longer range is to use a hydrogen propulsion.
Eloa Guillotin: And so today our vision is a decline in a mission that is based on three pillars. The market need, private jets. They need two tons of CO2 per hour. It’s crazy. It’s time to have an electric private jet. But this this is also the market where clients can invest because it’s a more wealthy industry on private jets.
Eloa Guillotin: Second pillar is to rely on mature technology. That means we are doing gas hydrogen, we are buying the tanks, buying the fuel cells, buying electric engine. The core IP of the company is to redesign the plane around an existing powertrain. So we are relying on automobile industry, Formula One suppliers, aerospace suppliers, and we design the plane adapted to hydrogen.
Eloa Guillotin: And the third pillar is all about safety first, right? Certification. In aviation, you can do a lot of prototypes. If they are not certified, that means nothing. So how do we make money is by certifying the plane um and sell it. So you have the business model is traditional. We do not reinvent that. You sell the plane and then you also have services and maintenance nouse fees through the life of the plane.
Alejandro Cremades: so So one thing that I want to ask you too is how were the, you know, the early days too, because in 2022 as well, you joined Y Combinator and the Bionairo doesn’t seem to be like the typical um Y Combinator kind of company. So why did you all decide to go to Y Combinator and what was the before and after of Bionairo after the experience?
Eloa Guillotin: YC, if I don’t mistake, they usually take one aviation company per batch. They took a supersonic one, they took a hybrid plane, so one per batch. And so we are the hydrogen plane of YC.
Eloa Guillotin: um Indeed, we cannot just apply the ARR or typical KPI that YC is pushing. And YC is very well organized. So they have a dedicated partners to such deep tech companies.
Eloa Guillotin: But the syllable I apply the same principle, which is make something that people want. So from day one, they push my engineers, the engineer side of me to just go and speak to clients, speak to clients, speak to clients. So I’ve done that you during, first of all, before YC, but also during YC. And they pushed us on getting LOIs.
Eloa Guillotin: And that’s not traditional in aviation because it was too early for the project to have official airlines, LOIs, but I did it. And now we signed over a billion dollar in LOIs. And so I would say the before YC and post-YC was to be able to realize that even in a very traditional industry, you can applies a basic principle of what is a good business is to make something that people want. So let’s speak more with clients. Let’s add up the product to their needs and iteration. So from what I see now, I’m doing a run tables with clients, one performance, five clients are on the table and we discuss about our plane. And that’s really the main learning for me is legacy OEM manufacturers don’t do that.
Eloa Guillotin: And I would say that would mean different.
Alejandro Cremades: Now that’s pretty cool actually, but in your case as well, it took two years for prototype. I mean, in YC, you know, when someone, you know, throws something together, it’s like a landing page and hopefully someone is going to, is going to buy it. And then, you know, that gives you the the data points that, Hey, you may be on the right the track. In your, in your case, it took two years to build a prototype. What was, what was that journey like to getting to prototype?
Eloa Guillotin: First of all, once you have your vision, you need to have the mission. And once you know which plane do we want to build for which market, you need to assess the technical challenges and retro planning of what do we want to de-risk. So to be able to build a prototype, we needed to have the question, what are the technical challenge we need to de-risk? That was the first sequence to really be able to assess what is the level of maturity What are the things we can buy? What are the things we need to build on spec? Who are the right suppliers? Once you have that, then you reach for planning to, okay, now let’s build a prototype and you de-risk the technical bricks. um So it’s it goes like any project that I do with a traditional timeline, I would say. First, you assess the goal, the money and the people behind it. And then you find the partners and then you start building.
Eloa Guillotin: That’s a theory. In practice, it was crazy. um But we did it. So basically what we have done is that we wanted to de-risk the architecture of the powertrain subscale. So we have decided to design, integrate, test on the ground, and test in the air the first hydrogen electric plane of France, the most powerful one of Europe.
Eloa Guillotin: Even if it’s subscale for us, it’s a two-seater plane that we’ve put in the air. It’s still is the same architecture of the powertrain. So from that, that took us two years to build the project, find the right partners, find the pilot, onboard people. ah The leap time of component is really long. So to be delivered the component, to test it, to iterate, because it’s never first time right,
Eloa Guillotin: Then to get the permit to fly. It’s very special for this type of plane. um It’s faster for sure. And then to put it in the air. So yeah, two years two years project. We wanted it to be 18 months and two years.
Alejandro Cremades: That’s incredible. Obviously, as part of that, you know you need capital to be able to finance the operations and and everything. So how much capital have you all raised to date and what has been also the experience of going through those motions?
Eloa Guillotin: Now, December 24, we raised 44 million. We need way more to certify the final plane. um But it’s still a very good start. As you know, it’s exponential. So we now we are at the inflection point of such a company. How was it? Crazy, like every single ah fundraising, we’ve done three and a half rounds. I would say a half because in the middle you had save. So let’s say we’ve done three rounds, but in the middle we took saves. A part of those 44 are grants also, a small part of it, but still. um We’ve done one round in Europe before YC, small one, then we did YC, then we did saves, and then we did a service A, we simply closed 20 million.
Eloa Guillotin: How is it? um I loved it, to be honest, oh because I’m really, really convinced of what we are doing. But I also love everything that the build is achieving so many great milestones that my job is to vulgarize those milestones and explain how those milestones are de-risking the technology to people that don’t barely know anything too about aviation.
Eloa Guillotin: and That’s something I absolutely enjoy. um My little trick you asked me earlier about that, my only advice would be to go in person. Even if it was post COVID time, for such projects, I flew all over the world to meet people in person. And my conversion rate from Zoom to in person exploded. Yeah, so really the in person meetings are Working.
Alejandro Cremades: I can totally get that. Now, ah one thing that comes to mind is when you’re receiving money and investors are betting on you, and even, you know let’s say, employees as well, um they’re betting on a on on the future that you’re living into, and you are alluding to with with a vision. I mean, you’ve talked about vision many times, so I want to touch on this and double click on it. And if you were to go to sleep tonight,
Alejandro Cremades: And you wake up in a world where the vision of Bionario is fully realized. What does that world look like?
Eloa Guillotin: you would look at the sky and see three sides of plane electric private jet electric regional plane and commuters electric commuters i’m saying electric does not mean lithium batteries right i imply hydrogen electric behind that so vision is to make aviation electric and the retro planning is not just private jet private jet is a go-to market this is where the need is strong The technology is major and the certification path is simpler, quote. But the vision is you have to scale the size of the plane and would have three size, three family, it’s called program in aviation, to make to make aviation electric, not just business aircraft.
Alejandro Cremades: I love it. so We’re talking about the future here, but I want to talk about the past and doing so with a lens of reflection. so Imagine I put you into a time machine. And basically, I’m able to bring you back in time, you know, maybe to that moment where you are now ah brainstorming with your now co-founders about a world where you could bring something, you know, before you even got started with all the different projects that led to Beyond the Arrow. And let’s say you’re able to have a chat with that younger self, you know, maybe like four or five years ago, and you were able to tell that younger self one piece of advice before starting a business. What would that be and why, given what you know now?
Eloa Guillotin: I would not change anything. I would just say go faster. That means trust yourself on exactly is the same thing. Do the same mistake, the same good thing, that say the path, but just everything faster. That means don’t doubt. Just do it because some people are are telling me you are young for what you do and I think the opposite. I’m like, I’m already 28.
Eloa Guillotin: ah this plane should be built faster. So I would just say, trust your dream, trust your daring side of you. Just don’t doubt and just do it. That would be the so same path, but just faster.
Alejandro Cremades: I love it. So for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Eloa Guillotin: Not linkading. I do not watch linkading. I don’t have Instagram. I don’t have Twitter. I’m sometimes too old French engineer. So honestly, it’s hard. I would say through Anais, my head of communication. She’s way better than me on that. I’m really focused on, ah I have a very strict schedule on discipline about myself, especially about sports. So I’m saying no as I discuss with you to most of the solicitation. So Anais is a good way. And worst case, find a way to find my WhatsApp number.
Alejandro Cremades: That’s a good one. Well, hey, well, thank you so much for being on the Deal Maker Show today. It has been an absolute honor to have you with us.
Eloa Guillotin: Thank you for your for your time and your interest. See you soon.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at al*@pa**.com“>al*@pa**.com
The post Eloa Guillotin On Raising $44 Million To Build The World’s First Electric Business Aircraft With Low Emission Hydrogen Propulsion appeared first on Alejandro Cremades.
Mark Heynen has successfully navigated the startup ecosystem several times, running the entire gamut from building, scaling, and funding companies to exiting them. His journey demonstrates the power of resilience, learning from failures, and successfully pivoting to adapt to market conditions.
Mark’s latest venture is Knapsack, and he reveals what it means to build a rocket ship in the current environment. The company has Alphabet, Ascend Venture Capital (Seattle), FiDi Ventures, and Gradient Ventures.
In this episode, you will learn:
- Mark Heynen’s entrepreneurial success stems from learning through failures and pivoting to meet market needs.
- Focus on impactful, global challenges, even if they seem difficult or resource-intensive at first.
- Assembling the right team, empowering talent, and fostering cohesion are crucial to building successful companies.
- Achieving traction requires identifying the ideal customer profile and ensuring the product meets their needs.
- Ventures like PayJoy and Skycatch demonstrate the potential to transform established sectors using innovative technology.
- Mark’s latest startup, Knapsack, addresses AI adoption challenges by enabling secure, local data processing.
- Mark envisions distributed AI systems seamlessly integrating into workflows, boosting productivity while prioritizing privacy.
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Your email address is 100% safe from spam!**About Mark Heynen:**Mark Heynen has led go-to-market in emerging markets for large and small companies, from Google’s initial push into maps in the mid-2000s to Facebook’s early mobile efforts and ultimately launching PayJoy, a Silicon Valley-based fintech in 20 countries.
Mark currently serves as VP of Business Development at the Stellar Development Foundation. His focus has been on analyzing markets, structuring transformational partnerships, hiring highly functional teams in the market, and then producing revenue quickly with great unit economics.
Mark has also raised ~$100M in early-stage VC, venture debt, and SPV debt financing across four companies he built and advised companies on fundraising.
Prior to moving to Silicon Valley in 2006, Mark split his time between India and London, founding and running his first startup, Electrobug Technologies.
As this company had clients in 18 countries and 250+ staff in India through a wholly owned subsidiary, Mark learned firsthand the challenges and opportunities of working in emerging markets and is currently an advisor for a number of startups.
Mark graduated magna cum laude from Amherst College with a degree in Economics and History.
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Read the Full Transcription of the Interview:Alejandro Cremades: alrighty Hello, everyone, and welcome to The Deal Maker Show. so Today, we have a founder that has done it quite a bit of times, you know so many that he may get dizzy. It’s incredible. and they We’re going to be talking about the whole journey you know from building to scaling to financing to exiting, ah you name it. you know We’re going to be talking about you know what you learn. you know You raise, you burn all and all the money, then you pivot. We’re going to be talking to about launching in a market that maybe you know you realize that it was not the one, and then you just listen for product market fit. And then also what he’s up to nowadays you know with his latest company,
Alejandro Cremades: you know, which they’re building engineering, they’re a rocket ship, you know, and and what it looks like to build also in the current environment. But again, brace yourself for a very inspiring conversation.
Alejandro Cremades: And without further ado, let’s welcome our guest today, Mark Heynen. Welcome to the show.
Mark Heynen: Thank you for having me.
Alejandro Cremades: So originally born in Germany, but you came here to the US quite early. So give us a walk through memory lane. How was life growing up for you?
Mark Heynen: like good Actually, we’re going to have to stop and pause. I have to make one correction. My my last name is pronounced Heinen.
Alejandro Cremades: Heinen. OK, so here, let me let me let me let me repeat that again.
Mark Heynen: Yeah, thanks.
Alejandro Cremades: So let’s welcome our guest today, Mark Heinen. Welcome to the show.
Mark Heynen: Thank you for having me.
Alejandro Cremades: So so born and raised, born actually in Germany, but raised in the US. s So give us a walk through memory e lane. How is life growing up for you?
Mark Heynen: well i um moved when I was two years old with my family from Germany to the US, grew up in Connecticut, um was ah you know fortunate enough to actually have um you know a great experience in Connecticut um doing ah sports where I was really pushed to um excel early on. And I think that really helped me build some good habits later on in life.
Mark Heynen: um ah went to school at Amherst College um and did some consulting in DC after ah college and and then moved to London where I initially caught the bug of starting companies.
Alejandro Cremades: So let’s talk about that. How do you get into into the whole venture world? How did that happen?
Mark Heynen: Well, it really happened almost by accident. So um I was hired by Kingfisher, which you know if you basically combine Best Buy and Home Depot and put it in Europe, that’s what Kingfisher at the time was in London, a FTSE 100 company. um I was hired as their internet guy in 1999. The chairman, Sir Jeff Mulcahy took me in the first day and asked me, I have two questions for you. What is the internet and how do I buy it?
Mark Heynen: And so I had this really interesting job of educating the senior management team on e-commerce and what e-commerce was, um did a couple of tours of Silicon Valley and met a number of the web one companies, eBay, Netscape, etc.
Mark Heynen: And as I was going through that process of educating myself, educating others, I actually realized that though there was a really interesting opportunity to start a company around price tracking online, effectively a Nielsen online. And um to do that,
Mark Heynen: initially for consumers. And so I left the company and started Electrobug, which is my first company, raised money from a VC, a Belgian VC at the time, ah raised about a million dollars, and launched a website. um And I was Very proud of this website we had built. It was beautiful. It allowed people to um effectively compare prices of electronics, um you know, sort of the um CNET of Europe at the time. ah We were super excited about it.
Mark Heynen: um The only problem was no one came to visit the website. And we had spent a lot of money putting it together. And we had really been product first rather than market first in our approach. And we had burned through all of our money. And so that gave me a hard lesson on how to actually build a company and how to prioritize um you know the order of events in building a company. um And so ultimately, we ended up um having to let go of most of the team in London and pivot the company into a completely different business, which is this Nielsen business I was mentioning where we were actually providing B2B price checking. And that was ah that basically required us finding a whole new set of ah backers, a whole new set of venture capitalists to back us, ah buying out the existing investors and launching an entirely new company that was ah quite a brutal process.
Alejandro Cremades: But eventually, the company you know went through an acquisition. you know And as they say, you know first company, first exit is is pretty amazing. So how was it like, too, going through that transaction? What was the lesson learned there around going through the full cycle as a founder?
Mark Heynen: So we were first in this space. So when I first started this concept of B2B price tracking, um you know we took the consumer price comparison engine, made it an engine for businesses to use for price tracking.
Mark Heynen: and i first walked into a retailer and introduced myself as, you know, having working for an organization, doing this work, even though we hadn’t really built a product, and ah ended up signing up that retailer on the spot and um building this company from scratch. um So we were first, other people filled in later on to um to do um similar work because they spotted this opportunity.
Mark Heynen: ah So that transaction was really, um you know, a merger of sorts with another company that ended up, um you know, was doing very similar work. And then ultimately that company ah was then acquired by another company which then went public on the ah bombbased stock exchange And so it was an interesting transaction because, you know, whenever you’re doing a, um you know, acquisition or merger with another strategic or corporate, ah you know, you obviously have an interesting dilemma where you, um you know, really need to make sure you’re spending time
Mark Heynen: on something that is going to happen. um You’re divulging a lot of information during that process. I was fortunate you know during that refinance period where we had pivoted to B2B, I had to find new investors. I found some fantastic investors and board members. One of them was Esther Dyson, who um is well known to people who have been active since the late 90s and 2000s, a really fantastic um advisor for founders, ah was able to, um with her help and Eric Bangrin and Jeff Wood and a number of the
Mark Heynen: individuals who came on board was able to navigate that process and make sure that we got to a great outcome for the investors and for the employees. um And I think you know a big piece of this was that we had let go of the team in London. We still had three people in London, but I moved to India to hire 250 people in India. And so we had a significant team to um you know effectively serve our clients in 18 countries.
Mark Heynen: And so we wanted to make sure during that transaction that the team was well taken care of and that all the stakeholders had a good outcome.
Alejandro Cremades: So after this, instead of like going at it again as a founder, you know after a tasting, you know the venture world, you decided to go more into more like the corporate side of things. you know I guess Google back then you know was not as big as we know it today. But tell us about this journey of switching gears and and going and working for somebody else.
Mark Heynen: Well, one thing I learned through that process ah with Electrobug, one thing I knew coming out of that process is that I did not know very much about how to run a technology company in the modern age. you know but I had been, it was my first time founding a company. I had learned a lot on my own, but I had seen the ascent of Google and other companies and I realized there’s a lot more to learn about operating at scale, and I wanted to learn how to operate at scale. So it was an interesting adjustment, um joining Google in 2006. One thing I found really fascinating was the team I joined, which is a business development team working on maps and content acquisition, included a lot of ex-founders. They seemed to like hiring ex-founders.
Mark Heynen: The founder of Shazam, for example, was on that team as well. A number of other people had joined from exits. And I think that created the right DNA. um And it allowed me to learn how to, first of all, recruit and evaluate people in the right way. um I think that’s something Google has a really unique skill at. And it allowed ah me to think about products at scale. I worked on Google Maps in emerging markets. ive worked on um growing Android from nothing, you know the G1 you might remember in 2008. And it really helped me figure out how to actually operate at that global scale and make long-term decisions um to basically have massive impact.
Alejandro Cremades: So then let’s talk about to um jumping to Facebook. I mean, it’s really amazing because you were able to grab two companies that were like writing you know really really fast and that have um had a tremendous impact in the in in in in the world of business. So how do you how do you switch you know from one chapter the and to the next, you know from Google to Facebook?
Mark Heynen: Well, it was actually just through ah personal relationships. You know, I have a philosophy generally that whenever you do any kind of partnerships, business development, you should be relationship first and think about the long-term implications of what you’re doing. I was working on Android. My job was to actually build out the social media category on Android. This was back when there was the G1, the iPhone had launched. People were not interested in developing on Android.
Mark Heynen: um I bought Twitter onto Android. I um you know bought Foursquare on. That was a big deal at the time. um And the white whale, the thing we were really hoping to get on was Facebook. Facebook publicly said they would, Android was vaporware and they would not want to implement on Android. I think ah already Mark Zuckerberg was making noises that they he considered Google a competitor.
Mark Heynen: And ah I may just made it my mission to get to know that team and to find out how we can actually break through this log jam. Ultimately, through a lot of negotiation, um we found a way to launch Facebook on the Nexus One in 2010. And also, well, that was in 2009. And then through that process, got to know the team. ah We got along very well, and they recruited me over, and I joined in 2010.
Mark Heynen: um And so it was a very smooth transition. It did feel very chaotic compared to Google. um You know, this was at the time a thousand person company. I was going from a ten thousand person company at Google to a thousand person company at Facebook.
Mark Heynen: um they i think the Week I joined um in May 2010, there was already a big privacy issue brewing um that many said were was threatening the existence of Facebook. And so ah it did not feel like an established company or a corporate company by any stretch of the imagination.
Alejandro Cremades: What did you learn from, um you know because obviously you are coming now from from a startup into those two like incredible companies. like What were the three biggest lessons that you took away that maybe like some patterns that you were seeing repeating that maybe now you’re looking at them and and really keeping them in mind as you’re building now again from scratch?
Mark Heynen: It’s a great question. I think the first thing is always solve a big problem. ah you know I think this is where…
Mark Heynen: Larry, Sergey, and Zuck have really been able to excel. um They’ve been able to think broadly about um what’s happening in the world and what shifts are happening and think about solving a big problem, even a problem that you don’t have resources to solve right now, and to continually go after those big problems and work at them and work at them, even if they are hard to solve to begin with.
Mark Heynen: um I think the second is ah people first. Ultimately, nothing works if you don’t have the right people on board. And being really careful about um you know how you evaluate people joining you, um betting on potential um and raw horsepower, and making sure you’re spending time optimizing those relationships, the teamwork between people. um Ultimately, if you have a functional team and you’re going after a big problem, you’re generally going to end up in a good spot.
Mark Heynen: Um, it also taught me not to worry about certain things. Um, you know, there are certain details, um, that I would obsess over in my first startup that I realized were really not that important in the grand scheme of things and not something I should really worry about. Um, so I think that was a really great learning from, uh, in terms of company building and something I took forwards.
Alejandro Cremades: So after um you know working for other companies, you decide that it’ say the time has come you know to to go at it again as a founder. So at what point does that come knocking? And it was he was ah a bunch of years already, not like five or six in saying you had your last chapter ah closed with your first company. So when did you realize, hey, maybe maybe i should I should do this entrepreneurship thing again?
Mark Heynen: I was really getting the itch. ah you know In 2012, it had been six years. um Obviously, Facebook had also grown. Facebook it was IPO-ing in 2012. A lot of things change at the time. ah And I was seeing these big shifts happen. Obviously, there’s the social mobile shift at the time, which introduced a lot of interesting opportunities.
Mark Heynen: um and It was very clear that it was a great time to be starting companies in the Bay Area specifically. um I had not had that experience. I’d started my first company in London. At the time, there was not really a culture around founders. There was weren’t the tailwinds that we were feeling in 2012. Most people in London in the early 2000s, I would share that I was starting a company. They would ask why I didn’t just go get a job, why I was putting myself through this. um And so it was actually really um ah great time ah you know two thousand and twelve
Mark Heynen: was really the time when Dropbox, Airbnb, a couple of other large companies really came together, companies that became large. um And so I ended up doing some explorations. And through those explorations, I reconnected with a bunch of people I’d known before and um found that there was a really great opportunity with Drop Talk to explore what’s possible with a new paradigm for photo sharing, more transitory photo sharing. This was actually before Snapchat.
Mark Heynen: um We ended up doing some great work. um I think, ultimately, Snapchat ended up dominating um that space. um And we pivoted into more B2B direction and ended up selling to um Dropbox. So I don’t think that was a home run. That was more of a single. um But I think it was a great experience in terms of actually getting this um my feet wet in terms of that journey.
Alejandro Cremades: So it sounds like now, you know, you have two exits under your build. You’ve experienced Facebook, Google. As they say, once an entrepreneur, always an entrepreneur, and you had it in you. why Why joining others, you know, versus saying starting again? What happened there with SkyCuts?
Mark Heynen: Yeah, I think I really enjoyed the process of um starting new and I really liked the process of actually attacking a big problem. And with SkyCatch, I met the team and I saw that they were yeah actually taking advantage of a pretty fundamental platform shift with drones actually starting to become more available and ah needed um you know exactly what I had um already been able to um do previously at Electrobug specifically, which is carve out a go-to-market strategy. And so I joined the initial team um and was able to um bring that into market. And you know I think this was a really fascinating time period. um you know If you dial back to 2013, 2014,
Mark Heynen: drones were relatively new. People didn’t quite know whether they were legal, whether they were not legal, ah what the potential for those drones were. There were American drone manufacturers that were doing quite well at the time. 3D robotics was emerging. And we realized that there was this interesting opportunity where people in construction and mining and even in agriculture had not seized the opportunity yet that was being offered them and so we ended up finding a way to scale a data business out of this. I think the really exciting part of that was um you know
Mark Heynen: when we got called by the people running the new Apple Campus Project, AC2, which is the current Apple headquarters. They had just broken ground. um They needed daily documentation of this construction project because it was effectively a $6 billion dollars construction project. And as you can imagine, if you know you’re not tracking the 5,000 people working on that project, well, you could have significant disagreements or misunderstandings.
Mark Heynen: And so that was really a highlight of that period because we were able to have a really massive impact on ah one of the most iconic construction projects um in the 2010s, really in the world. And I think that um also showed what was possible in terms of implementing a new technology into a relatively traditional industry at that time construction, very difficult industry to sell into. um And I think that was, ah you know, a really fantastic experience. um And something, you know, I’m quite proud that SkyCatch was one of the few drone companies that was able to survive.
Mark Heynen: the drone apocalypse that happened in when DJI started reducing their prices dramatically. um you know They partnered with DJI. That was another important move um that happened um during my tenure. And ultimately, they’re doing very well as a drone data company at this point.
Alejandro Cremades: So the next chapter, Pei Joy, arguably one of the biggest ones that they that you’ve done to date you know in companies that you’ve um you’ve started. Pei Joy, a company that has raised a you know at least this close to over 400 million. you know Quite a success. I’m wondering there, one of the things that the that you experienced was that initially, you guys thought that it would be the way to go to launch in the US, but you ended up doing it in Mexico. so i guess What is the company? What does the company do? Because they’re still up and running and very successfully so. And then what did you guys learn about adjusting and getting it right on product market fit?
Mark Heynen: Yeah, I started PageA with my friend Doug Rickett, who I worked with at Google, and Gib Lopez, who he had met at Stanford GSB. And Doug had experience with Pay-as-you-go solar in Africa. And the observation, the insight that drove the creation of PageA was, Pay-as-you-go is a great way for the underbanked people without credit to be able to afford hardware that they can’t normally afford if they don’t have credit. And so if you can lock a phone if someone doesn’t pay, you can actually allow them to pay weekly, biweekly, monthly for that device without having to do extensive credit checks um or have other sort of infrastructure in place. And that could be a global mechanism for people to actually start paying weekly or regularly for
Mark Heynen: devices, um even if they’re in the prepaid market, which the majority of the world is. So that was the general insight. um That was um definitely true in the U.S., the underbanked in the U.S., and we realized we could actually launch very quickly by opening up in phone stores in the Bay Area initially and then ultimately across the U.S. in the prepaid market.
Mark Heynen: And we had some early traction. I think what happened ultimately was that we saw the trajectory of that traction and we realized this is not the trajectory of a world beating company. i It was doing well. We had really happy clients. But ultimately, what we saw when we were talking to people elsewhere in the world is that they really wanted this technology in their markets. And we actually had an inbound from a potential partner in Mexico. um You know, we had, ah I had formed a partnership with a company called Brightstar, which is a US company that had a lot of connectivity in Latin America. um And ultimately,
Mark Heynen: through that partnership and through other relationships, we were able to, uh, connect with a retailer in Mexico, um, called sensel, who was very interested in launching this, uh, and was ready to actually spend a lot of time with us to do the hard work to get this compliant in Mexico. But this was the first year of the company, you know, launching in two markets in the first year of the company before we’d even raised our series a.
Mark Heynen: Uh, felt like a really big lift. Um, ultimately, um, I boarded a plane, went and spent time with sense. I’ll validate it, realized it was actually, um, you know, great opportunity. Spoke with the team. Um, you know, we weighed the pros and cons. Uh, you know, ultimately we’d said, let’s go ahead and do it.
Mark Heynen: And we launched um you really about a year and a half after first ah selling our first phone. We were actually live in Mexico and ultimately the traction we achieved there was phenomenal. um And, you know, it’s phenomenal because 80 90% of the market is prepaid. So obviously much bigger market, but also People really liked the pay as you go model. It was very differentiated from what they were used to, from the other retailers there, Coppell Electra. And I think the lesson, the overarching lesson there was don’t be afraid to follow the market, even if the market actually ends up being um in a difficult to reach area or you know ends up requiring some investment to get into that market. If you’re feeling market pull, that’s probably the most important thing to prioritize when you’re,
Mark Heynen: you know launching a product into market.
Alejandro Cremades: So you actually, um you know after this, you went to Stellar and you were then that you were there actually helping with go-to-market initiatives ah right before what you’re doing now with NAP, which we’ll talk about it in just a little bit about what you guys are doing with NAPSAC. So I want to ask you because there’s a lot of founders right now trying to figure things out, trying to figure out the go-to-market. What can you tell them about tackling effectively go-to-market as a founder?
Mark Heynen: Well, I think there is not one single playbook that works, but I think the the important thing is to actually get the management team all on the same page on a playbook that you’re going to feel will work well for your product.
Mark Heynen: um I feel there’s been a lot of work on this, ah you know, over the last decade or so where, you know, things are more known. I do think defining your ideal customer profile initially, especially in a B2B context, you know, um ultimately, most of my companies were B2B, even Payjoy, we were selling to retailers who then sold to consumers, so it was B2B to C.
Mark Heynen: um Figuring out your ideal customer profile um and actually figuring out a profile that is quite narrow to begin with and focusing entirely in on that profile and making sure you do a very good job for that initial profile will really clarify, A, what the product needs to do to get traction, and B, it’ll clarify whether that profile is providing the pull you were expecting in terms of wanting your product.
Mark Heynen: um and I do think that there are a few questions you can ask that are um and of very instructive to figure out whether you have that product market fit or not and whether this is going to work. So one great question, um which I think Sean Ellis ultimately came up with is, would you be disappointed if this product disappeared tomorrow? And if the answer is yes to that question, you have a sense that you have some level of product market fit.
Mark Heynen: I think the next thing there once you have some level product market fit is really distribution and how to actually engage with your clients. And I think that has actually changed quite a bit over the last, you know, um decade or so.
Mark Heynen: I think initially it was all about, you know, steak dinners and sass and trying to actually sell one by one slack showed product like growth can really um be another mechanism. And at this point, I actually think we’re in sort of this third phase where we’re not actually even relying on entirely on product like growth, but relying on people finding and hearing about your product through other channels, people using it, viral mechanisms, and starting to um really engage deeply with your product and realizing the product is quite essential.
Mark Heynen: and and being an advocate for that product within the organization. um And, you know, I think if you think of the growth path of Snowflake and and the large B2B companies these days, that’s what I think we’ve seen work. And ultimately, I would say with Payjoy, you know, right now we’re in um nine countries, ultimately, um you know,
Mark Heynen: We have tens of thousands of retailers using the product. Those retailers likely heard about the product from other retailers. So this isn’t ah really product-led growth in the classic sense of I’m going to tell my colleagues about this. This is this is an essential thing I need to sell phones. Therefore, I’m going to use it.
Mark Heynen: um And therefore I’m going to tell a lot of other people about it because it’s important to me that other people use it as well. And I would say that’s actually the path of crypto. You were asking about my my move into crypto. Ultimately, that’s actually a path that, um you know, a lot of those crypto projects had to traverse as well. People were building networks of people using these products because it was so exciting for them and they wanted to bring other people in. And that created a lot of organic growth, which I think is a fantastic way to grow as a technology company.
Alejandro Cremades: So let’s fast forward now. Let’s talk about knapsack, which is your your latest baby. And what are what are you guys doing at knapsack?
Mark Heynen: So the idea behind knapsack is that a lot of companies in financial services and healthcare in particular are really not very comfortable sharing their data to large AI clouds. And so the typical path that, um you know, a company would have to go through and, you know, page is a FinTech. So just imagine um something they would have to go through is, you know, looking at the,
Mark Heynen: things they want to do with AI, realizing a lot of it touches on their corporate data, and then looking at how they can go about implementing those things and realizing very quickly they can either trust a new untested AI cloud where they upload all their data to that cloud.
Mark Heynen: Or they can do um you know a private cloud solution with OpenAI or with Google, which often A, involves consolidating all their data into a single cloud, which is not advantageous, and B, it involves um A lot of cost. I mean the average open AI service agreement on Azure is now a million dollars a year, and that cost is prohibitive for most people. And so really, you either can um decide to just upload your data to perplexity or others in a public crowd cloud decide it’s
Mark Heynen: doesn’t need to be private and do the cheap and cheerful solution. ah That’s actually what’s happening. 80% of people are just uploading stuff without telling anyone. Or you can decide to do something very expensive and very difficult. um And those options do not seem great for most people. ah People want to share their data. Well, people want to use AI on their data, but they don’t want to share their data. And we realized we could actually come architect a completely different ah system where you’re effectively downloading an application on your computer, syncing your data on the computer, and never sharing it with us or with anyone else and using AI locally on your computer. um And that seems to be a much more efficient and much more private way to do this. It also opened up the opportunity then for organizations or enterprises to um basically
Mark Heynen: download knapsack behind their cloud, behind their firewall, um and sync it to their data again without sharing with anyone else. So an enterprise version of this same architecture. um And that felt like where the world was going in terms of compute being on the edge, include people wanting to have a more efficient system. And so we realized that was actually a direction we wanted to build in. We started Building it out. And we realized very quickly that financial advisors in particular have this problem. um If you imagine a financial advisor, they have access to a lot of very sensitive customer information. They are actually
Mark Heynen: from a regulatory point of point of view, not allowed to upload this information to any cloud, let it open AI or any other cloud. um They really need to process quite a bit of information um in a very short period of time to help their clients. A lot of financial advisors have over 100 clients, so they need to have some level of scale. Some of them operate independently. Some of them operate within you know five or 10 um a teams of five or 10 or so. And ultimately, um they should be using AI 100 times a day, but they’re fundamentally blocked. So that that seemed to be a great starting point for um you know to my point before about understanding your ideal customer profile to begin with. That seemed to be a great place to start. And that’s what we’re doing right now. We have
Mark Heynen: an application that’s live for people to download and use on knapsack.ai. But we’re spending a lot of time with financial advisors to define automations for them and to help them use AI with their data without having to upload their data to a new cloud.
Alejandro Cremades: So if you were to go to sleep tonight, Mark, and you wake up in a world where the vision of knapsack is fully realized, what what does that world look like?
Mark Heynen: Well, That world involves people actually using AI in a much more distributed manner, in a much more personal manner. So when you ask a question, you know whether it’s on your phone or on your computer, that AI system should know your complete email history. It should know about every file on your computer. It should know about every calendar event across all of your accounts. And it should ask knowing all that context, knowing everything about you.
Mark Heynen: um It should also be able to operate without you having to ask. So that’s actually the other piece of what we’re building. We’re we’re not just requiring someone to use a chat box. ah We don’t think the chat box is the dominant or winning UI in AI. ah We are enabling automations where things will automatically happen prior to you even asking based on what’s happening in your world. So a great mainstream example of this is meeting preparation. so
Mark Heynen: you know ah I knew we were talking, knapsack automatically pushed a meeting prep brief to me an hour before our call, ah detailing, you know, the previous people you had on your podcast and you know what the nature of your pod and ah also the nature of our conversation and knew everything about my past emails. And so that’s an example of something that’s pushed at me that will end up being very impactful. And you can imagine that happening 100 times a day in different ways where, you know,
Mark Heynen: the device to tech something’s happening in your world takes action and takes action on your behalf, either independently or with you in the loop. I think initially it’s going to be with you in the loop and ends up making you a lot more productive. And so ultimately I think that is the world we’re going to face going forward is that people are going to be automating a lot of parts of their lives. um And those automations are going to feel very natural. And I think five or 10 years from now,
Mark Heynen: it’s going to be um hard to imagine them not existing.
Alejandro Cremades: So let’s say I bring you back in time now. I put you into a time machine and I bring you back to the year of 2000. You know, it’s the moment where you’re thinking about starting a company of your own and venturing into the world of entrepreneurship. And let’s say you’re able to stop that younger mark on the tracks and give that younger mark there in London, one piece of advice for launching a business. What would that be and why, given what you know now?
Mark Heynen: Well, I could cheat and say, I should go move to Palo Alto and meet these guys called Larry and Sergey and join them in any way I can, right? um But let let me actually give you a more direct answer. So I think the practical piece of advice is,
Mark Heynen: um first of all, make sure you’re solving a very big problem. And that was actually the challenge I had in That first company that market research, you know, being the next Nielsen was not a really big problem. It was an interesting problem and I could get immediate traction, but ultimately it wasn’t a big enough market where um I could grow into um building, you know, a large company that had true scale. And I was able to bring it to, you know, catch profitability. um And I think that was fantastic. But ultimately, that was a challenge. So I would say that’s the first thing. Make sure you’re solving a big problem. I think the second thing is be people first. um You know, think about
Mark Heynen: the people you’re bringing on board, um take your time in terms of bringing on those people, define your core values, and define what you want to prioritize amongst your team, and then make sure you’re betting on potential. And um ultimately, people will have a lot of different roles in your organization.
Mark Heynen: um I would say 80% of the challenges I had in my first company were people related, just you know people doing things that they were um ah not supposed to do or um you know acting in unpredictable ways. Obviously, I was young, didn’t know a lot about management at the time.
Mark Heynen: yeah to add to that that most of the team was in India I was in London, I was actually managing a lot of people through MSN messenger which is I guess the early equivalent of slack. um And so you can imagine, it was a very challenging experience at the time.
Mark Heynen: um I ended up actually spending you know three to six months per year in India to make sure that I really got into and solved those people issues. And I imagine I could have resolved those early on by thinking through the culture a little more.
Alejandro Cremades: I love it. Mark, for the people that are listening, I would love to reach out and say hi. What’s the best way for them to do so?
Mark Heynen: Yeah, so you’re welcome to reach out to me on LinkedIn or Twitter on Mark Hynden. You can also go to markhynden.com and you can see all my socials. um And I am also on threads and on Blue Sky on Mark Hynden. So I’m active on all of those.
Alejandro Cremades: Amazing. well Hey Mark, thank you so much for being on The Dealmaker Show today. It has been an absolute honor to have you with us.
Mark Heynen: Well, thank you very much. Really appreciate it.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at al*@pa**.com“>al*@pa**.com
The post Mark Heynen On Breaking Down Barriers to Access To Fintech, Smartphones, And AI, Raising Over $400 Million appeared first on Alejandro Cremades.
In the fast-paced world of tech entrepreneurship, Daniel Lee stands out with a remarkable story of resilience, innovation, and vision.
Co-founder of Nooks, an AI-powered platform transforming the productivity of sales teams, Daniel recently announced a $43M funding round, bringing the total raised to $70M. Nooks’ top-tier investors include Kleiner Perkins, Lachy Groom, Stifel Venture Banking, and Tola Capital.
In this episode, you will learn:
- Nooks transitioned from a co-working spaces app to a dynamic virtual office platform, adapting to remote work trends.
- Daniel Lee emphasized deep user empathy, gathering insights to craft features that resonate with teams.
- Nooks automates dialing, coaching, and prospecting busywork to help sellers boost their pipeline and focus on the human side of selling
- By securing $70M in funding, Nooks aims to redefine how remote teams interact and work together.
- Lee’s entrepreneurial journey highlights the importance of perseverance and learning from setbacks.
- Nooks’ success underscores the growing demand for tools that enhance productivity and camaraderie in remote settings.
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Your email address is 100% safe from spam!**About Daniel Lee:**Dan Lee is the Co-Founder and CEO of Nooks since 2020. Daniel was previously a Machine Learning Engineer at Scale AI in 2020. In 2019, they worked as a Quantitative Strategies for IEX Group, Inc. and as an ML Researcher for Cerebras Systems.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty. Hello, everyone, and welcome to the Deal Maker Show. So today we have an amazing founder, a founder that is joining us and that they has built it, scaled it. I mean, ah you name it. you know They recently announced their latest round of financing. you know They raised over $70 million. dollars about 80 people, and they’re riding this rocket ship. so Again, we’re going to be talking about their founding story, some really interesting stuff there, how he met his co-founders at school, also how they went about um you know going, you know raising their last round. It was a round that came out of nowhere you know with a really strong partner such as a client of Perkins,
Alejandro Cremades: And then also what the early days looked like and and how they really you know found that interesting you know inflection point there when it came out the beginning with sales teams. But again, really interesting discussion, super inspiring journey. And without further ado, let’s welcome our guest today, Dan Lee. Welcome to the show.
Daniel Lee: Thanks, Alejandro. Super excited to be here.
Alejandro Cremades: So originally born and raised in New Jersey. Give us a walk through memory lane. How was life growing up for you?
Daniel Lee: Yeah, for sure. I was actually born in Manhattan, grew up in New Jersey, um and and then cameout to the Bay Area for school. But um say, growing up, um my main hobbies and activities, one was ice hockey. ah So I grew up playing ice hockey since I was little. I still really enjoy ice skating, rollerblading, you name it.
Daniel Lee: um And another was kind of science and math and and research. um So I was always you know kind of doing ah extra science, ah extracurriculars. um I remember one time in in high school, I got in trouble for for launching some sugar rockets that I had made and cooked up. um But yeah, those those were my main interests going you know growing up.
Daniel Lee: and then ended up going to to Stanford for for college. That’s where I met my co-founders, Rohan and Nikhil.
Alejandro Cremades: How do you get into computers and AI and machine learning and all of that jazz?
Daniel Lee: Yeah.
Daniel Lee: Yeah, at Stanford, it kind of just happens. Actually, you know, and ever no so i um ah in high school,
Alejandro Cremades: But was it before Stanford? Was it before Stanford? I mean.
Daniel Lee: took an AP computer science class and I really disliked it actually. um And I was actually doing some physics research at Princeton Plasma Physics Lab in high school.
Alejandro Cremades: Wow.
Daniel Lee: And that ah piqued my interest in materials, material science. So I thought I might do something around that longer term. um When I went to Stanford and I started, I wasn’t studying any computer science.
Daniel Lee: I was thinking it might be either physics or math. Um, but then all my smartest friends, you know, uh, Rohan and Kiel and, and, you know, a bunch of others were studying computer science and I was like, Oh, I must be missing something. Uh, so I tried a couple of computer science classes, really enjoyed it and then, um, kind of sprinted to catch up. Cause I felt behind. Um, and I think, uh, when you study computer science and you learn to build things, naturally you tend to want to go build things. Um, so that, uh, definitely played a big role in in starting Nooks.
Alejandro Cremades: So let’s talk about a dropping out of Stanford because I know that, I’m sure your your parents were not happy about it.
Daniel Lee: um So you see, i I was fortunate in a sense. um It was, so i can I can explain the chronology. I was class of 21 at Stanford. I first stopped in 2019 actually. So I did a little bit over two years. um And I started working at Scale AI on their machine learning team as like a, um you know,
Daniel Lee: in during the school year internship where I stopped school and I was living and working in SF. um And, and I actually plan to study abroad at Oxford, uh, the, the following quarter after, after scale, but the pandemic, you know, obviously that was canceled, uh, scale started working remotely. So I went back to New Jersey. Um, and you know, then after wrapping that up, you know, the alternatives, one was remote classes and the other is, you know, kind of just continuing working, hacking on things. Um, and, uh, I was already a bit ahead. So the, the.
Daniel Lee: Remote classes, ah based on what my friends were telling me, didn’t sound super fun. So instead I started hacking on ah Nooks ah with this idea, how do you actually help making, ah make working slash, you know, studying remotely a much better experience, um kind of this concept of a a virtual office.
Alejandro Cremades: So then let’s talk about, a you know because that’s that’s kind of like when you were ah when you were at ScaleAI, obviously the whole thing, pandemic hit, nukes, it’s more like a site you know gig type of work. So how does the whole concept of maturing and graduating like um you know weekend project, you know to to two to really taking it seriously enough to say, hey, I think that this may be my next chapter and and perhaps you know I give my notice and go all in.
Daniel Lee: Yeah, great question. It was definitely a gradual process. um And I would say Nooks starting as a weekend project is maybe, um it was it was like, a I was doing it full-time, right? um ah Not as like a school project, not, you know, but but I was pretty interested. Like I was i got really into it. um And I probably like the sequence of events ah that that kind of led to more and more buy-in.
Daniel Lee: um First was deciding not to do my next summer internship that was lined up. um And that wasn’t a super hard decision. I was enjoying, you know, working on Nooks a lot. People were starting to use it.
Daniel Lee: And I figured I’m going to learn a lot more doing this. um you know But at the so at the time, it was still a project. My my ah ah parents were actually a little bit worried about that. um And then the next probably big step was getting Rohan and Nikhil to join in.
Daniel Lee: So you know we were all really close friends at Stanford. They were roommates. I was ah a quasi roommate. And in the early iterations of Nooks, I often showed showed them some of the prototypes. And I remember Rohan in particular was always like, hey, this sucks. like Why don’t you change it this way or you know make this improvement?
Daniel Lee: And at some point I was just like, dude, like, just come, come help me build this. Um, and that’s how, uh, that’s how Rohan joined and in, in Nikhil, uh, very shortly after. Um, and then probably the, the, um.
Daniel Lee: last step in in committing and really going all in and making this a company was um over that summer we had started getting a bunch of Stanford classes using Nooks and started you know basically ah gaining some some traction and momentum. ah And that fall, some VCs started approaching us and saying, hey, you should actually think of this as a company and raise some money.
Daniel Lee: um
Alejandro Cremades: and we’ll We’ll get into that in just a little bit. I want to ask you, what were the early days like? i mean Was there any ramen noodles in there or not?
Daniel Lee: Yeah, so um started working just at home in in New Jersey. um We actually then moved to Rohan’s basement in Virginia. um So there there were a couple of us in in Rohan’s family’s home in in Virginia. um Rohan’s mom was very nice and enough to to make us dinner often, so no no actually ramen noodles, um but definitely that vibe.
Alejandro Cremades: That’s incredible. so I guess for the people that are listening to um to get it, what ended up being the business model of Nooks, how do you guys make money as well?
Daniel Lee: Yeah, great question. So um really quickly, like background on Nooks or high high level idea of like what what Nooks is, ah we make sales seems more productive. So sales reps today spend a lot of time um doing things like writing emails and making calls and doing research online. um And AI is really good at doing these things.
Daniel Lee: um So, our goal is, can you automate this busy work, ah so that sales reps can focus on the more human parts of the job. And we have three um kind of main AI assistants, or, or products, um and I can kind of explain how how we monetize on each.
Daniel Lee: um We have a dialing assistant, which helps automate the manual parts of calling. So think like finding phone numbers, skipping answer machines and ringing, taking notes on calls. um We have a ah coaching assistant ah that helps you basically identify areas to improve on calls. Basically, are people answering questions the right way? We have an AI role play, part of that as well, that simulates customers and a sales rep can practice trying to sell to it.
Daniel Lee: um And then the prospecting assistant is the the third piece, which automates um a lot of the rest of the manual work in doing account research, ah prioritizing lists of prospects, and actually drafting emails towards them.
Daniel Lee: Um, and the prospecting and coaching assistant, uh, sorry, the the dialing and coaching assistant, uh, both charge on a per user basis. Um, uh, like, so it’s a per seat, uh, model and the prospecting assistant is charged more on a usage based model. Uh, and it’s all, you know, kind of SAS subscriptions.
Alejandro Cremades: So what was that moment like when you guys were like, I think that maybe we’re into something with this.
Daniel Lee: Great question. um So ah probably there were maybe two distinct phases of of Nooks. In the early days, we were not focused on sales teams. ah We were interested in kind of more, um I can share actually, I was interested in two problems ah getting started at Nooks. One was, hey, everyone’s working remotely. ah Can you help them work as you know efficiently as they were in person with this like virtual office? Kind of like a Zoom, but for co-working instead of for meetings.
Daniel Lee: um And then the second problem I was interested in is, hey, if you get that virtual office working, you have a lot of data on how people work. um And can you actually make it smart? So can you automate the manual parts of the job? Can you automate feedback loops to help people get better?
Daniel Lee: um And ah in that initial you know kind of first phase of Nooks, we spent a lot of time on that virtual office piece. um And you know the initial traction, we had a lot of Stanford classes using Nooks for office hours during the pandemic.
Daniel Lee: um ah that you know that’s kind of our initial set of users, and then started expanding to a bunch of startup teams, like sales, marketing, products, like varying and you know ah types of startup teams. And then in the second phase of Nooks, that’s when we started really making it smart and doubling down on on sales teams, focused on you know not only how do we help them collaborate, ah but make them a lot more productive. And i’ll I’d say like the aha moment there is,
Daniel Lee: you know We get feedback you know all the time, even kind of since the early days, where people sales reps and our users say, nooks makes my job fun. um People say, I would quit if we you know couldn’t use nooks. Or I’ve gotten promoted ah because I’m able to learn and you know get better at my job via nooks. Or even I’ve made more money.
Daniel Lee: because I’m able to hit quota and be more productive because of Nook. So I think um that’s been kind of this second aha moment, ah where we’ve seen that Nooks is able to really deliver ah meaningful value to to users.
Alejandro Cremades: So you were alluding to earlier, you know, how the whole fundraising journey, you know, started and with the VCs, you know, giving you some thoughts and guidance. and So I know that you guys have raised about $70 million. dollars The last round was announced in early, earlier this year, like a couple of months ago. But walk us through what was that journey to of going through the finances?
Daniel Lee: Yeah, great question. um So you know for context, this is my first company. um I have been really fortunate ah to to have a lot of help ah during you know learning the the fundraising and company building process from really great advisors. um And um I’d say the first round that we did um That one we were getting approached by by VCs. Nooks was still a project at the time, right? And we were getting approached by VCs saying, hey, you should, you know, make this a company and think about scaling it. um ah So really leaned heavily on advisors to to evaluate like, how do we think about it? Who should we talk to? um And ended up raising our our seed round um kind of in late 2020, early 2021.
Daniel Lee: Um, and then since then, um, you know, our, our series a and our our recent series B, um, uh, each has been kind of, uh, kicked off by like a preemptive offer. Uh, and then, and then we’ve, um, you know, kind of gone out and and tested the market.
Alejandro Cremades: So talk to us about the um you know the the the whole process, like the expectations that you experience and and how you know the whole interaction you know was changing with with investors to us. You were going from one financing cycle to the next.
Daniel Lee: Yeah, so when when you say the changing expectations, do you mean, like, the the differences in race?
Alejandro Cremades: because yeah Because it’s not the same, like for example, what you experienced at a seed stage was probably different you know than what you experienced at a series A in the latest round.
Daniel Lee: Yeah, totally.
Alejandro Cremades: also so So walk us through that too.
Daniel Lee: Yeah, so at The Seed, you know, we had no deck. We had no company. it was ah ah We had a product, and we had a bunch of, ah you know, varied different groups.
Daniel Lee: ah having giving great feedback on it. um so the seed was ah you know The seed was probably less of like a typical structured funding round. um and you know This was also our first time fundraising.
Daniel Lee: ah so I think we were lucky you know at every round to have ended up with with great investors who’ve then helped kind of with with subsequent rounds. um But yeah, that that seed round was probably the most interesting to to navigate. um And then at the Series A, um that one that one was was definitely different in the sense by that time we had already started focusing on um ah making sales seems more productive.
Daniel Lee: We already had, you know, we had revenue um and starting at the Series A, they were actually, it was more metrics driven. It was more like, okay, what is the longer term vision? What is the market size, right? A lot like more of the fundamentals. um And by the Series B um ah really, really much stronger emphasis on on metrics, on on growth and retention. And also of course on on the TAM and our our ability to go in and capture it.
Alejandro Cremades: So this last one too, where you got the round being preempted and you got Kleiner Perkins coming in, what does it look like when a round is preempted? Because i mean most people that are listening you know to us now, they’re probably thinking of the whole race of knocking doors. and how How did it work differently this time around?
Daniel Lee: Yeah, I think um it’s a good question. So one thing that that we’ve um kind of done around and and even in between rounds is um leveraging investor connections to actually get intros to their portfolio companies.
Daniel Lee: um We sell to a lot of you know growth stage tech companies and ah you know VCs often invest in a lot of these growth stage tech companies. So um you know even outside of funding rounds, we’ve kind of kept in in in contact with investors ah to help you know break you know break into their portfolio companies. um And at the most recent rounds, one of these firms that we you know was was helping us ah ah basically sent like a reverse pitch deck, and which indicated, hey, they’re they’re gearing up to to make an offer. And you know it’s it’s important in fundraising. it’s It’s best because this is a ah not a, um I’m forgetting the word here,
Daniel Lee: So it’s not a perfect market, right? Like there’s not perfect visibility. So you actually want to go um not make a decision based on one offer, but but actually collect multiple data points to to make a decision. um So then we we kicked off a bunch of other conversations with investors that we had um been been talking with.
Alejandro Cremades: So talk to us, I mean, because obviously investors and employees ah that you got their customers to, they’re betting on a vision. um So if you were to go to sleep tonight, Dan, and you wake up in a world where the vision of Nooks is fully realized, what does that world look like?
Daniel Lee: Yeah, that’s a great question. So, I’d like to give the analogy, you know, we’re we’re making sales reps more productive. I’d like to give the analogy of um the the transformation that that farmers have seen over the past, you know, like a couple hundred years, especially with the the industrial revolution. Farmers used to be plowing fields and more like manual labor. And now they have fleets of machines. They have drones, tractors, plows that do a lot of that manual work. ah And they are more like scientists today, where they can measure soil composition and optimize yields. And there are a lot fewer farmers actually, but there’s a lot more food.
Daniel Lee: um And I think something similar is is happening for for sales reps. ah It’s you know kind of an out there analogy, but um especially for sales reps that are focused on on generating opportunities, um ah like sales development and business development reps,
Daniel Lee: You spend the vast majority of your time on things now that AI can do, like writing emails and making calls and doing research online. AI is really good at you know writing an email or browsing the web and and summarizing things. um so As a result, the job is undergoing a very significant transformation.
Daniel Lee: um and In this world, you know one rep will be able to do what used to take 10. And they’ll be able to deliver a lot more value to customers and and to more customers. um so So in this world, you know I wake up one day and um the the vision is realized.
Daniel Lee: um ah value creation will be a lot more efficient, right? Where you can do it with fewer people, reps will be able to focus on the more human parts of the job, and millions of people will will have, you know, much, much better experiences in in their day to day.
Alejandro Cremades: So how does this AI you know wave is saying is, I mean, it’s it’s everyone is talking about it, no? I mean, how how how are you guys unlocking it with Nooks?
Daniel Lee: Yeah, it’s a great question. um I think it’s it’s really interesting how AI is being applied to to different domains. I think ah one thing that ah is is pretty evident in in the market is you know um intelligence is has reached levels, you know AI intelligence has just reached levels that were previously thought it’s going to happen in the next several decades, not you know not years.
Daniel Lee: um And you know with foundation models pushing the boundaries of intelligence with LLMs, I think one you know pretty interesting thing is that the practical the practical applications to solve real business problems remain underdeveloped you know compared compared to this intelligence. um So you know i’m I’m explaining um um explaining this this vision and this challenge with with the 3 million inside sales reps in the US.
Daniel Lee: um Even without improving intelligence much, you can imagine that their jobs will will be significantly transformed. um So I think sales is interesting ah as compared to other domains that people are applying AI. For example, support ah you know customer support or for coding or for like legal or compliance. um Because in a lot of these other domains,
Daniel Lee: the the end user or the consumer of the AI is a customer that’s looking for help, right? Trying to answer our question. Or it’s a lawyer who’s trying to also you know answer a question and and ah comprehend like some some documents. In sales, you know the the consumer is is a buyer that you know wasn’t necessarily thinking of of buying a product. right and you know they have They have other responsibilities. But you know this product can can potentially add a lot of value to them.
Daniel Lee: um In sales in particular, there’s there’s just this this higher bar ah that you have to meet. um you know In a world where everything is AI and like a buyer’s inbox is full of you know AI spam, um then the thing that stands out really is being human.
Daniel Lee: um so i think werere we get to work on some really interesting problems that are not just you know kind of automating completely a job with AI, but actually really interesting and complex like human-AI interactions. What are the parts of the job that AI should do? What are the parts of the job that a human should do? right In sales, humans should focus on building customer relationships ah and in delivering value and empathizing with their problems and developing like creative strategies to solve them.
Daniel Lee: um So um yeah, I think that that’s one interesting area that we get to ah think about in AI.
Alejandro Cremades: So ve we’ve been talking about the future here. i want I want to talk about the past, but doing so with a lens of reflection. now So if I was to put you into a time machine and I bring you back, you know let’s say to 2020, when you were starting to think about a world you know where you were going to do something on your own and become as an entrepreneur, and let’s say you’re able to go back in time and have a chat with that younger Dan, and you’re able to give that younger Dan one piece of a advice for launching a company, what would that be and why, given what you know now?
Daniel Lee: Yeah, that’s a great question. um
Daniel Lee: I think ruthless prioritization. um And this is…
Daniel Lee: um this This is you know becoming more and more common advice, but really have a small number of goals and and stick to them. um And you know this idea that you can do anything, but you can’t do everything. And you need to pick really what you want to focus on and and do. um I think early on, ah we were not as as as ruthless and in terms of prioritizing. ah And over time, we’ve realized, hey, we want to do few things and few things very well. um I think that that advice i’d I’d give to more entrepreneurs.
Alejandro Cremades: I love it. Dan, for the people that are listening, I would love to reach out and say hi. What is the best way for them to do so?
Daniel Lee: Yeah, connect with me on LinkedIn.
Alejandro Cremades: Amazing. Well, easy novel. Dan, it has been an absolute honor to have you with us. Thank you so much for being on The Dealmaker Show.
Daniel Lee: Yep, thank thanks for having me.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at al*@pa**.com“>al*@pa**.com
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In the entrepreneurship world, stories often begin in predictable places: classrooms, tech hubs, or corporate boardrooms. Casper Henningsen’s tale, however, takes us to the soccer field.
As a former professional soccer player in Denmark’s top league, Casper pivoted from the high-stakes world of elite sports to the equally demanding landscape of business and startups. His startup, GetWhy has attracted funding from investors like PeakSpan.
In this episode, you will learn:
- Building a professional soccer career from childhood taught Casper Henningsen resilience, focus, and the importance of a long-term vision.
- Recognizing his limits in soccer at age 25, he transitioned to consulting to maximize his best years and acquire new skills.
- Traits like discipline, grit, and team dynamics from sports proved invaluable in the business world.
- Consulting honed his ability to break complex problems into actionable solutions, a foundational skill for entrepreneurship.
- GetWhy’s synthetic researcher revolutionizes customer insights by delivering large-scale, actionable insights.
- Monetizing “work done” rather than software features aligns directly with client value creation.
- Building investor relationships and crafting a clear vision were critical to securing funding for his first venture.
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Your email address is 100% safe from spam!**About Casper Henningsen:**Casper Henningsen is the CEO & Co-Founder of GetWhy, a company that combines generative AI, technology, and human expertise to provide high-quality consumer insights quickly.
Casper is also a Member of the Board of Directors at Nordic Knowledge Partners, a company focused on investment research and proprietary M&A intelligence.
Additionally, Casper was the CEO & Co-Founder of UserTribe, a customer-centricity enabler company. Furthermore, Casper was a Member of the Board of Directors at Klausen + Partners, an award-winning tech/digital marketing agency, and a Senior Partner at Kunde & Co, one of Europe’s largest marketing and branding consultancies.
Prior to their entrepreneurial endeavors, Casper had a successful career as a professional football player at the highest level in Scandinavia.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty, hello everyone and welcome to the Deal Makers show. So today today we have an amazing founder. I think that this story is going to be awesome. you know I’d say definitely a story you know that is quite inspiring, a story of a professional athlete, a professional soccer player that ended up being you know ah hanging out the hanging up the boots you know on his a best time to be able to ah pick up the business side of things and take you know ah the career and his life to the next level. We’re going to be talking about raising capital, you know the ups and downs on that, also tackling a well-defined market, and then also how to think about
Alejandro Cremades: being patient you know with with the input and and what kind of output you get when you are a founder. no Again, the building, the scaling, the financing, all of that good stuff that we like to hear. So without further ado, let’s welcome our guest today, Caspar Henningsen. Welcome to the show.
Casper Henningsen: Pleasure to be on, Alejandro.
Alejandro Cremades: So born in Denmark. Give us a walk through memory lane. How was life growing up?
Casper Henningsen: Yeah, so so Denmark is ah is a very small country in the north of Europe, and it’s not definitely not the worst place you could be born, so feel quite lucky that that was the that was the place. ah That said, you know ah being born and raised by an uneducated single mom, two kids, and you know a lot of tough love. And you know we need to take care of of of making a living. and And that was sort of like you know um just the premise growing up. ah So as a young kid, I think you know I pretty quickly learned the concept of imagination and dreaming and and kind of like setting a future flag that you you start to construct a reality around. and
Casper Henningsen: In my case that became from the age of five, it became soccer and and it became sports. um And I became relentless, dedicated around achieving the goal of becoming a professional soccer player. and and And that was definitely, if if just one sentence on my youth, that that was that was writing that chapter. At the age of 15, I signed my first youth contract and at the age of 19 or 20, I signed my first full-time contract and and had 12 years as ah as a professional playing at the highest league in in Denmark. so
Alejandro Cremades: what What was that like for you? Because I mean, when you are signing up ah for for anything, you know, when you’re 15 and now it’s like your dream, what you had dreamed with, you know, all your childhood of, you know, when you were getting out and and playing some games with friends or grabbing a ball and hitting it against a wall, you know, and just saying,
Alejandro Cremades: trying to improve and and watching TV, what is that feeling where all of a sudden you’re 15 years old, which obviously you’re still not an adult, but but you get you know that opportunity, that possibility opening in front of your eyes. How how do you go about not losing your mind and and just thinking that you’re a God?
Casper Henningsen: It’s a pretty weird feeling because as I said, you develop sort of like a superpower, which is you can construct a reality you don’t live in, but you kind of like have all the emotions of being in it. So I would still recall that day where you signed the contract and now it was actually reality. It didn’t really feel that much different from what I anticipated. And it was sort of like, okay, now that part happened. Now I need to become a full-time pro. I need to take the next step. So in in a weird way, I would say,
Casper Henningsen: You already had the feeling, it was just a question of when is it going to be reality? And and and sort of like, that was my view on it from the age of five. I knew it would happen. It was the only reality I could construct, but pretty crazy thinking about it, zooming out that you can you can do it in that way. But and but but that was really the feeling. i and kind of like I knew this would happen. I put in my input every day, worked incredibly hard, and I was very patient with my outcomes.
Alejandro Cremades: And how i i saying how was that like for you, too, in terms of discipline? Because now you know it’s like, hey, you signed a contract. You are 15 still, but but you have a duty. You have responsibility now to to to deliver.
Casper Henningsen: Yeah, I think there’s two sides to it. you know One is that you go through different stages as ah as a pro because, you know, one is that you have ah all the aspirations as a youth, but then you get into teenage years and there’s a lot of distractions and there will be a lot of defeats and there’ll be a lot of no’s and you will, you know, so you need to get through all of these kind of like different hurdles that definitely gonna challenge how much do you want it. So I think that’s one one part of it, which is really, you know,
Casper Henningsen: you’re really getting challenged on your character and and you know how determined are you because you’re gonna be pushed and you’re gonna be challenged by the simple way that life’s gonna distract you and you need to say no to a bunch of things. So that’s one one thing. The other thing is that your input needs to compound to a very serious level of outcome. and There is only 1% that starts playing football that even can make a living of it and by by by the generation. So you really need to trust that You cannot only a overcome the hurdles, but you’re also going to compound quality through your input every day.
Alejandro Cremades: And what was that the moment like where, I mean, obviously here you’re scaling through the ranks, you’re going through different teams, you know maybe you’re changing positions you know from striker to midfielder, whatever that was.
Alejandro Cremades: You’re 25 years old. twenty five years old i mean nowadays i mean you Look at Cristiano Ronaldo. He goes all the way up to 40 years old, and he’s like making $400 million bucks a year. but you know Messy. you know Same thing. Making $200 million dollars a year, probably $37.38. Now, you’re 25 years old. You’re still you know like at the point where Most players like start to develop their breakthrough years in terms of earning years. And on your end, you start to think that something is off. What was that like for you and what happened?
Casper Henningsen: yeah Great question. I would say that Luckily, I was able to zoom out and look at the trajectory and see myself in competition with all the other professional soccer players. And what I saw was that I was definitely in progress and I was developing, but I was not developing in a pace and inequality.
Casper Henningsen: that were able to compete at the level that I wanted. And there you can do two things. You can either stay in the game and use the next 10 years, which is your best years, trying to you know write a new chapter. Or you can say, all the learnings I have now, I could start writing a new chapter, which is how I’m going to play Champions League at business side.
Casper Henningsen: And I came to the conclusion that I wanted to spend my best years with all of my hard-earned learnings to try to write that chapter ah instead of trying to write a new chapter within football. So it was really tough decision, but I think the only way I could make it was that I was able to zoom out and look at the competition. If you use two of if you waste two or three years in such an intense environment, you’re going to have a hard time pivot and and actually underwrite your trajectory.
Alejandro Cremades: so How do you get into consulting? Because i mean here you are, a soccer player. It’s not like you have a master’s degree or or anything like that, which is the typical you know thing that you would see consultants do. you know They do the MBA, and then you know they get you know recruited by the consulting firm. In your case, all you had was the education of soccer. so i mean That’s quite the switch of Rooney there and you know and to be able to land the job.
Casper Henningsen: Yeah, that’s right. You know, in in in that way, I’m self-motivated. I learned, but I was also very lucky. It was a Nordic woody consultant, see around 350 people. The founder of that company were a former professional.
Casper Henningsen: And so there was a you know direct correlation. He knew the skills, he knew the attitude, he knew he knew the mindset that it took me to become a professional. And I think he betted on that I was so hungry to prove myself that I pretty pretty quickly with that attitude will learn the skills and and become and become very um you know productive for the company and have a good journey. So I don’t think it could be happening in any company, but specifically this consultancy you know had that culture and that belief that If you have the attitude and you have the mindset, you know there is a chance to build the skills.
Alejandro Cremades: what what what was that the you know What was that like to to be able to apply some of the skills, some of the leadership, sportsmanship that also you had developed and that you had a acquired from those 12 years playing soccer as a professional into the business world, especially you know with Kundi and Cole, where you are now like engaging you know with a bunch of different companies?
Casper Henningsen: It was crazy. I think mentality wise, I found a culture that was kind of like sports, but then you start putting in the craft. And what I pretty quickly learned was that there is a big difference between business and elite sports. And elite sport is much harder and it’s much more intense and has so much more friction than being in business. In sports, if you don’t remove friction and you’re not brutally honest week by week, you’re going to lose on Sunday.
Casper Henningsen: In business, you need to be patient, you need to have communication, you need to have leadership styles, you need to learn all of the softer skills that makes people come together and actually progress. And I needed to have that learning the hard way. So so that was one realization that in In sports, you take for granted that you remove friction weekly, you don’t do that in business life. Second, what I also learned was to acquiring skills by really being powerful on my input were no different than training and building skills in sports. So that was a direct correlation. I could become insanely good at something and write a new narrative if my input
Casper Henningsen: were impatient and with high quality. And I trusted in the outcome and were pretty patient around my outcome. So I would say you pretty quickly learn. You can write new narratives. You can become very skilled at something if you put in the input. But my biggest learning the first three or four or five years were that you can say the way you interact are totally different than you do at sports.
Alejandro Cremades: so So let’s talk about now um being a consultant, right? And and and now you know you got and all these lessons learned you know from your previous um journey as a professional athlete. Now you’re applying them into the world of business, but now you’re also developing new skill sets like, for example, becoming a consultant,
Alejandro Cremades: is specifically when it comes to problem solving, right? Because you’re now consulting these companies on strategy, you own issues, whatever they’re dealing with, but it’s all about helping you know with really generating those solutions. When it comes to a framework for problem solving and what you got you know out of those, you know let’s say four years that you were a consultant and and and really figuring out problems,
Alejandro Cremades: What was your biggest take as to how to tackle you know resolving a problem and going up about about about finding you know what’s the best way to go?
Casper Henningsen: But that that you’re absolutely right. You’re absolutely correct. That was my biggest toolbox. It was my biggest learning how to solve problems. I think if you have that skill set and and you are able to articulate it, you know you can you can be very productive and very successful due to many waves. So we really you know you’re getting learned how to solve problems and how to orchestrate an architect, sort of like a design around it, not only for yourself, but also for a group of people that needs to momentum and go in a direction.
Casper Henningsen: You know, that is the superpower you gain from being a consultant. It’s really this idea of having a framework where you break down a very complicated product or a problem into a series of actions, and then you get momentum in it by accumulating an energy group in a group of people. And when I learned that, and and when I also think kind of like I was on top of that, I was also, that would that should be my biggest learning in this. I think I’m ready for something new.
Alejandro Cremades: So then let’s get to that point. how do you how do you How do you really go through that process of, hey, I want to start something on my own. I want to control my own destiny. And this is what it looks like.
Casper Henningsen: Yeah, so when I was ah when I was doing consultant, I became a senior partner at the firm. And when you do that, I had six or seven different units under my leadership. and One of the units were insights. And so my job was to build an appealing proposition around insights and make that tangible and attractive for the business and the customers of ours.
Casper Henningsen: and And very quickly, I became you know very passionate about that specific unit and what it could do if it was placed right. But I also saw all the problems with the format. m And doing that for four years with quite an amount of intensity, I saw an opportunity to go and solve the problem I felt on my own body.
Casper Henningsen: in in a more sustainable way as an entrepreneur. So that became my my bridge into to starting my own. I realized the problem, I lived it, and and i wanted to and I wanted to do something about it.
Alejandro Cremades: So what ended up becoming you know Get Why? what What are you guys doing at Get Why?
Casper Henningsen: Yeah, so so we are in the consumer insight space or customer insight space. The customer insight space is pretty broad and well-established, and it’s a service-first industry. um and And what we do is we build technology and advanced models to produce great insights on very rich video data, pretty unstructured data, and distribute these insights into decision making and workflows, basically, and at the operating units at at a company. him And the way we did we put a different proposition to market is we’ve built the first and only digital researcher, a synthetic researcher,
Casper Henningsen: where we have a technology stack that replicates the workflow of a researcher, and then we’ve built proprietary models to create content in that workflow, which essentially gives a very strong proposition. We sell work, we don’t sell software, um and we have long-term advantages on, you can say, the customer experience. We’re going to create a fast insight.
Casper Henningsen: that is very, very filled with substance and quality. And we’re going to be very disrupted on price. So we could say, we are here to to produce insights and distribute them to action. And our way of solving it has been to build the first digital researcher that works kind of like as a researcher, you would you would look at at McKinsey or Bain or Ipsos or Kanta, but it’s a synthetic model that replicates the workflow and produces the exact same work as they are doing today. And by that we have a,
Casper Henningsen: very strong in differentiation and proposition in the market.
Alejandro Cremades: That’s amazing. So um so what is what is the monetization? How do how do you guys make money?
Casper Henningsen: Yeah. is So when I say we we charge for work, I really mean it. So work in our industry are an insight done. So we are not selling a feature set or we don’t sell and a subscription to any tooling. you you You buy a subscription for the amount of work you want to have done and you can start that work simultaneously at night, in the morning, in the weekends.
Casper Henningsen: Our digital researcher doesn’t care. and So you’ you’re going to be charged by the work our researcher do for you and the amount of insights it delivers to your organization, rather than paying you know a subscription for a feature set or tooling.
Alejandro Cremades: So in your guys’s case, you’ve also raised some money. I mean, how I know that that’s brutal, raising money, especially, you know, for your first time company. So how was that like?
Casper Henningsen: tons of learnings. and And I think if I can, you know, and my biggest learning is, you know, to really design and and construct a cap table long term. But but how it was we’ve raised just an order of $50 million. dollars um The last round were $35 million dollars raised by by peaks bank capital.
Casper Henningsen: and But we had seven races before that big round. And I can tell you something, five years ago, coming with a proposition to the market, which were, I’m going to build deep learning, I’m going to build AI, and I’m going to replace human work by a digital worker. That was not sexy. And and that took seven years that took five years, seven rounds to get to that stage where you then had the product ready and you could start monetizing it.
Alejandro Cremades: because in total, how much capital I guys raise to date?
Casper Henningsen: I think it’s 55 million in equity and around 10, 15 million in depth.
Alejandro Cremades: That’s amazing. How do you how do you ah think about equity and debt? How do you go about it differently when it comes to raising one or raising the other?
Casper Henningsen: Yeah, it’s it’s you know my rule of thumb is you you you shouldn’t do depth if it’s operational and it’s you know dayto day to day. That is not a good way to fund your business. Any day of the week would do that by equity.
Casper Henningsen: and So I really use it for these two purposes. Equity is for you know having a sustainable you know operating unit and depth could be for acceleration or things around that you that you want to take care of. So that that’s my that that has been sort of like my my my guiding star. and But as a young entrepreneur being first,
Casper Henningsen: you know ah and And you know that yourself. In the first couple of rounds, you don’t really have the optionality. You come with an empty box and an empty bank account. And it it’s you know it’s just to make a living. you know Can we continue another quarter or two? And and and and I would say it’s sort of like that we’re were the first four or five rounds where you know we didn’t really have optionality. So we we needed to take what we could get.
Alejandro Cremades: So, talking about the equity side of things, because i mean when you’re raising money from equity investors, or even when you have you know employees, like in your guy’s case, you have over 40 employees. what is like Vision is a big one, right? Because they’re all betting on vision. They’re all betting into the future that you’re living into. So, with that being said, if you were to go to sleep tonight, Kasper, and you wake up in a world where the vision of get wise is fully realized, what does that world look like?
Casper Henningsen: It is a world where companies and consumers or customers are in alignment. And what we innovate and what we produce are in sync with the market needs and the attractability. um ah So we actually reduce tons of waste, but we also make work meaningful for the company. So I’m really envisioning a company that operates with consumer and customer centricity at the heart of their decision making.
Casper Henningsen: m And to do that, we need to create a complete new insight that are able to be injected in how cmpanies operate. And I think that’s what we are what we what we are trying to do.
Alejandro Cremades: So I know that it has been quite the the journey too when it comes to patients and input and and how to think about them. and And I know too that there is a lot of founders and myself included where it’s tough you know not to get impatient and to think too much about the finish line and forget about that journey that gets you there. So what what can you tell us about patients and input and and what leads with it?
Casper Henningsen: I think you need to be incredibly impatient with your input. Put your best quality every day in all the hours you are on, but you need to be extremely patient with your outcome. So to write a big narrative, like it was for me from the age of five, becoming a professional sportsman,
Casper Henningsen: It is exactly the same when you want to write a big narrative in industry or starting your own business. You need to write a great narrative and a scope of orientation, and then you need to be incredibly impatient with your input, but you need to be very patient with the outcomes. Otherwise, you’re going to be derailing, you’re going to be defocused, and you’re going to take bad decisions along the journey.
Alejandro Cremades: So let’s say I was to put you now into a time machine. now As we’re thinking about decisions, lessons learned, all that stuff. And I put you to a time machine and and I bring you back in time to that moment that you were giving your notice yeah the ah ah at & Co. and and basically to embark in really taking ownership of your own destiny.
Alejandro Cremades: And right there on the spot, you’re able to have a chat with that younger Casper that is coming out of the headquarters of Coney and go after giving your resignation letter. And you’re able to sit down that younger Casper, let’s say for a coffee.
Alejandro Cremades: and you’re able to give right there on the spot one piece of advice to that younger Casper. you know What would that be and why you know on launching a business, that piece of advice on launching a business, that one piece of advice that you would give to that younger Casper and why, given what you know now?
Casper Henningsen: Hmm. I would empathize a lot what we just talked about. So the younger Kasper would say, you know have the right orientation, write a big and enough narrative that is appealing and makes you passionate. But be extremely focused.
Casper Henningsen: in building your business in sequences that allows you to control your cap table and build it in sequence step by step instead of just being all over. So you’re working with a paradox, which is your scope of orientation or your vision needs to be controlled by a very, very focused and and more segmented ah way of building your business. And I learned that the hard way. If you don’t do that,
Casper Henningsen: you’re going to be you’re going to be hard You’re going to be hit on cap table. You’re going to be deoriented. So you need both. You need the very ambitious scope of perspective. But when you break that down and you build your business, you need to be extremely segmented into small chapters that you then write and complete before you start another one.
Alejandro Cremades: Okay. so So for you too, right? When it comes to developing yourself, because I mean, it has been seven years of really pushing this thing. in And obviously you want to always make sure that you’re growing at the same pace as the company and you are a competitive beast. I mean, you you you are a professional athlete, right? I mean, you know what it takes and you know, the discipline and the hard work and dedication that you got to put into it. Applying that to business.
Alejandro Cremades: to developing yourself so that the company doesn’t outpace you. How did you go about that, to be able to be at the same level as the company was going from one cycle to the next?
Casper Henningsen: Yeah, great question. One, you need to be aware what stages you’re in and what the company calls for. So you need to be able to zoom out and have the right assessment on the different different chapters and the different needs of your organization throughout building the company. I think that’s that’s first.
Casper Henningsen: Two, when you then are going into chapters or needs that you have gaps within your current capability, I think you need to be brutal honest with yourself around what i what is my weaknesses and where do I need to develop? And then you need to be relentless focused on your input, building these capabilities. and For me, as I also mentioned, my biggest one of my biggest kind of like learnings has has really to become a leader.
Casper Henningsen: and and and I’ve worked very intense on that and both you could say by the natural kind of like extension but but also simple things like trying to become a good dad become a good you know friend become a good husband and and stuff like that I just found there’s so many synergies between being a good person and being a good leader.
Casper Henningsen: And so you are absolutely right, I think there’s many sequences, there’s many capabilities that you need to acquire throughout such a journey. But it all starts with what are the different chapters, what do they call for and where’s my weaknesses or strengths that I need to apply within a certain chapter and be brutal honest with yourself around that. If you’re going to be wrong here, you’re probably going to build them, you know, a less attractive company.
Alejandro Cremades: So this is amazing, Casper. I’m sure there’s a lot of people that that are super inspired and that are wondering you know how they could reach out and and say hi, and then also to learn more about Get Why. What what can you tell them?
Casper Henningsen: Please reach out on LinkedIn. I’m very active there and would be happy to to engage.
Alejandro Cremades: Amazing. Well, Casper, thank you so much for being on the Dealmaker Show today. It has been an absolute honor to have you with us.
Casper Henningsen: Thank you for having me. It’s been a pleasure.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at al*@pa**.com“>al*@pa**.com
The post Casper Henningsen On Raising $55M To End Traditional Research with AI appeared first on Alejandro Cremades.
Tanuj Mohan is no stranger to the world of entrepreneurship. From growing up in India to becoming a successful, repeated founder, his journey is a testament to innovation, perseverance, and a deep understanding of technology.
Tanuj’s latest company is AirEye, which has attracted funding from top-tier investors like Canaan, USVP, toDay Ventures, and Steve Krausz.
In this episode, you will learn:
- Tanuj’s career began in engineering. Driven by curiosity and big-picture thinking, he moved away from corporate roles into entrepreneurship.
- His first venture in network management set the foundation for acquisitions by industry giants like Cisco and Siemens.
- Enlighted, Tanuj’s smart building solutions, addressed energy inefficiency by integrating sensors into light fixtures, enabling local optimization.
- Enlighted’s pivot to retrofit solutions and data-driven SaaS applications helped overcome market barriers in the construction industry.
- Fundraising was challenging due to a lack of credibility in the energy sector, but Tanuj eventually raised over $100M by aligning with investors who believed in his vision.
- Siemens’ acquisition of Enlighted brought global scale to smart building technology, reinforcing the long-term viability of the system.
- Tanuj’s current role at AirEye continues his mission of solving critical problems, which, this time, focuses on securing Wi-Fi-enabled devices from remote hackers.
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Your email address is 100% safe from spam!**About Tanuj Mohan:**Tanuj Mohan is an experienced entrepreneur and technology executive known for his visionary leadership and innovative thinking. He is currently serving as CEO of AirEye.
Most recently, while at Amazon, he successfully unveiled Amazon Sidewalk, the world’s largest IoT network, which now extends its coverage to over 90% of the US population.
Before this, he served as the CTO and Founder of Enlighted Inc., a pioneering company in the digital transformation of buildings, which Siemens acquired.
Tanuj has also played integral roles at Cisco and Novell, where he contributed to the development of network, security, and data products. His impressive track record includes holding more than 50 granted US patents.
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Read the Full Transcription of the Interview:Alejandro Cremades: All right. Hello, everyone, and welcome to the Deal Makers Show. So today we have a repeated founder, you know a founder that has been very successful, you know successfully exited founder. So he’s one of those tier zero founders and that are out there. And they we’re going to be talking about all of the good stuff. We’re going to be talking about how to think about fundraising, how he actually went about getting his last company acquired, what he’s doing now because he’s building a rocket ship.
Alejandro Cremades: sort of thing about go-to- marketet How-to How do you think about building your board? you know i’m Making the board they really be an effective tool you know when you’re really pushing strategy and implementing then on the execution side of things. But again, building, scaling, financing, exiting, all of that good stuff. So without without further ado, let’s welcome our guest today, Tanush Mohan. Welcome to the show.
Tanuj Mohan: Hey, thank you, Alejandro. Very nice to be here.
Alejandro Cremades: So originally born in India, so give us a walk through memory lane. How was life growing up over there?
Tanuj Mohan: You know, it was fun and very diverse. My dad was a doctor, is a doctor, and my mother is English. So I grew up in a very diverse environment in India. of Ended up going to IIT Delhi, not a computer science degree. And I loved roaming the world. At that time, the only way to roam the world was to come to the US. So I did end up coming to the US s after that.
Alejandro Cremades: So then, let’s talk about the let’s talk about you getting into the workforce too. Because i mean obviously, see you know you got you got going you know early on. i mean And even before that, you know you started but the computer science, the engineering. Why engineering out of all things?
Tanuj Mohan: Honest answer, so growing up, there were two paths forward, a middle class India, you become a doctor or you become an engineer. and My dad was a doctor and I actually saw him work late nights, get hauled back from vacations to treat patients. And I said, man, I’m not sure I want that kind of life. So I decided to become an engineer and I was actually really good at it. I took everything apart. I was very curious as a kid and it it was natural for me.
Alejandro Cremades: so then So then in that case for you, tell us about getting into the workforce because you got started with Hughes and then you know that kind of like graduated. but then But what was that like for you, you know getting into the corporate world?
Tanuj Mohan: You know, when I when i reflect now with with my career, it was a good learning experience, but I always felt like a little bit of a misfit because I always saw things at the system level. And when you start your career, you are given little tasks without looking at the big picture. And I always realized I was a big picture person and wanted to ask the questions of why you were doing what you were doing.
Tanuj Mohan: ah you just Thinking about it, somebody explained this really well. you were There was a problem and somebody was optimizing the traffic signals for for a future where self-driving cars would be there. They could communicate with the traffic signals.
Tanuj Mohan: And you know people would be waiting to cross the road. And they and they were saying, OK, the cars will notify the signals you know whether to be green and let all the cars through in one direction. If somebody shows up, we should stop it. They were doing a whole bunch of optimization of how communication between the traffic signals and the cars would work.
Tanuj Mohan: And then when you step back and looked at it and you said, well, if they were all self-driving cars, you don’t need traffic signals. They already know how to identify human beings, pets. They already know where each other is. So you know the traffic signals would be eliminated. And growing up, that’s what I actually felt in the corporate world, that when you as an engineer were given a little task and not allowed to understand the context of the task,
Tanuj Mohan: you know It was a little frustrating for me, though I learned a lot you know in the companies that I was, great companies, very well managed, and gave me a lot of exposure. Luckily, I started in networking at the time when Apple Talk, XNS, Frame Relay, they were all protocols and IP wasn’t the dominant protocol. So it was a great experience for me to learn how people thought and how they came up with their own protocols. Apple talked from one extreme ease of use, and then IPX performance, and then IP was somewhere in between between ease of use and performance. So you know it was very insightful to see you know what people took as the main tenant for what they were solving for and how they came to the solution. And if you just changed what you were solving for, you would come up with a completely different answer.
Alejandro Cremades: so then So then in your case, you know what would you say were the immediate steps that needed to happen for you to eventually become an entrepreneur?
Tanuj Mohan: I was fortunate. Nowell was starting in India in Bangalore and that was my second job and three folks from the US came to start the company. We started Nowell, so it was like a little bit of a startup. We took over a ah product for Nowell and started to build the next generation version around fault tolerance, building high availability systems.
Tanuj Mohan: What happened after that was the the three founders after the two-year duration came back to the US and started a company. and The company was called iManage. It was in the network management space. And they asked if I would like to join. So I left India to join them in in in in my first startup. and I was like the first engineer, but it was the first startup I was part of. And we built a network management system for A company called Yago, which was yet another gigabit operation at that time, that was very successful, ended up getting bought by CableTron and then became reversed on later on.
Tanuj Mohan: During that journey, our network management platform was very generic. It was built in a very generic fashion, and a company called Pipelinks at that time came to us and said, hey, could we do the network management for their, this was an optical switch, for for their switch. And we decided to do it. Yago was getting bought by CableTron.
Tanuj Mohan: the pipe links were getting bought by Siemens and we were the network management team for both companies. We kind of had to pay. And at that time, you know Cisco was a, and still is a big, much bigger brand. So we decided to go with pipe links and then found our way into Cisco. So at Cisco, you know continued building the same network management system. At the end, it became the de facto network management system for all of Cisco’s.
Tanuj Mohan: optical line of business units. So it was built in such a generic fashion and was so scalable that it actually became really popular and was actually one of the only things that continued for years after the acquisition. The the actual product kind of disappeared into another acquisition that Cisco did afterwards called Saran. But the network management system we built survived for decades after our acquisition.
Alejandro Cremades: So let’s talk about Enlighted. So how did the whole concept of Enlighted come to mind? Because at this point, you know you were you were for many years in the corporate world. And I’m sure that going from the paycheck 9 to 5 to all of a sudden, you know you got to build your own destiny. I’m sure that was quite a you know nerve wracking.
Tanuj Mohan: It was. And look, working in Cisco, I was optimizing one packet per second, of you know optimizing code so that the router throughputs could go up you know by one packet per second. And I was sitting on a floor where the entire floor was lit up.
Tanuj Mohan: One person would come in, work late, go to the restroom, have a coffee, and the whole floor would be lit for hours after that. And I just looked at the sheer wastage. The whole building is being lit up. The HVAC for the entire building is working. And maybe there are five people in the building.
Tanuj Mohan: where there could have been 1,500 people. So that’s when I was like, wow, what am I doing here? you know I’m optimizing something whereas the environment around me is so wasteful. and And that’s where the idea struck me as to why is that the case?
Tanuj Mohan: And I realized there that the the sensing was very broad. They had one sensor for the entire floor. And the way they could affect change was also very broad. They could affect change at the you know and half a floor level. so So I was thinking about it. And I said, you know what would the right answer be? The right answer was, well,
Tanuj Mohan: you know versus a bolt-on technology, it should be a built-in technology. Every light fixture should be able to sense its own environment, make its own local optimized decision. And that’s the leap we made from the way all the other companies were operating because lights were one thing, sensing was one thing, actuation was another thing, software was running somewhere else. And we brought all of that together and said, well,
Tanuj Mohan: you know, if the thing itself could sense what it needs to do and could operate with the brain, nothing could be more effective. And that’s when I you know decided to to to move out of the corporate world and start this company. Now, you said I was in the corporate world. That was true. But because of acquisitions, I still felt I was in a startup working on the same thing with the same team, moving a lot quicker than the bigger corporation. So it never really felt. Maybe Siemens felt a lot more corporate. But when ah during my early career, it didn’t feel that corporate. at Amazon, obviously.
Tanuj Mohan: and know has a very, very strong culture and you you know but get to know it and get to work with it. So that that those were different.
Alejandro Cremades: Because for Enlighted, why ended up being the business model there? How were you guys making money?
Tanuj Mohan: you know It was one of the toughest businesses to pick, honestly, because construction is where we were selling. And the first thing that happened was new construction when we started the company had stopped. It was the previous crash. So we had to say, wow, you know we can’t get into a new building. Getting into a new building had ah another set of challenges because what we would say is the the construction mafia still exists.
Tanuj Mohan: and the way the channel is set up, it is not set up to take in a new startup. So we had no way get to get into deal in new contraction then the the downturn happened. And the only thing that were happening were were fixture replacements. Luckily for us, LEDs were happening. And at that time, we said, well, the best way for us to do it is to integrate our sensors with the LEDs and do it as a package. So so we we created a retrofit kit that could replace the floras existing fluorescence with LEDs. And the savings we realized would pay for the system.
Tanuj Mohan: So that’s the unique insight we had with with how we constructed our product so that we could get into the market, and not having to dis disrupt the entire chain, but just come in over the top, sell directly to the end customers, sell the proposition. And we were lucky that companies like Google, et cetera, could look at the solution and embrace it directly and then instruct the channel and the industry to embrace our solution.
Tanuj Mohan: now There was one Google and not most other companies, you know the CEO, wouldn’t know whether he had fluorescence or he had LEDs. They simply didn’t care about it. So we had to step back and say, how can we make this a real sale besides the the leading tech companies that are willing to lean in and, quote unquote, help a startup? And we realized the energy savings were were significant. 70%, 80% of the energy spent on lighting is what was being wasted. And we were able to recover that.
Tanuj Mohan: Given the significant savings, we then created a finance model where we actually made it a CFO sale. And this we went to AT&T and said, hey, we will simply replace all your fixtures with our technology. And you pay us over the next yeah three, five, seven years for for the system. As a fraction of the savings that you are getting. So in fact, you know it’s a no risk system and you you know you are actually making money off of it. Now the idea was this would allow us to scale the company
Tanuj Mohan: And the platform, the key thing about the platform was that it was gathering data. It was not just doing lighting control. It was gathering second by second data of what the movement in the in the building was. We had an additional radio that you know we put in so that we could scan for Bluetooth signals and we could do indoor location. So the idea that you know We were putting something in that was far more expensive than a regular sensor but had value in the future from the data that would create SaaS applications on top or something that we never lost sight of. and
Tanuj Mohan: We invented the global energy optimization program that normalized the energy rates in Hawaii versus Texas and allowed people to do their entire portfolio. And once their entire portfolio was done, we were able to launch sa applications on top of that because you know you are not doing it building by building.
Tanuj Mohan: the the buildings might be managed by local facilities but the corporation as a whole could benefit from this application. ah maybe that
Alejandro Cremades: And how do you guys ah go about raising money? Because all you know, you raised day over $100 million. That’s a lot of money. So how do you guys go about going through the emotions of the financing cycles, too?
Tanuj Mohan: So we we started with some seed money and There was an investor who told us something and it’s very critical. What he said is you can draw all investments in four quadrants. He says, know the people, know the industry. So if the investor knows the industry and knows the people, the most number of investments happen over there. The second number of investments happen when they know the people, they don’t know the industry.
Tanuj Mohan: The third number of investments happen is when they know the industry, they don’t know the people. And the fourth is they don’t know the industry and they don’t know the people. And they said, you are in that quadrant. You are doing something that you are creating a market. Nobody knows this market. And nobody knows you in this market. You are doing energy efficiency. You are known in networking. You are not known in energy efficiency and buildings. So you have no credibility from that perspective.
Tanuj Mohan: So you have to move into one of these quadrants before you can actually get invested. And I was thinking about it. So what we did is we got a seed investor to join our team, who was known to most of Silicon Valley. And he took us to another set of seeds that allowed us to get first down the funding, which happened to be from the, at that time, the partners of Silver Lake, a large PV fund.
Tanuj Mohan: oh So, that’s how we started and and that’s and and know something that most that what you know people fundraising should know when they’re talking to an investor and if they haven’t already decided to invest in the space, all they’re doing is educating the investor.
Tanuj Mohan: And they should be careful because if you are educating the investor, it is highly unlikely the investor will invest in you. Once the education is done, he might find somebody else. But now he’s there aware of the industry. They might invest in the next person. So be very clear when you are educating the investor, it is very unlikely that that investor will invest in you.
Tanuj Mohan: because they haven’t already made the decision to invest in the space. So that was something very critical that was put in a very simple terms to figure out which part of the quadrant you’re in.
Alejandro Cremades: And at what point does the whole idea of Siemens coming knocking and and an acquisition become something that it was a possibility?
Tanuj Mohan: So when I built this company, I didn’t fully appreciate that when you actually solve a customer’s problem, and that’s what you know I think, see, uml Amazon is really good at. They look at the customer’s problem and work backwards from there. Sometimes we work as a startup, hey, I don’t want hardware, I just want SaaS, market value’s that a lot.
Tanuj Mohan: And when we did our business, you know there was installation. you know There was the construction industry. There was the construction channel. There are regulations. There’s Title 24. And then there is a data business. There’s a SAC business at the other end. So there were very few companies that were willing and and capable to you know look at everything at that scale.
Tanuj Mohan: so We were lucky that Siemens saw this and said, okay, you know this is something that is very important to us, you know from the from know saving carbon all the way to using this data for other purposes, including HVAC optimization, from you know mustering in case there’s a fire alarm, from physical security, even in COVID times, you know the same system could have been used for you know contact tracing.
Tanuj Mohan: So, Siemens was one of the few companies that you know could could solve for a number of those applications you know because they had it in their portfolio.
Tanuj Mohan: So it was a great acquisition for us. They were in all countries. And they have a very distributed, strong channel. So it gave us a lot of exposure to the construction industry.
Tanuj Mohan: And and brand. Siemens is a big brand. you know Our system is going to go in for 20, 30 years. So when you make that decision to put us in a building, you are making the decision for 20, 30 years.
Tanuj Mohan: And it’s a tough decision to make with a smaller company. So that’s the other problem that got solved.
Alejandro Cremades: So after the after the acquisition happened, you know there’s something really interesting here that happened for you. And that is that you went to workforce events. And then after that, you go to Amazon. But what is mind-blowing to me is that you went back into the corporate world for another five years. And as the saying goes, once an entrepreneur, always an entrepreneur. What took you so long to get going again?
Tanuj Mohan: You know, sidewalk was a very unique opportunity. It was one of the few divisions in Amazon that had all of the functions. It had product management, it had business development, it had all the functions in a small team. Normally in large companies, those roles roll up to very senior levels. In Amazon, Cyborg would like a startup in Amazon, a well-funded startup with a big brand. so So the opportunity was very unique and
Tanuj Mohan: and the Amazon brand could accelerate this startup. like nothing else so I actually viewed it as the best thing you know you don’t have to go fundraising which is you know which is always one of the worst things while building a company and and and you can open doors you can call anybody you can call you know a chip manufacturer and say hey you would love them to work on the sidewalk chips and they would take your call seriously as a startup you know to get the the big chip
Tanuj Mohan: you know you you have to be four or five years in the in the journey with large volumes with amazon you could just promise a volumes are coming and they will take you very seriously and price it for those volumes which would make the business real so now when i looked at so many things i said well you know this is This is something you know that is very compelling. It’s like a startup without all the problems of a startup around you know fundraising, you know brand recognition, and longevity issues. Are you going to be around? So that’s the reason I actually joined Amazon to do Cyborg. And I actually passionately believe in the vision.
Tanuj Mohan: There are so many things that can’t be done because companies that you have a tap that’s leaking. Now, the person knows how to make taps. He cannot actually build a smart tap that easily because it requires a whole bunch of other skills. And with something like Sidewalk, you could put a Sidewalk chip in it. The tap could directly talk to the cloud. And now, as a user, I could just scan the tap and say, hey, if it’s leaking, let me know with the text.
Tanuj Mohan: I was talking about, you know you could have a tap that’s leaking. And if the manufacturer installed a sidewalk sensor in it, ah the the tap could become a smart tap, i.e. a user would simply scan the tap and say, here’s my phone number. If it leaks, let me know. It could sell through the regular channel. It could sell through your Home Depot, your Lowe’s. And you wouldn’t have to actually figure out whether you need a you know You need a gateway or anything. The tap would find some network, find its way back to the cloud, and and would just work. so so So sidewalk was that unique opportunity where IoT for things could be made real.
Tanuj Mohan: and and And that’s kind of the you know the reason I looked at this as a very unique startup that could have a huge impact. So we launched our ah Sidewalk in March of 2023, and ah the networks up and running folks can build on it.
Tanuj Mohan: when ah
Tanuj Mohan: you know When Arai came to me and at Amazon, ah Honestly, I was speaking to the you know the the investors and the founders there, and I looked at how broad they were approaching the company with every vertical. They believed there was a play with the with Amazon, with Ring doorbells and alex Alexa speakers to scan the air to make sure that nothing unknown was happening in the air. So what AirEye does is we are your first line of wireless defense.
Tanuj Mohan: Today, more than half the devices that are Wi-Fi enabled are not your laptop or not tablets or not phones. You have Wi-Fi radios and printers and coffee machines and TVs. And all of these devices can be accessed directly over the air. So if there is a camera next door to you and it has been hacked by a remote attacker, that camera is in your airspace. So if a remote attacker hacks into your TV directly over the air. You have no first line of defense. Your defense is you know ah is a firewall you know that comes in from the network side. But the TV, the coffee machine, the printer has nobody defending its wireless interface. And most of these devices have a very low bar for security. They were made for ease of use. They aren’t patched regularly, et cetera.
Tanuj Mohan: so Whenever I came to me, it dawned on me that and a lot of the OT work I had done in the past, with all these you know critical devices managing critical things, didn’t have a first line of defense on their wireless side.
Tanuj Mohan: so so ah I started to speak with them and said, hey, you can’t do all verticals. you know Home is a different vertical. Healthcare is different. Airports are different. So based on my startup experience, I was the telling them, you really need to focus with the resources you have. Make a compelling story for one vertical.
Tanuj Mohan: And then you know start moving to the to the other verticals. So during that process, they asked if I would like to join a CEO and and and and take over the company.
Tanuj Mohan: and And I felt it compelling enough to go you know build something, be my own boss ah again.
Alejandro Cremades: I love it.
Tanuj Mohan: so so So I said, OK, I’ll jump into it.
Alejandro Cremades: So I guess, obviously, you know you guys are now you know still in the early stages. I mean, you just say got started last year. I know that you guys say raised about $8 million bucks or so. I wonder you know if if if I was to put you guys, you know or let’s say I put you now into a into a position where you go to sleep and you wake up in a world where the vision of AI is fully realized. What does the world look like?
Tanuj Mohan: So yeah I’ll give some context to that. yeah yeah Recently, there was an airport attack where people who are trying to connect to the public Wi-Fi connected to somebody who was broadcasting the public Wi-Fi. And that person, this was ah an Australian citizen who got who got arrested. He stole the consumer’s social media credentials.
Tanuj Mohan: So now things like that are happening all around us and people don’t know. you know Had that person actually connected the ah the unfortunate victim to the actual internet, they wouldn’t even have known that there was a man in the middle.
Tanuj Mohan: okay but But because the connection went nowhere, the person finally got caught. Now, this is a blind spot for everybody that nobody is actually looking after you where it comes to wireless Wi-Fi. So in in a world where you know I would look at this, you would have a specific wireless airspace defense.
Tanuj Mohan: in every area that provides wireless services. And the wireless airspace defense does two things. One, it stops you from connecting to rogue networks, evil twins, bad actors. And it stops bad actors from connecting into your devices. So this would be the vision.
Tanuj Mohan: Today, we are doing an overlay network, i.e. we install alongside existing hardware. Tomorrow, I believe this functionality will get consumed by the access providers, and they would have to run more resources to do continuous active defense at every node. So defense won’t be an afterthought. It would be integrated with the service provided and would consume you know quite often as much resources as providing the the service.
Tanuj Mohan: Today, it’s an afterthought with 15%, 20% of resources assigned towards defense.
Alejandro Cremades: no So let’s say I put you nine into a time machine and I bring you back in time. And let’s say I bring you back in time to perhaps around 2008, where you were thinking about the opportunity or the possibility of launching something of your own for the first time.
Alejandro Cremades: Now, let’s say you’re able to have a conversation with your younger self and you’re able to give that younger self one piece of advice before launching a business. What would that be and why, given what you know now?
Tanuj Mohan: working backwards. so So I used to say, but you asked me about AI, at Enlighted I used to say my vision is our sensing technology would be every in every commercial light fixture in the world. I would say that was our vision and that way anybody could write an application, because the data stream was consistent across the world. So you could, you know, you would have a iOS or an Android like app platform. But the way I went around building that business was we were making money on the sensors, you’re making a lot of money on the c sensors, and we kept building our sensors. And there was a lot of ah room in the margin for
Tanuj Mohan: our competitors. There was nobody there, but you know there were lighting companies that they said, well, you know we should build our own sensors. you know Our margins are half the margins of Enlighted. This and know sensing technology looks off the shelf. So we should go build our own sensor. At that time, I should have realized, and they did come for licensing opportunities, and we were priced at software margins.
Tanuj Mohan: and When I looked at my vision, I said I should have just given it away. I should have given our hardware reference designs away. I should have given our software away just so that the data was coming to our cloud. And we should have focused on building a SaaS application, paying back to you know a percentage back to the light fixture manufacturer who actually helped us get there.
Tanuj Mohan: But we were making so much money on the hardware that we we couldn’t take our revenue from $100 down to $5 for a future. And now I realize that the only way the vision could have been achieved was that we you know when we were far ahead, we should have licensed our technology to everybody to make sure that our data
Tanuj Mohan: platform and the applications could become a reality. So that’s one thing I would say that work backwards from your vision and make sure you know how to achieve it versus getting stuck. Okay. I’m doing commercial buildings. I’m doing parking lots. I’m doing, you know, we got lost in the verticals and forgot about the vision and how would one achieve the vision? So that’s something I would tell people work backwards.
Tanuj Mohan: actually you know figure out the steps to achieve your vision. And in a don i mean don’t get sidetracked because your you know it looks like, hey, so much revenue is coming. So let’s go after it. And revenue is king, I agree. But then it sometimes comes with the cost of losing sight of what you started off to achieve.
Alejandro Cremades: Absolutely. So Tanuj, for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Tanuj Mohan: ah ah LinkedIn. So Tanuj Mohan, you can find me on LinkedIn and they could reach out on LinkedIn and we can connect from there.
Alejandro Cremades: Amazing. Well, hey, Tanuj, thank you so much for being on the Dealmaker show today. It has been an absolute honor to have you with us.
Tanuj Mohan: Alejandro, thank you. ah Very nice meeting you and ah hoping the listeners enjoy this as much as I have.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at
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The post Tanuj Mohan On Raising Over $100 Million To Build An Intelligent Buildings Systems Platform Later Acquired By Siemens appeared first on Alejandro Cremades.
In a rapidly changing world, navigating uncertainty, building scalable solutions, and creating positive social impact are more critical than ever. These were the focal points of the conversation with Maheen Rahman, a trailblazing entrepreneur and finance leader who has raised $50M.
Her company, Infra Zamin. has attracted funding from top-tier investors like InfraCo Asia Investments and Karandaaz Pakistan.
In this episode, you will learn:
- Embrace change: Maheen Rahman highlights how adapting to change throughout life helped her thrive in uncertain environments.
- Finance isn’t rocket science: Building a strong foundation in financial principles can open doors across various sectors and opportunities.
- Restructuring is tough but necessary: Successfully turning around a failing company requires difficult decisions, such as workforce reductions, but can lead to long-term growth and profitability.
- Acquisitions can unlock growth: Rahman emphasizes the importance of scaling through mergers, especially for smaller companies aiming to expand their market reach.
- Impact-driven finance: Through Infra Zamin, Rahman is working to provide access to capital for underserved sectors, catalyzing growth in developing markets.
- Scaling isn’t always direct: Creating self-sustaining frameworks, like encouraging banks to lend without guarantees, is key to achieving long-term, scalable impact.
- Business with a purpose: Rahman believes in balancing commercial success with social good, citing examples like helping rebuild after natural disasters through innovative financial instruments.
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Your email address is 100% safe from spam!**About Maheen Rahman:**Maheen has over twenty years of experience in investment banking, research, and asset management.
Currently she serves as the Chief Executive Officer of InfraZamin Pakistan, a Private Infrastructure Development Group (UK) company, and has played a crucial part in setting up operations and developing a project pipeline.
Under her stewardship, InfraZamin is fast establishing itself as a key player in financial markets with a view to catalyse private sector investment into infrastructure projects.
In her previous appointment, Maheen served as the Chief Executive of Alfalah GHP Investment Management where, under her leadership, Alfalah Investments has grown to be one of the largest asset management companies in Pakistan.
Prior to that, Maheen was the Chief Executive of IGI Funds, Head of Research at BMA Capital Management, Corporate Finance Associate at ABN AMRO Bank, and Investment Banking Analyst at Merrill Lynch. She has the experience of working across multiple geographies during her career.
Maheen has been featured on Fortune’s “40 Under 40’s women to watch” list, in 2015.
She is currently Independent Director at GlaxoSmithKline Pakistan, Director for the British Overseas School, Director Nasra Public Schools, Advisor to Katalyst Labs, Director at Khaadi, and Director of Centre for Economic Research in Pakistan.
She is also the former Director of Special Technology Zones Authority, Pakistan, former Chairperson and Director of the Mutual Funds Association of Pakistan, former Director Pakistan Institute of Corporate Governance, and former Member of the Prime Minister’s Task Force on Restructuring of Evacuee Property Trust Board.
In addition to her extensive work experience and professional achievements, Maheen holds a Bachelor of Science (Hons) degree in Economics from the Lahore University of Management Sciences (LUMS), and a Master of Science in Finance and Economics from Warwick Business School in the UK.
She also has several capital markets certifications including Series 7 from the New York Stock Exchange, and is a certified Independent Director from the Pakistan Institute of Corporate Governance
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Read the Full Transcription of the Interview:Alejandro Cremades: All right. Hello, everyone, and welcome to the Deal Maker Show. So today we have a very exciting founder ah that is joining us. you know She is a powerhouse. you know We’re going to be talking about raising money. On their end, you know they’ve done you know quite a bit. you know All in all, you know if you aggregate everything, we’re talking about 400 million. ah They are actually right in this rocket ship where we’re going to be talking to about how to think about building a product um that really you know covers a gap in the market, how to think about scale, as well as how to think about not just commercial um when you’re thinking about building a business, but then also about doing good for the world. So again, the building
Alejandro Cremades: financing, scaling, and all of the above is something that we’re going to be covering today, which we love to hear. And praise yourself for a very inspiring conversation. So without further ado, let’s welcome our guest today, Mahin Rahman. Welcome to the show.
Maheen Rahman: Hi, thank you, it’s great to be here.
Alejandro Cremades: So originally born in Pakistan, Mahin, but you were raised everywhere. So how was life growing up for you? Give us a walk through memory lane.
Maheen Rahman: ah Sure, so i was I was born here in Pakistan in Lahore, but I grew up effectively, I think in the UK. And I also spent a little bit of time in Africa, which was interesting. um So I think by the time I graduated high school, I had done about six different schools. um So naturally sort of got very good at getting to know people quickly and then maintaining those friendships and relationships through life which I think is kind of the best part of switching so many different schools and and and growing up that way. um So yes I moved back to Pakistan in 2005 and I’ve been here since so it’s been about 20 years now um and it’s been a very interesting ride.
Alejandro Cremades: So one thing there ah that is really interesting to what you just mentioned is you were in, I think by the time that the you were graduating, you know you you were probably already in seven prior schools and that is new places, new friends, new everything. How do you think that the experience of jumping from one place to the next really shaped who you are and then also how you’re able to be with uncertainty?
Maheen Rahman: I think it helped me realize that change is a constant in life. um And you can’t get too attached to certain ways of doing things or places or people, and I think embrace change. And I think that’s what I learned very early on, I think as a child, um that you know if I was going to be shifting schools and people and countries every three years or so,
Maheen Rahman: Then naturally, I was going to have to adapt pretty quickly um and and realize that change is really something that leads to growth. And I think that’s something that’s actually carried me all through life. It’s kind of embracing that change rather than resisting it.
Alejandro Cremades: And what about finance? What cut your eye on about finance?
Maheen Rahman: So that’s an interesting story. So I think way back, I think mine must have been grade 11 or grade 12 or something like that. I read a book called Liars Poker. And it was a big, big sort of hit at the time among the Wall Street types. And it was all about the 1980s and Wall Street and, you know, how the mortgage market was developing, how the bond market, the stock market was developing. And I just found that absolutely fascinating. um So within that was kind of born this desire to learn more about finance. And so I went to college, studied more about it. And I think for me, it was a no brainer once I graduated college that this is where I wanted to build my career. So that’s where I started.
Alejandro Cremades: And obviously in your case, too, you decided to go into corporate now and to you know to kind of like join some of those bigger operations such as like Merrill Lynch, ABN, Amro Bank.
Maheen Rahman: Mm hmm.
Alejandro Cremades: how How was it like experiencing those larger shops?
Maheen Rahman: I think you you’re you’re grounding in terms of your understanding of finance is is developed exceptionally well by these large institutions. I think Merrill sent sent me on a training course, which is over three months.
Maheen Rahman: um And then they really do grill you. I mean, I’ve done the 18-hour days. I’ve done the all-nighters. I’ve done that investment banking routine way back in sort of the early 2000. And I do think that, you know, that skill set, which I learned at that time at Merrill, at IBM Amrow, really has held me up through life. I mean, you know, that grounding has been intense, but it has been exceptional in terms of my understanding of how finance truly works.
Maheen Rahman: Um, and you know, we, we all say that it just looks very daunting from the outside, but you know, on the inside, it really isn’t rocket science. It’s about, you know, using techniques and tools, um, within the financial sphere to just do different sort of things for you. Um, so I often, I often sort of tell people that, you know, this is not a rocket science or this is not daunting. You should really learn the basics of finance and then you can pretty much apply it everywhere in life.
Alejandro Cremades: So for you, eventually you ended up and joining IGI funds, but it was more of a restructuring type of um initiative for you.
Maheen Rahman: and
Maheen Rahman: thank
Alejandro Cremades: I mean, and then and then after that you went through an acquisition, no?
Maheen Rahman: yes
Alejandro Cremades: But restructuring, how how difficult is to do a restructuring?
Maheen Rahman: it
Maheen Rahman: Very hard. So this was an asset management company that had burned through about 40% of its baseline equity. um And, ah you know, the sponsors, the shareholders, they were not happy with their previous CEO. um So I got the opportunity at a very young age. I mean, I think I was just 32 to take over an asset management company that was running deep, deep losses. um And I took it as a challenge because, you know, let’s face it, at 32, you can afford to make some mistakes. I mean, what’s the worst that could have happened to me um at that point in time if I hadn’t succeeded?
Maheen Rahman: um So getting into this, this was back in 2009, so you have to understand we were just coming out of the global financial crisis. Asset management everywhere was taken a beating, right? Markets everywhere had struggled. um So restoring investor confidence was really hard.
Maheen Rahman: um And then at the same time, you had an asset management company that was just running losses. um So we went through a very difficult restructuring cycle that took about six to 12 months in which we, I would say, you know, we had to let go of almost 70% of the workforce.
Maheen Rahman: And that I think was the hardest part because you’re dealing with people and you’re dealing with the you know people that have been with the company perhaps ah you know a long time. um But you know once we got through that difficult year, we were able to restructure the company. We were able to give better investment returns to our you know investors and shareholders. um And then come 2013, we were acquired by a much larger group. um So you know the return to profitability took us about 15 months.
Maheen Rahman: um And then we had a already an offer on the table because the sponsors were looking to sell out. So we had an offer on the table for the company within, I would say, 36 months of me taking over. um And so, you know, we we were able to sell out and be acquired by much larger shareholders and a much larger financial group at the time.
Alejandro Cremades: so So then in this case, you know for you, i mean ultimately the company got acquired. and And I guess going through an acquisition, what what what is that like?
Maheen Rahman: So it’s tough. um The thing is, with an acquisition, you know and it’s it was a requirement of the business. So if you look at it dispassionately, if you’re a small asset manager, um you don’t have met much in terms of distribution. You’re really just doing very small scale institutional business. After a while, your growth is going to get stunted. um And you know some people are happy to go with that. I mean, you have asset managers that sit on very small amounts of of money, $50 million, $100 million, $200 million. dollars But that’s not the real fun, right? The real fun in asset management is getting to size and scale, because that’s when you you know you get taken seriously by larger investors. um you know You have many more opportunities in terms of distribution. So this company, um IGI Funds, which I was part of, needed to shift its shareholding structure away from sort of family-owned groups
Maheen Rahman: towards large-scale financial institutions that had the breadth and the width and distribution capability to take the firm to another level. And so the the merger just made absolute sense. I mean, you know, Alphalal was a much larger group. It also had a struggling asset management company. um And so when they made a bid for this, the merger just, you know, worked from the financial perspective. But naturally, it was obviously going to be really hard to bring together two companies. And I think that’s what my job was initially in the first year or two.
Maheen Rahman: um to see which people um would be retained, you know, how the systems would be integrated. I mean, it’s a basic thing of where are we’re going to sit as a unified force, you know, which office do we sit in, right? um And those were sort of decisions we had to make from ground up. um So really, it’s like recreating an entirely new company from you know, sort of from two different entities that now have to be brought together. um The other thing that really impacts you during these changes is culture. um You can have two different sets of people and two different sets of employees, both with very different cultural mindsets and very different ideas of how each institution is. um So I think unifying and finding a new culture that was born from both institutions
Maheen Rahman: um that was That was also a big primary focus. And I’m very happy that we succeeded. um And within, I think, a year and a half to two years of the merger, we really were on very smooth sailing as far as a lot of the issues are concerned.
Alejandro Cremades: And then from there, you’re going to Alfala to where you became the chief executive. um And this was ultimately the immediate step before you became a co-founder, I mean, ah an entrepreneur yourself no with the infra-summon.
Maheen Rahman: Right.
Alejandro Cremades: So what were the sequences of events that needed to happen? Because I mean, at this point, you were in the corporate world for quite a bit you know since the late 90s.
Alejandro Cremades: So I mean, it’s it’s obviously, it’s it’s risky to become an entrepreneur. So what pushed you in that direction, given that everything that you knew was just being incorporated and being an employee?
Maheen Rahman: So I think the interesting thing is that after a while, I did 12 years of asset management, 12 years of raising funds, of creating that new new, I was creating a large institution. I felt I had done pretty much everything that I came to do at Alfa. I had certain personal goals for myself.
Maheen Rahman: I managed to achieve them, I had certain targets. And I think by the end of it, I was looking for what next, right? um And um I was approached by um the the sponsors of Infrazamen, and they came with a very unique proposition, right? They came with an idea of impact finance, and I think that’s what interested me. ah But naturally, the shift was very risky. I was going from a institution with over 250 people, which I was heading,
Maheen Rahman: um which was part of a massive financial group, um into a pretty unknown a sort of brand, um which was really just sort of appealing to me on a very basic idea. And that basic idea was how do we ensure access to finance in developing markets where finance is so difficult?
Maheen Rahman: to obtain, right? And I think that was the sort of, you know, it just kind of ignited that interest in me that but can this work? Can this access to finance piece work?
Maheen Rahman: And the more I sort of talked to them, um and this was the Private Infrastructure Development Group, which is based out of the UK, the more the idea began to really appeal. um And I think I was sort of interested anyway in seeing how we could do development finance. And here was a really interesting and unique way to create opportunities for others.
Maheen Rahman: um Others who were interested in starting their own businesses, others who were interested in large-scale private sector infrastructure projects to raise money from the local domestic capital markets, um which which sort of at the moment were just kind of a sort of playground of the very large business groups.
Maheen Rahman: So we were kind of fighting for the little guy. We were fighting for the guy who was not going to get access to that kind of capital um without us. And I think that’s where the idea just grabbed me. And so as a result of those conversations, I agreed to leave, um you know, a job that I really enjoyed at Alfela. But to kind of take that challenge and move into a field which was new, completely brand new in terms of the scale and the size and whatever we were trying to achieve um and see how I could do it. So I did start off ah really at the being the first employee. So I was the company secretary, I was the CFO, I was the you know marketing head. i was just So you know at the end of the day, I went from being a very high end CEO into
Maheen Rahman: a business which really had to be built from absolute ground zero. um And I’m very happy to say that the last three-year journey has been incredibly rewarding so far.
Alejandro Cremades: that’s amazing So for the people that are listening to get it, what ended up being the business model of infraam and
Maheen Rahman: Right, so what we do is we provide credit guarantees. We provide guarantee solutions to the private sector, to companies. Um, which can’t find that financing elsewhere. So for example, Alejandro needs to go to a bank. Uh, he needs money to set up a new project or a new manufacturing line, or even just put a solar solar panels on his rooftop. He can’t seem to get the bank to listen to him because the bank is like, Hey, we don’t know you. We don’t understand your risk. Um, or you, do we just consider you to re you know, risky to lend to.
Maheen Rahman: um So this is where Infra-Zaman comes in. So Alejandro approaches Infra-Zaman and he says, can you give me a credit guarantee which I can take to the bank? um And suppose we like the project, we do our due diligence, um we run the numbers on it and we give you a credit guarantee which you can take to the bank and you know they will lend against our collateral or our guarantee as opposed to you. So actually the bank, you know we’re taking the risk and we’re taking your risk onto our balance sheet and allowing the bank um that comfort so that they can lend to you. So we’ve just unlocked
Maheen Rahman: a piece of lending or piece of capital access which may not have happened in the past without us. So that’s the kind of catalytic impact that we want to bring into markets like this and in the last three years we have actually demonstrated that in some really interesting transactions.
Alejandro Cremades: And also talk about um fundraising too, because i mean you you have all been quite successful there and also that’s a piece of of what you do. So um how much capital all in all have you raised and what is the breakdown too of that?
Maheen Rahman: Yeah, so the so the company started up with about $50 million dollars of capital. We are able to now leverage that to issue $400 million dollars of guarantees in the market already.
Maheen Rahman: um We are looking to see how we can raise additional capital next year. But for now, I think our balance sheet is quite steady, quite strong. We further have um alliances with various other sort of institutions to do grant financing. So we do also do grant financing as well for you know sort of capacity building in the markets or to bring down transaction costs. I mean, a lot of the time, sometimes you know ah companies come to us and they don’t want to bear that costs of transactions. So we actually raised that grant financing to bring down overall transaction costs for companies as well. So we try and see where we can fit in combinations of grant, combinations of equity, and then leverage our balance sheet um to to really stretch our capital. I mean, you imagine yourself with just $50 million dollars of equity, we are able to do $400 million dollars of guarantee issuance, right? So that gives us a lot of size and scope. and
Maheen Rahman: This keeps multiplying, so the way we are structured, an additional 50 million dollars would would double our capacity. to do more guarantee frameworks. That’s just the way we structure the entire capital base. So you know our advice to sort of entrepreneurs is kind of think outside the box. you know Everything does not need to be equity. Equity takes away from your own ownership. So look at other forms of um lending that are available to you. um I think in the US, the market is incredibly developed and advanced in terms of looking at venture debt or looking at debt instruments, et cetera. But in other parts of the world, that is a challenge.
Maheen Rahman: um But I think you can use, ah you know, read don’t reinvent the wheel just to see what’s been done elsewhere and and try and replicate aspects of that in terms of what makes sense for your own structure.
Alejandro Cremades: And then also, as part of the business now, how how have you guys been thinking about scale?
Maheen Rahman: So in terms of scale, um What we want to do is bring bring transactions that can then be replicated and push forward that scale themselves. and So what does that mean?
Maheen Rahman: That means that if we’ve got a company that has come to us, used a guarantee, raised money in the market, the next time around, they may not need the full guarantee framework and they could just do it themselves. um So for us, scale is not necessarily us doing all the business, but it’s kind of enabling banks to recognize risk and price it and do it without the guarantee in the future. Excuse me. And so that way we’ve kind of unlocked a whole new segment of of lending. um One example of how we’ve done that is in solar. So if you look at solar projects, I think five years ago, um and we have a sister company called Grantco, five years ago, I don’t think anyone really did distributed solar financing, which is sort of your rooftop solar. I think two transactions later,
Maheen Rahman: We are now seeing banks willing to lend themselves to such projects, meaning that not only have we done those two projects, but we’ve now enabled a whole other range of projects to come to market without the guarantee. So for us, the catalytic and scaling impact is really around opening up market channels for new sectors and new technology. And that’s so that’s how we’re demonstrating it so far.
Alejandro Cremades: And then now let’s let’s put aside the the whole scale and and and the commercial side of things of any business. right What about going ah a step above that end and also thinking in parallel about doing good for the world? What does that day look like for you all?
Maheen Rahman: Yeah, so everything we do has to carry development impact. And i’ I’ll give you an example of how we enabled this here in Pakistan just last year. So um we had a microfinance institution here. I don’t know if you follow Pakistan, but in 2022, we got hit with some really bad floods. um You know, displaced like 33 million people, destroyed like 5 million homes. It was an exceptionally bad sort of disaster from the climate perspective, right?
Maheen Rahman: Now in terms of rebuilding, that rebuilding takes a long time, but what we did is we created a structure or a bond, right, that was launched in the capital market last last year with a microfinance institution which would then lend or use the funds from that bond that would lend exclusively just to women to read reconstruct sort of flood-damaged homes um rebuild schools, you know, and refurbish businesses that had been damaged. And so provide that livelihood across the board, right? um And we call that the gender bond. So we actually ended up launching through the guarantee the first gender bond out of South Asia, which is quite a sort of unique, um you know, sort of
Maheen Rahman: instrument that we created. um And we were supposed to we did this to demonstrate market impact and to demonstrate how you know funds could be raised through capital markets and bond markets as well. right um But the development impact was so interesting. um It was supposed to impact about 30,000 women. I think to date, and we are just shy of about a year of the bonds launch, we’ve already um impacted about 18,000 women.
Maheen Rahman: in sort of low-income segments. um And about 15% of that bond proceed has gone towards house reconstruction. all of which were damaged in the fund, the remainder has gone to upgrade sort of schooling facilities, et cetera. So, you know, we try and build in development impact at every layer. And and that that, for me personally, was an incredibly sort of rewarding um aspect of the job ah because anyone can put together structured finance, anyone can put together project finance, but how do you layer in development impact, ESG, climate, all these sort of nuances, which are so topical today,
Maheen Rahman: And how do you get mainstream commercial investors to invest in such projects without compromising their returns? And I think that’s what we managed to do with the gender bond. And we look to replicate that now um across various different sectors as well. So it’s finance innovation as well as development finance, which I think has been a really nice marriage throughout the story of Infra Zaman.
Alejandro Cremades: So then talk to us, too, about if you were to go to sleep tonight and you wake up in a world where the vision of infra-summon is fully realized. What does that world look like?
Maheen Rahman: Well, it would look like a place where infrasamine should be out of a job because we’ve done our bit in terms of catalyzing the market and getting the market to recognize risk and lend to sectors which normally wouldn’t get it. um That kind of world would have open access to finance for all sorts of innovation. All sorts of industry um would enable domestic institutions, local banks, local capital markets to um, lend long-term to infrastructure financing, such as bridges, water plants, et cetera, so on and so forth. So really a world where financing is available for very difficult projects, um, and is available in a very sort of open and risk, um, you know, risk aware manner. Uh, and that would be kind of the ideal, right? That’s what we aspire to that kind of access to finance for everyone.
Alejandro Cremades: So, let’s say it now kind of like return like in a time machine. Let’s say I put you into a time machine and we’re going to be able to go back in time. and Let’s say I put you into a time machine that brings you back to, let’s say, 2020 or 2021, where you were thinking about maybe building something of your own.
Alejandro Cremades: And you’re able to have a chat with that younger self, your younger self, Mahin, that Mahin that is a few years earlier. And then let’s say you’re able to give that younger Mahin one piece of advice before launching a business. What would that be and why? Do you know what you know now?
Maheen Rahman: Oh, that’s a good question. um I would just tell the younger Mahin, keep going. Don’t stop. You’re on the right track. Because I think when you’re trying to do something brand new, there’s too much doubt. There’s too much doubt. There’s too much fear. There’s the fear of the unknown. um And I think the first year was quite tough. It was hard to set everything up.
Maheen Rahman: um But yeah, I would just tell her now, don’t stop. Keep going. It is going to work. It is going to come together. And you shouldn’t be afraid. And take that risk. And and I think that’s that’s really what what would have been enough.
Alejandro Cremades: So um ah I think I mentioned this to you earlier. I’m a girl’s dad and day and I have ah three girls that day you know they’re quite entrepreneurial too. They do their limit their lemonade stands and all that stuff. I do believe that the world needs more female founders and they and I know that eventually you know they would then love to get out there and and make a difference you know in in in a similar way, hopefully, you know today to the way that you’re doing it. What kind of advice do you have for all the female founders, all the ladies out there that are thinking about taking ownership of their own destiny?
Maheen Rahman: Um, do it, just do it. Uh, I think you can overthink this to kingdom come. You can talk about the risks and the challenges to kingdom come, but ultimately you have a passion for something. Don’t lose that and just go with it. Um, I really don’t want to say more than that. Um, the reality is that you can bomb. Uh, but the reality is you can also do really well. Uh, and you learn by doing.
Maheen Rahman: But if you don’t ever do anything, you’re never going to learn. So just go for it. I mean, if that’s a passion, just follow it. You’ll find your dream. I mean, I have three daughters myself, so I’m a girl mom. And you know my our focus in life has been just to encourage them on every opportunity they wish to take. So um as a girl dad, and as to all the little girls out there, I would say just do it. There’s nothing really to stop you.
Maheen Rahman: um other than yourself.
Alejandro Cremades: I love it. So, Mahin, for the people that are listening out there that would love to reach out and say hi, what is the best way for them to do so?
Maheen Rahman: um LinkedIn or shoot me an email. I do respond, um but LinkedIn is usually a good way to find me.
Alejandro Cremades: Amazing. Well, Mahin, well, thank you so much for being on the Dealmaker show today. It has been an absolute honor to have you with us.
Maheen Rahman: Thank you. It has been fantastic. Thank you so much.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at
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The post Maheen Rahman On Raising $50 Million To Build A Credit Enhancement Company To Issue Guarantees For Promoting Private Infrastructure Projects appeared first on Alejandro Cremades.
In an era where environmental concerns are more pressing than ever, Daphna Nissenbaum is a shining example of how passion and determination can spark innovative solutions. She is the CEO of TIPA®, a company dedicated to creating fully compostable packaging.
TIPA has attracted funding from top-tier investors like Blue Horizon Ventures, Triodos Organic Growth Fund, Horizons Ventures, and Greensoil Investments.
In this episode, you will learn:
- Daphna Nissenbaum’s journey from tech to sustainable packaging was ignited by a conversation with her children about plastic waste.
- TIPA® focuses on creating compostable flexible packaging, addressing the challenges of conventional plastic recycling.
- Daphna’s background in computer science and finance equipped her with diverse skills to tackle the complexities of material innovation.
- Raising $140M in funding was a significant achievement, highlighting the growing investor interest in sustainability.
- The path to success included learning to embrace rejection and understanding that perseverance is essential in entrepreneurship.
- Daphna emphasizes the importance of believing in one’s vision and making decisions that prioritize environmental impact.
- TIPA® aims to create a future where packaging materials biodegrade, enriching the earth rather than polluting it.
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Your email address is 100% safe from spam!**About Daphna Nissenbaum:**Before launching TIPA®, Daphna was CEO of the Caesarea Center for Capital Markets and Risk Management at the Interdisciplinary Center (IDC), Herzliya.
Previously, she held various management positions at SPL World Group Ltd, a provider of revenue and operations management software, prior to which she held the position of project manager at Whelty Lager Ltd., located in Boston, MA, USA.
Daphna holds an MBA specializing in Marketing and Entrepreneurship from IDC Herzliya (graduated with honors) and a BA in Economics and Software Engineering from Bar Ilan University.
She graduated from the elite Israel Defense Forces software engineering program (Mamram) and served as an officer (ranked captain) in the Israeli Navy software unit.
Today, Daphna is leading the TIPA® team in the movement to revolutionize packaging systems and rid the world of plastic pollution.
TIPA® fully compostable flexible packaging replaces conventional plastic, turning waste into a resource, a crisis into an opportunity.
See How I Can Help You With Your Fundraising Or Acquisition Efforts
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty. Hello, everyone, and welcome to the Deal Maker Show. so Today, we have an amazing founder joining us. She is a powerhouse, you know a really incredible company that she’s building with a really amazing goal. ah and then We’re going to be talking about how the idea was born.
Alejandro Cremades: how she was able to raise the money, not having the domain expertise, and then also for a segment that was not they known for raising you know tons of money, and then also how ah she went about the you know really developing you know the company, building it up to having employees all over the world,
Alejandro Cremades: and all of the good stuff that we like to hear when it comes to building, financing, scaling, and all of that. So without further ado, let’s welcome our guest today, and her name is Daphna Nissenbaum.
Daphna Nissenbaum: Thank you.
Alejandro Cremades: Welcome to the show.
Daphna Nissenbaum: Hi. Hi. Thank you for having me here today. Pleasure being here.
Alejandro Cremades: So originally born and raised around the Tel Aviv area. How was life growing up over there?
Daphna Nissenbaum: It’s always interesting to to grow up here. Always something is going on, but um it’s ah it’s a very good place to be raised at, a very free childhood. um Yeah, I was lucky to to be born and raised here.
Alejandro Cremades: And in in your case, i mean you you got into computer science quite early.
Daphna Nissenbaum: Right.
Alejandro Cremades: What what caught your attention about computers?
Daphna Nissenbaum: So I was very good in mathematics and and my parents were told, so if she’s good in mathematics, maybe she’s, she’ll be good at computer science or she will be good at computer science as well. So actually I started my computer science career at high school.
Daphna Nissenbaum: So I went to, I studied the computer science back then and then continued it over to my first degree, the BA degree and et cetera, and worked in this ah filled with. um I think it was in the first part of my career, but several, several years.
Alejandro Cremades: And even you know ah going into university, you also did think computer science, you did economics, then you mixed it up with marketing and with entrepreneur entrepreneurship. So obviously, you know it sounds like computers, you were really hooked into it thing at an early stage. So why combining it with those other areas?
Daphna Nissenbaum: was always a I was always very interested in in business. So how to do business, how to grow business, how to create business from scratch. um Different aspects like marketing, economics, all that. So i was really was really interesting it was interesting to me and I was really thrilled to study it. Study is not enough. We have to practice and that’s what I do today. I practice business um from from all different aspects.
Alejandro Cremades: Was there was there like anyone in your family that or or someone close to you that had built a business that got you thinking like, wow, you know maybe I’d like to look into doing that one day myself?
Daphna Nissenbaum: Um, yeah. So first of all, my father has his own business, but that’s a local business. But and more, more importantly, I think that’s my husband who built two companies, two successful companies, and then was in the virtual venture capital business. So, um, yeah, I had a inspiration, which inspirational stories around me.
Alejandro Cremades: That’s amazing. so um So for you, you eventually went to the army ah and there in Israel, are both men and women you know go to the army and you went at the age of 18. How was the experience so far of going through that for you? And then also what did you learn around discipline?
Daphna Nissenbaum: So um to go to go to the Army, it’s part of our life here. There’s no question. You go to the age of 18, you go to the Army. You join the Army. So um i was I was kind of aiming to go to the computer science space and computere develop software for the Army. That’s what I did. There was a special program, prestige one.
Daphna Nissenbaum: that I was a i was actually i was um planning to go and eventually eventually went to there. It’s a long program and then I was i was designated to work in the Navy and to develop specific systems for the Navy. i I learned a lot in this brand, a lot. First, the technological side, which is obvious, but also I work in a very,
Daphna Nissenbaum: being a discipline system, um out to how to lead, how to build something from nothing. That’s how to think and create ideas out of the box. That’s part of the education that it goes through. and So it was very inspirational educational and spiritual experience for me, which I took a lot to my to my then coming business career.
Alejandro Cremades: Why did you eventually, after you got your MBA and and all of that, and and you enter the um ah workforce, why leaving the world of computers and going into research?
Daphna Nissenbaum: um I know I worked, I worked for When I left the Army, I worked several years in the computer science industry, um different different jobs, different positions, different countries even. But then I decided that that I want to change my career. That was my first change. I wanted to do something else. Actually, it was what post my MBA.
Daphna Nissenbaum: So kind of I can say that my mind opened to two new things and I wanted to experience something else, not just say the same area that I was in at that time. So my first career change was going to the financial markets, more financial markets. And I am i actually was the CEO of a research center on capital markets, risk management in capital markets. thats So that was my first career change. I was there for several years, really enjoyed it, learned a lot.
Daphna Nissenbaum: Uh, again, took several tools to my next career step. And when I decided that I want it to change again, then I, uh, I went to be to build my own business and that was deeper.
Alejandro Cremades: That’s amazing. So how did the whole idea and the incubation of it? Because as they say, ideas, they are like dormant. you know We don’t even know that they are there, but they incubate over the course of time.
Daphna Nissenbaum: Right.
Alejandro Cremades: And then there’s like certain a points you know in time that help to shape farther that idea. And then a moment in time where it’s like the tip.
Alejandro Cremades: you know it’s just like it just like You’re like, okay, let’s go. So walk us through all of that. you know How did it incubate? How it progressed in that moment where you were like, screw it, let’s do it.
Daphna Nissenbaum: Okay, so for years I wanted to to have my own business. It just didn’t wasn’t just one point one point in time. For years I wanted to build my own business and I was thinking what would be the best idea. You know, I’m i’m coming from from from the from um from software area, so it was kind of immediate. I couldn’t think about that, but I wanted to do something else, not knock not in the in this space.
Daphna Nissenbaum: And I read um i read several um several around researchers on how new great ideas were born, what to look for new ideas, et cetera, et cetera. And eventually I understood that the biggest the biggest ideas are just around us. We just have to open our eyes our eyes and think about what would be but what is what is What would change our life? and and And I started to think this way. Just look around me, just open their eyes, open my mind. And one day i had a I had kind of a discussion with my children around the plastic bottles they used to take to school. And and then heard about the recycling problem. And then heard about is the the plastic the plastic challenge.
Daphna Nissenbaum: et cetera, et cetera. And I went out jogging. I joke every morning, so I went out jogging, and I thought to myself, what would be, so this plastic problem exists, and we don’t see any course so of of changing anything in this industry. It just grows and grows and grows dramatically.
Daphna Nissenbaum: And it all goes to the sea and the damage that is it actually brings to the world is is enormous. And I thought, okay, what would be the most intuitive way that we can use packaging? To use packaging. And I said to myself, okay, so the first thing that came to my mind was an apple.
Daphna Nissenbaum: Because when I ate an apple and I thought the residuals to the waste bin just disintegrates by the grid by itself and turns into compost into soil, right? um And I said, okay, so nature also packed. Nature packed the bananas, nature packed the oranges, nature packed the nuts, et cetera, et cetera. And all those, ah all that food is packed with ah with a compostable packaging. So why won’t we do the same?
Daphna Nissenbaum: and And that was the inspiration. And then the idea was to develop a package that is on one hand will bring all the properties of conventional plastic, but at the same time will be fully compostable.
Daphna Nissenbaum: which means that we can treat the package exactly as we treat, for example, the banana peel or any other organic material. So if we put a package or the organic um on all the orange peel in a compost bin, it disintegrates and biodegrades and turns into soil, into compost within up to six months.
Daphna Nissenbaum: So as opposed of having conventional plastic package that lasts forever and forever can be 400, 500 years, it doesn’t really matter. That’s forever for us. If we can have a package that once post-consumption can go into the organic waste bin and and turn into an organic material within a very short period of time, why won’t we do that? And and that’s exactly that simulating nature. So that’s how the idea was born.
Alejandro Cremades: And then what happened next?
Daphna Nissenbaum: And then, okay, so that’s the idea now. I’m not ah i’m not a plastic engineer. I’m not a chemist. you know I have no background. on material materials background. So I started to investigate. I met my partner then at the Kindergarten, by the way, but we joined together and started to look for the the scientists that can help us and bring such a solution to the world and and started to working in the path of developing a solution.
Daphna Nissenbaum: Two things I understood um you know in this in this journey and the beginning of the journey. First of all, it’s not going to be easy. um Otherwise, someone else probably would have done it before. But it’s not going to be easy. It’s a journey. It’s going to be a long one. um It’s inventing new materials and inventing new packaging. And packaging has a very important role enough you know with our food. So it needs to protect the food, et cetera, et cetera. So there was a lot to invent there. And the second thing, I mean, the idea started with, as I said, I discussed with my kids, the the plastic bottles, and I thought we would like to replace the bottles, but no, the main problem is not the bottles. The main problem is all the other packages that we use for foods. um and And I also understood that actually recycling
Daphna Nissenbaum: or hardly works, hardly, hardly, hardly works and the percentage are kind of very, very worrying. um And within all this huge industry of food and and packed food, there are segments And we decided to focus on flexible packaging. So flexible packaging is opposed to bottles or jars. Flexible packaging are all those soft packages that we use a lot. For example, for granola bars, for snacks, for for fresh produce, for bread, et cetera, et cetera. All those soft packages, actually very thin packages that are very similar to nature creation. I mean, it meant it it mean i mean it’s the same,
Daphna Nissenbaum: the same in the same space and those packages use usually but and um blend materials together and once there are few polymers blend in the same the same film, in the same same package, then there’s no way to recycle it. it’s like just It’s like you blend few colors together and then you want to you want to to separate them, there’s no way to do that. So bottles are made from one polymer, usually PET. So it’s easy to to recycle, easier to recycle, but flexible packaging impossible. So we focused on we focused on flexible packaging and then, and that’s how we started the long journey.
Alejandro Cremades: so So what’s the business model of Deepa? How do you guys make money?
Daphna Nissenbaum: It’s a, it’s a very, very good, very good question. And I’m saying it because we were, we were considering several, several ways, but eventually we invent, we invent the new materials, right? This is our innovation protected with the very strong IP globally, et cetera, et cetera. Our intellectual property. The second thing that we developed is knowledge on how to process um our materials throughout all the supply chain of conventional plastic. So we can manufacture our products, ah our packages on conventional plastic machinery. So that that was very important for us from day one to make sure that we can we can work on the same machinery. And now when we can work on the same machinery, there’s no need for us to build new facilities or buy new machines. So we collaborate with companies who already manufacture those type of packages.
Daphna Nissenbaum: So we are fabulous. um We sell our films, manufacture our films at three three, four, five facilities globally. That’s it. And we sell the films to companies who manufacture packaging. So that’s ah that’s in a natural our business model.
Alejandro Cremades: And also, I mean, it’s it’s really remarkable the amount of capital that you guys have been able to raise, also given the fact that this was not like your domain expertise. I mean, you jump right into this, um given your background.
Daphna Nissenbaum: Right.
Alejandro Cremades: But then also it was a segment that was not attracting a lot of money also. So how has it been the um the journey of going through the motions of raising, I believe you guys have raised you know close to 140 million, which is a lot of money.
Alejandro Cremades: So how has it been the experience too of raising the money for you guys?
Daphna Nissenbaum: First of all, I think to everyone, except maybe very unique companies, it’s it’s not easy to raise money. um It’s a challenge. it’s It’s the CEO challenge. And I’ve been, you know, all my life, all my life in Tippa, working on raising money.
Daphna Nissenbaum: At the beginning, it was very hard, because since I’m not a scientist, I’m not coming from the software, from the materials there. science industry. and i hit and and you know So the first money is raised from friends friends and family who actually knew me and knew our capabilities and believed in us. And so that was the very early early stage money. And then um we looked for for for investors globally. um we we could We couldn’t raise money you know from from um from fans who were investing money more in the space of
Daphna Nissenbaum: of ah of apps, of of other technologies that are not not not our technology. It was very challenging. So we eventually we found our first investors were both Israeli-Canadian fund and that in led round A. In round B, we had more families, family offices that joined us, who really believed in us. and Actually, those those investors were looking for something else to invest in, not just the regular, familiar startups that are in the same very well-known spaces.
Daphna Nissenbaum: so families who looked for sustainability. There were families who looked specifically for to solve the plastic and plastic challenge. um So that was there was it was it was challenging. I can say that the last round when the company started to grow and we had to we already had teams in Australia, in in Europe, in North America, and we and started to demonstrate growth, it was a bit easier one, still a challenging one, but a bit easier one.
Daphna Nissenbaum: the the but The investment environment was very good at that time as well. um So we managed to have on board very significant investors. We are very proud of, of course. um So it’s it’s unique investors. and it’s ah But um I’m glad we are here today, right? This is our oxygen. So and the money is our oxygen, like every other company.
Daphna Nissenbaum: and
Alejandro Cremades: what what has been What has been, I guess, your biggest lesson when it comes to fundraising?
Daphna Nissenbaum: Well, um first of all is to accept the word no. That was very hard for me at the beginning and to understand that people don’t necessarily see what I see. And um people are looking more to to have a return faster than doing the right thing to the world. Anyway, it’s still right. You know, 1% the right to do that. But was it was hard for me. it was um I learned, today I can say, I think I can say better, who’s the person who’s going to invest in such companies or who’s not. um i can I can sense and the eagerness or the level of interest in in products like ours or or similar to ours.
Daphna Nissenbaum: I can say that there’s no meeting that I didn’t take. I took all the meetings. There were rounds that I even met more than 100 investors until I found the one that said yes. And I can also say that if there’s one that says yes, then the others follow. So we had a very interesting story in Round of the Rounds. I think it was the last one. It was the previous one. We had investor wanted to invest in us.
Daphna Nissenbaum: And they started the due diligence and we ran through an awful, awful process. They kind of pushed us to the corner and we go to the, pi we go to the point and and they said, oh, we’re progressing, we’re progressing. And then like two months before the money ended, they came with, them with demands that we couldn’t, couldn’t meet. I said, no, thank you. I’m not, I’m not working with an investor that is not going to, to do good for the company.
Daphna Nissenbaum: And we had no money. We had no money. It was about, it I didn’t know what I’m doing, what I’m going to do, but gladly I got support for another few months from our current investors. And, and then we, we, we started the the round again and all of a sudden there were like three, four, five kind investors that came and said, yes, we’re going to join you. We’re going to join. And we close this significant, wonderful round.
Daphna Nissenbaum: I had to have courage to do that, and to say no to money when you have no money in the bank. But um but gladly, it turned out to be the right decision.
Daphna Nissenbaum: And we closed a good round that led us to the next round, which was ah significant to the company as well. So yeah.
Alejandro Cremades: That’s amazing. That’s amazing. So so obviously, with a money, you know, with also employees, I mean, you guys have employees globally, you know, distributed. I think that there is a definitely a bet, a bet on division, right? And when we’re thinking about division, you know, if you were to go to sleep tonight and you wake up in a world where the vision of TIPA is fully realized, what does that world look like?
Daphna Nissenbaum: Wow. um That’s my dream. um it’s um It’s a better world to our children. It’s a world that actually um moves into more organic materials, which is much more what nature asks us to do. ah It’s a world that we have no huge amount of plastic left behind us.
Daphna Nissenbaum: Hopefully, nature can recover and be in a better place. Just imagine that all the plastic that we use turns into sand, into soil. And there’s no footprint, bad footprint behind us. I mean, it’s not going to be 100% all around the place, but we can definitely live a better heritage, a better world behind us.
Alejandro Cremades: I love that. I love the sound of that. So nothing like a better world no and making a difference like you guys are doing. So um obviously it’s been about 12 years you know and and change that you guys have been really pushing this initiative of TIPA.
Alejandro Cremades: um you know One thing that they that I guess you know going towards that vision too is I guess the the consciousness and mindset around climate change and all the issues you know in the last years, especially when you guys got started with this, I don’t think the consciousness was as as as present as it is today. know and Nothing like being at the right time in history when you’re building a business. How do you think timing and being able to have the wind blowing behind your back has helped you guys with building the company?
Daphna Nissenbaum: So um when we started, you’re very right. There wasn’t any awareness. I mean, people even asked me, what’s the problem with plastic? why Why are you seeking to do something else? so and then And then the awareness increased. I think it was around 2017.
Daphna Nissenbaum: when countries like China, like the UK, started to to work against plastic, conventional plastic. But then, unfortunately, during COVID and and the war, things changed back. We all know that. Sustainability did not remain the main thing that people are looking at. and Although we we have to, we must.
Daphna Nissenbaum: um So I think that ah the best time for us is still in front of us. It’s still to come. um I think that what we see today, actually, is the
Daphna Nissenbaum: Companies, not just not just countries countries, countries said plastic is bad because they know they know the statistics the statistics, they know the numbers, they know the pollution, but companies didn’t have any, and yeah they look at the bottom line, so day they didn’t want to take step into changing the packaging. But what we see today is that even the big companies are starting to to get ready for that day and working on alternatives to plastic.
Daphna Nissenbaum: um and We see more and more, again, it’s not the governments, it’s more it’s more the people, it’s more the it’s more the the brands, the supermarkets, the retailers that are working towards changing changing them the the plastic amount of plastic that they use.
Daphna Nissenbaum: I think that the right time is in front of us because there was there was um there was a statement that was said by I think the majority of the companies on the board that by 2025, all the packages will be either recyclable or compostable or reusable. And then they changed it because they couldn’t they couldn’t reach that. they they They continue to work on recycling and obviously it doesn’t work. So so so now they understand they need to do something different. So the the line was pushed over to 2030.
Daphna Nissenbaum: And now we see companies getting ready for that. And I think that we will see the increase in the demand coming in the next one to two years.
Alejandro Cremades: So obviously, as I was saying, you guys have been at it for 12 years, and there’s a lot that happens ah during this time, and and a lot of lessons learned, a lot of successes, a lot of failures, and I think that failing is part of a succeeding, so it’s very important. And and and in this in this case, what I like to do is I like to put you into a time machine.
Alejandro Cremades: And I like to bring you back in time. I like to bring you to that moment you know where perhaps it was around 2009 where you were starting to think about like building something of your own and becoming a ah founder. And let’s say I gave you the opportunity of showing up and being right there with your younger self, with that younger Daphna, and being able to give that younger Daphna one piece of advice before launching a business, given what you know now. What would that be?
Daphna Nissenbaum: Um,
Daphna Nissenbaum: first of all, I would say, I would do the same as I did do it. It’s not going to be easy. You just need to know that it’s not going to be easy. You need to know that it’s going to be long. Um, you need to have the patience, which I did, uh, but, um,
Daphna Nissenbaum: i Look, I think that sustainability or or changing the fundamentals of the way we live, this is our future. That’s what I think. More than adding more applications or whatever, more cyber, this is important as well. But but we need to invest ah to invest ourselves, our lives, our minds,
Daphna Nissenbaum: in changing things in the way we and the way we live. um So I guess I would have done the same. Maybe, maybe I would say, you know, I’m trying to think if don’t do this, do that, but then I wouldn’t, you know, I wouldn’t learn the things that I needed to learn. So it’s kind of hard for me to say maybe,
Daphna Nissenbaum: Act faster. Do things faster. Maybe if you if you if you have your guts feeling, don’t be afraid. Do it immediately. Don’t wait for other people to to tell you if it’s right on or wrong.
Daphna Nissenbaum: I would say, and that’s maybe the one the one conclusion that I would say, if you but if you believe in yourself, and that’s the first thing that you need to believe, you have to believe in yourself and in your vision, and stick to the vision and don’t change it according to what other people say, that’s one thing. And if you believe in your vision and believe in yourself, believe in your God’s feeling, and and just do what your mind or your heart or your feelings tell you to do,
Daphna Nissenbaum: um You know, maybe too many time too many in too many times in my in my career in my this part of my career, I listened to advisors that I shouldn’t listen to. and I heard. i didn’t Eventually, I took my decisions. And when I needed to take my decision, I asked myself, okay,
Daphna Nissenbaum: Leave the company, leave the people aside, leave the advisors aside, leave Daphne aside. What is right for the company? What is right for the vision? Because that’s where we have to stick. well we have to stick If it’s me, if it’s someone else, this is what we need to do.
Daphna Nissenbaum: And eventually that’s the way I took my decisions. Like like like I said, and you know, in the investment, the investment story that I just told you, I was promised to get, it I don’t know, a certain um amount of money if I get them in the company. I said, no, this is not right for the company. So so so that’s, if if I can go back, i so I would say to myself, you know what to do? Just do it and don’t don’t afraid, or don’t be,
Daphna Nissenbaum: Don’t be too suspicious about your your your gut’s feelings.
Alejandro Cremades: I love it. So Daphna, for the people that are listening, I would love to reach out and say hi. What is the best way for them to do so?
Daphna Nissenbaum: I’m in LinkedIn, of course. i am Our website is tipa-corp.com. T-I be happy to contact anyone.
Alejandro Cremades: Amazing. Well, hey, well, Daphna, thank you so much for being on the Dealmaker show today. It has been an absolute honor to have you with us.
Daphna Nissenbaum: Thank you, thank you so much. Pleasure to be here, as I said.
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Tomer London, co-founder of Gusto, a company with over 2,500 employees, relates what it means to go from humble beginnings to building a hypergrowth business. His journey is an exciting blend of personal history, entrepreneurial lessons, and hard-earned wisdom.
Gusto has attracted funding from top-tier investors like Kleiner Perkins, Sands Capital, Fidelity Management and Research Company LLC, and Cross Creek.
In this episode, you will learn:
- Tomer London’s upbringing in a small business family instilled a deep understanding of entrepreneurship’s emotional rollercoaster.
- His military service taught him invaluable lessons in humility, discipline, and teamwork, shaping his approach to startup challenges.
- A failed early startup experience highlighted the importance of effective go-to-market strategies alongside solid product development.
- Gusto, initially ZenPayroll, was born from extensive conversations with small business owners to address their unique challenges.
- The company’s success is attributed to its customer-centric approach, ensuring product development is driven by direct feedback.
- Participating in Y Combinator gave Gusto critical support and momentum, leading to rapid product development and funding.
- Gusto’s vision focuses on empowering small businesses and their employees, simplifying back-office complexities to foster growth and success.
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Your email address is 100% safe from spam!**About Tomer London:**Tomer London is the Co-Founder and Chief Product Officer at Gusto. He is responsible for the development and execution of the product vision — reimagining how modern payroll, benefits, and compliance should operate.
Tomer was previously a Product Development Intern at Bump Technologies, a PhD Candidate at Stanford University, and the Co-Founder and CEO at Vizmo.
Tomer has also worked as a Researcher at Intel Architecture and as a Commander at the Arrow Defence System Academy.
Tomer London completed their PhD in Electrical Engineering at Stanford University. He then went on to complete a Master of Science in Electrical Engineering at the same school.
In 2012, Tomer attended the Y-Combinator winter program. He completed their undergraduate studies at the Technion – Israel Institute of Technology, where they studied Electrical Engineering.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty. Hello, everyone, and welcome to the Deal Makers Show. so so Today, we have a really amazing founder, you know a founder that has built a massive company. i mean We’re talking about a company with over 2,500 people, so you can do the math you know and the level of impact that they’ve had. and We’re going to be talking about how to think about opportunity, how to talk out to your customers to be able to get it right when it comes to the product, going through the experience of an accelerator, as well as getting going on startup fundraising, which is you know one of the things that you need to do as a founder of a hypergrowth company.
Alejandro Cremades: And then also feeling the pressure to expand product amongst many other things. But really praise yourself for a very inspiring conversation. And without further ado, let’s welcome our guest today, Tom here in London. Welcome to the show.
Tomer London: Thank you. Thank you. Excited to be here.
Alejandro Cremades: So originally born in and you grew up as well in Israel. So give us a walk through memory lane. How is life growing up?
Tomer London: Yeah, totally. So yeah, grew up in Haifa in Israel. um And, you know, I grew up around a lot of small businesses. So my dad has a small business for over 35 years now, a clothing store.
Tomer London: So for me was just a big part of my childhood going after school and helping around and whether it’s helping clean the store or answer phone calls or selling and learning how to sell, that was a huge part of my childhood. And then for a small business family also, that’s what you talk about at the dinner table. You talk about the customers, talk about the vendors, talk about how things are going.
Tomer London: And then finally, there’s also like the, the non glamorous parts and the parts that kind of make you, you know, kind of really appreciate that the hard work that goes into building a small business. Um, where, you know, I remember my dad kind of, uh, needing to skip different, you know, family events and things like that. Um, just dinners, things like that to just go and, and, um, to this back room that we had in the house with this, um, um, calculator, if you remember the ones with the ribbons in the back, that’s kind of like, you know,
Tomer London: And he was like, um you know, needed to spend hours and hours and hours to close the week and see the cash flow and understand whether, you know, where the business was. So, you know, my child was a lot around kind of that kind of small business and kind of um stress as well as false, the wonderful things coming from building, you know, kind of building your own dream and making it a reality. And that’s just my dad. I also had my grandfather and my aunt headed off different small businesses. So, you know, honestly, that was kind of all around me.
Alejandro Cremades: So what was it like to to see your parents perhaps going through the roller coaster of emotions of being a business owner?
Tomer London: Yeah, it’s the emotional piece that’s that really stuck with me, you know, that’s kind of what I a lot of ah with the memory. So these are things such as, you know, seeing my dad coming in the house, like at the end of the day, and like, kind of see like this bright, you know, kind of face and like a big, you know, big smile, and you know, ah this was a good day today, good day of work. And, you know, he, he would be really quick to share like the, you know, the revenue for today or to share the big win it could be like you know getting you know uh like uh like kind of renewing his rent with like a lower price so it makes the business more profitable could be having a new employee joining and i’m really proud and excited about the the work of that employee but then there’s also the again the negative kind of emotions where you know there’s a stress of like oh my god there’s all these loans that into repay and that there’s like a holiday that just
Tomer London: that this calendar year means that there’s more days in the hall, more days of, you know, holidays, people have more time off and we’re going to get less customers. And um so that’s totally just kind of a part of, of, of, of, you know, what it means. And, and definitely start with me. I remember, you know, kind of thinking to myself, um you know, about different career paths and things like that. And I felt like, you know, um for me, like running a small business like that, that, that seems really, really, really hard.
Tomer London: um And I kind of got um closer and closer to software when I was, I think in my teens, early teens, and it was actually to build um software to help in the store. So I had all these lists to keep track of the inventory of the store and to see what we need to order. So it could be, you know, this was ah this is this was ah like a men’s clothing store. So um is it like jeans? Which jeans are missing for each size, for each model? Is it suits? Is it shoes and all that stuff? And you know, if you keep losing, I kept losing my list.
Tomer London: um I needed to recount things. So that’s obviously, you know, a waste of time. It was very frustrated. So I was thinking, you know, computers are really good at this stuff, remembering things, right? We have a 83, 86 at home. um And I was lucky enough to get introduced to, um you know, Visual Basic, which is a very simple programming language, really, really easy for a kid to learn um by the the like the the bookstore that was just next to my dad’s store, actually. um And so I picked up this book, this really big, thick book. It was all in Hebrew, which was good for me because I didn’t have English back then. um And I kind of learned how to build a simple um program. And I built like this very, very simple inventory management program that was super helpful. And my dad bought a PC to his store as a result. And for me as a kid, you know I was like, I don’t know, 11, 12,
Tomer London: um My mind was blown like, wait, like you’re buying a PC just for this software. That’s like, you know, I felt like I was really kind of making an impact. And it’s funny how those things go, but you know, looking backwards, it’s like, oh, look at that. Tomer at the age of 12 was already building small business software. But, you know, sometimes life, you know, kind of, you know, obviously there’s a lot of ups and downs and they did a lot of other things, but sometimes it’s funny how kind of, you know, you kind of close the circle. And and for me, small businesses is just honest. And for Josh and Eddie, who started the company with me and many of people who work in Gusto, we we love small businesses and we have this kind of direct connection to them.
Alejandro Cremades: I mean, in your case, you know as you were saying, you got exposed to programming you know very early when when you were actually at the store with your parents. And then from there, you know you actually went to the military. you know I want to ask you here, what kind of discipline do you think it gave you you know those three years that you spent in in the military in Israel?
Tomer London: yeah and You know, it’s so interesting. So in Israel, there’s a three years mandatory service for men back then when I was there it was two years for women, three years for men. And they basically kind of put you wherever they want. So you you yes, you have some some say on which you need to go to. But it’s it’s the military’s decision. And I really wanted to go to the you know, the software kind of computer engineering sort of units, where Israel is the dev really kind of amazing units around that you learn a lot and develop your skills and and do things that are meaningful. ah But I they didn’t pick me and I ended up ah they put me in a combat unit, which in the Air Force, which was not my pick was not number even 17 on my list, you know. um So that
Tomer London: That right there for me was a big learning um of just like, you know, um humility, and how to deal with things that are not in your control. You know, I think up to that point, you know, I did well in school and I generally was, I felt like I was in control in my of my life and like, you know, doing homework and, you know, doing different projects and things like that. I was always ahead. I was two steps ahead.
Tomer London: and then over over all of a sudden like you kind of get a big like kind of slap in the face like hey it’s all cute and nice but in the next three years you’re going to do this thing and this thing is is nothing like you’ve ever done before and it’s actually quite difficult. So um that was one huge learning humility and I kept getting that slap in the face every few months in the in my military service because you know I would say military um at least the Israeli military you know they they They have, um you know, it’s it’s it’s not a creative effort. It’s not a creative, um you know, sort of project. Like you you go there and you have a role and you need to do your job. And there’s not a lot of what you can do around it. You kind of need to do what you’re told, at at least when you’re a very junior, which, you know, was I was. um That was really hard for me. um But I’ll tell you what, like at the end of it, like in the last few months of of my of my service, um i I was so,
Tomer London: full of excitement and energy towards the next step, which was for me that, you know, going to the test neon and learning, studying electrical engineering, I just could not put down like calculus books and physics books and like the kind of first couple of semesters. I was already swimming and ready to jump in um because I think i I gained appreciation for how lucky it is to be in a place where you can go and study in an undergrad degree and and really kind of pave your own path. And the military, again, for three years, 18 to 21,
Tomer London: um You kind of need to do what you’re told and obviously you know do the best you can with with with with that. um But you know I was very excited about that next thing. I’ll say one last thing, which is camaraderie is one thing that I think I really took from it. So this amazing there is an amazing experience of like when you and a group of ah of other people come together and um you have a shared destiny where you know it’s it’s either you do it together and you win together or you lose together. like it’s it’s It’s up to us to get together and figure this thing out. and this thing may be really really complicated community dangerous can be you know something that you never thought you’ll you’ll you’ll have to do. um and When you look back like that camaraderie is so amazing it’s just it’s just it’s a tight human relationship that even today twenty years later um you know i feel so close to these people that was in service with anything there’s some commonality with startups.
Alejandro Cremades: A hundred percent. Now talking about startups I mean after this you did electrical engineering then you did a bunch of internships and then you build your first startup. And as they say you either succeed or you learn. And in this case there was a lot of lessons learned. So what happened there.
Tomer London: Yeah, totally, that’s a good way of saying it. So so yeah, so I was, um so so here’s the thing. i Like any normal adult, I had to have all these calls to service centers as a part of my life. It could be calling your cellular phone provider, it could be calling your doctor or your or the hospital or something like that, right? And then when you call in, it just is an extremely annoying thing where you gotta wait and you have this IVR that speaks to you slowly and tells you if you want this go to option number one please listen carefully because our menu has changed you know and you kind of need to go and that was like god damn it like we got it there has to be a better way and I remember thinking like at this moment right now this second there’s millions of people
Tomer London: who are doing nothing but just waiting for that freaking IVR to to finish, you know, that voice menu. So that was like the pain point. And, you know, back then, um this is 2008 or 2007.
Tomer London: um Back then, you know, the iPhone was super, super early. I don’t even remember if it was launched back then. um But everyone had a feature phone. And these are phones that these Nokia phones that had um or Samsung phones um or blueberries ah that had um um a sorry, blackberries, blueberries.
Tomer London: ah that had like ah internet connection so you had this really kind of simple W WAP internet and i was thinking hey would it be cool if you call one of these centers but instead of waiting on the line you can just visually see all these menus and can navigate yourself and even self serve without talking with somebody that was really that sounded cool so um i got together with a few friends we were again we were doing art degree in electrical engineering. I quit my job. I had like a part-time job at Intel, which was also really fun, but another topic for another day. And I quit that job to start this thing um with with a few friends. And we built the technology. And it was actually quite cool. it was I’m i still today pretty proud of the the kind of the way it was it was built, because um um technically, it was multiple technical challenges that were difficult. Because it you didn’t need to install an app. There was no app installed. You just call. Boom, you get a menu on your screen.
Tomer London: um So um and then so the technology was like, OK, product technology you got a good prototype. Things looked good. We felt good. We raised a little bit of money, like see from from, you know, government and from some some friends. And then we went out to do the selling. How hard could that be? The technology is amazing. The product is amazing. Everyone’s just going to gobble it all up. Well,
Tomer London: Unfortunately, no one bought it. Unfortunately, I spent months and months of month i spend much and months and months um kind of trying to figure out how to go to market. How do you sell? you know I knew how to sell clothes in a clothing store. I knew how to sell you know maybe like kind of simple things. I did some door-to-door sales for like internet, a high bandwidth internet.
Tomer London: um um and things like that. But I didn’t know how to sell for huge enterprises with like hundreds of millions of dollars in budgets. And I failed there. And as a result, like we kind of got stuck. um We got some LOIs. We got some even like some um you know um early ah pilots going on. But we didn’t really do the sale. So um that’s where that’s where we got stuck. And you know lots of learnings from this. But you know I would say the primary one is When you cut when you build a plan and you know try to figure out how the startup is going to work, obviously the product and technology are critical. But if you have that and you have no go to market, you’re dead.
Alejandro Cremades: I hear you. I hear you. Now, in your case, you know one door closes, another one opens, and for you the next door was to go to Stanford to get your PhD. And that was a pivotal moment because that is the moment where you really got going with your co-founders at Gusto. So how did that happen? How did the you know the band you know come together?
Tomer London: Well, first, here’s a funny story. I thought that Stanford was in England. um i I learned about Stanford because of ah um this amazing commencement speech that Steve Jobs did in 2005. Incredibly inspiring. If you haven’t heard it, you should. I listened to it probably dozens of times at this point, and where he talks about you know your ability as an entrepreneur and as a human being to make a difference in the world. um I was i was you know incredibly inspired by it. And it was done at Stanford. I was like, wait, where’s the Stanford place? I heard of Harvard and MIT from movies, right? But I never heard of Stanford. So anyway, um apparently Stanford, ah ah in spite of the name, it feels like it’s from England. It’s actually in in Silicon Valley, and I heard of Silicon Valley, and I kind of got into it.
Tomer London: a little bit more. um A friend of mine ended up actually going there. um So, ah you know, decided to to apply and there was kind of, you know, landing at in San Francisco and then going to Stanford for my electrical engineering PhD. And, you know, i I didn’t know anybody. I was literally came on my own. You know, I had one friend who was actually on vacation when I landed, so he was not there. And I was literally just trying to figure out how am I going to find some friends and you know find a community. um There’s a lot of things that I did and one of them was to apply to this cool program that Stanford has called Stanford stanford alumni mentorship program that connects current students with peer with prior students um and that’s how I got to know Josh um who’s around my same age um and you know we kind of learned
Tomer London: that um kind we met through that, which is cool. We learned that both of us have startup experiences. He had a startup previously. I had a startup. um you know We’re both electrical engineering graduates. And um um we that’s kind of how we got together. And you know we then started spending time every week to just brainstorm ideas, you know like things that we care about, problems we see in the world, ah areas where we think technology can help.
Tomer London: um And um over time also, we brought in Eddie, my third co-founder still kind of kept brainstorming ideas and things like that. And we ended up um you know looking at multiple different areas. But the area that kind of kept kept coming back and stuck and stuck with us is how can we help small businesses succeed? Because you know our personal lives, we had small businesses and our families and so forth and friends. And we felt like there’s so many software brands that are focused on consumers.
Tomer London: There’s so many software brands that are focused on enterprise, but not many focused on small businesses. And they have lots of problems. And it’s a huge market. There’s six million employers in the U.S. And when you talk with them, they got a lot of problems to solve. So we kind of jumped on that. And and piroll was our first um um really started with bill as the first pinpoint.
Alejandro Cremades: so How do you go about then speaking with tons of small businesses to make sure that you would get the product right before even touching the product? which I think that one of the yeah issues that I see all the time is that founders build on assumptions you know instead of building based on data points that they’re able to capture.
Alejandro Cremades: And that’s where many of them fail, but it sounds like you guys got that right. So how did you think about like, Hey, maybe, you know, we should have a chat with all these small business owners to really understand well, the product be before we even build it.
Tomer London: The cool thing is when you talk with a lot of um of your customers, a lot of potential customers, and umm and and you talk with like 10, 20, 50, 100, and you talk with them about their day, talk with them about the problems that they’re seeing, what ends up happening, it’s not just data points.
Tomer London: you You build intuition. Your brain connects the dots. So then a week later, a month, a year later, when you’re in front of a problem trying to solve for them, you can bring up that intuition. And that intuition will be probably more correct than not. So what we do even today at Casto is um really trying to make sure that everyone who builds a product, definitely the product management team, the design team,
Tomer London: but also other folks on the team, marketers for sure. um Guys, just spend time with customers and build that intuition. So you’re right. like there’s I think the one mistake people make is to just completely rely on their intuition without even talking with customers. That would be like a crazy thing to do.
Tomer London: But there’s another problem which is people who overly relying on data points without really getting the qualitative side of spending that face time. It’s like, oh, i you know, I looked at you know some statistics and here’s what I think the statistics are telling me to do. And I think that really misses the point. You’ve got to spend time with the customer. um So, okay, so how did we get from this to that? Honestly, pretty easy.
Tomer London: i we You see it in a room, you open Yelp and literally that’s what we did. You open Yelp and you say, today I’m going to talk with Spas and Salons in San Francisco. And Yelp gives you all their phone numbers and you call one by one. You call, call, you talk with them. The next day I’m going to talk with barber shops and you talk with barber shops in San Francisco.
Tomer London: So we kind of did that. We also, literally every place we go, we introduce ourselves and try to create conversation. We had friends that you know started startups and other small businesses. And we you just everywhere you go, those small businesses exist. That’s the nice thing. It’s unlike when you build enterprise software, you’ve got to find the right buyer in the right place. Honestly, with small businesses, it’s easier. It’s a little bit more like consumers. They’re everywhere. um So we did a lot of that, a lot of repetition. I got a lot of nos from all of this. And you know we were looking for you know What are some huge problems? And and the problem of, you know um um you know obviously, it’s really hard to start a company and build a company. one of the hard the One of the hardest things is anything around team and people. There’s kind of two big ones. It’s money and people, right?
Tomer London: um And the people one was one that we felt is not addressed right, because when we talked with um these small businesses about the software that they use for payroll and for HR and things like that, and these are really small businesses, they felt like this is not the right that this software was not built for me. It was built for big companies. This software is you know not friendly. It’s too expensive. it’s easy It’s hard to use. Why is it not as simple as my online bank? Right. um So we felt like there was a great opportunity there.
Alejandro Cremades: So at what point do you were you like, I think we got it. I think we we see a pattern here. I think it’s it’s time to start to get going.
Tomer London: Right. So you’re trying to build that conviction, right? When you’re exploring all these ideas. And one of the ways to look at to to get conviction is look for emotions. So um when the customer is super pissed off, or when the a potential customer is super pissed off, and when the potential customer is super excited about something, that’s where your ears need to perk up. Anything in the middle, the 90% in the middle doesn’t matter. It’s the top five and the bottom five that really is the signal, right? Because people are nice and they want to be nice to you. and you know so they’re going to be most of them are going to be kind of in the middle okay so what we learned so that’s kind of a crazy story so we had um
Tomer London: I did like around 30 conversations at that point with people around their payroll product, that the product of the useful payroll. And I had two different people who mentioned to me that for you know that their payroll provider name was ABC. I’m just going to use like ah like a name here. Not my real name, but ABC. um They told me they they just wanted to tell me. They help they felt compelled to tell me that they have their password to ABC is fuck ABC.
Tomer London: And that was crazy, because like first, I didn’t ask people fast forward. So there may be even more than two people. And second, you know like obviously, they were upset. Obviously, they felt disappointed. right So that’s where it is a huge opportunity. So that was like one of these aha moments. There was more. like Here’s one another example. um you know There’s this account that we knew. I knew personally she worked in in a company that I was ah was involved with.
Tomer London: and we just um took her for lunch and say, hey, you know, we have this idea, we want to build a new payroll product and bring it to the market for small businesses. And we came in, we had like a presentation, we have like this whole spiel, we wanted her to give us feedback, right? None of that happened. What did happen is the moment we opened our mouths and said we want to build a payroll product, she just started saying stop.
Tomer London: you need to do this, you need to do that, this is broken, that is broken, this is why I hate that product, this is why this product is broken, da da da da. And you kind of saw again the engagement, the excitement, so you knew like, okay, there is something here. um So I remember like in those kind of days, and this is kind of all the span of a few kind of days or a couple of weeks, two weeks, um we we kind of built up more and more and more confidence that there’s something there.
Alejandro Cremades: So obviously the rest is history. I guess for the people that are listening, what ended up being the business model of Gosto? How do you guys make money?
Tomer London: Right, so we started really identifying with this pain point of of of payroll, and then quickly we figured out like, hey, you know, if you solve payroll rights, you already have all the employee data, you already have this important moment of employees joining a company, you have this important problem to solve around taxes and compliance. So we figured out like, you know, payroll could be just the first out of multiple different problems that we can solve for our customers. So it ended up being being this very broad prompt platform. So today we solve, you know,
Tomer London: um um payroll, but also helping you get your company started and also helping you, um you know, um with ah time tracking and helping you with benefits and compliance stuff and tax credits, even, and and many other things, international contracts for payments and more and more and more things. um And the business model is simple. There’s kind of basically two revenue streams. The first one is subscription revenue. So, you know, you got to basically pay every month, like a pair of employee per month.
Tomer London: um And then that subscription can have multiple pricing points, depends on which products that you use. And then the other, um the additional revenue streams coming from commissions for our benefits business. So, you know, in the US, small businesses often, you know, use a small group of health insurance and that’s, and you know, we don’t charge the customer for it, but we do get a commission because we are the brokers um on this health insurance product.
Alejandro Cremades: So, obviously, Y Combinator was a pivotal experience, too, for you guys. And I think that that, obviously, to kickstarter the whole financing um side of things with a very successful seed round. So, why was Y Combinator so pivotal for Gusto?
Tomer London: Totally. Yeah. Well, why, why see for us um is it just was really, really, really helpful in the early days, honestly, still today. That’s one of the cool things about that. It’s it’s a community you kind of carry with you and, and you know, kind of.
Tomer London: reconnect and there’s all these opportunities to to go and and help you improve your company. But you know back in the early days, the thing that was really cool is that it’s basically this three months program or a two and a half months program. um And at the end of it, there’s demo day. So you have back then, there was like 50 companies or 55 companies, and we were one of them. And you look right, and you look left, and you’re like, gosh, these are really smart entrepreneurs and builders and engineers.
Tomer London: And you know your your friends but you also kind of competing on the on in the end what investors are going to invest in you know investors are going to come into them a day they’re going to pick like one two three companies whatever their budget is um they many angel investors um and you know you’re kind of competing not not for customers but for for like the quality of of how much progress you made in those two and a half months so what ends up happening is you know you ah just figure out that you just got to go all in here.
Tomer London: You’ve got to bring every single you know calorie that you have to you know through the table. So in this two and a half months, we worked super, super hard. When we started, we you know we we barely had like a line of code. And and we ended up um um these two and a half months with a prototype. So definitely not a full payroll product, but a prototype. um And 30 customers are using the the prototype.
Tomer London: I’m so we felt like you know we kind of were able in this in this very short time i think we collapse a year of ah like a year of work two and a half months. I just working you know like crazy you know weekends and evenings um and and making a lot of quick decisions.
Tomer London: um And um you know challenging ourselves, too, because we look right and left at, gosh, like I always felt like we we’re at the bottom half. At every point of the of the process, I felt like you know we’re probably you know one of the least you know kind of successful companies in here. And it’s not because I didn’t feel good about us. It’s more like I felt like, gosh, these guys are amazing.
Alejandro Cremades: So all in all, obviously, you know that propelled you guys, that allowed you to also raise a very successful seed round. So for the people that are listening to, how much capital have you guys raised to date, and what has it been the emotions of going through all the different financing cycles and expectations from investors?
Tomer London: Yeah, I think you know so we raised over $700 million dollars in our existence. um We’ve been around for over 12 years. um And every round is different. But where we are today is you know I’m really, really proud of it. We’ve been profitable now for over a year, um actually quite profitable, i still going really, really well. So we’re no longer in this place of like kind of needing this infusion of cash to keep the company. So that’s that’s an awesome milestone.
Tomer London: um But you know in the in kind of as you go, I would say in the early days, you need to have, um you know you raise the the kind of the seed round, the A round, even ah even the B round somewhat to build a product and kind of build that initial vision of like, hey, if we build this, you know we’re going to have like a like you know a great product market fit. And it’s not just you know we’re building a product if you’re not selling a customer. We had customers already in seed and then series A and then series B.
Tomer London: But then when you go more like around the series CD and and later, um that’s where more like a game of numbers it’ is more. OK, we should have a good product market fit. And now it does go to market scale does economics. Are you profitable? Right. Is this going to hit a wall around profitability?
Tomer London: um So it kind of becomes less about the the promise of the and and the vision for the future, and more about like, oh, yeah, what have you actually done? And how does that compare with other opportunities out there, right? Which is kind of like, you know, very rational, and and I think, and and I think really, you know, the right way of doing things. You want kind of this series DE e phase, you know, investors that are not just charmed by the, you know, the founders and, you know, who they are as as people, although that is, I think, important because you’re, you’re Relying on their to and other management to take you to the future to come to the future
Tomer London: But you want them to be very rational and look at the numbers and ask themselves and kind of look at patterns across other other companies and ask, you know, is this a good business? It’s going to be a great business. So, you know, the later rounds were really led by, you know, folks like T. Rowe Price and Fidelity and like some of the kind of more like, um you know, yeah private to public um sort of investors. and And that’s kind of how how our journey has looked like.
Alejandro Cremades: So obviously, when you get investors say on board, when you have over 2,500 employees like you guys have today, which is really remarkable. And and being a profitable company too, that’s unreal. Vision is very important, right? And they’re all betting on the vision. And to that end, dfey I was to ask you, Tomer, if you were to go to sleep tonight,
Alejandro Cremades: and you wake up in a beautiful world where the vision of Gosto is fully realized. What does that world look like?
Tomer London: All right, so I wake up in this magical world. um So, you know, that but there’s a few kind of sides to our mission and each side will paint that picture a little bit. So the first one is around peace of mind. So it’s the idea of can we help small businesses and um and and entrepreneurs, um you know, make it easier for them or give them peace of mind when they start their business and where they grow and they maintain their business. So in that future world,
Tomer London: you know, I wake up in the morning and every person who has an idea that they’re excited about, um you know, that they can go out there and start their business. And obviously, you know, it’s always going to be hard. You need to build a real business. So that that doesn’t go away. But you have the peace of mind that all this stuff in the back office, all the compliance stuff, all the kind of the mechanics behind the business is solved for you. So you can really focus on your product and your service. So that’s the first thing. The second thing is um this idea um of great workplaces you know helping the small businesses these medium businesses growing businesses have great places to work um so what is a great place to work right it’s a place where you come in and you feel valued you feel like you’re compensated correctly you feel like you know your performance is evaluated correctly you feel like you have opportunities for growth.
Tomer London: um You feel like you can have good personal relationships with other people around you so that is again another part of our vision and what we’re trying to do whether it’s like that kind of the that all the work we’re doing around benefits making enterprise level benefits available for small businesses. um Or whether it’s things like performance reviews and like kind of training and kind of help small businesses be a little bit more.
Tomer London: kind of bring all the insights and professional stuff and making it easy and simple and consumable for small businesses so they can be successful as well. The last part is personal prosperity for employees. And that is like when you get paid, right? If you’re the individual getting paid, get that paycheck to do more for you, right? So in the cases of emergency, have access to that pay earlier if you need it, if you’re you know If you need that, um um if you’re saving up, have an easy way of taking that paycheck immediately and putting that into savings. We have products already around all this stuff and it’s a very promising part of Gusto. um so But yeah, it is a a really big part of our vision.
Alejandro Cremades: So now let’s talk about the past, but doing so with a lens of reflection, because you’ve been pushing this for close to 13 years. I mean, 13 years in the corporate world is like a thousand years. It’s really unbelievable. no so So that’s how that’s had a long time. Now, let’s say I was to put you into a time machine.
Alejandro Cremades: And I bring you back in time. I bring you back in time maybe you know to 2012, that moment where you’re in Stanford and they you guys are starting to think about maybe a world a world where you can really um bring a solution to those payroll issues that you were seeing with small businesses. and right there on the spot, you’re able to have a chat with your younger self, with that younger Tomer, and you’re able to give that younger self one piece of advice before launching what ended up becoming gusto. What would that be and why, given what you know now?
Tomer London: Yeah, yeah. I think, um you know, there’s a lot, there’s a lot like I would say, probably, but the thing that pops up in my mind is usually the hardest and the most important, the best parts, but also the hardest parts and the is all around people, right? Because people are, they’re everything, right? If you know you have a problem with your go-to market, guess what? The right person can help you. If you have a problem with your product, guess what? The right person can help you.
Tomer London:So it’s all about people. um And I think the mistakes that you know ah some of the mistakes that we made over time that are that were most kind of difficult and were around ah people as well. So I’ll give you one example. And probably this is the advice I would i would i would give to myself 10 years plus um time ago.
Tomer London: is um you know you have this this moment where the startup starts to take off right things are starting to work out you’re starting to see product market fit you got like some nice press that people start to hear about you um still very very early on you’re still the initial team like I don’t know 10 20 30 people.
Tomer London: um And then you start like for your job, open jobs, you start seeing these amazing people applying, like amazing on paper, like, you know, people who worked the best companies and managed hundreds of people and, you know, did this incredible work and and And you look at this and you’re like, they want to work for us? That’s crazy. You know, we’re just this little company. So you jump on it. And, you know, maybe in the interview process, you’re like, huh, this is interesting. they’re They’re talking differently and they act differently. And their answers are very different than the other candidates. Other people we hired here. But, you know, what do I know? They have much bigger and better experience than I do on paper.
Tomer London: um And then sometimes those people are amazing because they do teach a lot of things, but sometimes um it’s that it doesn’t work. And it doesn’t work because what a lot of times what makes um zero to one successful is not what makes one to end successful. And you can have someone, you can have processes and you know kind of ways of working that are amazing to take a company from a hundred million ARR to a billion dollars in ARR, but If you try the same thing at 1 million ARR, it’s just going to completely fail, right? So you need to bring in people. um Obviously, experience is important and then look into it and you can get a lot out of it. But people you need to bring people who are absolutely open to do things completely differently in spite of their experience. So that’s one thing I would look we’re looking back, um I would advise myself.
Alejandro Cremades: I love that. So, Tomer, for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Tomer London: Oh, yeah, I’m on Twitter, tomerlondon. So feel feel free to to reach out there. You know, gusto is hiring across the board. um So just check out our our hiring page and gusto dot.com. And yeah, thank you. Thanks for for for this 100. This was really, really fun.
Alejandro Cremades: Amazing. Well, Tomer, well, thank you so much for being on the Dealmaker Show. It has been an absolute honor to have you with us.
Tomer London: Thank you.
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The post Tomer London On Raising $700 Million To Build A Payroll and HR Software Platform Enabling SMEs To Manage And Grow Their Workforce appeared first on Alejandro Cremades.
In a candid and insightful conversation, Bence Jendruszak, co-founder of a leading fraud prevention company, shared his entrepreneurial journey, offering a blueprint for aspiring founders on scaling a global business, leadership growth, and staying ahead of market trends.
Bence talks about how Seon has offices in four locations worldwide with over 270 employees. It has raised $100M from top-tier investors like Creandum, IVP, Fielder Capital, and PortfoLion Capital Partners.
In this episode, you will learn:
- Bence Jendruszak’s global upbringing instilled adaptability, a critical skill that shaped his entrepreneurial journey and business expansion into the U.S.
- His interest in engineering and logical reasoning inspired him to study economics and later enter the world of cryptocurrency.
- Pivoting from a crypto exchange to fraud prevention, Bence and his team founded Seon to combat online fraud with innovative tools.
- Expanding Seon into the U.S. market required relocating and rethinking the initial approach to achieve growth.
- Scaling from 30 to 300 employees presented challenges, highlighting the importance of structure, process, and experienced leadership.
- Letting go of ego and recognizing when to bring in new leadership was essential to Seon’s continued success.
- Seon’s focus on solving fraud issues has led to impressive growth, raising over $100M and aiming to take the business public.
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Your email address is 100% safe from spam!**About Bence Jendruszak:**Bence Jendruszak, based in Austin, TX, US, is currently a Chief Operating Officer at SEON. Fraud Fighters. He brings experience from previous roles at HyperTeam Üzleti és Informatikai Tanácsadó Kft. and HILTI.
Bence Jendruszak holds a 2015 – 2016 European Business School Oestrich-Winkel. With a robust skill set that includes Public Speaking, Microsoft Office, Business Strategy, Strategic Planning, Communication and more.
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Read the Full Transcription of the Interview:Alejandro Cremades: alright Hello, everyone, and welcome to The Deal Maker Show. so Today we have a very exciting founder you know founder that they basically is going to tell us a thing or two about building, scaling, and financing a business. you know They’ve accomplished the incredible growth with the business. ah They’ve also raised quite a bit of money. They have offices in four different places around the world with over 270 employees.
Alejandro Cremades: and We’re going to be talking about coming from Europe to the U.S., what that means, and also how to think about scaling, what are some of the issues when you’re scaling, how you think about letting go of your ego, what does it look like when the company’s outgrowing teams, all of the good stuff that we like to hear. so Without further ado, let’s welcome our guest today, Ben Zendruskak. Welcome to the show.
Bence Jendruszak: Yeah, thanks Alejandro for having me. It’s a pleasure to be here and would love to share any and all ideas I might have.
Alejandro Cremades: um Amazing. so Born in Hungary. I know that thing growing up you moved quite a bit because of your dad’s job. so How was life growing up for you?
Bence Jendruszak: Yeah, it was and was not easy because of my father’s job. He was actually working for GM and we moved a lot around the world moving from Romania to Russia, to Kazakhstan, and then ultimately back to Hungary. And you know, this took, it took a toll on me in the beginning, but generally what I had learned is it’s very, if you can handle naturally stepping out of your comfort zone, that actually becomes a superpower for you after a while. And I’m still sort of like reaping that in my adult life as well. It’s very easy for me to step out of my comfort zone. Hence the reason why I decided to move over to the U S from Hungary, um,
Bence Jendruszak: Last year in the beginning of last year and to support our our us expansion basically It’s allowed me to get comfortable with it and allowed me to you know, when you move from um from Hungary to
Alejandro Cremades: how was How was it for you? I’m sure that it shaped you quite a bit, you know moving around when you were growing up, going from one place to another place, making new friends. How do you think that allowed you to deal with uncertainty?
Bence Jendruszak: to Romania and you don’t speak, you’re like seven years old. You get, you get into a school where they speak English. There’s all these new faces around you. You have no friends and you don’t even speak the language. Um, I mean, you, you pretty much learn to sort of like adapt and sort of adapt to the new environment, make new friends and yeah you know, start surviving. And then that happens three years later. It happens again. And then two years later it happens again.
Bence Jendruszak: um So after a while you treat it as as natural and I guess um I guess I am Like I said even in my adult life like I’m not afraid of change. I know everything’s gonna be fine I can I can adapt pretty quickly to whatever changing environment. I am experiencing
Alejandro Cremades: So then let’s talk about how you developed the law for engineering, maps, physics. you know Where did all all that come from?
Bence Jendruszak: Yeah, I’ve always been a numbers person. So it’s just very logical to me, or at least it seems very logical to me. And I always like to understand why things are happening in the way that they are happening. And I just felt that maths and physics and and science generally are able to describe ah what I am experiencing in the world. And there’s very logical reasoning Behind those so that’s what got me on the path of either You know being an engine becoming an engineer or studying economics and and understanding like the the greater sort of on a grant on a grand scheme of how the world works and I ultimately chose the path of ah Economics and they started studying business and management in university
Alejandro Cremades: So then let’s talk about university because the university in Hungary was quite a pivotal for you. You know, that’s where you met your co-founder and where you guys started to daydream about a future where you could do something together.
Alejandro Cremades: So that eventually got you into cryptocurrency. So walk through us you know walk walk us through what was that the experience like?
Bence Jendruszak: yeah
Alejandro Cremades: how why Why you guys actually connected so well? And and then what did that daydreaming look like?
Bence Jendruszak: Sure. So, Tamash, my co-founder, he is, ah we were good university friends and this was early 2010s. And this was in the, not even the wild West. This was in the time of cryptocurrencies when it was not popular at all. Like, I mean, you could, you could basically, if you researched what it was used for, it was mostly used to and exchange goods and services ah That were related to illicit activities generally. So there was a bunch of dark net markets ah that had relied on on cryptocurrencies and and Bitcoin and they were being shut down and restarted and that was just really interesting to us generally and we thought Why don’t we start a crypto exchange? We truly believed in crypto so we thought like in the future cryptos are gonna be much more popular than they were back then and and And we saw a lot of, the yeah, we just, we we, we just saw an angle there, which was very interesting to us. So we, we wanted to start as a hobby project as we were, you know, having beers after, after school. and We wanted to start a crypto exchange and that’s exactly what we did. And so.
Bence Jendruszak: After starting to accept credit card payments, we recognized that ah we were hit we were being hit with a bunch of fraud, and people are checking out with stolen identities, stolen credit card information, and it’s a major pain. And and so that was no news to us, because even as we were reading these darknet forums ah where they talked about cryptos, it was clear that like um there even the most basic script kiddies could learn to to fraud businesses online.
Bence Jendruszak: um because the tor mo and like the tor usage of the Tor network, um general sort of the wave of cryptos becoming more and more popular um was a perfect inflection point. Like anonymity from all aspects was a perfect inflection point for fraudsters to become to to start doing what they were doing on a larger ah scheme. And so long story short on our crypto ah on our crypto exchange we had to solve the issue of fraud and we said okay let’s put our thinking hats on and let’s start thinking like ah like these fraudsters and how could we actually filter them out and we looked at the marketplace back then of fraud tools there was nothing that we specifically liked everybody was aiming for an enterprise sales motion and we weren’t their ideal customer profile so we started building our own internal fraud tool
Bence Jendruszak: And we started monitoring IP address, whether there’s any VPN or Tor usage as they’re checking out. ah We started monitoring um the email address. We started looking for discrepancies between billing information and and the IP location and such minor sort of trends. And we quickly dived very deep into the intricacies of how fraudsters are thinking. and and the rest is history, I’d say.
Alejandro Cremades: So then what happened next?
Bence Jendruszak: Yeah, we built our own fraud tool and we realized that this this is a problem that’s not gonna be going anywhere. It’s a very sticky issue. Almost every online business is impacted by online fraud. um And we said, okay, we’re gonna pivot, we’re gonna forget about our our crypto exchange and we’re gonna be building a fraud prevention tool from now on. And one day,
Bence Jendruszak: we are going to ah take this business public. And that’s still our aspiration today. And that’s what we’re driving for every day. And we’re, you know, at the same time, we’re helping all of these amazing online businesses to solve their fraud related problems, except on a much ah on a much more professional ah level, you know, eight, nine years later than what we had originally thought we would we would be doing.
Alejandro Cremades: So what what ended up being Ben’s the business model of the company? How do you guys make money for the people that listen you know to get it?
Bence Jendruszak: Yeah, it’s very simple. So there’s various levels of checks that we can support um the businesses that we’re supporting with. So we can monitor fraud at the point of registration, at the logins, at at the point of a transaction or a checkout process. These are a couple of examples. There’s many different angles where um during the the the touch point with the consumer,
Bence Jendruszak: our customer integrates us, and we have a simple API integration. And then we basically ah bill based on the usage of our system. So the more the more checks we do, the more you pay. And you basically pay a couple of, in the ballpark of a couple of cents per check.
Alejandro Cremades: So you guys got started in Europe, and I know that eventually you came here to the US, and then that’s not easy. but what’s that thing What was that journey like of you know figuring out there in Europe?
Alejandro Cremades: Hey, I think that we need to pack the bags and also expand ah over there. you know what How did you come to that realization, and how difficult was that transition?
Bence Jendruszak: Yeah.
Bence Jendruszak: So we originally started building our business in out of Budapest, Hungary, where it was the two of us, my co-founder, and then slowly and steadily we had a team of five then ten and 10 and 30 people. And then all of a sudden we realize we’re serving customers in, uh, in the European region, in, uh, in Asia Pacific and in Latin America.
Bence Jendruszak: And we have a decent revenue share from all these all these areas. and And we knew that stepping into the US was not going to be easy because it’s a very competitive market. Most of ah the competition was based out of there. And at the same time, every time that we had talked to ah a US prospect, their first question was, OK, do you have a US entity?
Bence Jendruszak: Do you have any customers from the US and do you have a u sales account yeah you do have an account executive based out of the US that I can talk to? And the answer was always no to each of these questions. So we we consciously did not step into the US market for the first three approximately three years of our operation, because we felt we could drive enough revenue from all these different markets that I had listed before. And we were we were growing in these different markets. And we knew that we would need more dry powder to to basically tackle the US market. And so I think it was after our Series A funding round, um where which was in like in around 2020, something like that. I mean, the the years are flowing, and like they’re kind of flowing together. But um but after our Series A funding round, we everybody told us, every founder that we talked to,
Bence Jendruszak: who made the leap from Europe to the US, they told us it’s not gonna work out if you just deploy troops over there. like Either a founder has to relocate or you really have to hire some very senior leadership out of the US who who you you know you hold their hand very closely and and you travel a lot and they understand um the product that they have to sell, they understand the market.
Bence Jendruszak: um and deeply and they also live and breathe your culture as a company otherwise they’re just going to be a detached limb and they’re not going to succeed and so we we don’t believe we don’t really believe that as first-time founders and we just hired a couple of account executives and and ah people in charge of cold outreach and we brought them to Hungary for like two months we thought we would train them and then send them back to the US and it’s all going to work out fine And we sent them back and we had tried and tried and tried for a year, about a year, and we realized like this is not going anywhere. Like we’re not we’re not able to gain traction. um And that’s when we we made the conscious decision that somebody’s gonna have to relocate. and um And that’s how I decided in the beginning of last year that I would move to the US. s and And I moved last January to Austin, Texas, where we have our US
Bence Jendruszak: headquarters. And in the meantime, we had also ah hired our chief revenue officer out of the US who transitioned into the company beginning of last year. And he’s been doing an amazing job of up leveling the whole ah revenue organization and transforming the whole revenue organization.
Alejandro Cremades: So talking about the revenue, I mean, you guys were tripling year over year and then that growth also you know came with a with some dangerousness attached to it.
Alejandro Cremades: So so what happened there? you know I mean, when you’re thinking about tripling year over year, you’re like, my God, you know we’re making it happen. But you know theyre that came with some pains so and with a course correction.
Bence Jendruszak: Yeah.
Alejandro Cremades: So talk to us about that.
Bence Jendruszak: Yeah, there was a there was a time when we went from 1 million ARR to 3 million to 10 million ARR. We tripled our revenue of year over year over year for for a couple consecutive years.
Bence Jendruszak: And it was a crazy time of growth. um That that is when I think we We hired, we went from like 30 people to 250 to almost 300 people all of a sudden in a matter of 24 months. um And you know, you start out with, you’re sitting in a room and you can gather everybody and you can interact with everybody on a daily basis ah with around 30 people. And then all of a sudden you’re,
Bence Jendruszak: 250 to 300 people sitting around in different offices or around the world um You’ve got time zone differences that you have to account for um You you’ve just ah yeah, it it was a crazy time of growth and and we made a lot of mistakes we thought that whatever worked at um At the level of at ah At the smaller scale, we can just replicate that at a larger scale. And in reality, that assumption was completely wrong because we had to processize things. We had to implement um systems and tools and processes and actually um find the right leaders ah to scale those given functions. And in a lot of cases, we don’t even take the time to do that.
Bence Jendruszak: Um, you know, just being very, uh, like as I speak about it, I’m being humbled by thinking of that time. There were, there were cases where we, we would scale a team from, I don’t know, five people to 20 people in a matter of a couple of months without hiring, uh, the right leader first, but just, you know, promoting people internally and, and thinking back in hindsight. Yeah. I learned a lot. And so has my co-founder from that time.
Bence Jendruszak: And yeah, it didn’t, I mean, in certain cases, it didn’t end well. We had to realize that we made some mistakes and we had to course correct um those mistakes and make sure that we we we implement the right systems processes and find the right leaders for the teams and also the right people for the teams, because yeah in some cases we we were missing them.
Alejandro Cremades: And in terms of, far I mean, right now, I mean, incredible, you know, the growth, you know, you guys are like at about 40 million ARR, four offices around the world, 270 employees. I mean, obviously, that level of growth to require support and infrastructure from a capital perspective. So how much capital have you guys raised to date? And how has it been also going through the motions of raising money?
Bence Jendruszak: Yeah, um we have raised around $100 million in the ballpark of $100 million dollars thus far. um
Bence Jendruszak: we we close the We closed the Series A funding round around in 2020, and then somewhere in the first quarter of 2022, we closed the Series B. So there wasn’t a long ah time delay between the two, and I might even Like, I mean, uh, like I said, the years are like the exact date. If you ask me right now, I’m not going to recall it. Um, but, uh, but generally speaking, raising capital has not been difficult for us. Um, I think, like I said, fraud is a fraud is a growing economy. Um, and businesses are actually spending more and more on, on fraud tools year on year.
Bence Jendruszak: Um, and so the, the economy’s there, right? Like, like it’s a sticky problem and investors are, are generally from my perspective, they’re, they want to be investing in cybersecurity and fraud prevention. Um, and at the same time, you know, if you see a company that’s growing very healthily, um, then fundraising is is not an issue.
Bence Jendruszak: ah from our perspective and we’ve always closed our rounds pretty swiftly and we’ve chosen chosen the right investors and um and it’s been yeah it’s been pretty good good past couple of years.
Alejandro Cremades: so then So then let’s talk too about the growth because you know with growth, like we said also, you know it could be that it may outpace teams, outpace people. It can also make you reflect on on you know why it makes sense to perhaps let go of egos. Well, what can you tell us about that too?
Bence Jendruszak: Yeah. ah I mean, ri ah coming back to the topic of, of growing and making mistakes, I think another difficult aspect of growing your businesses is understanding that whatever worked from one to 10 million ARR is not going to get you from ah necessarily not going to get you from 10 to 50 million ARR and, and, and 50 to 200 million ARR, let’s say, or, um,
Bence Jendruszak: And, and I think at these different stages of, uh, of the grow fly cycle in a company, you also have to understand what is the skillset that you require from your executive leadership. And, um, and can they actually deliver on that or can they in the, in, as the company grows, can they actually step up, um, their,
Bence Jendruszak: their ownership, their responsibility set, and because the problems change from within these different stages. so So I think in hindsight, I have seen our executive team develop and change in the meantime, right? Like in in some cases, we had to um we had to be very upfront with some of our leaders and and sit down and have a um ah totally transparent conversation about like, hey, we feel like we’ve reached the ceiling and and we’re probably going to have to up level and the way that we’re doing things. And then in certain cases, ah you know the the person decided that they they like working mostly in in the early stages of ah of a startup and a company. In certain cases, the people were motivated to to learn more from their new ah from the new leaders that were coming in and they wanted to stay and we worked it out and we found ah we found the relevant
Bence Jendruszak: um position within the company where they could stay close to the new leader and um and see how we build things from this point onwards. So I think there’s many different cases you really just have to be transparent with one another and set the right goals and objectives and see if we can make the leap and if not then that’s totally fine but then we have to up level the teams and and the skill sets within the teams and at times you just have to hire and a new leader within the team and that’s that.
Alejandro Cremades: And what about, for example, when you’re thinking about building a company, let’s say at a seed stage versus, let’s say, series C you know type of a company, how do you how do you need to be thinking differently?
Bence Jendruszak: Sure. I think in seed stage, um it was really about just getting product market fit and hustling sort of like your way through early revenue growth. And that is what describes my days if I’m a seed stage founder. So I would drive demo calls all day long and in between I would be writing our blog posts for our search engine optimization strategy and hoping to drive some ah more inbound um inbound traffic onto our website that would convert into more demo calls that I could drive the next day.
Bence Jendruszak: um so So then from seed to series A, it was very much about ah about that. And then series A onwards, it was about, okay, let’s like what we’ve done so far seems to be working. We found the relevant verticals that we can address and solve their use cases. So let’s add more heads to into the organization.
Bence Jendruszak: And um that’s exactly what we did. And as we neared Series B, that’s when we should have processized and implemented systems, processes, and upleveled our leadership. And I think we were too late to do that. So that took us a year ah to year and a half to identify. And then that resulted in us having to cut back in certain areas and actually ah tear down certain teams that we had built up And then we had to go from from there onwards. And last year has been about um about operational excellence for us. And our CRO joined beginning of last year. And I think he’s he’s brought great value to our executive team in setting. He’s definitely setting the bar high for a lot of us. And so we doubled down on operational excellence and ensuring that we dedicate enough resources and time on
Bence Jendruszak: on actually making our our ah company scalable from this point onwards and and making our teams investable. um And that’s what we had focused on for the past year. And I’d say we’re in a very good shape now and and we’re in a place where where we’ve been able to gain good US traction. We’ve closed some deals that I’m um’ rather proud of. And I think we, yeah, we’re gonna end this year on on very good terms and I’m happy where we are right now.
Alejandro Cremades: Amazing. So then let’s talk about vision here. Imagine you were to go to sleep tonight and you wake up in a world where the vision you know for the company is fully realized. What does that world look like?
Bence Jendruszak: Yeah, look, I think we’re we’re we’re in an industry which is very impactful. We operate in an industry that is very impactful. we are helping We’re helping stop bad actors from doing what they are. And that has like implications on consumers being being safer.
Bence Jendruszak: uh it has implications on businesses saving uh saving money less less uh less basically less uh cost of fraud uh and you can invest in that that money that you would have lost in other areas um and generally i true i i truly believe that we’re driving towards the the greater good here now unfortunately um it doesn’t mean that we’re gonna be able to stop all the fraudsters everywhere around the world, right? Like this is sort of a cat and mouse game and you decide whether we’re the cat or we’re the mouse um because fraudsters, the the reason why they’re so good at doing what they do is they’re they’re generally very good at identifying loopholes, finding the gaps, and then and then it’s all about like plugging those in and
Bence Jendruszak: and maybe you can stay a step ahead for a certain period of time, but after a while, um these actors are just are just very good at finding loopholes generally. So all in all, I think we’re addressing a very important issue, and I’m like, I’m ready to double down in helping more businesses there than ever before. And I think in the US, I’ve seen I’ve seen some very good signs of of moving towards helping enterprise customers as well in order to solve their fraud issues, which I’m very proud of the the revenue team for actually getting us to a place where we’re enterprise ready. And on the other hand, since this is a growing issue, I don’t see it going anywhere. And like I said earlier, my aspiration is to to definitely go public one day. And I do believe that
Bence Jendruszak: Uh, the company that we’re building, we’re very healthy from a, from a financial perspective. Like I said, you had asked her around their business model. I think this is a business model that is, uh, there’s a very clear cut, it’s plain and simple. Um, the more you use our tool, the the the more you pay basically. Um, and so that’s where we’re at. I’m just excited to be in the space. And I think we, we started with my co-founder at the right time.
Bence Jendruszak: And I’m lucky to have him as a co-founder and we’ll see where this road takes us.
Alejandro Cremades: Well, you guys have been at it now for, you know, it’s it’s on its way to a decade, which is really remarkable. You know, in the world of startups, that’s like a hundred years in corporate, no?
Bence Jendruszak: Yeah.
Alejandro Cremades: So if I was to put you, you know, into a time machine bench and I bring you back in time, let’s say to 2015, where you guys were thinking about a world where you could, you know, take ownership of your own, you know, destiny and let’s say you were able to um Go back and have a chat with your younger self and give that younger bench one piece of advice before launching a business. What would that be and why, given what you know now?
Bence Jendruszak: Ooh, there’s so many things that I had learned and learned year over year. um
Bence Jendruszak: I think definitely I underestimated in the early days the time spent on on stra strategic alignment. you know We had thought that just basic, I think we let a lot of things fall in its place.
Bence Jendruszak: And had we discussed it more, the outcome would have probably been better sooner. And I underestimated the the amount of time that we spent on aligning on on what the strategy should be for the given quarter and then translating that strategy into a roadmap.
Bence Jendruszak: And then actually enforcing accountability from different functions and and leaders of those functions of the the big rocks on the roadmap is very important today. And I’d say we had figured that out. It was always evolving, but we had figured that out now. So I think I underestimated that in the early days. It also took us a couple of times of ah failure or like ah having been faced with with issues and hardships to to learn, to react to having to, you know, when you hit that ceiling that I talked about earlier with your leaders, I think that there was some, sometimes there where we were too late to identify that and we had too much, I think we were emotionally attached to to older ways of of working and we should have acted more quickly. And and I think lastly to sum up like a very,
Bence Jendruszak: To any founder, a very useful piece of advice is if your if your gut tells you that something is wrong um or or you or you feel like you should change something, you probably should.
Bence Jendruszak: so like don’t I think don’t wait to pull the trigger with that given thing. That’s something that I’ve learned over the years is um is act act act quickly because the more you wait, the the bigger the problem goes or the worse the situation becomes and the bigger sort of ripple effects it’s going to have. And that took some time to learn and and master.
Alejandro Cremades: So, Ben, for the people that are listening, I would love to reach out and say hi. What is the best way for them to do so?
Bence Jendruszak: You can always reach me on LinkedIn. You can send me an email on bents at cian.io. um And happy to, you know, happy to to basically interact with anybody. And I talk to a bunch of founders even at earlier stages. ah Sometimes we have dinner. Sometimes we check in on on Zoom calls. And I love, you know, I love ah giving back any of the knowledge that I had acquired over the years. I love giving back to the community. And I know I had conversations, I have conversations with founders that are in later stages as well, where I try to understand how they would think about a certain problem. And it turns out the problems are very much similar in every different case, no matter the company. um So, so yeah, I, I definitely, anybody can reach me if they want to.
Alejandro Cremades: Amazing. Well, Benj, well, thank you so much for being on the Dealmaker show today. It has been an absolute honor to have you with us.
Bence Jendruszak: Thank you so much Alejandro for having me and and thanks to the listeners for coming.
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Few stories in the world of technology and entrepreneurship demonstrate resilience, constantly reinventing technology and lessons learned from hard-fought battles better than that of Greg Mulholland, founder of Citrine Informatics.
Greg’s story is a valuable resource for entrepreneurs facing similar challenges in building a lasting company in an old-line industry like chemicals and materials. Citrine has attracted funding from top-tier investors like DRIVE Catalyst, Innovation Endeavors, DCVC (Data Collective), and Universal Materials Incubator.
In this episode, you will learn:
- Greg Mulholland’s journey reflects the power of blending technical expertise with business acumen to drive sustainable innovation in materials science.
- Citrine Informatics evolved from a consulting-based firm to a SaaS platform, enabling clients to use AI and data science for materials development.
- The chemicals and materials industry’s slow digital adoption posed challenges, but Citrine built trust through early consulting, leading to scalable solutions.
- Greg emphasizes the importance of trust in investor relationships after narrowly avoiding a catastrophic deal due to altered terms post-agreement.
- Greg’s vision for Citrine focuses on leveraging custom-tailored materials to enhance sustainability and performance across industries.
- COVID-19 forced Citrine to downsize by 40%-50%, teaching Greg the importance of lean hiring and maintaining efficiency.
- Greg’s focus on continuous learning, guided by mentors and advisors, positions Citrine for future growth and industry leadership.
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Your email address is 100% safe from spam!**About Greg Mulholland:**Greg Mulholland is the CEO and co-founder of Citrine Informatics and is a recognized leader in the use of digital tools and digitization practices in the development of next-generation materials and chemicals products and the creation of next-generation business models in the industry.
Greg has over a dozen years of experience in the chemicals, materials, and software industries and has led functions across nearly every part of the business, including strategy, finance, marketing, product, and industry leadership.
At Citrine, he has built a diverse, world-class leadership team that has defined the Materials and Chemicals Informatics industry globally.
Under his leadership, Citrine has been recognized as a WEF Technology Pioneer, a member of the Cleantech 100, the World Materials Forum Startup of the Year, and CB Insights AI 100 in 2017 and 2020.
Greg holds a BS in Electrical Engineering and a BS in Computer Engineering from NC State University, an MPhil in Materials Science from Cambridge University, and an MBA from Stanford University.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty. Hello, everyone, and welcome to the DealMakers show. So today we have a founder. you know It’s going to be quite an exciting conversation. We’re going to be talking about all about having an impact you know with the company, thinking about reinventing constantly the technology, also thinking about the you know staffing, how to go about that, you know how to navigate the different cycles, especially what happened you know to them you know during COVID.
Alejandro Cremades: as well as productizing. you know How to think about productizing when you’re thinking or you’re starting more in a way that perhaps is not the scalable way, but it gets you into different paths. and Lastly, we’re going to be talking about funding, fundraising, and some of the events that they run across, especially with bad actors that put them in a tough situation, you know negotiating you know terms. you know Already after having signed a term sheet and more you know when they were in diligence, but again, you know building, scaling, financing, and all of that good stuff. so Without further ado, let’s welcome our guest today, Greg Mulohang. Welcome to the show.
Greg Mulholland: Thank you all. ho It’s a pleasure to be here.
Alejandro Cremades: so Originally born in Kentucky, but you moved quite a little bit you know with the family. so um How was life growing up?
Greg Mulholland: I had a great life growing up. I came from a pretty technical family. My my dad ah ran chemical plants, ah making vegetable oil of all things ah for for a good chunk of his career. And my mom was an industrial engineer who who turned into a a technology teacher. And so I was surrounded by this understanding of heavy industry, but also understanding you know kind of what the next generation technology looks like ah very early on and and came to love both of those things, which is what led me ah to the chemicals industry.
Greg Mulholland: over over many, many years.
Alejandro Cremades: And I mean, computers too. you know I’m sure that they having your mother there you know what ah was a big influence.
Greg Mulholland: It was. you know From her, I learned a great level of curiosity around ah digital technology. and And that led me to ah head to, I went to North Carolina State for for undergrad and studied computer engineering and really found myself in a position where I was i was excited about computer architecture.
Greg Mulholland: I wanted to learn how to design processors and and and actually did learn how to design processors. But my big challenge there was I didn’t love it. I really wanted to be down more in the fundamental science. And so i I moved into transistor theory, moved into transistor design, and then realized that was just a material science problem. So started in the materials industry and and actually went and got a graduate degree in materials. And so it was a a lucky combination.
Greg Mulholland: Being able to learn physics and chemistry but also with that computer science and computer engineering grounding that allowed me to to do what I do today Yeah, so I was I was lucky I was I was studying at North Carolina State and ah Was about to graduate and I had applied for the the Gates Cambridge scholarship and That’s a story for another day But had gotten pretty far along in the process and had an opportunity to meet a professor at Cambridge that I was really excited about working with
Alejandro Cremades: And how do you find yourself in Cambridge, all of a sudden?
Greg Mulholland: ah didn’t end up winning the scholarship, but ah was at that point really emotionally committed to being there and so, ah because I had the opportunity to go I took it and ah really it was a was unbelievable academic community, but it also was a group of people that was similarly curious. It was a ah really special place to be to learn material science and to think about how data analytics could play a ah role in that space. and And believing at the time, I mean, now it’s it’s sort of common sense, but at the time that that materials informatics or or using data in materials was going to be a very um important technology.
Alejandro Cremades: So then ultimately, you know, you come back to the U.S. and then essentially you went into a same semiconductor company. So why did you chose that path?
Greg Mulholland: Yeah, you know i was I believed at the time and still do to a great degree that the the sustainable future of the planet and frankly our ability to support you know a growing population of middle class required electricity and ah electricity efficiently delivered. That was really kind of what was very important to me. And so i hadd written I did my master’s and was working on solar cells and then I came back and worked in power electronics.
Greg Mulholland: And so specifically, I was looking at um you know how do we make more efficient power devices, like you know the power bricks on your computer. You notice they’ve gotten smaller. That’s the material I was making, was the material that enables the power brick on your computer to get smaller. um It also is notably more efficient, wastes less power.
Greg Mulholland: And so it was a passion for me. It was it was this idea that we could make a change in the world. um And it was a huge technology challenge, but that made it all the more fun. You know, it’s it’s not ah we’re we’re not doing easy things. We want to do hard things because they’re interesting.
Alejandro Cremades: So why pausing the professional career and going back to studying?
Greg Mulholland: Yeah, you know, at that at that time, I was at this relatively small company. um They were in the 20s and 30s while I was there. um I i was became the senior most person without an MBA or a PhD. So the writing was on the wall for me that I kind of ah probably hit the end of my time there. And I also realized you know I wanted to learn the business side of things. I learned the technology, um but I hadn’t fully understood what it meant to take a technology to market. And so I applied to a few different programs, but so but ended up at Stanford for my MBA. um And you know it was it was ah being an engineer.
Greg Mulholland: Going into ah an MBA program is a super interesting thing because, ah you know, there are engineers there, but it’s certainly not the majority. And so learning to learning business culture, learning business language, you know, the math skills were never a problem, but a lot of the other stuff I had never seen before. And so.
Greg Mulholland: I was able to open my mind. I was also able to meet a really important colleague. um I met a guy who was actually, even before we started, ah his name is Dr. Bryce Meredith. He had finished his PhD in machine learning for material science, and then was at Stanford to ah to get his MBA.
Greg Mulholland: And we had this we had this immediate connection. you know i I was ah kind of the guy with the industrial problem, and he was the guy with the academic solution. And and when we sort of figured that if we could push the problem and the solution together and make the meat in the middle, that we could have something really special. And so the summer between our two years of business school, this is in 2013, we actually built a machine learning system. And we worked with a group at University of California, Santa Barbara. we They had a bunch of data about a certain class of materials known as thermoelectrics. And we were able to use these machine learning approaches to invent an entirely new class of thermoelectrics. And it worked. It worked experimentally.
Greg Mulholland: And so at that point, first of all, nobody publishes science papers out of business school. That was kind of fun. But we also knew that we had a technology here that was really revolutionary and and could bring a lot of new thinking to an industry that that was really able to benefit from new thinking.
Alejandro Cremades: so then So then what happened next?
Greg Mulholland: So we we because we were in the Stanford ecosystem, um we were relatively quickly able to raise money. We had a ah couple professors that we’d worked with closely who knew us and knew our business um and knew what we were trying to do. And so we we raised ah an initial note of about a million dollars. At the time, that felt like a lot, though. ah in the In the history of the company, certainly only a starting point. um But it gave us the the space and time to to further develop the company and develop the idea.
Greg Mulholland: And so in 2014, we went full time, then we graduated and ah started to hire our first few folks. And as we did that, um we realized we needed to take this product into market in a pretty weird way. um you know we We had sort of been surrounded by people doing the lean startup method or some you know related idea of we’re going to take something in the market and get the market to tell us what we want.
Greg Mulholland: In our case, we were going into the materials and chemicals industry, which is not known for being particularly digital. It’s not known for being ah particularly able to adopt new technologies, at least not of the digital variety. And so we had to basically, and we refuse to call it this at the time, but basically formed a consulting firm.
Greg Mulholland: we ah We had people that would deliver our software, that we would use the software on their behalf, and then we would help them invent new sustainable high-performance materials and chemicals. They’d own the IP, we’d own the software, but we still had to do a lot of the digital work. And for the next five years, that was our growing business. We were essentially essentially a consultancy, which is not what any of us wanted to be, especially our investors, but it’s what which’s what the market needed at the time.
Greg Mulholland: um and that was a
Alejandro Cremades: So how do you go how do you go from from from the consulting you know aspect to all of a sudden than productizing the operation and making it scalable?
Greg Mulholland: Yeah, go ahead.
Greg Mulholland: Yeah, you know, it was it was really We didn’t really want to. I mean, it was always the vision, but there are lots of visions where you realize the pain to get to the vision is is just so high that you don’t even want to go there. um and And that’s where we kind of had gotten to. We had realized that um the consulting model worked. We knew we wanted to move to software, but we couldn’t do it until we had several of our customers approach us and say, we cannot do business with you anymore.
Greg Mulholland: And the reason we can’t do business with you anymore is that we are one of the largest companies on planet earth, and you have 17 people on your team. and so you’ll never service us. It’s just physically impossible unless you have a scalable software platform, in which case we are interested. And so we heard this from a few different sort of mega companies and we realized that it was both a more scalable model and one that we could execute on because the market had changed. Now these companies were starting to think at least a little little bit digitally, never perfectly, but a little bit.
Alejandro Cremades: So for the people that are listening to to get it, what ended up being the business model of Citroen? How do you guys make money?
Greg Mulholland: Yeah, so we’re a little bit unique. um the The world of materials and chemicals informatics, often called materials informatics, um using data science to invent new materials and refine them, um there’ve been a lot of companies that have started and died over the years. um Most of them have tried to use a royalty model, where if you invent something using our platform, we get 2% of gross sales for several years or something.
Greg Mulholland: Citrine has never operated that way. And there’s a lot of reasons for that, but we offer a SaaS platform that companies use to invent billion-dollar materials, and we just get software fees. That might seem crazy, but it’s it’s how we ensure that our customers are some of the happiest customers in the world. And then, of course, if they need help, we have a professional services team. But we are at our core, the SAP or the sales force of the materials development process. Your data lives with us, you use our AI, and you invent your new thing.
Alejandro Cremades: So then in this case I mean you were alluding to earlier you know on the capital raise I mean you guys have raised a quite a bit of money. How much capital have you guys raised to date and what has been the experience of going through the different cycles.
Greg Mulholland: Yeah, we’ve raised just shy of $75 million dollars in the history of the company. um And we are it’s it’s it’s been super interesting. I mean, I’m sure all your listeners know that just as a venture community, ah we have gone through many different phases since 2014 and 2015. We’ve had moments where things looked like they were taking off. We were seeing companies get funded you know just with incredible, incredible volumes of cash. um And then we’ve gone through periods where things have been have been tougher.
Greg Mulholland: I think we have sort of gotten lucky, um and and i I say this only in hindsight, um that when things were really, really hot, we raised pretty modestly. um And it was partly because people didn’t understand the industry and partly because I think the the ah market is something that people take time to understand overall.
Greg Mulholland: um But it also means that as as things have softened a little bit in in recent years, we’ve been able to continue to maintain our valuation and and be in a position where um you know we we have a sustainable business on our hands. And that’s maybe the most important thing to me is you know we’ve had venture capitalists push us, especially before they invest, um push us to really go big and make a big investment. And it’s either you know go big or go home.
Greg Mulholland: And that’s that doesn’t really work in the chemicals industry because you’re gonna end up going home. you You have to be modest and and be careful about what you what you do in an old line industry like chemistry. um And so we’ve actually been very diligent about growing ourselves and and not, frankly, running ourselves out of capital as we’re learning the market, growing the market, and becoming the leader of the market.
Alejandro Cremades: so then So then I know that there was quite a a bit of experiences there that were not as easy with investors. I know that there was one in particular where it was all the way to the to the wire and with say you know bad actors there you know when it comes to agreeing to terms, renegotiating terms later on, indeligence, putting you guys against the um the the the wall you know really when it comes to a runway and options. So what happened there with you guys?
Greg Mulholland: Yeah, I mean, you know, we’ve had and it’s funny because in general I’ve had very positive experiences with investors but I’ve worked with enough of them now that you’re always going to have some tough ones. um And we did have and ah a case where an investor was a um offered us a term sheet, um and it was very explicit about each of the key terms as as many of your listeners will know these things aren’t hard to read.
Greg Mulholland: um And when we got the um the ah the formal docs back, and I make it a point to read at the docs myself, um we got our counsel to do it too, but I’m i’m always pretty pretty careful, we noticed that some of the definitions had changed. And the definitions changed and changed in such a way that we would be um They would have worked really against us. They would have dramatically decreased our valuation in ah in a future state um when this person or when this when this firm would have had an option to invest further in the company. And and that actually probably would have ceded control into their hands. And it was difficult because this was this was in a period where the company was running low on cash.
Greg Mulholland: um we needed to be um in a yeah in a particularly ah We need to be particularly careful. um and Fortunately, our our existing investors at the time ah were able to rally around and help us so we could step away from this this relationship because it was one where, you know I think think in hindsight, um I would have I should have and and now do get to know investors better ah before I expect accept terms from them because you know these are long-term relationships. They need to be built in trust. And and I don’t know what happened on their side. i don’t Maybe it was done all in good faith, but it had a very bad faith effect on me. And I want to make sure that I can always look someone in the eye and know that they are not going to try to pull anything um intentionally or unintentionally. And I’m very lucky that my my current investors are that way.
Alejandro Cremades: So how are you able to ah go back to the investors to be able to turn things around and not to find yourself in a situation of catastrophe?
Greg Mulholland: Yeah. i mean you know our our What I would say is is to any founders that are listening, you know investors are your best friends and your worst enemies a lot of times. right you know They’re always pushing you to be bigger and better, um but they’re also extremely um ah you know that they have their own They have their own expectations and desires as well. um In this particular case, I developed a very strong trust relationship with a couple of our largest investors, and I was able to go to them and be very transparent. It was not a time for me to play games on the back of other other games. It was a time for me to say,
Greg Mulholland: This is the situation we’re in. This is what I fear will happen. And let’s come to let’s come to a plan together. And so that’s what we did. And they were actually able to, they had reserves and they were able to put together a small and modest, um but but reasonable round for us that was able to bridge us to the next phase of the company. And I’m i’m grateful for for their support during that and and during many other times.
Alejandro Cremades: So how do you how do you go about really finding those investors that ultimately are going to be there, that they’re going to have your back, that are going to be supportive during those times? you know what What have you learned about filtering investors that are going to be there for the right reasons?
Greg Mulholland: Yeah, you know, I think ah obviously, maybe maybe not obviously, ah the first conversation I have with an investor is always really revealing. um Did they look at the materials I sent ahead of time? Are their questions well-reasoned and are they clear or are they just the same questions they ask to everybody else?
Greg Mulholland: um are they ah Do they have a perspective on the industry, on our industry, um that is consistent with my own? And do they want to build the kind of company I want to build? um There are lots of companies and investors that would push us push us to go you know work and make chemical weapons. you know that That’s a thing that people do um and is a real risk with AI. We will not do that. That is off limits for us in every way. um But then the next piece is key. Always do reference checks.
Greg Mulholland: I don’t hire an employee without doing reference checks. i don’t I don’t bring on an investor without doing reference checks. And especially for ones that will have some sort of control position in the company, I need to have an understanding of not just Not just what went well, don’t don’t just give me your best portfolio company CEO. Give me one that you went through some struggles with because it’s it’s really in those moments when things are tough that people show their true colors. And so ah I would say i’m like I don’t have any investors around my table that I’m unhappy with, um but I have a couple in particular that have been ah both personal and professional supports to me ah in really big ways. And I know that I can have straightforward conversations with about what’s best for the company and and best for their investment.
Alejandro Cremades: So let’s talk about now you know continuing in the um path of talking about people here. and I know that during COVID there were some bumpy times ah for you guys. what What happened there and how did you mitigate um some of those same hurdles?
Greg Mulholland: Yeah, so so you know we we were entering a period, you know we went through this transition that we’re talking about to to being a software company in 2018 and into 2019. And we were getting a lot of positive signal for the market and thought we were about to grow very quickly. And we hired effectively to that level. We we were our largest we’ve ever been at the end of 2019, early 2020.
Greg Mulholland: And of course, I think we all know what the early part of March, 2020 looked like. It was ah an economic disaster. And the chemicals industry really felt it badly, mostly because you can’t make chemicals without being together in person. And so a lot of these companies virtually shut down. I mean, they were still operating, but it was they were not investing in anything. And so we had to cut the team by nearly 50% at that time. It was maybe 40% or so. i don’t I don’t remember the exact number, but it was a a really, really big cut.
Greg Mulholland: And we did it quickly. We we made we made a move in April. um That was, you know, I think ended up being a thing that was really helpful to us in making it through that time. but But it really etched something in my brain. And and we’ve had we’ve had to do some some right sizing a couple times since. And every time it’s it’s etched deeper, which is We really, really need to make sure that we only hire the people that we absolutely need on this team. There there should be no luxuries until we’re incredibly profitable because you know it’s nice to have those things, but when the bad day comes, you find your tank out of fuel pretty quickly.
Greg Mulholland: So there was a and and an Apple earnings call a couple months ago. um maybe It was even but just a month ago. ah The Apple CFO um said, made a comment about having the right number of people. And he said, if you have the right people, you don’t need very many of them. and And I’ve come to believe that very strongly. It’s a really, really key thing to hire the right team, build the right team, support them with everything you have, but don’t bring on an extra five people because one person isn’t doing so great. Go find the right one person and make sure that they’re able to execute for you.
Alejandro Cremades: So obviously, when we’re thinking about investors, people, customers, they’re all betting on vision, right? So when we’re thinking about the vision here, and imagine you were to go to sleep tonight, and Greg, you wake up in a world where the vision of of the company, you know, of Citroen is fully realized. What does that world look like?
Greg Mulholland: Yeah, it’s where materials are a a ah lever of design, a design ah design feature of every product. you you know ah yeah When Apple releases a new iPhone, they release a new material with it almost every single time. Titanium was last time. They did some other aluminum stuff and magnesium stuff in the past. the key But but they’re they’re sort of special in that.
Greg Mulholland: And increasingly, what we’re seeing is materials, you know, the metals we use, the plastics we use, the glasses we use r ah are really sort of need to be custom tailored. We’re really pushing things that hard. And so just like you don’t you don’t design a car just by making the car, you design every part digitally first. We need to design our materials digitally first. And what that means is more sustainable materials, cheaper materials and more performant materials so that our cars are lighter, they get better mileage. Our phones are better. Our textiles and clothing are better. Everything is better because it’s tailored to its use case and we take less of a toll on the planet.
Alejandro Cremades: So we’re talking about the future here, but I want to talk about the past and doing so with a lens of reflection. If I was to bring you back in time. And let’s say I bring you back in time to that moment that you know you guys were at Stanford thinking about you know that company that you were going to build. And let’s say you’re able to show up you know right right there on the spot then and be able to have a conversation with your younger self, with perhaps your co-founder, and being able to provide one piece of advice before launching a business. What would that be and why, given what you know now?
Greg Mulholland: I think it would be to say, trust yourself. um There have been lots of times where I’ve had a particular view of where I thought things were going. um Even things like technology, where where that was not my expertise, right? you know I have some i have technology background, but I’ve had technical people on the team that specialize in that all the way along. And there are certainly times where I look back and I say,
Greg Mulholland: I knew better than to allow us to make a decision in that way. And I knew where the industry was going. And I ceded control. I put it in somebody else’s hands too early. And I think now I found a much better balance. um I have debates with my technical team. Even when I’m not going to make the final decision, we push each other in a productive way because I know the industry. I think I was a little too soft at times.
Greg Mulholland: That’s not to say you can’t be soft. I’m not somebody who believes in sort of founders make all decisions. I think that’s ah that leads to its own set of challenges. But I do think having great people around you and then pushing them harder and harder is a good lesson and one that I think we would have benefited from ah years ago.
Alejandro Cremades: So obviously you’ve been at it now for 11 years and ta obviously you guys have gone through different cycles in the business. How have you gone about to being able to develop yourself as well as the company was growing?
Greg Mulholland: Yeah, you know I’ve gone through ah periods of faster learning and slower learning. And I therere the you know i think ah there have been some really hard periods where I’ve learned a lot. um and And that’s maybe the most, the periods of most intense learning. But I’ve gone through phases. There was the technology learning, there was the market learning, and there was the leadership learning. And then finally, probably the strategy learning phase.
Greg Mulholland: um I work very closely with a couple of advisors and and mentors, call them coaches, one in particular that is and it’s kind of my go-to guy to talk things out because what I’ve learned is nobody has all the answers, but the people who have the closest thing to the answers are the ones who’ve done it before. And you know so I use use this person, his name is Tom, we we talk all the time and I’ll say, hey, I’ve got this ah HR issue or I’ve got this strategy issue or I’ve got this question or I’ve got this pesky customer, I’ve got this other problem
Greg Mulholland: How would you think about it? And he doesn’t give me an answer. He starts a conversation. And that’s the thing that feels best is is not getting to the answer. It’s understanding how to think through these problems in the future. And if anything, what I’m most excited about as we take citrine to the next level, because we are kind of getting through the current phase of our growth. um my My most exciting thing about that is to learn a new set of things. What happens? how do we How do we go from being the best in our industry to being a profitable company that can really step on the gas from a growth standpoint? And I’m ah i’m i’m really looking forward to that moment because it’s right around the corner for us and it’s a um it’s one where where new problems that I’ve never seen before will crop up and I’ll learn from those too.
Alejandro Cremades: Absolutely. Well, Greg, for the ah people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Greg Mulholland: Email is best, it’s just greg at citrine.io. um Feel free to ah to reach out. ah we’re We’re doing exciting things in chemistry and materials and artificial intelligence. And so if you’re interested in this space, we’d love to hear from you.
Alejandro Cremades: Amazing. Well, Greg, well, thank you so much for being on the dealmaker show today. It has been an absolute honor to have you with us.
Greg Mulholland: Thank you, Alejandro. It’s been a pleasure.
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The post Greg Mulholland On Raising $75 Million To Build An AI And informatics Platform For Creating Cost-Efficient And Performance-Oriented Materials appeared first on Alejandro Cremades.
Priit Lepasepp’s story is one of navigating the currents of history and reshaping the future of energy. Born in 1986 in Soviet-occupied Estonia, Priit experienced a world that was vastly different from the one he would come to build.
In this interview, Priit talks about overcoming hurdles and successfully scaling Sunly, which fundamentally transformed the energy landscape of Eastern Europe. Sunly has attracted funding from top-tier investors like Rivage Investment, Kommunal Landspensjonskasse (KLP), Copenhagen Infrastructure Partners, and mBank.
In this episode, you will learn:
- Priit Lepasepp’s early exposure to Soviet and Western systems shaped his entrepreneurial vision and adaptability in a global market.
- His legal background in environmental law provided valuable insights for navigating the highly regulated renewable energy industry.
- Priit transitioned from advisory roles to working in the renewable field and then founded a renewable energy company, seeking hands-on experience in driving real-world impact.
- Nelja Energia pioneered renewable energy in a skeptical market, eventually leading to a highly successful acquisition.
- Priit’s venture, Tuleva, disrupted Estonia’s pension fund market by offering low-cost, long-term investment solutions, showcasing his ability to innovate in finance.
- With Sunly, Priit shifted focus to end-user needs in the renewable energy sector, building an impressive 18-gigawatt pipeline of projects.
- Despite geopolitical challenges, Priit raised over $1.3 billion in capital, demonstrating the growing investor confidence in Eastern Europe’s renewable energy landscape.
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Your email address is 100% safe from spam!**About Priit Lepasepp:**Priit Lepasepp, based in Tallinn, Harju County, EE, is currently a CEO and Founder at Sunly. He brings experience from previous roles at Energiaühistu, Tuleva, Nelja Energia, and Law Firm Sorainen.
Priit Lepasepp holds a 2005 – 2008 BA in Law at the University of Tartu. With a robust skill set that includes Legal Document Preparation, Litigation, General Counsel, Planning Law, Contract Law, and more.
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Read the Full Transcription of the Interview:Alejandro Cremades: Already, hello, everyone, and welcome to The Deal Maker Show. So today we have a really amazing guest. you know I guess that has done it multiple times. you know I mean, it’s quite dizzy when you hear the amount of times that he’s done it, and very successfully so. And we’re going to be learning about pioneering you know in a new segment, in this case, renewables, ah how to go about you know like when you’re dealing with with with hurdles, with bigger banks, bigger players,
Alejandro Cremades: And then also ah how to go about overcoming you know hurdles that are presented by the market, by the circumstances. And again, you know building, scaling, financing, and even exiting. So brace yourself for a very inspiring conversation. And without further ado, let’s welcome our guest today, Preet Lepaseb. Welcome to the show.
Priit Lepasepp: Thank you for having me.
Alejandro Cremades: So originally born in Estonia. How was life growing up? Preet, give us a walk through memory lane.
Priit Lepasepp: My year of birth was 1986. So it was a Soviet Union still. So I’ve been brought up in a system where I was five years old when I started to see capitalism first. So I think for me, and it has been a good thing.
Priit Lepasepp: ah I was still not so old to earn much about in the 90s because in the 90s it was rather this kind of cowboy capitalism in in Eastern Europe that everything was still publicly owned and now and the people had the possibility to privatize certain things. So that I did enjoy, but what I enjoyed definitely was but everything else that a geek can have. so Obviously I had relatives that were in West and then I had the possibility to meet with them and and these kind of things and it opened my eyes on on many topics. One of the topics was that
Priit Lepasepp: ah how different things, what’s what was said in Soviet Union, how they were were really in the West, when the West was in your eyes. So TVs, everything that you can imagine. So the conflict was was very big. So this, I think, was the first big change in my life. Like, who am I today?
Alejandro Cremades: So tell us, how did you get into law? Out of all things, because I mean, obviously, that’s not really the path that you ended up taking as a founder, but out of all things, law. Why?
Priit Lepasepp: I think one of the speak big things why was was my brother. My brother was starting studying law before me and we grew up together. Our parents were engineers and I saw how complicated engineering could be and how complicated it is to earn money out of that as well. And and I thought that I’m rather this kind of social creature that I don’t want to so much deal with stuff, but I would like to deal with people. And at that time, I think it was ah also a right decision. i Basically, a lot of my relatives were engineers. And and then I thought that let’s let’s do a shift. And then I started started to study law. And quite quickly after that, I started to concentrate law in environmental aspects. And yeah, so this was the main reason.
Alejandro Cremades: So obviously that’s saying what ended up getting you into the renewable sector. I guess, how would you say that the legal background has served you? Even though you’re not a lawyer anymore, how do you think it has served has served you? Like what kind of perspective it has given you?
Priit Lepasepp: It gives you many aspects. I think when you study law first year, then you study social ah aspects, ah psychological aspects also, because it’s an order of of rules and why previously when you were not around, why those rules were invented or put on paper and how you can change them as well. And if you look at the field of energy, for example, or the field of financing, both are very regulated markets.
Priit Lepasepp: And to do their something, you have to have a view on those aspects as well. Like you have to be understanding not only the technical aspects, but the social aspects as well. And ah so why it is this so complicated to do a bank, for example, in Europe, you need to understand it or why to do how to do asset management company, then that you need to also understand. And when we talk about electricity, then you also need to know exactly how on paper it works.
Priit Lepasepp: because money and value and energy is something that is very important. Energy, I think when society or humankind invented fire, this was very important for us. And and and this has been constantly around. So there is a lot backlogs of standards, backlogs of laws, regulations that the need to understand, but not only understand, but also change So in in those fields where I’ve been doing business, lobbying has been one of the main things to even do that business in certain countries.
Alejandro Cremades: So how do you get into renewables and more importantly, the shift from being on the drafting to being on the execution you know side of things?
Priit Lepasepp: I think it’s ah something that I’ve quite ah early stage understood that I don’t want to be in advisory business ah because I then only saw one part and I only ah showed to my customers who were energy companies, for example, what are the risks there and how to act so different alternatives. But I never saw how they but my knowledge that I gave them, how it was then really done. So what kinds of risks were taken and how the project finally looked like. So this was the main thing that I really understood that
Priit Lepasepp: Being an advisor, it’s a very good thing to earn steady cash flows until you are old and you don’t anymore physically or mentally capable to serve. And I think this was the main thing. i Quite early stage, I wanted to go into a business and see myself ah how renewable energy will work internally. Because only then, when you understand that, you can do business in that sector.
Alejandro Cremades: So then let’s talk about a getting going with your first company with Energia, which ended up getting a really nice outcome. So how did the whole idea of Energia come together?
Priit Lepasepp: I think at that time it was, let’s call it first, Kyoto Brotogols that were signed with talking about CO2 quotas. The story started to be, let’s say, in the 90s and then countries ah were starting to think about renewables and thinking that energy sector impact to climate and and and environment.
Priit Lepasepp: and And then there was different ideas how to do it. And I think at that time, the main business was this old conventional ah renewables, which basically meant that you will develop a developer project, build it, and there is a free ride to the market, basically, that there is a subsidy and there is electricity price. and And when you will put all that together, then you can earn money out of that. So I think that could
Priit Lepasepp: That could explain also why we’re at the end exited as well, that those subsidy periods will start to start to end. The pioneering part was also relevant because the technology was still in early steps.
Priit Lepasepp: but I think Leila and Erika started when when when turbine sizes were still near one megawatt. Then our biggest turbine was three megawatt capacity turbine. So today we are talking about capacities of 6.5 on land or seven. And um and it’s completely different business. ah but One thing is technology as well. the Technology is involved and And if you if you keep on dragging the old assets, then you will stay to deal with them and not deal with the growth. So I think that that was that that was the that was that part with Nela and Erega. So why we did it, why why it was cool to do it as well. So I remember at the time when
Priit Lepasepp: then state-owned incumbent energy producers didn’t want to do renewables. They say that it’s a key display that we want to have big turbines and steam engines and everything related to the chimneys was cool and these turbines, they were just toys. But that toy business started to be a very big market for everybody.
Priit Lepasepp: so And I remember also that banks, they didn’t want to lend you money because they didn’t understand this key display. So it was very complicated to get the the project financed as well. So the pioneering part was was quite interesting, but I think it was good to that we closed that topic in 2018.
Alejandro Cremades: So for the company here, for Energia, it ended up getting acquired, right which is a amazing. So walk us through how that acquisition process came about. you know Make us insiders for a minute here.
Priit Lepasepp: I think two things. ah Investors, so being in new fields, they want to exit constantly. like ever you it’s ah It’s like, with the let’s say, with marriage. that you When I’m a lawyer, so I have this kind of aspect that if you enter into a deal, then you should think about how to get out of that as well. Not that the vow that you give is is less important, but I think you should concentrate on that as well. That’s how you will get out. so I think for Nela and Erica, it was a relevant time to get out because the investors wanted to get out. So it would have been hard to grow the business further, um we although we had a quite nice pipeline to to build. And in 2018, it was the time where incumbent energy producers wanted to have also renewable and energy pipelines.
Priit Lepasepp: and um And they wanted to do IPOs or raise extra capital on basis of renewables. So there there was a huge list of companies that wanted to acquire ah the business. And we were basically acquired by stone and state owned the energy company. and And after that we
Priit Lepasepp: basically exited for one year from the old market so we had no compete but I think in the deal what was relevant was was this interesting part that how to sell a company to a company that is smaller than you are and how to swallow their pride and that that i that and this kind of um feeling that you build it.
Priit Lepasepp: ah And I think that was and not easy. But looking back, I think it helped us a lot. We had the money, we had new ideas, and we can we were able to start once more.
Priit Lepasepp: so And also,
Alejandro Cremades: what were the terms of the what were the terms of the deal
Priit Lepasepp: I think it to simplify it, the the the shareholders got all together some 287 million euros in in cash in hand because it was ah the company had a almost almost of 600 million, ah but there was a lot of debt in that as well. So in that sense, it was a very, very good deal.
Priit Lepasepp: just before there were very good wind years as well.
Alejandro Cremades: What were the terms of the what were the terms of the deal?
Priit Lepasepp: um The company size at that time was 287 megawatts as well, like per million per megawatt. um and And there were like a pipeline of projects, almost one gigawatt that the the new buyer was able to buy. And what else? I think it’s, and and with those numbers, we were the biggest. And when we look suddenly today, after six years,
Priit Lepasepp: We have ah more capacity under operation and more in development that Nelya and Erga did. So it’s it shows that this was this pioneering business. Like you had a lot of things there already built. So, and they were operational and and yeah, but but yeah.
Alejandro Cremades: So one of the other companies that that you started to and that you are still part of is Tulava. And basically the whole idea was to bring the BlackRock type of model.
Priit Lepasepp: la
Alejandro Cremades: And you guys have been quite successful there with about a billion in assets under their management. So what exactly do you guys do at Tulava?
Priit Lepasepp: Tulava is a very simple and simple fund manager for second and third pillar funds.
Priit Lepasepp: And the second pillar is mandatory in Estonia, which basically means that ah that you need to put aside certain amount of money for your pension. So we don’t have ah like company programs for you, but we have state programs. You can choose asset manager and a fund where you would like to invest. And when Tulava started in Estonia, there were only banks that owned asset managers.
Priit Lepasepp: and who offered then this these kind of products and the the products ah management fees were very high so they offered usually index funds to Estonia and the cost was some 1.5 percent and it was 2016 just to envision everybody because they are very cheap today but they weren’t at that time and and also additional like costs to ah for the engineers to be part of the those funds were also there so all together in some places the funds total cost to end customers were over 2%
Priit Lepasepp: So to have a very long instrument carrying a 2% cost on you, it’s ah it’s killing you, and suffocating you and over 30 years it can swallow a lot of money that will not ever earn anything for you.
Priit Lepasepp: And we just did one thing. We gathered around some 300 people, ah sorry, 3000 people to raise cap very small capital because we started this business as a cooperative. And basically those people gave us money to do finance finance the financial requirements or legal requirements to do a fund manager in Estonia and then we went to talk with BlackRock and asked them to have to have different funds and we basically did a product that from the day one the cost was 0.5% all together with regulatory costs and ah we are today somewhere near 0.35 so
Priit Lepasepp: So this was the topic and the total home is almost one billion today. So it’s ah it’s growing and growing. And we are showing to the market as well that that long term savings are long term investments towards towards pensions that the index funds are are doing doing in longer run better due to the costs um mainly.
Priit Lepasepp: ah better than other actively managed funds in average. So I think it’s um it’s ah it’s a very good story and it’s this kind of positive continuing story and has been so far. And it’s very interesting also how to get investors on board and how to educate them in a market which is not very very well-educated on on saving so saving money in the past.
Alejandro Cremades: Now,
Priit Lepasepp: We have 75,000 customers today.
Alejandro Cremades: like everything, you know an entrepreneur is an entrepreneur, no? And in parallel, you know you decided to get going with suddenly, which is say arguably your biggest success to date in terms of size. you know I mean, it’s a remarkable what you guys are doing. So so suddenly, tell us about suddenly. Why suddenly and what’s the business model there in suddenly?
Priit Lepasepp: So suddenly, it started in 2019 from one thing. In 2019, there was new goals for 2030 by the European Union and also the member states to be more renewable.
Priit Lepasepp: And what we had there, the situation can be rather described as when a city has 100,000 more residents in them, ah where to put them to live and you don’t have the room. So um and then you still have the old regulation how to zone and and do yourself a building permit. So we had the situation where the numbers difference were very huge, meaning that there was almost no projects that you could build.
Priit Lepasepp: And there was nobody was developing anything, but you needed to have in in four or five years you needed to have in gigawatts new projects. So when we started, we started basically internally developing new projects. We were one of the early ones who basically understood that renewables is like industrial revolution that the new production units will be a new place and you need to sown them. So two things that we craft first were people, experts in that field. And the second was what was land. So we went to big landowners saying that, look look, let’s start to go develop and go own the assets on their sites and and and develop it. So we grow our pipeline
Priit Lepasepp: So far that we do, they have some 18 gigawatts on land developments in in ah wind, battery storage and and solar. And this was all due to the right decisions we made in 2019. But we have been constantly wanting to be a renewable energy company back again, meaning that owning assets and selling the electricity to to end consumers and we have been constantly investing into startups or hardware startups in our fields because we thought that in suddenly the the difference with the old renewable energy and new is that we have to concentrate on on
Priit Lepasepp: on end customers so not about the megawatts that you can build but concentrating on those megawatt hours because if you put into a small system too much ah renewable then the prices will be constantly zero and ah this zero will not help the end customer and it will not help suddenly as well. ah Why we need to serve depth as well. And the customer ah usually when the zero prices are there, they are not consuming as well. So you need to think about how to satisfy the end customers need. So this is different in suddenly compared to Nela and Erica, for example.
Alejandro Cremades: And obviously, it’s different too when it comes to financing. I mean, you guys have raised quite a bit. How much have you guys raised in equity and debt as well?
Priit Lepasepp: On the other company level, we have raised almost 300 million, so little some millions less, but but additionally, we just ended and closed a deal where we did a bond instrument with Copenhagen Infrastructure Partners and RIVARS, both fund managers, ah who um who gave us money to build out additional projects.
Priit Lepasepp: So it it was additional 300. And then we have, basically against that, almost the same amount of senior financing in project level.
Priit Lepasepp: So all together, it means that over over ah over a billion euros. And 60, or five five years.
Alejandro Cremades: Over a billion. i mean And and how how is it to the ah the journey of raising all that money? I mean, we’re talking about $1.3 billion between or more between both equity and debt, and also ah going through experiences like the Ukraine war that I’m sure that they complicated things quite a bit. So how has been the journey tool for going through the motions of raising all the money?
Priit Lepasepp: One thing is what is good about Eastern Europe now compared to 10 years or 20 years ago ah is that this Russian flag has been different. ah When Croatia conflict was there in 2007 or eight, I don’t recall anymore the exact year, but then the investor faded away also from the market. like west Western investors, then it was Ukrainian conflict start or Crimea conflict start in 2014, then the same thing happened once more. But now when when when ah last conflict started the overall conventional war um against Ukraine by Russia, then something completely different happened that the investors didn’t fade away.
Priit Lepasepp: So we did our last e equity raise and we started it exactly on the same day basically when when the conflict started and the situation wasn’t that grim as it was before. So it’s it shows as well that the Eastern European part of Europe are are seen a little bit differently than in the past, which automatically also means that if if you look at how much eastern europeans or Eastern European countries have to build up, for example, their energy energy systems,
Priit Lepasepp: going away from Russian natural gas towards a new facilities, then investors understand as well that it’s Europe. It offers, at the moment, better returns than in Western Europe. Yes, the risks are a little higher, but we are still in OECD, we are still in NATO, we are still in the European Union.
Priit Lepasepp: so um So yeah, so I think that ah it was a little, little a lottery ticket at that this time it really didn’t happen. So there we didn’t have anything like that we could do, ah but just to believe that that they will stay on the market. and and yeah so it but This time it went well, but we had also something to offer. so We had offered to build new assets and help the communities to get over ah from very expensive Russian natural gas.
Alejandro Cremades: So let’s talk about vision here, because obviously when you’re getting ah this level of investment, you know also getting the team together, vision is a big one. So if you were to go to sleep tonight, breathe in, you wake up in a world where the vision of suddenly is fully realized. What does that world look like?
Priit Lepasepp: The world will be almost fully ah renewable in those markets where we are. So it’s the Baltics and Poland today. And why? It’s possible. We are quite near to Scandinavia. and And also why I believe in that world is not about mainly about the climate, but it’s exactly the fact that We have only old power plants. It’s based on lignite or it’s natural gas. Natural gas is coming from different regions, but mainly it was coming from Russia in this region. And so these kinds of formulas at the moment help us to build out renewables. And the only reason is that you you can buy
Priit Lepasepp: PV plants, you can buy turbines ah and obviously you can buy natural gas power plants as well, but the the fuel is coming from the wrong place. So the opportunity is very exceptionally big and this is why I really believe that this time it will really happen. that those wind farms and and PV parks and pump hydro storage facilities and battery energy storage facilities will happen. And the consumers will also get smart because a lot of their money is wasted in this old market.
Priit Lepasepp: meaning that that due to the fluctuating prices, people don’t understand how the market really works, but then they have understood that they need to understand but because otherwise they will lose all their savings. So this cocktail together will mean that by 2030 Estonia or Baltics will be let’s call it statistically on average basis annually, 100% renewable. And Poland will still have some years to go, but it will be a very different system than it is today. So that is something that’s that I dream about to market and that though that keeps me waking up every morning. And this is a huge opportunity for investors
Priit Lepasepp: to be here because if the system is then built then for the next 25 to 30 years it will be still again this kind of quiet market but today it’s a very big opportunity at least for the next 10 years.
Alejandro Cremades: So we’re talking about the future here, but I want to talk about the past with a lens of reflection. Let’s say I was to bring you back in time, I put you into a time machine, and I bring you back in time. you know Let’s say maybe to that moment in two thousand around 2016 or so, where you were thinking about like venturing out and and heading into the entrepreneurial path. Let’s say you had the opportunity of being right there with a younger print, and you’re able to give that younger print one piece of advice before launching a business. What would that be and why, given what you know now?
Priit Lepasepp: I think I would learn a little quicker and to understand to take more risks because in some of the places you need to take the risk. It’s the same example, for example, what is said also that if you start to grind a new business for yourself, then when you really believe that it already works, then stop doing everything else and concentrate on this one topic.
Priit Lepasepp: ah you need to do it because otherwise let’s say there there is definitely somebody else who will take the idea from you. So in suddenly we have seen also many lost opportunities because just but we have seen good things as well happening. So this is where the value is coming from as well. So but it’s ah it’s quickly learning, adopting and also taking risks and also taking ah personal risks. So it meant in some some of the cases that all my money was invested and um I paid myself only a very low salary to pay salary to somebody else. so it’s And today it’s vice versa that i I’m paid quite okay.
Priit Lepasepp: and but it it hasn’t been constantly like this so my family has been involved in this risk taking and I’m very happy that I did many of those things that I did today looking back but giving some advice I think ah to do those things quicker, not to hesitate, try it out, see how it goes, and also adapt to that, that maybe it didn’t work out. In some of the business ventures in suddenly as well, we have closed down the business as well. You have to very quickly do it, but you can, it’s easier to do when you have some savings. So, um yeah.
Alejandro Cremades: No kidding. So Prit, for the people that that are listening, I would love to reach out and say, hi, what is the best way for them to do so?
Priit Lepasepp: To say what? Sorry.
Alejandro Cremades: To say hello. like People that are listening, that are super inspired, that are like, hey, how can I you know reach out to Prit, or how can I learn more about Shanli? What’s the way for them to do so?
Priit Lepasepp: I think one thing is LinkedIn. You can find me there. The other place is our website. So you can go there. You can contact me. And I’m quite open-minded. If you have a good idea, then I will be definitely on it.
Priit Lepasepp: And I will be quite frank if your idea is stupid as well. So this is one thing to understand that ah there might be good ideas that that has been working in the past as well. But yeah its um for me, it is very relevant that to see that To see the ambition, ah it’s it’s also with investors. ah There has to be ambition. So I’m i’m delivering today every year or I need capital every year almost 500 million euros next two years. So um there has to be, I have to commit and and the investor has to commit as well. So this is relevant. But other thing, what is relevant is that I i think
Priit Lepasepp: What is good about Sunlist is that I have two co-founders here as well. And we have been a very good sparring partners. And they have we we we do the sanity check to each other as well. So this sanity check I can give also to everybody else as well that, look, this idea is not, and at least in that form, it’s not working out or it would work out very well, but you have to start now. So yeah, that I can give.
Priit Lepasepp: as a promise ah to the listeners that that I can do as well.
Alejandro Cremades: Amazing. well hey well pritt Thank you so much for being on the Dealmaker show today. It has been an absolute honor to have you with us.
Priit Lepasepp: Thank you for having me.
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The post Priit Lepasepp On Selling A Renewable Energy Company For $319 Million And Raising Over $1.44 Billion To Offer Renewable Energy to Customers appeared first on Alejandro Cremades.
Mark Slack is a pioneer in medical robotics and one of the key figures behind CMR Surgical, a company now valued at over $3B. His incredible journey and path to entrepreneurial success was shaped by early challenges, military service, and a deep-seated commitment to improving healthcare through innovation.
CMR Surgical has attracted funding from top-tier investors like SoftBank Vision Fund 2, LGT, Escala Capital Investments, and Ally Bridge Group.
In this episode, you will learn:
- Mark Slack’s journey from South Africa to building a $3B company was driven by resilience, discipline, and a passion for innovation.
- Competitive sports and a career-ending injury pushed him toward medicine, shaping his entrepreneurial spirit.
- His military experience as a combat medic in Angola taught him invaluable lessons in discipline, character, and observation.
- Slack’s observations in the medical field led to breakthroughs in surgery, influencing his decision to create innovative solutions like CMR Surgical.
- CMR Surgical’s success is built on creating accessible, affordable, and safe robotic surgery solutions for hospitals worldwide.
- Fundraising success was bolstered by rigorous research, clinical evidence, and a clear value proposition, raising $660M in 2021.
- Navigating complex regulatory frameworks remains a significant challenge for medical innovators, but modern approaches to data curation can help streamline processes.
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Your email address is 100% safe from spam!**About Mark Slack:**Mark Slack is a co-founder and the Chief Medical Officer of CMR Surgical. He is a Consultant Gynaecologist with a strong background in clinical and translational research.
Mark trained as a medical doctor and Gynaecologist in South Africa, graduating with the Gold Medal for Obstetrics and Gynaecology for the Fellowship of the College of Medicine of South Africa.
He has continued to pursue a combined clinical and academic career with several successful innovations in surgery and Gynaecology. In addition, he has a strong interest in basic science research.
He still practices clinical medicine and surgery in Cambridge and is on staff at the Clinical School of Medicine at the University of Cambridge.
Mark actively participates in clinical and basic research and student teaching. He also has strong academic links in the USA, Canada, Europe, Australia, and South Africa.
His work resulted in him being awarded the Simms Black Professorship of the Royal College of Obstetricians and Gynaecologists and the “Leading Clinical Researcher” award by the National Institute of Health Research in 2015.
Mark has published over a hundred original peer-reviewed articles and contributed to over 25 textbooks.
His interest in minimal-access surgery led him to explore the possibilities of improving the uptake of minimal-access surgery by the utilization of more sophisticated surgical tools such as the robot.
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Read the Full Transcription of the Interview:Alejandro Cremades: alright Hello, everyone, and welcome to the Dealmaker Show. so Today, we have a really amazing guest. you know We’re going to be learning quite a bit you know on what they’re up to. you know Really remarkable. They’re building a rocket ship. um We’re talking about a valuation of over $3 billion in the last round. It was over $600 million in one go, so let that sink in.
Alejandro Cremades: and We’re going to be talking about you know basically the main motivations behind starting the business, ah how they went about raising money from where, what were some of the frustrations along the way, as well as the frustrations of being an innovator in a world and in a segment that is heavily regulated, as well as to how you unlock or not support from government.
Alejandro Cremades: so Again, very inspiring conversation, the one that we have ahead of us, and without further ado, let’s welcome our guest today, Mark Slag.
Mark Slack: Thank you.
Alejandro Cremades: Welcome up to the show.
Mark Slack: Thank you very much for having me, delighted to be here.
Alejandro Cremades: So originally born and raised in South Africa. So give us a memory lane.
Mark Slack: that
Alejandro Cremades: How is life growing up over there?
Mark Slack: yeah It was interesting, um yes, very much born and bred family from two, three generations there. um It was a difficult time in South Africa, politically it was a strange time and it was in the time of apartheid.
Mark Slack: um So as white people, we are very privileged. My parents were very left-wing, liberal, anti-apartheid. I’m so brought up complaining about the government, but so I went to school there. It was very peaceful. It was very, um we were encouraged to take part in sport. um And yes, a very sad um time as well because of the apartheid discrimination against people basically and the on on their colour alone. And very pleased to say those days have gone in my home country.
Alejandro Cremades: That’s incredible. So you were actually a champion athlete. So how do you think that that thing that competitiveness, you know, has fueled, you know, you as well on who you are and and how you tackle, you know, life towards an entrepreneur?
Mark Slack: Well, it’s um i always i always are often in I often employ people who come from ethnic backgrounds and Japanese ethnic backgrounds because I know they have a competitiveness in them. I was extremely competitive. I was a middle distance runner. I played a lot of sports, but the one I really excelled in was middle distance. um I had ambitions to go to the Olympics one day.
Mark Slack: and which were beaten by injury and that itself when I started getting injuries. um I maintained motivation. I didn’t give up. I then moved my attention to academia and got into university to study and read medicine. So um in many ways it drove me towards what I ended up doing as a profession.
Alejandro Cremades: Okay. So then, so then in your case too, I mean, injuries really push you in, in a different direction, right.
Mark Slack: Absolutely.
Alejandro Cremades: And and in a direction that the
Mark Slack: one yeah It introduced me to doctors that I saw and admired what they were doing and um it also meant I’d lost something I wanted um and it gave the motivation to succeed in something else.
Alejandro Cremades: So then let’s talk about a you getting into medical school because obviously you’re like, you know, maybe there is something here for me to explore as an alternative.
Mark Slack: Yeah, I mean, medical school was an interesting one. Because I’d been such a high-level athlete, my marks weren’t that good. And when I decided that I wanted to go to medical school, my teachers said, well, there’s a problem. You don’t have the high enough marks. I said, well, what do I need to do to to get in? They said, well, you have to work bloody hard. So I settled down for my last year at school, worked incredibly hard to get the grades you needed to get a first-class pass.
Mark Slack: to be able to apply for medical school and applied and got in. So that was that was good. It was um and very exciting. You know, the world of medicine, I found it’s something I really enjoyed. There were challenges. You had to learn a lot and to be good at it. You really needed a dedication. um So yes, a great profession.
Alejandro Cremades: So then I mean quite impressive that you decided to really go you know and and into the army into the into the service there and and all of a sudden you find yourself being a doctor in the middle of a battlefield. I mean I’m sure that was quite shocking and and transformative for you.
Mark Slack: Well it was quite weird because in South Africa we had conscription so you weren’t entitled to to um you weren’t entitled to decide whether you wanted to go to army. um You either went to the army or you went to jail or you left the country but then you could not go back. um I then went in, I went as a doctor and I volunteered to serve in Angola.
Mark Slack: that way see
Mark Slack: Sorry, I thought it was silence. My apologies. Let me just move that out.
Mark Slack: and
Mark Slack: My apologies, Alexandra. I thought they were all silenced. and So I had to go into the military and um so I volunteered to go to Angola. So I wouldn’t be serving against a South African. And I served as a combat medic, so I flew what we would call medivacs. We flew in helicopters to pick people up who were injured, bring them back, operate on them, and then take them back to South Africa. And I also served um supporting Angolan soldiers um from one of the rebel armies for a while. So a very interesting time. Learned a lot, learned a lot about myself, learned a lot about strength of character, and learned a lot about discipline.
Alejandro Cremades: So then in this case, a you know quite transformative, obviously, as you were saying, you know learning a lot about discipline. and how do you How do you find yourself all of a sudden landing in the UK?
Mark Slack: Now that was so partly that goes back to I was very worried that the South African government would never give up, that they would never break apartheid. And um I thought that it was just going to end in a conflagration and a terrible war. um So I made a decision to go and try the UK.
Mark Slack: um When I got to the UK, I got involved in research, I got involved in sub-specialisation, which I really enjoyed. And um so partly because of the politics in South Africa and partly because of the opportunities in the UK, I moved into the UK and um have been here ever since and have ah really enjoyed living here and have enjoyed ah my professional life here.
Alejandro Cremades: So then let’s talk about getting into Cambridge too and and and hitting it on the on the research side of things because that has been you know quite pivotal for you.
Mark Slack: Yes, so um I got into my subspecialisation and came into Cambridge. um I ended up as the Head of Gynecology in the University Hospital. um I was doing a lot of research in my subspecialty. So we did work in pharmaceutical work. We also did research in surgery, different operations.
Mark Slack: um which is fantastic to do. Plus, there is a huge supporting network. You can’t have an ego in Cambridge. There’s so many talented people around you, so many people bright, more Nobel laureates walking around Cambridge than they are in most countries of the world. And um so that was a very inspiring place to be. And um I had some ideas as well. I started getting interested in the business side.
Mark Slack: um of medicine. So some of my um ideas we um developed Johnson & Johnson and um they took over as a as a as products for me and took them to global launch. So I got the good experience in in taking an idea you know on the um business side and um taking it through his business case and um yeah taking it to launch.
Alejandro Cremades: So before that, you were you were also seeing a lot of a lot of things. um You know, you were even involved in the whole thing you know of implants that ended up being you know becoming dangerous.
Alejandro Cremades: So so obviously, you know, some of those things that you were doing that you were seeing kind of like push you in this in this direction, too. So what were some of those things that you were experiencing that kind of like started to feel that the that thought process, that the frustration you know that led you eventually to become an entrepreneur?
Mark Slack: yeah Yeah, I think one of the things is to be a good entrepreneur or an inventor or anything. You need to also be a very good observer.
Mark Slack: And you need to be an observer and honest when you see things that are different from the normal. You’ve got to be willing to think, oh, that’s different. And then you look at it and explore it and see whether something can be done. So you say the implants, they were using plastic um implants for um types of surgery. They use them for hernias. And in females, they were using it for prolapse operations. And I was aware that many, many years ago, 30 years ago, they had tried this with not great results.
Mark Slack: And um I um was very, very interested. So I um started looking at it. I then did work experiments in animals and I did laboratory-based work, which confirmed my suspicions that these umlants implants weren’t a good thing and shouldn’t be put in humans as they were being put, and started lecturing on that, talking about it. And um ultimately, these became found to be bad.
Mark Slack: um There was a huge amount of of um publicity around it and um it went to large class actions in the United States. I was the expert witnessing quite a few of them um as groups of patients sued the companies. So that was also a good reminder to me that if you’re going to do innovations in medicine, if you’re going to do innovations in surgery, you got to be sure that what you’re doing is safe.
Mark Slack: and you follow the rules that you do good, safe medical introductions at patients who don’t get harmed. So that was a really inspiring time of my life. But I’ve always been an observer, I’ve always criticized many, many years ago um when my wife had her first, our first child, she had quite a big hemorrhage and they wanted to transfuse her and I wouldn’t let them. Because I was scared of blood, I thought there were many dangers associated with blood.
Mark Slack: And um that, again, got me in a lot of trouble with my seniors. I thought, why was I interfering in the management? But my wife didn’t have a blood transfusion, which was good. And I went through, um you know, my career talking more on blood, doing more work on it. And in fact, now in 2024, the data shows that blood, of course, has some value. But in most cases, it’s not valuable. In 58% of transfusions, I think it’s harmful.
Mark Slack: um So it was that observation that I was willing to observe things, do different and be different. It doesn’t make you popular necessary. People can get quite cross with you when you challenge what the normal is and you’ve got to be a little bit thick-skinned as an innovator to go ahead and with your ideas and do it differently. And then of course I started questioning the way surgery has been done, which is why I got around to building a robot.
Alejandro Cremades: so Let’s talk about the ah the company. Let’s talk about CMR surgical. What ended up being the business model? How are you guys making money?
Mark Slack: Well, we started off, um there were um five of us who wanted to to um build a robot to help with keyhole surgery. Keyhole surgery is very useful. It massively reduces complications.
Mark Slack: um in surgery compared to the open surgery, but it’s very difficult to do and a very significant number of surgeons can’t do keyhole surgery, just too technically difficult. And we thought a robot might help that because with a robot you get three-dimensional view, you get magnification of the view, you have instruments that have articulated wrists,
Mark Slack: um it’s a All the functions are made easier, but the robots that were available in the market I didn’t like, they were too big, too expensive, they made you change many things. So we set out to build a builder robot that replicated the sort of robots, the surgery that you did with standard keyhole surgery. And that’s what we’ve done. So ours is quite small, very neat, and it enables you to do keyhole surgery in exactly the way you did it when you’re holding it with your arms. But a greater number of surgeons can do it. It’s more accurate, it’s um more precise, and so on. So that was the model. Now, number two, you’ve got to get a robot that fits into the flow of the hospital.
Mark Slack: You know, some of the big robots, you have to knock down walls to put them in. You have to reinforce the floor, raise the roof. Ours just fits in a normal theater. No disruption to the normal flow. It goes in. Training is relatively easy. we We have training programs on it. And then what you want to do is have that robot working five, six days a week. That then reduces the cost of it and it becomes a robot that is affordable for the health system to use.
Alejandro Cremades: So you guys have raised also quite a bit of money. How much have you guys raised too late?
Mark Slack: Right. So our first raise was about, we raised a tiny amount of money. We were very lucky. um A guy liked and heard our story and gave us enough money for the founders to leave the day jobs and start building. So we went from a computer generated image to operating in humans in five years, which is an incredible um record. We then raised about 300 million.
Mark Slack: um to and we employed many more people, got buildings, started building the robot. And then in 2021, we raised $660 million, which at the time was a med tech record. And that gave the company a market cap of about $3 billion and enabled us to expand the building to mature the robot and build a situation and for it to be sold in multiple countries.
Alejandro Cremades: And I mean one of the races was 600 over 600 million. I mean that sounds like a lot of money in one go. How do how do you go about doing that.
Mark Slack: No, it is a lot of money. I mean, 2021 was a good time to be raising money, but we had a very credible story. You know, we were able to show um the advantages of minimal access surgery, but the fact that not many sold, you know, in the United States, only 40% of people get keyhole surgery. 60% of people still get open surgery with all the complications. So we could show that, then we could show how keyhole could reduce complications, but difficult to do, and therefore the robot could help that.
Mark Slack: We had been very clever um and sensible. We had done early research. We had published it so we were able to show the people um how many cases we had done, the results we were getting from it, how long it was taking us to train people. um And so all along the way, we’ve had evidence and we’ve had been able to demonstrate what um we claim and so on. So it wasn’t just guessing. We could say, you know, we’ve done now so many patients. The other thing we did is from the very beginning, as I wrote, we we um put a registry in place. So every single patient operated on by the robot went into the registry. So when we’d say done 2000 cases and someone said, well, is your robot safe? I could say, well, we’ve done 2000 cases and we’ve had complications in X and they’ve done well, et cetera, et cetera. So we had all the results all the time. And we published that when we got to 2900
Mark Slack: and patients, we published those results in a big American journal. So, you know, people could see, not only had we built this incredible, like my co-founder, Luke, who actually designed the robot, is a genius in many respects. I mean, all the other robots are five foot eight, five foot ah ten and ten tall. They weigh 600 kilograms. Ours is tiny, small, five foot six tall, folds up into 38 by 38 centimeter footprint, can sit against the wall.
Mark Slack: And Lucas you know got it, but but in order to get people to find it, we had the safety, and we could demonstrate the training, and we could demonstrate the advantage in quite an early stage. So when we went for the big raise, we were able to say, we’ve done X number of patients, good results, e etc et cetera, et cetera. And people were very excited.
Alejandro Cremades: So let’s talk about also the frustrations that you guys have had to embrace because when you are executing on ah on a segment like this, it’s obviously as well heavily regulated. So um not only you have the uncertainty of building a business, but then also dealing with regulation. So how did you go about combining both and executing?
Mark Slack: Your regulations are real ah on an innovator’s nightmare. Now, I’m not against regulation. We have to have regulation to make sure that medical devices are safe, that they are introduced safely, that they are used safely on people. But the trouble is regulations are designed to try and prevent disasters that have happened in the past. But very often the disasters have happened because of um bad behavior on behalf of companies, almost criminality, rather than rather than um um you know sort of a lack of regulation. And they build regulations that won’t prevent problems in the future, but will add to the costs. And if you put too big a regulatory framework around it, that slows innovation hugely, and it raises costs massively. And if you’re a startup company, you have a burn rate.
Mark Slack: and And you have a certain amount of money. And you know trials are very, very expensive. A big clinical trial can cost you $3 million easily. And there’s a misunderstanding between devices and drugs. The top drugs in the world, $20 billion a year per drug they earn. The biggest med tech company in the world is Medtronic. They, as a company, make $20 billion a year. They have 800 products.
Mark Slack: So the return on investment in ah in a tech company is way less than in a pharmaceutical company. And yet they’re trying to put the same regulatory framework on tech as they do on pharma. And that’s just not going to work. And there are ways, there are propositions by academics to do the regulation more efficiently, um more affordably and better. And I think, you know, and that’s using things like real world data. We live in the world of data.
Mark Slack: We have databases. We can have registries of outcomes. We can put thousands of patients on relatively affordably, not just traditional clinical trials. We need to think of modern ways of curating data, keeping data, and proving safety of these devices.
Alejandro Cremades: So then let’s talk about tool how you unlock help from government. you know How do you go about that?
Mark Slack: Now that’s a difficult one. Now the United States does that I think quite well. If you build a factory for your company in the United States, um they will very often provide supplementary funding and help for people. um In Europe, that’s far less common.
Mark Slack: you know i’m i’m I’m in the UK, we’ve built a factory in the UK. um We got no help in building that factory. you know It’s in an area which needs employment. um It will provide employment. We could become a multi-billion dollar company and bringing income into it. And you would think that a country would unlock regulation a little bit, would provide support. Even you you’ve heard of the National Health Service, which we have in the United Kingdom.
Mark Slack: And when I sell a robot to the to hospitals in the National Health Service, I get no advantages of any other country. I go into the same tender process and the fact that whereas um when I go to India and I’m selling a robot in India, the Indian government has a policy called Made in India. And if I’m selling against a robot that was built in India, they get um advantages over me.
Mark Slack: um so So governments should think about supporting homegrown businesses and and getting them started so they can get to a point that they can compete internationally.
Alejandro Cremades: So then, obviously, you know incredible what you guys are up to, you know the fact that you’ve been able to raise you know all that money too and and how you’re serving you know folks. I think that vision is a really big one, no? um And something that has helped with propelling all of all of the incredible work that you guys are doing. So to that effect, Mark, if you were to go to sleep tonight,
Alejandro Cremades: And you wake up in a world where the vision of the company is fully realized. What does the world look like?
Mark Slack: Well, that’s the one I really do love. So my aim was multifold. When I came to start this, I said, I wanted to prove that you could build a very successful med tech company that could make a profit ethically and safely for the patients. So I would like to see now my, the big, the biggest company, robotic company in the world is an American company called Intuitive.
Mark Slack: They occupy about 4% of the minimal access market worldwide. They occupy a higher percentage in in in America. And they have a market cap of about 180 billion. and okay So I would like to, i would if we woke up and we had the success I wanted, we would remain um in control of our own company. We would be supplying a significant percentage of the robotic market for keyhole, just say 10%.
Mark Slack: I would like to think we are a company with a market cap of close to 200 billion. And we are building robots internationally selling to both the high income countries and the low and middle income countries at the right price. So it is an affordable system, improving health care. And to make a profit is not a problem. But I would like to make that profit while we are improving health and we’re providing it to the world. So my busiest robot that I have in the world is in Pakistan. And um it’s a low and middle income country and it works um satisfactorily in ah in a low income. Likewise, we have robots in England and France and Germany, so high income countries. so So my dream would be a large footprint in all over the world
Mark Slack: supplying both high-income and low-middle-income and delivering outstanding health care and to do that we would also be supporting and funding excellent medical research um so that the robot just developed got better and better both medically and engineering wise.
Alejandro Cremades: That’s fantastic. That’s fantastic. So Mark, let’s talk about now the the past and they’re doing so with a lens of reflection. Imagine I put you in a time machine. you know and I bring you back to maybe 2014 or maybe 2013 where you you were starting to incubate the thought of doing something. And let’s say you’re able to show up ah and see that younger self and be able to tell that younger self one piece of advice before launching a business. What would that be and why, given what you know now?
Mark Slack: So the one, yeah, there are lots of pieces of advice. The one big piece of advice is get a mentor. I came from a non-business background. So in the early days when I sat with my fellow and when the business people started joining us, I would look at my phone with Google, you know, what’s a K-Girl? What’s the difference between net profit, et cetera. So knowledge, and I think a business mentor is a very good thing, a more senior person, someone who’s been there before, someone who you can share your thoughts with and be guided. That’s one.
Mark Slack: Number two, always keep an incredibly close eye on the spend. Keep a very close eye on expansion. In some areas we expand it too fast.
Mark Slack: um you know, keep small, always earn ahead of spending, um and um keep a very open mind, which which I do do. But the things would be a mentor, and um the other thing is try as hard as possible not to lose control of the company um to investors, which ultimately most of us have to do. So when you get a big investment like we did, then you lose control.
Mark Slack: and I think ultimately um you would try and hold on to control.
Alejandro Cremades: Those are incredible, incredible things there. And I’m sure they’re going to inspire all the people that are listening. Mark, so thank you for sharing that. For the people that are listening that would love to reach out and say, hi, what is the best way for them to do so?
Mark Slack: um LinkedIn, I’m on markslack on LinkedIn and um it’s very easy to email me through my company on mark dot.slack at cmrsegical.com and I’m pretty good pretty good with responding to people.
Alejandro Cremades: Amazing.
Alejandro Cremades: Well, easy enough, Mark. Well, thank you so much for being on the Deal Maker Show today. It has been an absolute honor to have you with us, Mark.
Mark Slack: It’s been an honor to be with you. I’ve thoroughly enjoyed it. Thank you very much for inviting me.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at
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The post Mark Slack On Raising A Record-Breaking $660 Million In The MedTech Space To Pioneer Robots To Perform Keyhole Surgery appeared first on Alejandro Cremades.
In a rapidly evolving world of fintech and entrepreneurship, few stories exemplify resilience, adaptation, and foresight quite like that of Malte Rau.
In this interview, Malte talks about navigating his company, Pliant, through different countries and currencies. He also reveals fundraising insights, having raised over $70M in equity and more than $200M in debt from top-tier investors like SBI Investment, Alstin Capital, Motive Ventures, and Neosfer.
In this episode, you will learn:
- Malte Rau’s entrepreneurial journey is rooted in resilience and is shaped by early experiences of adapting to new environments.
- He transitioned from consulting to fintech, finding excitement in the fast-paced, high-risk world of startups.
- His early ventures taught him the importance of market timing and building trust with investors.
- Founding Pliant, Malte focused on B2B card issuing with a unique value proposition, allowing the company to scale quickly.
- Pliant raised over $70M in equity and $200M in debt, vital for its operations and expansion.
- Malte overcame multiple challenges, including the collapse of Wirecard, pandemic disruptions, and tough regulatory hurdles.
- His conservative market expansion approach ensures sustainability while maintaining a focus on high-spending clients and cross-border operations.
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Your email address is 100% safe from spam!**About Malte Rau:**Malte Rau has a diverse work experience in the financial industry. He is the CEO and Co-Founder of Pliant, a company that has developed a flexible corporate credit card integrated into existing financial processes.
Prior to Pliant, Malte founded and served as CEO of Geldspeicher GmbH. He also worked as the interim Chief Risk Officer at FinCompare – Smarter SME Financing and as a Portfolio Manager and Head of Fintech Investments at Global Growth Cap.
Malte Rau has also held positions at Lendico Global Services GmbH, auxmoney, zeb consulting, and KPMG, where they gained expertise in risk management, strategic projects, and consulting.
Malte Rau obtained their Bachelor of Science (B.Sc.) in Management and Economics from Ruhr-Universität Bochum. Malte attended this institution from 2007 to 2010.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty. Hello, everyone, and welcome to The Deal Maker Show. So today we have a really exciting founder you know joining us, a repeated founder. you know Right now he’s riding a rocket ship. you know They’re like growing like crazy in different countries, different currencies. But again, what he’s done is remarkable. Not only they’ve raised the over 70 million on the equity side, also over 200 million on the debt side for their operation. But we’re going to be talking about how bumpy you know the first years were, you know whether it was Corona, you know partner issues with one of the partners that they had. Also, so how to deal with fast growth when you are ah especially tackling a very heavily regulated market like they like they are doing. And then also, how do you go about the whole thing on ah building, scaling, financing, and beyond? So without further ado, let’s welcome our guest today, Malte Rao. Welcome to the show.
Malte Rau: Thanks for having me.
Alejandro Cremades: So originally born in Berlin, so give us a walk through memory lane. How was life growing up in Berlin?
Malte Rau: It’s more like from stories. I lived here till I was 10. So, um, I actually, uh, don’t remember, but my dad told me like I was there when the wolf came down. So I was actually like one year old. So that was quite interesting. But the time after I can only.
Malte Rau: talk about the kind of vibe the city had once the wall went down and was pretty amazing, according to my dad. But for myself, I didn’t remember too much. So I think that parts of my life after then, when I moved away, when I was 10, I was a little bit more shaping my character than the first 10. But I wish I have more stories from actually that supposed to be an amazing time.
Alejandro Cremades: so So obviously, you moved to attend to spend the youth and graduated high school a little bit away from from Berlin. I’m wondering, too, how was that you know process of being in a different place, making new friends, dealing with the uncertainty? I’m sure that shaped you up quite a bit.
Malte Rau: Maybe I compensated with a lot of chocolate, to be honest. So I gained a lot of weight with the age of 10. So when we morphed away, it was for the my the job of my dad. And from that point on, kind of have to you’re kind of unrooted, right? So your roots are still in Berlin, but then you’re moved away. So I think they did a lot of adjustment and took some time to adjust to it and find your place again. But I think.
Malte Rau: With this experience, it also shapes you maybe in good ways, maybe in some parts you only discuss in therapy.
Alejandro Cremades: It sounds like ah the world on of consulting, I mean, you studied economics and management, but it sounds like the world of consulting is what really got you hooked to start off your career. What but was it about consulting that they got your interest?
Malte Rau: Yeah, I think like generally when I picked the subject of my studies, I wasn’t too sure exactly what I wanted to do. I always knew I like numbers and then after studying, I spent some time in an internship abroad in the US and coming back, consulting sounded like the best option because if you’re not 100% sure the ever-changing projects in consulting and these kind of things,
Malte Rau: a very good way into the job market. You could still figure out a little bit where you wanted to go. And I got kind of hooked on the risk management side of things. So I didn’t plan on becoming a risk manager or someone who spends a lot of time and data. But this is where after like two years after the financial crisis, there was a lot of demand. And so I ended up at KPMG crunching some numbers for some banks in Germany. And so yeah, I think it was ah coincident at the same time but also lucky to go to be at the right time at the right place.
Alejandro Cremades: So, I mean, you you actually work for big companies like KPMG and and so forth. What was it like, you know, like to really, because here what you were doing ultimately was like risk risk management. You know, it sounds like that was the specialty that you developed. So how was it like, you know, like going through all these different organizations and taking a look at risk management? I mean, what what’s that about? Because I mean, right now your family has, and and it that’s had nothing to do with risk management. It’s all about taking risk.
Malte Rau: Well, yeah, I mean, that’s that’s true, right? Sometimes I’m joking also, I’m ah risk friendly and not risk averse risk manager. There’s are that many, but I still think it shapes you a lot because in a way what you do also when you play with this data, you still have to see like what are kind of the worst case scenarios. What is the outcome you like like to prepare for? So but these kinds of things were for sure very early on.
Malte Rau: experience that helped a lot to shape your mind, to think also, to be prepared for other scenarios. But of course, it moves very slow. It was big banks we worked for. So still, this project took some time. We had impact, but at the end, also as a consultant, you usually leave after the implementation. So you don’t really see it bearing fruits. So in that regard, I think it was good to train your brain to think in a certain way. And nowadays, I still think back a lot How did I approach it in a larger corporation? And got my own learnings out of it, but there was also a reason to leave at some point in time.
Alejandro Cremades: so then So then let’s talk about to getting into the whole world of lending and and then also rocket internet and the world of startups. Tell us about how you did that shift ah into something more ah specific in terms of industry.
Malte Rau: Yeah, so it was also a little bit of coincidence. It wasn’t fully planned at that point. I was still thinking about kind of the partner track in a consulting environment, but a former colleague of mine left KPMG to join a company called OX money. It was still quite early stage. And when we had a conversation, when he was leaving the consultancy, it just sounded very interesting. I said, okay, cool. Whenever you start hiring, building but a bigger team, give me a call.
Malte Rau: And two years later, or one and a half years later, he actually did. And this is how I got involved in this idea of leaving for a smaller company. So then I took the step. I never looked back because it was very exciting. And the impact you have in a startup when I joined was like around 30 people.
Malte Rau: It was really nice to see and you really had to train different muscles when you build landing capabilities as well as risk management for early on startups. So when you do that, you have to think completely different because you don’t have a big bank in the background and you We’ll learn quickly that usually banks are paid first us and not fintechs these things. So when you just adjust the models that you have in banks, they don’t work in fintech. So that was quite interesting. And that was a company focused on consumer. Afterwards, I went to a company that did similar things.
Malte Rau: But more on the SME lending side, so slightly different again. They don’t necessarily have as much data, but also very interesting. And Rocket Internet was the company that intubated. And after that company was sold to ING, I joined Rocket directly to build a venture debt fund that focused on refinancing fintings with lending operations, which was kind of closing the gap or the loop a little bit to also help provide the liquidity a lot of these learning fintechs have due diligence in what they do every day and it was quite easy once you have been on the other side beforehand to do the diligence so the other way around.
Alejandro Cremades: I mean, rocket internet, you know at that point, was also booming. So I’m sure that that gave you great exposure on on things that work, things that don’t work.
Malte Rau: Yes for sure.
Alejandro Cremades: So I guess, what kind of pattern were you seeing on on the things that were working?
Malte Rau: So for me specifically, I mean, we had some lay, but like touch points also with the equity arm, but we were a little bit disconnected because at that point, Rocket had or sitting on, I think, 2 billion in cash and said, like, well, I think we can’t spend it all on just equity. So let’s build also debt practice. So we, of course, swapped deals or when there was already Rocket investment, that was a way of building pipelines.
Malte Rau: But we didn’t have the mandate that we basically have to do the refinancing just because they’re also an equity investor. But what we saw is that there was still a lot of potential of, I would say, generating above market returns.
Malte Rau: and When you have access to early-on stay start-ups with the backing and a brand of Rocket where people even consider like taking higher prices for a better brand. So that was one of the parts, but from a pure lending perspective I think we did an amazing job when it comes to just the pure returns and like basically mitigated all defaults. So that was interesting. I think by now, as everybody knows, Rocket is shutting down most of their things and the debt practice was also one of them and it turned into different focus areas and just fintech and that’s also the point when I thought okay, seeing the investment side, I think it’s time to venture out, do my own thing, start as a consultant myself, but then always with the the aim to also found a company.
Alejandro Cremades: So then let’s talk about the that moment where you decide to take the leap of faith and and venture out and start your own thing. How how did that unfold?
Malte Rau: I think first, like i you know wasn’t like the the youngest founder, I would say, when I started that I was always above 30 and I took some time to also study what I think was like the success um or the the area of success that the founders I’ve met by then really excelled at and at some point I just had the feeling well I’m not really learning more from these like very good founders at the current stage so that gave me the comfort to really take the leap of faith and also at the same time
Malte Rau: you of course start with an idea, talk to angels, talk to people you worked for and I think the biggest push or compliment I got was simply that from all parts of my life beforehand and that yeah CV in general from every part someone wanted to invest because they trusted in my judgment even though the the first company that was not the the right judgments to invest. But I think that was especially the part where if you have peers that also push you, I mean, you can have a lot of things in your head. But of course, once people are willing to give you money, um that’s quite interesting. But also learning from that experience for the second company that when we actually were able to pay back most investors during that first company, but some said you don’t have to do that, you know, and that was also a big aha moment. So that
Malte Rau: Even when you have it, and angels invest. They also do some. They have usually even the higher risk profiles and like pre-seed investors, but also the bigger returns. But that was, I think, also big learning.
Malte Rau: um But you gained a lot of confidence that people trust you with their money that know you.
Alejandro Cremades: No kidding. No kidding. Now, now with this with this first venture, obviously, you know as they say, you either succeed or you learn. right and And this company, basically what they but you guys were were doing but was basically risk management solutions ah and they’re more in the open banking you know data um world.
Malte Rau: Yeah.
Malte Rau: but
Alejandro Cremades: But you either succeed or you learn. I guess things that didn’t unfold the way that you had hoped for.
Malte Rau: Yeah.
Alejandro Cremades: So well what happened there?
Malte Rau: Yeah. So for us, of course, we saw that there’s a lot of opportunity. There’s this new data source that’s super relevant for risk management. Also something a lot of FinTechs early on just utilize to close the information asymmetry they have towards banks to really be able to also convince customers to use They are loan products. And at that point in time, this way of underwriting was not really available to banks. And the overall interest was there. The part that I would say kind of killed the company was simply the sales cycles, right? If you’re younger, you haven’t sold anything to a bank yet, which of course, first say all is super interesting. And then you sit there the first year, wait for the budget. For the second year, it doesn’t work out. And then at some point, you just have to say, yeah, I guess this won’t work out.
Malte Rau: Um, and also if it was a little bit early, I would say, because you see now that similar business models are taking off or are quite successful. So overall, um, sometimes it’s market timing, but also like for me afterwards, it was the point where I said, well, I might not want to do or found another company. Um, it took a lot of convincing from ah my mentor to say, Hey, um, let’s, you should try it again.
Malte Rau: It happens. um like I think that’s something that also shapes you also go for the other for the next step where you have these learning moments like, well, you don’t have to really return the money. um That gives you more confidence also to take even a bigger risk, I’d say.
Alejandro Cremades: What was that point for you? I’m sure it was a massive um when you decided it’s time to pull the plug here on this opportunity. And and what was that thing reflection ah journey?
Alejandro Cremades: Because I know that there was ah a mentor that was the one that they had to give you a slap across the face, you know sort of saying, saying hey, Mate, let’s go.
Malte Rau: Yeah.
Alejandro Cremades: Pick yourself back up and and keep it moving.
Malte Rau: Yeah. Should happen.
Alejandro Cremades: so So yeah, so so I’m sure that that was quite an experience and very transformative transformative for you.
Malte Rau: Yeah. Yeah. I think it’s like two points in time, right? The first one is really you it’s I mean, you see it coming, right? It’s not that you try to cling on a little bit, but then once you actually take the decision, it’s actually a relief, which is, a lot of people always say, yes, it’s very stressful, but if you know, okay, this will come. But once you have taken the decision, everybody’s informed. It can also be a factor of relief. And I still had some time also to do some projects in between, like to keep me busy.
Malte Rau: and And the biggest really pivotal moment was also the said like this communication of that one age as well, like we invest, we know the money is at risk. And then the mentor um was a failure from our money the CEO there who also the hired me like very early on. ah He clearly said, well,
Malte Rau: I know you have kind of the talent, right? I needed some build up. It didn’t necessarily need to slap across the face. It was more like, okay, I’m here. I can support you. I’m sure this will work out, helped me shape the idea, even helped me fundraise because I said, like, I don’t, I don’t want to go out. Like basically I had like everything provided to me. um And that was such an amazing and experience and it wasn’t like,
Malte Rau: It was my own drive. It needed someone to drive me and now I’m driving myself insane, but then that’s kind of and the story behind that.
Alejandro Cremades: That’s incredible. So then talk to us about how the idea for your newest baby, and which is a rocket ship, how how did it ah you know come together?
Malte Rau: Yeah, so we at that point in time, when we decided to fund the company, my co-founder and I started to look, especially in the card space. um It was already quite hot space to be frank. So there was already seven companies in that space. And we still saw that there’s a big gap in the market, even though it seemed quite busy for a lot of investors, because there were already so many companies that already have raised even their Series A. And we were the new kid on the block.
Malte Rau: um I wish that we would have had the romantic story that we suffered from bad credit cards. Actually, it’s more that we fell in love with the technology, the complexity. So I’m always saying that we are more a bunch of nerds rather than the ah inspired people that found a very special way. We just saw there’s a lot of opportunity, meaning that a lot of these providers focus on direct business and we choose i have chosen a path where we rather enable others in a different way with partners into the mass market rather than trying to be the dominant brand in these kinds of things. So I think that was
Malte Rau: An interesting approach to the market and at the same time needed a lot of convincing of VCs or investors also that you don’t have to be either or because we have direct business and and in end indirect business. But nowadays, I think looking at our P&L, they’re happy because actually that is a very good approach to save marketing expenses.
Alejandro Cremades: so then So then tell us you know what ended up becoming the business model of—how do you say it well? Because I have the Spanglish kicking in pilot.
Malte Rau: Yeah. but Client like compliant.
Alejandro Cremades: li Client.
Malte Rau: Yeah.
Alejandro Cremades: Client. Yeah, you see you know my my accent sometimes you know gives gives me the hurdle spot.
Malte Rau: Yeah.
Alejandro Cremades: But with client, what ended up becoming the business model?
Malte Rau: Yeah.
Alejandro Cremades: How do you guys make money?
Malte Rau: So client is a B2B card issuer. So cards do, or ah most of the card providers have two revenue streams. One is of course you offer also software around the card that you can charge.
Malte Rau: For us, the main revenue source also is the interchange fee. meaning that if you use a card at the merchant, the merchant pays a fee. In the business space in Europe, it’s not regulated or kept like the consumer cards.
Malte Rau: So this is why there’s not that many consumer cards in comparison to the US. And with that, you then make around yeah an average maybe 2% and the US is actually more than you make per transaction, but that’s a big revenue stream and your customer doesn’t really have to pay for it.
Malte Rau: And that’s the main revenue driver for us. It’s a big chunk of change.
Alejandro Cremades: I know that the first years too of the business were a little bit bumpy. you know We’re talking about issues with coronavirus, you know lockdown, also issues with the partner that you guys you know were dealing with.
Malte Rau: Yeah.
Alejandro Cremades: you know i mean It sounds like it was full of ah adrenaline.
Malte Rau: Yeah.
Malte Rau: Yeah, adrenaline is good. It’s a good way of dancing with the black swans. So yeah, we actually, like when we started raising, um, this is what we started in February and then the lockdown had happened.
Alejandro Cremades: No kidding.
Malte Rau: We had term sheets, they were withdrawn, right? It was the first lockdown. It wasn’t like, well, money is free now. It was still the phase where I don’t know if the web just got a word is going to end. So that was a tough. And we then still got a term sheet and from a family office. um And we thought, OK, this is amazing because we’re the only one who can raise right now. And then we decided to take the money and start working on it.
Malte Rau: Which if we would have waited a little bit, I think the money afterwards would have been cheaper again and maybe a more interesting cap table at that point in time. But so we went for it um and then started working, hired our first seven engineers. We were a team of 10 at that point in time and then two or three months in.
Malte Rau: our lovely partner Weierkart decided to yeah be the biggest fraud in the German stock exchange ah that has happened so far and that was the point in time where after three months of burn um you’re there have no setup so basically we had where were quite close to say like guys, do you want your money back now? um But I remember it also they don’t necessarily need it, but at that point in time, then we continued to push on and decided, okay, we we are still going to finish the product. We’re going to search for new partners, which was not easy. And we came to the next point where then we didn’t have enough money to go live. So we had to raise two pre-seats, which luckily worked out in the end, but those are not the easy fundraisers and you take
Malte Rau: Your, your cap table gets messy. that’s
Alejandro Cremades: No kidding. So let’s talk let’s let’s double click on that. How much capital have you guys raised today?
Malte Rau: Yeah.
Alejandro Cremades: Because I know you have the equity side and then also the debt side.
Malte Rau: Yeah. So on the equity side, a little bit more than 70, so seven zero million in USD. And on the debt side that we need, especially for refinancing of our card receivables around 200 million, which we are not fully utilizing, but that we have committed.
Malte Rau: and that we can use to scale our business, especially for the part of the customer base that is high spending and needs credit lines in the millions. And that’s the base for that. And we continue to to raise even more, especially debt, and because there are so many cash requirements you have as a FinTech. Sometimes it’s just sad.
Alejandro Cremades: How was the um the journey to of going through the motions and the different cycles, and you know again, for raising all that money?
Malte Rau: Yeah.
Malte Rau: I think the initial one, besides like Corona, we always felt that we had the time where it wasn’t the best timing because then when we didn’t race, everybody’s doing the big rounds. um And the other existential fundraise I would say was then end of 2022.
Malte Rau: where we absolutely had to raise and we actually closed early 2023, but we talked to 150 VCs. I would say 99% said no and also said, well, similar story during Corona. We don’t know where this is going. We want to set it out for now. We focus on our own portfolio, but then we were lucky to find one investor um in Japan, SBI,
Malte Rau: which is quite active actually also in Europe as a FinTech investor, but we had to fly for a 20-minute meeting to Tokyo for the for the final IC, so that was also a nice experience and they even decided on the spot which was interesting because then with our term sheet we landed and had our Christmas party.
Alejandro Cremades: Wow, that’s incredible.
Malte Rau: if
Alejandro Cremades: that’s think and And what’s the difference, too? I mean, you are alluding to it on a company like this between raising equity and raising debt. And how do you go about what’s different from raising one approach or the other approach?
Malte Rau: Yeah, I think for me, coming from the debt background, debt is a little bit easier just because it’s very rational and it’s very number driven. So you just say, like well, this is a loan book, this is data here, you’d like to finance it. And usually it’s not as hard if your loan performance is great. um But then for equity, being like selling a vision and these kinds of things that um as a data guy, it’s a little bit harder to wrap your head around. So there’s also,
Malte Rau: a lot of coaching feedback on decks that were um yeah required. And I still feel that our deck is to the stage, not as easy, not as vision there in comparison to what we are actually doing. and So it is for me a skill set that I for sure need to even get better um round by round. But whenever we raise our Series A, I’m looking forward to the first fundraise in a more relaxed environment.
Alejandro Cremades: and And obviously, you know, when you’re a startup, not only you have to deal with the uncertainty of, um you know, going through the hoops and the fast growth of of being a startup, but then also in your guy’s his case, you know, dealing with regulation.
Malte Rau: Yeah.
Alejandro Cremades: It’s a heavy, heavily regulated, them you know, segment. So how do you go about the uncertainty of both?
Malte Rau: yeah
Malte Rau: yeah First of all, wasting a lot of money on lawyers. so I shouldn’t say wasting, but there’s a lot of the money. um those The first people who make money with FinTechs are usually lawyers, especially in the regulatory it regulars tori environment that we are in.
Malte Rau: But initially, we had Larry to have one partner for the cards, one partner for the lending. So you had so many partners and vendors to manage. And that is a lot of time investment. And also, all these discussions abound. And who is allowed to push this button? Or should that be ah allowed a regulated entity or not? So it gets really to the nitty gritty details, where even before, if you have worked in regulated um are spaces or even fintechs sometimes when you have to build yourself and so talk to lawyers where it’s like one sentence in your TNC that when then the regulator could claim that you need a license for this and this is really what it gets down to and yeah you have to triple ah check everything and usually all our legal projects are cost at least double from what we initially think.
Malte Rau: and
Alejandro Cremades: No kidding. No kidding. So let’s say you were to go to sleep tonight. mal You wake up in a world where the vision of client is fully realized. What does that world look like?
Malte Rau: So our hypothesis, is the way we go to market is clearly that best in class software and banks when sounds maybe not as but and inspiring as some other visions, but this is the way we position o ourselves. We think that business relationships or businesses have a very strong relationship with their bank, which is a harder bond than having a millennial checking out a new Neobank.
Malte Rau: So therefore, we want to position enable, bring the technology to banks so that everybody can utilize or benefit from digital cards that we offer. So we think that if that happens, continues to happen, of course, hopefully they also buy our services, but then they are positioned very well. and And that would be not a dream come true, but I think that would be the world where we would excel specifically.
Alejandro Cremades: So I know, too, that team you guys have been, again, you know alluding to the growth earlier you know and as part of making this like a mega ah success. You guys are operating now in different countries, different currencies.
Alejandro Cremades: How how how do you deal with that? I mean, that sounds like madness.
Malte Rau: Yeah,
Malte Rau: yeah yeah it ah it unfolds all the problems. I think like when it comes to markets, we have just chosen a very conservative approach. So for us, every market is like a new market marketing channel at the end, right? It’s similar to like a Google campaign. You just say, well, I try something out and either it pays off or it doesn’t. so We hire usually only one or two people, especially in Europe, we have so many different markets. We have core markets, but it’s usually you hire two people and then you give them a specific timeframe and see if they start paying off. And otherwise we also had markets where the head was not perfect. So we just decided to shut down the market, wait six to even 12 months to hire someone who really is a game changer for the company.
Malte Rau: And that was a very big learning. and But we never said, for example, build big offices in France, hire 10 people. like It’s really to like really bootstrap mindset. So this is, I think, where even though we have a broad reach and we can also do a lot of cross-border things, at the same time, we always stayed quite conservative and always follow our highest-bending clients, but at the same time try to really get market access through then our partners.
Alejandro Cremades: Thank you.
Malte Rau: So I think that is where we could of course, have more complexity if we would be more aggressive in these markets. um And the second part, I think, multi-currency is something where it sounded easier than it was um to launch it because the liquidity flows behind that are just very complicated because we can not only offer them, we also can lend them, them but and you always need to do cash calls and these kind of things and to build books in all of these currencies so that you have
Malte Rau: will utilize facility is tricky. And we are not ya yet. We just an announced it. um It will take some time to say that we have um yeah deployed in all of these currencies. But it’s things that when someone tells you here’s 11 currencies, and yeah well, this currency takes two days longer to send. But Visa wants that in one day earlier. What do you do now? right And that’s something goes through every currency.
Alejandro Cremades: So now let’s let’s put you into a time machine.
Malte Rau: but
Alejandro Cremades: And let’s say I bring you back to end of 2018, you know, when you were thinking about starting something of your own, becoming a founder, take ownership of your own future and destiny.
Alejandro Cremades: And let’s say you’re able to appear right there, right now with your younger self. And you’re able to give that younger self one piece of advice before launching a business. What would that be and why, given what you know now?
Malte Rau: I think it would be mainly patience. So a lot of times as a founder, you push, push, push, and it not only takes a soul on yourself because of course being stressed or trying to push being and impatient, that is something that also not only eats at the people around you or feeds from the people around it also takes your own part or you um also give a lot for it. so some of these things where it is not necessarily like believing in like or like beingan having faith to do something, but quite often you have to really say, okay,
Malte Rau: This might take longer than you expected and that’s fine, right? It sounds like some something easy, but I think all founders are usually quite impatient, right? Because they also know there’s a wall I’m running and I’m running fast. and But sometimes you really have to slow it down. um And that’s something that I still try to to the state. And I think my co-founder and some others would still say.
Malte Rau: We’re not very good at it yet, but that’s a skill you really need to develop as early as possible. Also, if you become ah someone who has a lot of people in the company, you have to present that because if you’re like the chicken without and a head, then you will only hire people like chickens without heads.
Alejandro Cremades: I hear you. I hear you. malte so So for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Malte Rau: You can just find me at LinkedIn, ma row so as I don’t think there’s anybody else with that name so far, maybe in the future. My son has a different name.
Malte Rau: I was, I was i wondered, I couldn’t name a junior, or my wife wasn’t happy about it. Even though she’s American.
Alejandro Cremades: that’s amazing well It happens.
Malte Rau: Yeah.
Alejandro Cremades: It happens.
Malte Rau: that Thank you for the ro invitation.
Alejandro Cremades: Well, hey, Malte, thank you so, so much for being on the Dealmaker show today. It has been an absolute honor to have you with us.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at
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The post Malte Rau On Raising $270 Million To Enable Companies To Issue Physical And Virtual Credit Cards And Integrate Data Into Their FinTech Stack appeared first on Alejandro Cremades.
In the bustling world of biotechnology and venture capital, few stories are as captivating as that of Adam Mendelsohn, the CEO of Vivani Medical.
Adam’s journey demonstrates an inspiring blend of vision, perseverance, and adaptability required to navigate the complex landscape of building and scaling a company–particularly one that transitioned from a private entity to a publicly traded powerhouse.
Adam’s company, Vivani Medical, has attracted funding from top-tier investors like the National Institutes of Health.
In this episode, you will learn:
- Adam’s journey from Santa Monica to bioengineering was shaped by early exposure to music and influential science teachers.
- Working with Alfred Mann taught Adam the importance of perseverance and innovation in entrepreneurship.
- Nano Precision Medical’s success began with a groundbreaking drug delivery technology and a winning business plan competition.
- The reverse merger with Second Sight Medical Products provided crucial capital and resources for Nano Precision Medical.
- Transitioning to a public company, rebranded Vivani Medical, involves heightened scrutiny and offers increased visibility and investment opportunities.
- Adam emphasizes focusing on market impact and execution when communicating with investors rather than just technical details.
- Despite market fluctuations, Vivani Medical remains optimistic, with plans to leverage its innovative technology in upcoming clinical studies.
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Your email address is 100% safe from spam!**About Adam Mendelsohn:**Dr. Mendelsohn has served as a member of the Vivani Medical Board and the Chief Executive Officer since the company’s merger was completed in August 2022.
Prior to the merger, Dr. Mendelsohn was a co-founder of Nano Precision Medical and its Chairman of the Board and Chief Executive Officer, setting the strategic vision for the company since 2011.
Dr. Mendelsohn received his Ph.D. in bioengineering at the UC San Francisco/UC Berkeley Joint Graduate Group in Bioengineering, Class of 2011, during which he was awarded an NSF fellowship to perform research at Kyoto University.
Dr. Mendelsohn published multiple peer-reviewed articles describing new treatment options for Type 1 diabetes through the immuno-isolated transplantation of insulin-producing cells under the direction of Professor Tejal A. Desai.
While in graduate school, Dr. Mendelsohn served as the director for the Venture Innovation Program in Life Sciences and completed his certificate in Management of Technology with the Haas School of Business.
Dr. Mendelsohn has served as a Technical Advisor to the Alfred E. Mann Institute for Biomedical Engineering at USC, a fellow of the Startup Leadership Program, the President of UCSF’s Graduate Division Alumni Association, and is currently a board member of the Maestro Foundation.
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Read the Full Transcription of the Interview:Alejandro Cremades: alright Hello, everyone, and welcome to The Deal Maker Show. Today, we have an really an amazing founder, really. i mean The company that he’s writing is quite the ah the company. you know It’s a very interesting sequence of events there when it comes to reverse mergers and transactions that they’ve done, and now they’re a publicly-traded business.
Alejandro Cremades: But we’re going to be certainly talking about all of the good stuff that we like to hear about building, scaling, financing, also what inspires him and what inspire him do ah to be but have that perseverance as a founder, as well as how to articulate the value of what you’re selling you know and and your business, ah also growing into becoming a public company CEO, and many other um really incredibly inspiring topics that we’re going to be covering today.
Alejandro Cremades: ah Without further ado, let’s welcome our guest today, and that is Adam Mendelsohn. Welcome to the show.
Adam Mendelsohn: Thank you for having me Alejandro. It’s a pleasure to be here.
Alejandro Cremades: ah Originally born in California, in Santa Monica, give us a walk through memory lane. How was life growing up?
Adam Mendelsohn: Oh, it’s hard to complain. It’s only after I moved away from Santa Monica for my graduate school did I learn to appreciate how good that I had it. Um, really incredible weather all year round. Uh, it’s a wonderful place to be connected to a lot of inspiring people. Um, and I, you know, can’t really complain about my childhood. I, uh, went to the local, uh, you know, public schools, which I thought gave me a lot of interesting experiences and helped, uh, prepare me for, uh, the real world going forward. And yeah, it was an incredible childhood.
Alejandro Cremades: So then talk to us about how music and and physics as well you know played ah quite a role in your upbringing.
Adam Mendelsohn: Well, you know, I started playing piano since I was five years old and violence since I was eight years old. um ah And at that time I thought I was going to go into music professionally, um but I then discovered my love of sciences as I was in probably middle school. I had a really terrific science teacher and in high school a chemistry teacher um who ah really opened my mind to ah what science and technology ah can achieve. um And I want to tell you a little bit about um my my parents because my father ah was able to ah connect with some incredible medical device entrepreneurs and one in particular whose name is Alfred Mann.
Adam Mendelsohn: He’s no longer alive, but he ah you know developed devices that deliver insulin, that restore hearing to the deaf, um that restore sight to the blind. And he made himself a billionaire. And I had the opportunity to get to know him and be inspired by him and work at his companies as early as being in high school. And I think that really sparked my desire and interest for finding a way for me to make an impact um in health care with new technology.
Adam Mendelsohn: um And it was just just an incredible ah beginning to what I hope will continue to be a fruitful career going forward.
Alejandro Cremades: And that’s a tremendous opportunity, working alongside with someone that has had you know that tremendous amount of success. I guess, what were some of the key ingredients that you took away from the experience of working with him that you knew you would apply you know being a leader?
Adam Mendelsohn: Well, so let let’s take one example of this company that he founded called Minimed, which is the company that I interned at when I was in high school. um they developed an insulin pump for type one people with type 1 diabetes. And up until that point, the only method for people with type 1 diabetes to receive treatment was to monitor their glucose as best as they could and administer insulin to maintain their blood sugar levels. And if they didn’t do it in just the right way, it could have pretty drastic consequences.
Adam Mendelsohn: um so um When Al was developing this insulin pump, he was you know ahead of his time. People didn’t appreciate the value that this type of technology could provide until after he had already essentially developed the product and some studies were conducted that showed that this type of technology can really have a dramatic improvement in the efficacy and the outcomes for patients. And at that time, although he persevered for a long time to be able to develop this product,
Adam Mendelsohn: And that’s when everyone became interested and that ultimately led to Minimed being acquired by Medtronic in 2001 for $3.7 billion. dollars And so what I learned was you know not necessarily to just focus on what everyone else is thinks is hot right now, but instead to try to peel back the layers and identify the real opportunities to have an impact, have conviction in what you’re doing, persevere, be resilient, and obviously you have to be correct at the end of the day that what you’re working on is going to be valued and important. um But it gave me the motivation ah to persevere through all of the you know efforts that I’ve been through, including the PhD, the company that I’m building now,
Adam Mendelsohn: um And i I always keep that in mind. and And when you think about these kinds of medical technology or biopharmaceutical innovations, the life cycles are very different than a technology company where you can build a software, you can get some traction with users quickly and identify whether or not it’s going somewhere. In our case, we we aren’t allowed to um sell to a single individual until we’ve gone through a very lengthy and expensive regulatory approval process.
Adam Mendelsohn: ah So there have to be other ways to be able to articulate the value of what you’re working on. And his inspiration definitely has played a large role in my willingness and motivation to ah continue to work on on what I’m working on.
Alejandro Cremades: and Eventually for you, you know what you did is you went to get your PhD in bioengineering, but that was quite the pivotal moment because you had the opportunity of meeting your two co-founders. So how was that?
Adam Mendelsohn: so Yeah, well, it was it was an interesting story. I went to UC San Francisco and UC Berkeley to do a PhD in bioengineering. um And just a little bit of context was before doing the PhD, I worked for a couple of years after my undergraduate, which I think provided some pivotal perspective for me because I went into the PhD program knowing that I did not want to become a professor and I did not want to continue in academia. But the reason that I went into the PhD program was so that I could become familiar with all of the new science and technology, and particularly related to drug delivery because that’s the company
Adam Mendelsohn: ah that I was working on, that’s what they were focused on. um So I ended up in this lab that was at the intersection of micro and nano structured materials um and how that can be applied to studying biology, tissue engineering, and joint delivery. And my co-founder, Kate Fisher, ah was the president of the UC Berkeley Nano Club, and they were hosting a business plan competition for nanotechnologies. And ah late one night in the lab,
Adam Mendelsohn: she given what we were working on in the lab she said surely we there must be some idea that we can put together to apply for this competition and I was there late and my two co-founders were there late and we liked working with each other and one of my other co-founders and I had the same idea for applying this nanoporous membrane technology for sustained continuous delivery of medicine from a ah small implant. um And we put this idea together into a business plan presentation and ended up winning that competition, ended up ah sharing first place in the UC Berkeley Business Plan Competition. We took that around the country and around the world.
Adam Mendelsohn: and ultimately with the positive feedback we received, developed the confidence to start a company um right kind of after we finished the PhDs.
Alejandro Cremades: So then talk to us about how this company came about, you know because this ended up becoming nano precision medical, you know which obviously went through like a sequence of events that we’ll talk about in just a little bit. But how do you guys arrive you know to, hey, this is what we want to do. Let’s do it together and let’s go.
Adam Mendelsohn: Yeah, so at first it was an exercise. We had this idea. ah I had written about it separately in one of the courses I took through um this management of technology certificate program at the Haas School of Business at UC Berkeley hosted allowing graduate level engineers and MBA students to take it together.
Adam Mendelsohn: I had written about this idea of applying this ne type of new type of nanoporous membrane, new type of drug delivery technology for um you know helping really chronic diseases be treated in a more you know easier and convenient manner. um But the business plan competitions and and winning them um and really understanding more about the market and beyond just the science and technology, which we were focused on at the time when we were in the PhD program,
Adam Mendelsohn: ah and a lot of encouragement that we received from those around us, as well as, again, as I mentioned before doing my PhD, my knowledge that I wanted to go back in the industry. I wanted to either work for a company developing a product or start my own. um I immersed myself in all of the opportunities to network. I joined all of the entrepreneurial organizations that existed at UC Berkeley and UC San Francisco.
Adam Mendelsohn: um And all of that ah came together for us.
Alejandro Cremades: you
Adam Mendelsohn: We were able to to attract some financing to um get started, ah limited amounts at the very beginning. ah But that’s kind of how it all came to happen.
Adam Mendelsohn: And I haven’t looked back since.
Alejandro Cremades: That’s incredible. so then So then talk to us about what was the one ended up being the um the model for nano precision medical, and then also at what point does it become you know perhaps an opportunity to become a public company?
Adam Mendelsohn: Yeah, so, you know, I should mention that while we had this idea ah for this new type of technology, that’s really all it was in the early days. um We were ah familiar with a concept that this type of nanostructured material could achieve this performance with the material that wasn’t so well suited for implantation. And we identified and we discovered a way of making it with a more suitable implantable material, but that’s all it was. So the first few years of the company were research where we were doing it in very inexpensive facilities that the universities enabled us to rent. ah We initially started with a bench and a desk in the basement of the bioengineering building of UC Berkeley campus and then we moved off campus
Adam Mendelsohn: And it wasn’t really until at some point along that journey that we demonstrated that our thesis was turning out to be correct, that this type of material was indeed able to provide you know constant delivery of medicine over many months, um that more capital was willing to ah you know be invested in our in our venture, including bringing on and a strategic investment from one of the large pharmaceutical companies AstraZeneca um along the way. Now, the way that we became a public company was through a very interesting a series of events that had to do with a another company, actually one of the Alfred Mann companies. ah He was one of the founders of Second Sight Medical Products. This is a company that
Adam Mendelsohn: developed a prosthetic retina and received ah FDA authorization for a rare population of patients with a genetic disease called retinitis pigmentosa um to stimulate their optic nerve and provide them with some artificial vision ah where they were completely and profoundly blind prior to this this type of device being used. Now right now there’s some buzz about because Elon Musk and his company Neuralink is discussing applying their technology for restoring vision to blind people as well. But many people may not realize that this company Second Sight Medical Products already did that and brought it through clinical trials and received an FDA authorization. Now, that first product for a variety of reasons was not a commercial success. That company ended up winding down their operations, but keeping a skeleton crew and keeping the ability to resuscitate
Adam Mendelsohn: ah what they were working on going forward. um and ah that But after they had wound down their operations, they received approval for a new set of of external eyeglasses that were more comfortable and had a longer battery life um that they had filed for prior to winding down the operation.
Adam Mendelsohn: Now that announcement they made ah turned the company into a meme stock. This was in the GameStop era ah and they there was a lot of activity in their stock and they were able to raise about $75 million dollars of capital into this company that didn’t really have a leadership team anymore, had kind of unclear prospects with the application they were pursuing with their technology.
Adam Mendelsohn: um but a lot of capital. So ah what happened was they started to look at um opportunities to invest that capital into related companies so that they could find a path forward for second-site medical products. We were one of the companies that they were evaluating in part because some of the directors of Nano Precision Medical were also directors of second-site medical products.
Adam Mendelsohn: Second site formed a special committee of non conflicted directors to evaluate nano precision medical as an investment opportunity and after getting to know us ah that special committee proposed that we bring the companies together primarily to focus on what nano precision medical my company was developing but also because our team was maybe in a position to try to put the technology behind this prosthetic retina on a path towards success. um And what we’ve done is since we became a public company and the merger closed a couple of years ago, primarily focused on these long-term drug implants for chronic disease treatments, primarily for weight management and diabetes with the very exciting GLP-1 class ah in which Ozemptic and Wigovi household names nowadays
Adam Mendelsohn: are a part of, but we’ve taken the assets from second-site medical products, um transferred them into a wholly-owned subsidiary called Cortigent. The team had identified prior to the merger a different application of the technology, stimulating the visual cortex and ah being applicable to possibly 50 times the number of patients.
Adam Mendelsohn: so that the technology which has been in an FDA-authorized ah application may be able to have a commercially viable business. And we are, right now, we’ve filed an S1 for Cordigit, and we’re we’re going to see if we can’t independently finance the subsidiary around a new application of that technology. But we’re primarily focusing on the drug implants ah for chronic disease treatments that Nanoprecision Medical, my company, ah has been working on.
Alejandro Cremades: At what point the where you guys were like, hey, maybe we we do this deal? Because i mean it’s is is not an easy you know transition, going from being a private you know company, then all of a sudden you’re a public company, reporting, you know all of that stuff.
Adam Mendelsohn: Yeah, it’s it’s a very good question. We certainly weren’t aspiring to quickly become a public company. ah But at the time ah that we negotiated ah this merger, um the capital that seconds I was bringing to the table, and you know in addition to that, my own desire to see if we couldn’t put the prosthetic retina ah technology to good use as well,
Adam Mendelsohn: because I had been familiar with Second Sight from its beginning days because of my father’s involvement with Al Mann and the founding of that company. um But and all both of those reasons, and given the other kind of investment and financing opportunities that we had available to us at that time, ah let us decide to proceed with going through the reverse merger.
Adam Mendelsohn: um And ah the capital that ultimately was available um you know has sustained us for for for you know quite a while. um And it turned out that we negotiated that right at the peak of the markets. I think it was December of 2021.
Adam Mendelsohn: um when, I’m sorry, December of 2022, when, sorry, December of 2021, when that deal was negotiated. And since then, ah the markets had, you know, went through the last couple of years of pain. And hopefully now with ah kind of the macro conditions changing and inflation coming down, maybe interest rates coming down, ah you know, very soon, things can change. But it did get us through this period of time that has been very challenging for biotech companies for smaller pre-revenue early stage biopharma companies.
Adam Mendelsohn: ah to be able to raise money. And now that we’re about to begin ah clinical studies, we have FDA clearance to to do so with one of our programs, and we’re expecting ah clearance for the obesity program and the obesity study ah that we expect to be able to initiate in the fourth quarter of this year. um you know Maybe now we’re we’re ready to take advantage of being a public company and the kind of exposure ah that being a public company can provide, although the downsides of the public reporting aspects and being at the whim of the public markets and and our sector and what’s happening, which can be either in your favor or out of your favor, is something that we have to manage. And ah ultimately, that’s where we are. I think we’re in a good position going forward. ah But that’s how that all came to be.
Alejandro Cremades: And how has it been through the experience of being the CEO of a public company?
Adam Mendelsohn: you know it’s interesting because we are a public company because we have a listing on the nasdaq um and there have been some moments when it’s felt like we are a public company as an example earlier this year we announced some weight loss data in obese mice and that the market reacted to you extremely favorably but i think being a public company today is very different than it was 20 years ago in that there are so many more public companies and just because we announced something doesn’t mean the public actually knows it. So but right now we think we have such a compelling value proposition. And currently we’re, we have an internal project called Project Radar Screen. We want to get ourselves on the radar so that people can be made aware of what it is that we’re developing, because even though we’re public, it’s still a challenge to really feel public.
Adam Mendelsohn: um With that said, ah I definitely have, we and we have incredible experienced advisors. Everyone else on the C-suite of the company has decades of successful experience doing this. I’ve been learning.
Adam Mendelsohn: like drinking from a fire hose from all of them. And it’s been a couple of years now. ah So I’ve been through the full cycle of all the quarterly and annual reports and you know been to investor conferences and cultivating analysts to write research reports. All of these are experiences and capabilities that were just unnecessary as a private company.
Adam Mendelsohn: ah But ultimately, I appreciate the value in these activities because it’s much more important for ah but for a public company. So it’s been a it’s been an opportunity for me to learn a new set of skills, a new set of considerations, which I think will be valuable um just to understand that more intimately in anything that I do going forward. Of course, you know continuing to build this company is continuing to be my primary focus. But it’s been definitely an adventure.
Alejandro Cremades: And how much capital have you guys raised to date for the overall entity and how has it been the experience too of raising money?
Adam Mendelsohn: Yeah, so we’ve raised money in a variety of different ways since Nano Precision Medical was first founded. The amount of capital outside of the capital that came to us from the reverse merger ah has been on the order of $50 million, dollars and there was about $50 million dollars in second-site medical products at the time that we went through the merger.
Adam Mendelsohn: um And these financings have been, you know, initially friends and family, other rounds in which, you know, other family offices came on board, AstraZeneca, making an investment was a fascinating experience dealing with a big pharmaceutical company.
Adam Mendelsohn: um And earlier this year, we we raised money through an investment bank as a public company on the back of the preclinical weight loss data that we obtained. And that took you know one day to do um on the back of a lot of stock activity. So there have been very different means of obtaining financing that we’ve conducted.
Adam Mendelsohn: um But it it’s ah definitely has not always been easy, ah particularly in the earlier days. um It takes a long time to cultivate relationships, ah to ah convince people that ah this is a good investment opportunity. um And it’s ah particularly as a private company,
Adam Mendelsohn: It’s a very inefficient ah marketplace for to be able to connect investors to opportunities. it’s It’s a little different as a public company. It’s somewhat more efficient. But as a small public company, there still are, I think, ah more efficiencies that we hope to be able to obtain as we grow as we go bigger.
Alejandro Cremades: So obviously there’s a lot of founders that that are listening now. So I’m wondering, what could you tell them about how to articulate the value of what you’re doing?
Adam Mendelsohn: Well, let me first say that when I first, as ah an an initial entrepreneur, would pitch our company, I think in the first sentence I would use the words titanium oxide nanotubes because that is the material that we have developed that we were so excited about.
Adam Mendelsohn: um I think that I probably don’t even use those words at all anymore until I get to the very end of a picture, maybe not even in the first conversation at all because it’s not, um one needs to focus on the value that investors may realize, the market opportunity that exists, the problems that you’re addressing and how you’re going to address them uniquely and effectively.
Adam Mendelsohn: how you do that, the nuts and bolts of the technology and the science behind it, um become secondary. And that evolution in my articulation of our value proposition, I think, reflects the judgment I’ve gained through the experiences in in figuring out how to effectively articulate value. So I think for a first-time entrepreneur, my suggestion would be to focus on focus on value.
Adam Mendelsohn: um I also want to I don’t think that um I can emphasize enough how important it is that the management team is seen as credible and that the investors are going to oftentimes think about who the people are just as much if not more than what it is that they’re trying to develop because in the entrepreneurial journey,
Adam Mendelsohn: maybe the first idea that you’re working on is going to be a home run, but that’s not usually what happens. And being able to be nimble and to pivot when necessary and to demonstrate to investors that you’re capable of assessing the situation and making intelligent decisions about what the next step should be as you go forward, I think is a critical ah attribute that you want investors to be able to perceive that you have.
Alejandro Cremades: So, obviously, talking about vision too, because I think that vision has a big component there. If you were to go to sleep tonight, Adam, and you wake up in a world where the vision of the company is fully realized, what does that world look like?
Adam Mendelsohn: Well, um I think that world is one in which anyone who could benefit from not having to worry about taking a pill or injection to manage their chronic disease can live their lives freely, can be healthy because they have a tiny implant in them that’s easy for them to get and receive and replace. um And really allow people to, this used to be one of our tag lines, the freedom to live healthier. um and And so that vision that I just articulated has more to do with the external a result of us succeeding in what we’re doing as opposed to internally ah what our company would look like.
Adam Mendelsohn: um But as far as our company, that’s what that’s what I focus on. That’s what’s most important is what are we going to be doing for people? And of course, being able to do that would would mean that we have a ah very efficient ah scaled operation internally that allows us to have multiple programs developing products that enable us to improve treatment options options for chronic diseases.
Adam Mendelsohn: um that are able to leverage a lot of the infrastructure that we’ve already built and more infrastructure that we do build. um But that’s ultimately the vision has to be on what it is that we’re doing for people.
Alejandro Cremades: So let’s say I was to bring you back in time now. you know Let’s talk about the past. So let’s say I bring you back in time maybe to 2010 when you were thinking about starting something of your own. and Let’s say you’re able to go back in time and have a chat with that younger Adam, and you’re able to give that younger Adam one piece of advice before launching a company. What would that be and why, given what you know now?
Adam Mendelsohn: I think that the one thing that I wasn’t prepared for, um I knew that it was going to be ah very challenging in a lot of respects, but one area that I didn’t really appreciate was the challenge of people.
Adam Mendelsohn: um the challenge of cultivating people, managing people, and creating the right culture. And I would probably encourage that Adam to be prepared beyond the uncertainties and the challenges ah from ah from financing, technology, manufacturing, regulatory, but to make sure that the people that are being brought to the table at the beginning of the company that the there is the investment in assessing them and making sure that they’re the right people long-term cannot be overlooked. um And that’s probably the one thing that that Adam ah didn’t ah understand or appreciate as much as I wish he did, although I think we’ve managed fine with the people that we brought. That was something that I i could have, um that Adam could probably have understood better.
Alejandro Cremades: So, for the people that are listening, Adam, that would love to reach out and say hi. What is the best way for them to do so?
Adam Mendelsohn: They can contact me by email at just my first name Adam at vivani.com and I would be happy ah to hear from anyone. I’ve had a lot of people give me advice over my career and I am always happy to pay it forward. I wish everyone luck. It’s not easy but it’s very rewarding and fulfilling and um I definitely encourage people that want to make an impact on the world to put themselves out there and try their best. And just the trying is going to be fulfilling, I think, in and of itself. um And I wish everyone the best. Please feel free to contact me.
Alejandro Cremades: Amazing. Well, Adam, thank you so much for being on the Deal Maker Show today. It has been an absolute honor to have you with us.
Adam Mendelsohn: Thank you for having me. It’s been my honor.
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The post Adam Mendelsohn On Raising $100 Million To Develop A Portfolio Of Miniature, Long-Term Implants To Deliver Drugs More Efficiently And Consistently appeared first on Alejandro Cremades.
In the world of AI, few founders have navigated the intersection of coding, corporate experience, and entrepreneurial vision as effectively as Ulrik Stig Hansen.
As the co-founder of Encord, Ulrik’s path offers a fascinating roadmap for founders looking to build and scale in the rapidly evolving world of artificial intelligence. Encord has attracted funding from top-tier investors like N47, Y Combinator, CRV, and Crane Venture Partners.
In this episode, you will learn:
- Early coding experience: Ulrik’s early passion for coding set the foundation for his entrepreneurial journey.
- AI’s potential: The rise of AI models, such as GPT-2, signaled a technological shift Ulrik didn’t want to miss.
- YC impact: Y Combinator helped avoid early mistakes and accelerated product-market fit.
- Fundraising lessons: Raising $50M across multiple rounds required vision, metrics, and perseverance.
- Product-market fit: True product-market fit became evident when the sales team closed deals autonomously.
- Scaling challenges: Scaling Encord involved hiring top-tier talent and navigating a lean, efficient growth strategy.
- Focus on problem-solving: Deep involvement in solving key problems while delegating less important tasks was key to Encord’s success.
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Your email address is 100% safe from spam!**About Ulrik Stig Hansen:**Ulrik is the President & Co-Founder of Encord. Ulrik started his career in the Emerging Markets team at J.P. Morgan. Ulrik holds an M.S. in Computer Science from Imperial College London.
In his spare time, Ulrik enjoys writing ultra-low latency software applications in C++ and enjoys experimental sushi making.
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Read the Full Transcription of the Interview:Alejandro Cremades: alrighty Hello, everyone, and welcome to The Deal Maker Show. Again, you know more building, scaling, financing, all of that good stuff that we like to hear you know with the founder that we have today joining us. He’s riding a rocket ship.
Alejandro Cremades: you know as we like them. And we’re going to be talking about early experience, for example, what it was for them to go through Y Combinator. Also, what was the experience of finding product market fit early on, as well as to how to think about scaling and the motions that you got to go through in order to make it work. But again, really, really inspiring conversation ah ahead of us. So without further ado, let’s welcome our guest Ulrich Stig Hansen. Welcome to the show.
Ulrik Stig Hansen: Thanks, Alejandro. Excited to be here.
Alejandro Cremades: So originally you were you were raised right outside of Copenhagen. So give us a walk through memory lane. How was life how was life growing up?
Ulrik Stig Hansen: Yeah, that’s right. So I grew up in a small town outside of Copenhagen, which admittedly was the most conducive environment for an aspiring AI founder. But there weren’t too many distractions around there. So I got into coding early on and probably spent the better part of five years just kind of coding, working on different projects, perfecting my skill set, um which, um you know, have been very important, I think, to my journey as a founder. of um given that I had that early kind of experience in building products and ah talking to users and all that good stuff.
Alejandro Cremades: So what do you think got you hooked into into coding so early on?
Ulrik Stig Hansen: Well, I think coding is you know it’s a very interesting discipline in that you can build things from your you know bedroom, which I don’t think you get in any other kind of like discipline. So um I really like the the problem solving aspects and the building aspects. And if you combine those two, I think you can like spend days you know just like pondering over a problem um and like just get stuff out that you can have people use within within like very short periods of time, which I don’t think is the case for any other um thing that you could do with your time.
Alejandro Cremades: So what was that the journey to get to JP Morgan?
Ulrik Stig Hansen: Yeah, so, um you know, I really like building stuff. um And I knew that I wanted to start a company one day. So I maybe thought that I had to get experience working in ah business and finance to to get there. So I moved to London early 20s to start my career there. um I think had a great time, learned a lot of things. But ultimately, um when you work in a big corporation, right, I think any corporation, you don’t really get hands on building stuff. um And I always wanted to get back to building. So I stuck around there for a few years, but ultimately decided to leave to to, to found on court eventually.
Alejandro Cremades: and And before that, you know you you were getting you know started on the AI, that excitement around AI, which you know obviously ended up getting you to Imperial, which is an incredible university where you did your your master’s in computer science. But what was so appealing to you about AI and and what was going on in the space?
Ulrik Stig Hansen: Yeah, that’s a great question. So um I think when I did my computer science master’s in Imperial, that was right around the time when the transformer model came out, the first YOLO model came out. um The GPT-2 model came out from OpenAI in like 2019, I think.
Ulrik Stig Hansen: um So the interesting thing was that these models that had been, I think, very much confined to like academic research were actually starting to deliver value in the real world for, I think, the first time. So AI, of course, have had a few false starts, and it didn’t quite live up to the hype of the past. um So that was incredibly exciting, I think, to see from the sidelines. If you kind of looked ahead, it was very clear that we were on the on the precipice of ah of a major technological platform shift. And I think I would like be very sad to miss that because I think anyone who’s grown up during the kind of early days of the internet um and have been in entrepreneurship or is excited about starting a company always felt that we missed out on the um the internet revolution. um So I just couldn’t miss out on the on the AI revolution.
Alejandro Cremades: So how do you end up meeting who ended up becoming your co-founder out in court?
Ulrik Stig Hansen: So I met Eric, my co-founder at an entrepreneur network in London. Eric had just left his job. He worked in high-frequency trading. He was working on big data systems, putting thousands of models into production to, of course, like do different things, to trade stock futures and ETFs. um But we saw the world in very much the same way in that the data part of the AI development stacks. AI, you need models, compute, and data to get working. um There was a huge opportunity just because the innovation of the past couple of years had not been what we had seen for models and compute. So we thought there was an incredibly exciting opportunity. That’s really why we started on-court.
Alejandro Cremades: So what ended up becoming anchored for the people that are listening to get it? What is the business model? How do you guys make money?
Ulrik Stig Hansen: Encore started off as focused on data annotation. So when we went out and started Encore at the beginning, we talked to probably like a thousand plus AI engineers, researchers, ML engineers, data scientists, and they all like basically said the same thing.
Ulrik Stig Hansen: which was that they were having a really hard time getting the best data annotated ah to use in their models. I think since then, like the problem has shifted somewhat from being a data quantity problem into being a data quality problem.
Ulrik Stig Hansen: so um you know Instead of getting like high quantities of data, people are now much more focused on getting the right data into their into their production AI systems. So we’ve really built Encore to solve that entire workflow from solving the data quantity to the data quality problem, breaking down the problems with three distinct pieces of data management creation, getting the right data annotation, so having humans provide feedback feedback to the model, and then model evaluation. So making sure that um you are pushing the right data into the model and taking all the data out of the model that might be poisoning the data set or hurting your your model performance.
Alejandro Cremades: So what was that the journey of going through a Y Combinator? Because there’s a lot of people that are probably listening thinking about you know the whole accelerator thing or incubator thing. So at what point do you guys realize, hey, you know like maybe it makes sense to go to San Francisco to join a Y Combinator to become part of that community? How was that thought process? And then also, what was the experience like of going through Y Combinator?
Ulrik Stig Hansen: We yeah went to YC in the winter of 21, which is just more than ah just over three years ago. It was a very odd time because it was doing the but the depths of the the COVID pandemic. So all of our YC experience was fully remote. and I’m sure the in-person experience is much better.
Ulrik Stig Hansen: I think for a first time founder, you probably can’t find a program or an accelerator um that helps you avoid as many mistakes as whited as YC does. So when you’re first getting started, you may like not think about fundraising the right way, you might not think about finding product market fit in the right way. And I think the YC network really helps you hone in on like the things that are important and prevent you from spending too much time on things that are less important to you know initially finding product market fit, getting your first customers, and beginning to um scale out some of your product engineering teams initially.
Alejandro Cremades: So then coming out of Y Combinator, what was what was that like? Because it was kind of like a rocket ship too, especially the way that things started to happen too on the on the financing front. So what was that like coming out of there?
Ulrik Stig Hansen: Y Combinator I think has probably one of the best um fundraising environments attached to it. So YC definitely helps you a lot with getting the initial capital in. ah I think you know the common misconception is like that’s by no means a given. um You really have to work hard i think to get the investors that you want um and to ah get that initial capital in. I think YC really helps with that, but they can like solve the problem for you, of course.
Ulrik Stig Hansen: Coming out of YC, we raised in a very hot funding environment in 21. So we raised ah a pre-c the series ah sorry pre seed and a Series A in 21, which really gave us like the the capital that we needed to build out um the initial product engineering team, ah build out a great product that we could sell repeatedly to our customers, and also afforded us the luxury of um You know, making a few mistakes, I think, on the sort of product, finding product market fit fit side and also ah the initial scaling of the of the team.
Alejandro Cremades: So then talk to us about what how that fundraising journey was. I mean, how much capital have you guys raised to date?
Ulrik Stig Hansen: We have raised $50 million. dollars We just closed a $30 million dollars Series B a couple of months ago with NYX47, with participation from Y Combinator, CRB, our seed and Series A investor, and and and also a bunch of other ah great investors that we’ve been very excited to get on board. I think the common mistake that people make is that they take um fundraising likely and they kind of like take it for granted that they’ll be able to raise money, especially being an AI company. And I could just tell the the audience that that is definitely not the case. It is extremely difficult. The Series B market is still, I think, reeling from a bit of an overhang from the boom years. So I think the most recent round was definitely the most ah difficult one ah to raise. ah
Ulrik Stig Hansen: But you know I think we we managed to get it done. We managed to get some great investors on board. And we have now a lot of capital for the next phase of ah the anchor journey, which we’re excited, incredibly excited about.
Alejandro Cremades: And we’ll talk about that in just a little bit, but it was very impressive the fact that you guys were able to do the pre-seed seed and series A in such a short amount of time. Why why was that the case?
Ulrik Stig Hansen: Yeah, that’s right. so Back at then in 2021, this was like pre-chat TBT days, right? So AI was still sort of like something that people were like peripherally interested in, but it wasn’t the main thing that people were going after. um I think back then, like crypto and blockchain, I think was very much like the thing that was like hot amongst investors. um But I think we had an insanely compelling pitch, even at the time where, um you know, you could kind of see that The AI boom was like right on the way or ready to take off. We’d already gotten our first like initial set of customers. We worked with some of the world’s leading ah AI teams, both at big enterprise models like AI Scaleups. um We already had some of those customers early on, given the insane customer focus that we’ve had. so we really build the product to
Ulrik Stig Hansen: to support those kinds of use cases. And I think we were quite lucky to find and ve you know a set of investors who really believed in that vision and decided to back us pretty early on when the team was like pretty still pretty ah pretty small.
Alejandro Cremades: Because what was the timeline you know between Pre-Seed Seed and Series A? What are we talking about here?
Ulrik Stig Hansen: Yeah, so I think pre-seed we raised in like February. That was like the the Y Combinator check. The seed round we closed in May and the Series A we announced in early October.
Ulrik Stig Hansen: So it was a very, very short timeline. I think that year was pretty crazy. like We ultimately spent most of our time, or not most of our time, but a lot of our time, ah conferring with our legal counsel and and whatnot to get the the rounds done. But um ultimately, you know it gave us the firepower that we needed to ah get to initial scale and raise the Series B this year.
Alejandro Cremades: Yeah, because typically people think more like 18 to 24 months between financing cycles. What was your guys’ thought process behind, hey, you know what, let’s let’s go at it again with another financing.
Ulrik Stig Hansen: for this year you mean or for back then?
Alejandro Cremades: No, for the pre-seed seed and Series A all within such a short period of time.
Ulrik Stig Hansen: Yeah, that’s a good question. So, um you know, we were very lucky to get some amazing customers and amazing logos on board pretty early on. And we kind of like knew already at the time, like what we wanted to build. So for us, it was really a function of like, how quickly could we move on accelerating our product roadmap to um get to build those pieces of the product that we wanted to. um And ultimately, like more cash gives you the flexibility to like hire more people and move faster. um And that’s ultimately like what we ended up doing.
Alejandro Cremades: And how different was it that year, you know, doing early stage stuff, you know, versus the Series B, which is more like growth stage stuff. I mean, it’s quite a ah transformation going from early stage to growth stage. So what was, how different did you find the process of going to the Series B?
Ulrik Stig Hansen: Extremely different. Early stage is all about like vision. I think it’s very little metrics driven. Of course, like you have to have some customers and like some use cases to kind of back it up when you go out and pitch um to make sure that like investors can even believe the vision that you’re selling. I think series B, early growth stage is when things start to get more metrics driven.
Ulrik Stig Hansen: So you start to look more at um different like types of stats metrics like CAG payback periods, ah account executive ramp times on like efficiency metrics, gross margins, and these sorts of things that um will matter even more for later stage rounds where Let’s say that early stage is 90% vision, 10% metrics. I think series B is probably somewhere like 60, 40, or 50, 50 vision and metrics. And when you move to like series C and beyond, the pendulum kind of switches in the opposite direction where it’s 20 to 30% vision and 70% metrics.
Alejandro Cremades: So then it sounds like you guys found product market fit very quickly. What was that moment where you were like, I think that we’re into something here.
Ulrik Stig Hansen: Finding product market fit is always like an interesting thing, right? Because I don’t think there was like a singular moment when um we experienced like, oh, now things are growing extremely rapidly. I think it’s a series of events that just end up happening and then all of a sudden you realize, oh, I’m the founder and i and I’m no longer involved in every single deal anymore.
Ulrik Stig Hansen: So now when we when I see deals close, and I think this is actually the moment where I thought, okay, we have product market fit, was when our sales team started closing deals that I had no idea like ah what those companies were doing.
Ulrik Stig Hansen: um And I think that’s quite a special moment for a founder. It’s kind of like so you know having code that almost writes itself when you see that happening because it means that
Alejandro Cremades: you
Ulrik Stig Hansen: you could build some repeatability into your um sales motion and that the next challenge for you probably is going to be figuring out like how do we scale that up. um
Alejandro Cremades: So then when you’re thinking more about the growth stage where you guys are at now, you know how do you go about ah have you guys found you know that that that comfortable situation or maybe not comfortable?
Alejandro Cremades: Really the the the path to follow you know that was more on the scale side and and what were going what was like going through those motions to make it work.
Ulrik Stig Hansen: People, I don’t think, like talk enough about um scaling a company. um They talk a lot about 5D product market fit. and I think scaling a company is like probably equally difficult, if not more difficult, than finding product market fit.
Ulrik Stig Hansen: This is probably a function of the air gets thinner the longer you get in the journey. So ah for like some of them, even later stage wise, the companies know that the founders there, um you know, they don’t have many peers that can actually like ask questions from. um So that becomes like being the the biggest challenge. I think for us, you know,
Ulrik Stig Hansen: The challenge now is really finding enough qualified people on the go-to-market side that can sell a technical product to a technical buyer in what is still a pretty early market. And I think that’s been one of the main challenges for us is that’s just finding enough um high-quality salespeople that can help us um run the sales function and like run the deals like pretty much autonomously.
Alejandro Cremades: So then, so then also for you guys now, you know, you’ve, you’ve also, we’re talking about scale. So I want to talk about scaling people because in the last year you guys have grown according to LinkedIn by about 36% the employee count. And in the last two years, by about 112%. So how do you think about to scaling when it comes to people, when it comes to culture so that it doesn’t break?
Ulrik Stig Hansen: It’s an incredibly difficult thing to get right. um I think so. We have very much focused on um scaling the team or our headcount in a and profitable way. So not throwing like every sense out of the the window and like just hiring people for the sake of hiring people. We very much like attempted to hire the best possible people and then like you know, getting really the best talent on the board, instead of like hiring 10 people, we might have like three and then we’ll pay them a bit more, we’ll get them more equity in the business. um So we have like a highly concentrated set of highly qualified and talented people that can help accelerate the growth of the company because ultimately,
Ulrik Stig Hansen: ah More people means like more operational overhang means, um you know, you ultimately end up moving slower. um So we very much like taking that sort of like lean approach to growth, which I think has served us well, especially in a funding environment that has been ah somewhat challenged over the past couple of years.
Alejandro Cremades: And then also, how has it been to the dealing with the ah board, the corporate structure, making sure that people are aligned? How do you think now about board dynamics? you know what What can you share with the people listening as well? um
Ulrik Stig Hansen: We had a pretty small board for a long period of time. So CRB, our Series A, and Seed Investor um have been on the board and we’ve had a fantastic board member um from CRB that have been i think instrumental to getting to the company to to where it is today. um I think for the Series B, we’ve gotten um and another investor board, which of course meant up also getting another person on the board, um which I think is great. It adds a lot of credibility to the company that you have a real board assembled. And it also just helps with offering fresh perspectives on the various different types of problems that the business faces and like key decisions we have to make. um And I think for us, like we have really been focused on getting the right people
Ulrik Stig Hansen: on the board, ultimately by giving a board seat away to an investor, it’s kind of like a marriage you can’t get a divorce from. So you have to make sure that that you you get it right and that you can um you can work with these people for like many years going forward.
Alejandro Cremades: And then when it comes to a problems, I mean, you were talking about problems earlier. Also, what what have you learned about problem solving? you know and And really rallying the team around, you know whatever is in front of you guys.
Ulrik Stig Hansen: I think this is probably one of the main things that I’ve learned as a leader that um to solve problems in the business, um you have to get insanely involved in the details of whatever problem that you’re trying to solve and then all the problems that may not be important or like may ah seem like they’re important but not important, you should just delegate. um so That has really been ah the main learning for me. And ah we’re still very much as founders involved in problem solving across the business. I’m still ah doing daily standups with our sales team, our customer success team, with our solutions team ah to make sure that like we are focusing on the right things. Because I think if you scale, that really becomes the the hardest part of of building a company. ah Because you lose that focus, you lose that alignment, and people start to like solve problems or attempt to solve problems that are not there.
Alejandro Cremades: So we’re talking about people earlier. I want to i want to just double click on that. you know When it comes to people, you know they’re already all all of them, they’re all betting on a vision, right? Whether it’s investors, customers, employees.
Ulrik Stig Hansen: Mm hmm.
Alejandro Cremades: So if you were to go to sleep tonight and you wake up in a world where the vision of Encore is fully realized, what does that world look like?
Ulrik Stig Hansen: That’s a great question, and also a tough question. I think in that scenario, um you inevitably start to focus on like what’s next. um So you know our initial vision was to automate the data annotation process for comp computer vision. I think we managed to kind of achieve that within the first 12 to 18 months, or at least to make meaningful progress on that, where like that ceased to be the main thing that we’re focused on. And then we kind of like moved on to the next thing.
Ulrik Stig Hansen: um so i think in a startup, right, if you’re doing well, if you’re doing stuff, and if you’re like growing in some dimension, there will always like be new problems to solve. And you will always like, re, let’s say like, um you reevaluate your vision, and you focus on like, what’s next, ah when certain things are, are achieved. And I think this is a very interesting thing, actually, because I think, ultimately, like with big companies, right, that are not led by the founders anymore, that’s something that they sometimes lose sight of, right, where they stick to the initial vision, but they kind of forget all the stuff that’s around.
Ulrik Stig Hansen: um or like they failed to update their assumptions about the world, like move on from what the but business was all about initially.
Alejandro Cremades: I love that. you know There’s actually a great book called Good to Great, Jim Collins, you know and he really talks about the how how businesses that have the founders living, you know they lose the essence and and how they decline you know over over the course of time. So that’s that’s great that that you mentioned that. I guess we’re talking about the future here. I want to talk about the past, but doing so with a lens of reflection.
Alejandro Cremades: Let’s say I was to put you into a time machine, and I bring you back in time, back to London, you know back to maybe like five years ago when you were thinking about doing something of your own, you know which obviously ended up becoming encored.
Ulrik Stig Hansen: Thanks.
Alejandro Cremades: But let’s say you had the opportunity of having a chat with your younger self, and you have that younger Ulrich right there in front of you, and you’re able to give that younger Ulrich one piece of advice before launching a business.
Alejandro Cremades: What would that be and why given what you know now?
Ulrik Stig Hansen: People always tell you to be patient and you know wait for the right opportunity to come before like making the the jump. um And I think what I probably would have told myself is like don’t be patient.
Ulrik Stig Hansen: The earlier you start, the younger you are when you do it, the more shots you’ll have in gold, the more shots you’ll have at finding something that actually works. um So yeah, I would probably have started earlier if if I could have.
Alejandro Cremades: and I think that as we’re talking about learning here, how have you thought about really scaling yourself too you know to be able to scale at the same pace with the company so that the company doesn’t outpace you? How have you thought about that too, the resources, the advisors, the people that you’re surrounding yourself by as well in order to learn?
Ulrik Stig Hansen: That’s an incredible difficult thing because, you know, you see your employees sometimes they kind of like stop to scale once you hit certain milestones. They might be good at the zero to one phase. They might be good at the one to five phase. As a founder, you don’t really have that luxury. You kind of like have to continue to scale. um Otherwise, you’re going to probably get fired by the board, which of course is not ah the outcome that you want. I think the things you can do as a founder are um meeting the right people, um being in the social circles where you can discuss ah the various different types of problems and challenges you have in the business pretty openly. I think YC honesty is great for that because it gives you that peer network of people that you can um
Ulrik Stig Hansen: you can like talk to and you can learn from. Of course, like not everybody has that luxury, so they have to find it elsewhere. um But that’s, you know, something that I think has been instrumental to at least, um ah you know, my own personal growth, but also I think the company’s growth is that and we have that network, we have the investors that we can ask for help from, um you know, we have all of our, um you know,
Ulrik Stig Hansen: advisors and all these things that um we shouldn’t you should just shouldn’t be ah afraid to ask for help, right? I think that’s really what it comes down to. So ah you need to be able to be vulnerable and ask the tough questions, ah even if you don’t like hearing the ah the answer.
Alejandro Cremades: I love it. So Ulrich, for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Ulrik Stig Hansen: So you can either go on our website um on uncored.com, that’s E-N-C-O-R-D dot.com, or just pay me directly on my email, which is ulrich, U-L-R-I-K, at uncored.com. And I’ll make sure to get back to you.
Alejandro Cremades: Amazing. Well, hey, thank you so much, Ulrich. It has been an honor to have you with us. Thank you.
Ulrik Stig Hansen: Thank you for having me. Thanks, Alejandro.
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In today’s ever-changing business landscape, few founders possess the experience of building multiple successful ventures across different industries. An Australian entrepreneur, Jason Wyatt, is an inspiring example of such a founder.
Jason’s platform, Marketplacer, has attracted funding from top-tier investors like Salesforce Ventures, Ellerston Capital, Acorn Capital, and Soul Patts.
In this episode, you will learn:
- Jason’s accounting background, despite not being his true passion, provided a crucial foundation for understanding business finances.
- The idea for BikeExchange emerged from recognizing the gap in the bike industry for an easy, convenient marketplace.
- Marketplacer evolved from BikeExchange by leveraging its technology to help businesses grow without owning inventory.
- Jason emphasized the importance of 100% dedication to one venture to maximize its potential.
- Turning off half of Marketplacer’s product offerings allowed them to focus on large enterprise clients and scale effectively.
- Marketplacer helps retailers like Tesco and Gap expand product categories without re-platforming, leveraging their audience and supply base.
- The process of raising $120 million involved storytelling, understanding investor needs, and navigating a tough capital market.
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Your email address is 100% safe from spam!**About Jason Wyatt:**Jason Wyatt is the current Executive Chairman & CEO at Marketplacer. Prior to that, he was the CEO of BikeExchange.com.au from January 2007 to December 2014.
Before that, Jason was the Financial Controller at General Motors from February 2006 to June 2009. Jason has a degree in accounting from the Institute of Chartered Accountants Australia and a Bachelor of Business Administration (B.B.A.) from RMIT University.
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Connect with Jason Wyatt:* LinkedIn * The Org * Crunchbase * General Assembly
Read the Full Transcription of the Interview:Alejandro Cremades: alright Hello, everyone, and welcome to The Deal Maker Show. So today we have another founder, you know another repeated founder. He’s done it a couple of times, and right now he’s riding a rocket ship. and But we’re going to be talking about all types of good stuff. We’re going to be talking about pivoting. We’re going to be talking about getting large accounts from large customers. We’re going to be talking about figuring out scale, but again, the whole thing that we like to hear, building, scaling, financing, and beyond. So without further ado, let’s welcome our guest today, Jason Wyatt. Welcome up to the show.
Jason Wyatt: Thanks for having me and I really appreciate you letting me speak to your community.
Alejandro Cremades: So originally born and raised in in Melbourne. So give us a walk through memory lane. How was life growing up for you, Jason?
Jason Wyatt: ah As Australians, we’re pretty fortunate. Australia is such a beautiful country. It’s got a very safe and stable government. um But you know we had an amazing upbringing with an amazing family. And yeah and yeah my father was ultimately a um ah business person, so he sort of drilled it into us from day one, you know the love and passion for business and and helping people with the problems they need to be solved.
Alejandro Cremades: So you also went to university there, you know, and basically you did the whole thing in accounting. You know what? We’re accounting out of all things.
Jason Wyatt: yeah It’s really interesting like because ah when people maybe i’m obviously not a born accountant, let’s say I’m a born salesperson, if anything, but um yeah dad growing up, ah he wasn’t he was actually an accountant and started a accounting practice. So no different to most kids you know if the apple fuckt doesn’t necessarily fall that far from the tree and follow it in his footsteps. But you know from day from about the age of 11,
Jason Wyatt: yeah he He never forced me, but he encouraged me to you know pick up the ah financial paper and read five pages every single day, you know just so I could start to learn about business, learn about learn about those concepts. And then I got good marks at school.
Jason Wyatt: um And Ben, I didn’t really know what to do. So rather than picking something generalist, I picked the commerce degree where it could be quite open and keep my open and my choices open um as an 18-year-old boy who was sort of discovering the world. And yeah eventually ah I pretty good marks and then you went to one of those career days that you have at a college or a university. and you know, KP&G and all the big accounting firms were there and they sort of scattered you and recruited you and lured you in with ah with a but big hook to say how great they are and and sort of, you know, what that career progression would take. So, you know, just took the opportunity. um And I look back on it now with reflection and
Jason Wyatt: You know, ultimately, you know, was I ever going to be an accountant zero chance? But what it gave me was an amazing background. You know, no one can fool you now. You’ve got that little weapon in your pocket around understanding penile and cash flow and all those things. A good basis behind it.
Alejandro Cremades: Now, for you, you ended up going to London. You know you left in Melbourne, you go to London. I guess, what kind of what kind of world do you that it gave you to see what was outside of Melbourne?
Jason Wyatt: um It just completely opens your mind, doesn’t it? You go to a great big city like London and you know I was a massive surfer growing up. I remember actually catching a tube from Heathrow London tube and yeah I had a bag on one shoulder and I had my surfboard. I had four surfboards on the other
Jason Wyatt: go over there and party and um surf the coast of France um amongst it. But you get off this tube and you look up at the you know you look up at the you look up at the city and you’ve got nowhere to live. You’ve got no job. You’ve got no money. So very quickly, you’re a little kid in a big city and you’ve got to learn survival, right which is one of the the primary functions of life within it. But you know a city like London’s just sensational. It’s got so much diversity, so it’s so cosmopolitan, it’s so much fun, um but it can it can it can teach you so much, but it can also spit you out if you you know if you don’t change and adapt and and put yourself in the environments where you can be successful.
Alejandro Cremades: and You also went through different companies, as you were saying. i mean You did Morgan Stanley, you did Reuters, a little bit of everything. you know I can say, what do you think was the pivotal moment for you that really got you to be like, okay, now is my more time now to take over my own destiny and create my own future?
Jason Wyatt: I was sitting there working in in London and yeah you’re working banking or you’re working finance and you’re kind of you’re working in decimal points or basis points and there’s no innovation really in the product. You know you talk about spreads and whether I can make a 0.001 of a more margin today or you’re working in accounting and yet you’re working in the past, so the whole time you’re focused on doing financial reports or or telling people what’s happened and you’re not really focused on telling people what’s going to happen or shaping what’s going to happen. um So that the pivotal thing for me is that I think I was just ultimately completely bored. There was just no, it was like like the places, the cultures were great fun, the companies were good companies that were just boring in what they did, if that makes sense.
Alejandro Cremades: so then So then how did the whole ideal bike exchange come together?
Jason Wyatt: um Actually, ah my best friend and I, Sam Salter, he was living in Melbourne at the time. His family was from a cycling industry and he had a classified background. So before marketplaces, there was classified things so of cars dot.com and those types of businesses where you couldn’t actually transact online.
Jason Wyatt: um And then i i I fundamentally, at the same time, wanted to get out of just working for a company um and putting some of that knowledge together. So we kind of teamed up um We looked at the market at the time and we said, you know what, there’s more bikes sold than cars. These bikes are often 10 to $20,000. We looked at the industry and said, the bike shops are never going to be able to figure out in ah in back in 2007, never going to figure out out SEO and SEM and online marketing. um yeah and And the consumer was demanding you know a destination, a single destination where we could provide ease, convenience and choice for their consumer journey and just make it easier for them to buy.
Jason Wyatt: so When we look at those forces together, you know but it’s a great industry um with a big tan. The industry is ripe for disruption um and and we knew a model that was going to work um within it that we could scale quite quickly. and From day one bike exchange work, which is fascinating, right?
Jason Wyatt: because and yeah yeah I remember the first single day we put up and we put the website up within an hour there were people talking and communicating through it and within a week there were 500 and then within a month there were thousands. So quite often the market speaks whether it’s a good idea or not and in this case the market spoke quite quickly.
Alejandro Cremades: And you were there for about seven years. I mean, how was that journey? I mean, seven years in a startup is like a lifetime.
Jason Wyatt: it is It is like a lifetime in there. But again, when we think of it back then, um the access to good technologists um and the access, you know, it’s not like living in Melbourne, we were living in in the bay in San Francisco, right? Like, so it’s a different sort of acceleration path. So you had to graft it out a little bit more. You had to, you know, we had to take our time. It wasn’t as easy to raise money in this market back then as it is now.
Jason Wyatt: um But what we quickly realized is is yeah the bike business was really good and and in 2012 we won um Telstra, like an Australian business, small business of the year. right like So we just spun it up and we and and it was humming along. And on the back of that, actually many people approached us and said, can we use your platform to do you know We don’t want to do a bike marketplace, but we want to do a babies and kids marketplace, or we want to do a furniture marketplace. And then we just constantly got these inbound calls and emails from people saying, hey, oh I want to do that same model, but in a different industry. And that’s really sort of when Market Placer was born. yeah We had a very different model back then. yeah know we We took
Jason Wyatt: We took an equity stake in their business. We took a license fee behind their business. The platform wasn’t built for any product at that time, but what it did, is it taught us, it taught us that maybe our biggest asset wasn’t actually the bike business, but probably the technology business that the bike business was built on.
Alejandro Cremades: So then at what point do you decide this time to walk away? Because i mean this is say also your first company, your first baby. you know I think that eventually, when it’s your first company, you know it happens many times for entrepreneurs that that you think you are the company. You become attached to it in every shape and form, especially after seven years. What happened there for you to decide it was time to turn page?
Jason Wyatt: Well, when you’re working 18 hours a day, you’re involved in nine businesses. All of them are going okay, but you know ultimately ultimately, it’s very difficult to run that many spreads of businesses and then you have to pick one. So i ultimately come to the decision, if i’m if we’re gonna be successful in marketplace, it needs 100% of my time, 100% of my focus. And it was probably one of the biggest lessons that I learned was, you know, these things are hard. If you want them to go fast, it’s 100% dedication into them, it’s 100% passion into it. So, and that that’s exactly that’s exactly what I did. So, I stepped off every other single board and Marketplace have got 100% of my focus with zero distraction.
Alejandro Cremades: So because I know that tool bike exchange was listed, so what was the evaluation I’d speak?
Jason Wyatt: It listed at its peak for about $80 million. dollars So i walked away yeah and it was but I walked away before listing, but yeah I had a great result um out out of that. And you know it was ah was a really great journey and a really great story. But it taught me so much around creating a marketplace, leading a team, building a technology team, and all of those things. So you know it was an incredible journey and an incredible result.
Alejandro Cremades: So then for you eventually, you get going with Market Placer. So obviously, you know like after the experience with bike exchange, you know doing it for seven years, you know you you had a very good understanding on how to think about building and scaling, and also how to think about building something in a really good market. So how do you start to think about Market Placer becoming that next you know part of the chapter in your in your journey as a founder? and And why did you think it was meaningful enough for you to take action on it?
Jason Wyatt: Well, when you think about um the opportunity behind Market Placer is, one thing I’ve always looked at is what, if you’re gonna sell a technology product to a customer, ultimately what problem are you trying to solve? And the problem we were trying to solve was how do we make it easier for people to sell things that they don’t own? How do they how can we make it, whether you’ve got a big audience, whether you’ve got an existing customer base, how do we make it just so seamless
Jason Wyatt: that you can grow without the need of opening new warehouses, to grow without the need of owning inventory, and ultimately leverage your unfair advantage, which always comes back down to your position in the market with an incredible customer base and or um deep relationship with suppliers and accelerate that at a, you know, with basically like an autopilot mentality at a speed that you would never be able to do if you were buying, owning, shipping and sending inventory in its own right. And that’s ultimately with the problem marketplace that solves
Jason Wyatt: is is if you’re ah if you know if you’re a large retailer or a medium retailer or you’ve got a big audience, how do we plug our technology, our supply base in and ultimately put you on autopilot to scale without the need of a huge capital base behind you? And that’s that’s what we that’s what we sort of went out and did and and yeah we’ve been fortunate enough to secure some of the best and leading contracts in the world.
Alejandro Cremades: So for the people that are listening to get it, what ended up being the business model of Marketplace, or how do you guys make money?
Jason Wyatt: Yeah, so we work with some of the biggest retailers like Albertsons and Tesco and retailers all over the planet ah and we you know We connect our platform into their e-commerce engine and just significantly increase their supply base. A good example is the gap in in the United States. When you when you shop on the gap,
Jason Wyatt: You’ll see they’ve got the traditional gap clothing, they’ve got the connection traditional products, but you’ll also see now that they’ve got you cots and prams and all of these new categories that they’ve never been traditionally been selling before.
Jason Wyatt: So all of those new categories are actually powered through the marketplace platform. So when somebody buys something on the gap, pushes the order back through the marketplace platform through the supplier. So we’re effectively, to you know, the gap wouldn’t say they’re waking up and creating a marketplace.
Jason Wyatt: but we’re enabling the effectively dropship or send third party products and open up all of those new categories behind it. So the way we make money is we charge a monthly SaaS fee um and then we take a percentage of that of of that turnover. So when we work with businesses like Tesco or Albertsons or The Gap or Woolworths in this region, which is some of the largest retailers,
Jason Wyatt: is not only that we get the SAS fee, but and we get ah we we truly see ourselves as a partner in that business, and we get a percentage of the turnover forever.
Alejandro Cremades: It was quite the um you know the interesting hit on product market fit because right away you guys you know started to receive a phone calls you know from from potential customers. so How was that like? you know It sounds like it was a really good start.
Jason Wyatt: It was amazing, but it was frightening because these phone calls weren’t from um small little startups. They were from some of that the largest retailers in the world. right like So our products started effectively at enterprise, which most tech companies take 20 years to get into enterprise. So um it was a really interesting it was a really interesting journey behind that.
Jason Wyatt: You know, never forgetting the same month we had Tesco, um we had Qantas, which is for the airline, um and we had um and we had the Gap email us and said, hey, I want to create a marketplace. Like, it’s very rare you get that in life where you can get such amazing customers um contacting you. so um But, you know, they’re moats now for our business. When we think of the you know our customers, ultimately they’re theyre they’re our moat.
Jason Wyatt: um in there that there we’ve got unbelievably deep relationships and you know we power a huge supply base um you know that transforms that transforms them. A good way to think about it is if you see the, for the United States, if you see the evolution of what Walmart’s been able to do with their marketplace even against Amazon and it’s really started to shift their party product. Walmart really started that journey before we were live and they bought Jet dot.com But what we’ve been able to do is enable these other incredible retailers using that platform to implement a very, very similar strategy on a global basis.
Alejandro Cremades: So for you guys, there was also a very important moment in time where you decided to turn off half of the product. I mean, that sounds quite scary.
Jason Wyatt: It’s very scary when you’ve got investors um and you’ve got 40% of your revenue rolling through that segment of yeah of your business. But what we realized is, and so for the listeners out there, we actually had ah had a full stack. So you could create a marketplace using Marketplace from scratch. So we had an you know a marketplace commerce engine, we had the search engine, we had the shopping cart.
Jason Wyatt: But ultimately, really, if we were ever going to scale, it wasn’t going to be through those small startups or those sort of mid-market concepts where, hey, I want to create a marketplace for a surfboard marketplace and a surfboard industry. If we’re truly going to scale, we had to think of where are all the customers and how do we get into those into that customer base on an easier and faster basis. So then Tesco is never going to re-platform their commerce engine.
Jason Wyatt: um Albertsons are never going to re-platform their commerce engine. So you know we had to go headless. The whole world was going to a microservice architecture and we had to go headless at speed. But in order to do that in the most modern, in the cleverest way, we had to turn off probably half of our product-based and yeah we were never going to compete with Shopify. We were never going to compete with the likes of Salesforce Commerce Cloud. So we made a really brave decision to to ultimately switch off half of the product, switch off a huge portion of our revenue. um But the way I look at that is it’s like this you know it’s like in business, you look at scaffolding. you know You’re building the building, right? The first thing sometimes yeah you know you build is the scaffolding on the outside, don’t you? like And then ah ultimately, what comes straight through the center is the big building, which is the greatest asset of all. So when I think of bike exchange, when I think of the full stack offering,
Jason Wyatt: ah And they weren’t necessarily the mistakes because we couldn’t have got here without all of that learning. But, you know, the building through the centers, clearly, the deep problem that we solve with marketplace. And now, you know, we we just need to determine the opportunity of being so big that, yeah, we’re so focused on that one thing.
Alejandro Cremades: Now, for you guys, you were talking about investors earlier. How much capital have you guys raised to date and how has it been the journey of raising money?
Jason Wyatt: ah We’ve raised about $120 million. dollars And to be honest, the process of raising capital sucks. Anyone who tells you they like it, I think has a different mindset. you know So you’ve got to you’ve got to go out there, you’ve got to really nail your story. like So what problem do you solve? How do you solve it? And why are people going to back you?
Jason Wyatt: um Yeah, over over the other 150 investments they’re currently looking at, you know, ultimately within it. So then it’s it’s like, yeah you know, you’ve got to go to multiple, multiple firms, you’ve got to put your heart on your sleeve um the whole way through. And, you know, it’s its fundamentally a numbers game because
Jason Wyatt: You’re going to talk to many, many funds and it’s not that you don’t have a good idea or you don’t have a good business or they don’t believe in you. You’re just not the right fit for them. You just don’t meet their metrics. You don’t meet their industry. You don’t meet necessarily their sort of mandates behind their funds or it’s the wrong timing. So you’ve got to start with a big net.
Jason Wyatt: um You’ve got to get good advisors to help you on the way through. You’ve got to nail your story um behind it. And then you’ve got to really, really deeply understand your metrics. you know you’ve got to As the market has become more sophisticated, yeah the metrics absolutely matter in this market in particular. It’s become probably one of the most difficult capital markets um yeah with the level of interest rate in the world.
Jason Wyatt: so or the in the time that I’ve been in business. So you’ve really got to understand those metrics and and make sure that they believe in what you’re doing and they’re going to get a great return ultimately.
Alejandro Cremades: so then So then, obviously, you know when when investors make a bet, you know and I think that it’s not just investors. I mean, I think that it’s also customers or employees. I think that vision is a really big factor for them. And and and I guess a question for you here that comes to mind, Jason, is if you were to go to bed tonight and you wake up in a world where the vision of marketplaces is fully realized, what does that world look like?
Jason Wyatt: It’s really simple. yeah It’s ultimately selling on autopilot. I think all of these businesses are just, they’ve taken too long and they’ve cost too much. and And there’s so many manual processes in the past in it. So you imagine a platform where you can just plug in the The world of supply, it tells you what to sell. It tells you how much to sell it for. It makes sure it gets fulfilled. It opens up a world of unlimited growth on a global basis without the need of holding any inventory or capital behind it. So, you know, ultimately that’s what we’re creating behind Marketplace. There is this concept of, you know, your ultimate growth autopilot on a global basis.
Alejandro Cremades: so then So then for these two, i I want to ask you as well, thinking about skill. How have you guys thought about skill and how do you go about figuring out skill?
Jason Wyatt: yeah I think scale comes in many forms and many sizes. right like so we had to scale We started this business in Australia. We had to scale out of Australia. australia so Probably too early in our journey, just through the necessity of getting out of a pretty small country, is we had to internationalise the product.
Jason Wyatt: so And in doing that now, you know, the product has unbelievable product fit in the United States and North America and and right through Europe. So our first point in the product journey is how do you scale the products that can work in the markets you want to exist in there? And then when we when we ultimately thought about scale in what we’re doing is where Where are ultimately our customers living and how can we get to them in the fastest way? Well, they’re already living on e-commerce engines, aren’t they? So whether you’re Tesco or whether you’re on Shopify or whether you’re on BigCommerce, if we want to empower growth for every e-commerce business on the planet,
Jason Wyatt: Well, where are those e-commerce businesses living? So what we went out and did is we made amazing connections and relationships with the e-commerce platforms and just made it so easy and fast for anyone using any e-commerce platform on the planet to turn into a marketplace instantly. So we launched what we call FastArt.
Jason Wyatt: now is where we can turn, if you’re on big commerce, we can get you up and running in a really cool way um and and start your marketplace journey or category extension journey um you ah in ah in a completely frictionless way. So when we talk to scale, we talk to every e-commerce business on the planet and turning them into a marketplace.
Jason Wyatt: And then the second piece of that puzzle is, yes, we’re a technology company, but ultimately, if we’re if if if we’re going to solve that problem, we’ve got to come out of the box with all the suppliers. So you know what we’ve really heavily focused on over the last couple of years is becoming the biggest marketplace of every product supply base in the world as well.
Jason Wyatt: So, you know, when we think of the three things, you know, you’ve got huge consumer base through our customers and our network, leveraging that network effect of those commerce business that exists there. And then out of the box, every supply that you could ever imagine. So we we make it easier and faster than anyone else so to create or to grow on the planet.
Alejandro Cremades: So I guess, say for the um especially for the people that are listening, you know i want i want to I want to ask you something here because we’ve been talking about the future too. We’ve been talking about scale. I want to talk about the past and doing so with a lens of reflection. you know Let’s say I was to put you into a time machine and I bring you back in time, you know maybe to 2007 when you were thinking about starting something of your own. ah Let’s say you had the opportunity of having a chat with your younger self.
Alejandro Cremades: If you were able to be right there with that younger Jason and give that younger Jason one piece of advice before launching a business, what would that be and why given what you know now?
Jason Wyatt: I think it’s a really good question. and So if you think of founders and what makes founders successful over somebody else, and including including myself that is in there, is is you actually,
Jason Wyatt: is the ability to be yourself and to be a founder. And it’s completely okay to be that person within it. Because the reason you’re successful is because you can make fast decisions is because you’re not afraid of failing is because you can think of things that others can’t think of is that because you can make a really complex problem so simple that the world can use it in ah in a really cool way. um And
Jason Wyatt: you know I think there’s so many naysayers out there that say, don’t do this for these reasons. And um ah you you’ve you’ve got to achieve, you’ve got to do it in this way because this is the way everybody else does it. But if you’re a founder and you truly believe in your vision, I would say, don’t don’t let the naysayers stop you. Be the maverick that’s inside you and do it at an incredible pace.
Jason Wyatt: um we Sometimes you will rattle a cage and that’s completely fine. Because if everybody’s happy all of the time in everything that you do, the chances are you’re not disrupting anything fast enough within it. So I would say go harder, go faster, and go sooner.
Alejandro Cremades: Love it. So Jason, for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Jason Wyatt: um Just connect on LinkedIn is probably the best way. So JSON, Y, W, Y, A, double T. And you know it’d be great to connect. And um and you know yeah thanks for thanks for the time today.
Alejandro Cremades: Amazing. Well, Jason, thank you so much. It has been an absolute honor to have you with us.
Jason Wyatt: My pleasure.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at
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The post Jason Wyatt On Raising $120 Million To Build A Marketplace Platform And Dropshipping Solution To Help E-Commerce Companies Scale appeared first on Alejandro Cremades.
Elizabeth Rossiello, founder and CEO of AZA Finance, has been riding the wave of startup life since 2013. Over the past decade, she has steered her company through 16 “crypto winters” and raised over $80M.
Elizabeth’s journey is not just inspiring because of the impressive figures but also because of her resilience, adaptability, and vision in navigating the ever-evolving fintech landscape.
AZA finance has attracted capital from top-tier investors like FTX, Pantera Capital, Draper, Greycroft, and Development Bank of South Africa.
In this episode, you will learn:
- Resilience and adaptability are essential in navigating the volatile startup landscape.
- Early experiences, like growing up in diverse environments, can shape leadership skills.
- Networking is crucial for securing capital, even with those outside your comfort zone.
- The African fintech market offers unique challenges and opportunities for innovation.
- Staying true to core values and company culture strengthens long-term business success.
- Entrepreneurs must communicate their vision, especially in frontier markets.
- Success requires more than talent—it’s about leveraging networks and opportunities.
SUBSCRIBE ON:
iTunesGoogle PlayStitcherTuneInRSSSoundCloudSpotify For a winning deck, see the commentary on a pitch deck from an Uber competitor that has raised over $400M (see it here).
FREE DOWNLOADThe Ultimate Guide To Pitch Decks Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
Access The Pitch Deck TemplateUnlock the pitch deck template used by founders to raise millions. Just enter your email below.
Your email address is 100% safe from spam!**About Elizabeth Rossiello:**Elizabeth Rossiello is the CEO and Founder of AZA, a financial technology company that provides banking and payment solutions for frontier markets.
Prior to AZA, Elizabeth was an Africa Investment Associate at Grameen Foundation, where they made debt and equity investments in microfinance institutions and social enterprises across sub-Saharan Africa.
Elizabeth also worked as an analyst at Credit Suisse and Goldman Sachs, and as a consultant for Acumen Fund, AGRF, Wellspring, Fenix Intl, GALVmed, and Farm Africa.
In 2009, Elizabeth became the Deputy Office Director for Planet Rating’s East and Southern Africa office. In 2012, Elizabeth was appointed as a Co-Chair of the World Economic Forum Global Fourth Industrial Revolution Council on Blockchain.
Elizabeth Rossiello has an M.A. in International Business and Finance from Columbia | SIPA, a B.A. in Political Science, German, and Italian from State University of New York College at Buffalo, and a Diploma from Hunter College High School.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty. Hello, everyone, and welcome to the Deal Maker Show. So today we have a really incredible founder, you know a founder that has been riding the ship you know of her startup ah since 2013. So now we are on our way to 11 years. you know There is, say, 16 times you know that they that they have experienced and survived you know what is called the crypto winters ah and really inspiring journey you know when it comes to building, scaling, financing,
Alejandro Cremades: They’ve raised over $80 million dollars and really inspiring background story and and and and beyond. So brace yourself for a very interesting conversation. So without further ado, let’s welcome our guest today. And that is going to be, let’s see if I pronounce it very well here, Elizabeth Rosiello. Welcome to the show.
Elizabeth Rossiello: Perfectly pronounced. Thanks for having me.
Alejandro Cremades: So born and raised in Queens, New York, Elizabeth. So tell us about life growing up. Give us a walk through memory lane.
Elizabeth Rossiello: Well, I’m from a community in Queens, which is, I think, still the borough in the United States that speaks the most languages. um And everybody in my um elementary school was from a different country.
Elizabeth Rossiello: So I grew up in a really multicultural international setting. Everybody was an immigrant. Everybody had different food at home. Everybody had different languages. Everybody had different customs. So already from an early age, I was aware that there was life beyond my own family, which was cool. And it’s at the tone. And then I kind of continued on and became a nomad pretty early. I left Queens to go to school at a fancy school in Manhattan and then right after my undergraduate, I went to Europe and I kind of never came home. So those early steps where I grew up, it was a bit of a rough neighborhood. I won’t lie. When I go back there with my kids, they’re like, whoa, mom. But it really developed a resilience early age and taught me that if I wanted to get out and see the world, I’d have to do it myself.
Alejandro Cremades: so then So then what kind of um perspective would you say it gave you? I mean, obviously being in a multicultural um area like you were in Queens kind of like opened up you know a lot the way that you thought about life, about the world. I guess as you were getting out of New York and as you were now in Europe and and and you were experiencing that there was a world outside of the US and outside of Queens, what kind of um perspective do you think that gave you?
Elizabeth Rossiello: You know, it’s also interesting because when you grow up in an immigrant neighborhood where everybody is from a different place, you’re representing your own culture and to other people at all times. you’re I was explaining what it meant to be Italian American, why my family ate certain food or what we went to church or what we traditions we had to my Chinese American and my Russian American friends. So you’re kind of representing yourself. You’re like a little founder already, you know, representing your community and getting along. And it teaches you to communicate with people who have a different worldview. Even now, I’ll meet people, my age mates, who I think are international, went to international business school, who have traveled, and they really struggle to communicate with people who think differently than they do. They’re like, why won’t he understand that? Or why don’t they accept this? And for me, I’m always thinking, where are they coming from? What do they know? How do they make decisions? what
Elizabeth Rossiello: what level of context do they need? And it’s really set the tone for how our team now, which is from all over the world, communicates. And I think, I didn’t realize I had that in me until I became a leader, but I really do believe that’s from where I grew up.
Alejandro Cremades: and Obviously, there was like a really interesting transition of events to the professional level because you started in government, then from government to banking, then banking kind of like give you that exposure to microfinance. and I think that that was kind of like the segue to getting going as a founder. but Walk us through what was the thought process behind perhaps starting from government, how that you know got you into banking, and then how that eventually led you into founding the business.
Elizabeth Rossiello: Well, I’ve talked about this before, but I didn’t really know about that many careers. I didn’t really know. My whole family are public school or state school teachers. Everybody, it’s the family businesses to work for the city. And firemen, policemen, sanitation workers, maybe there’s some independent contractors who do construction work, but that’s it. So I didn’t know what careers were out there, but I did know that smart people could become lawyers or doctors. That was always talked about in the neighborhood and by my parents.
Elizabeth Rossiello: So I was kind of pushed to think that I would be one of those two things. And, you know, when you when you go to school in the city and I went to, like, I traveled to another planet going to school in the Upper East Side, and there my friend’s parents were like, I’m an Oscar winner, or I write the music for Sesame Street, or, you know,
Elizabeth Rossiello: I owned 12 magazines. I was like, what are these jobs? One person was like a photographer, you know, things you didn’t know about. And so a lot of my career has been taking a step of what I knew, what I could see. And then once I got there looking around and saying, oh, wait, I can go higher. I can go higher. And I think, you know, it was exciting to me to see what was next. So one of my one of my first internships was a friend’s mom who was and a lawyer and she worked at a hospital and I got to see a little bit about what the but that looked like and what policy looked like. And then I took a class and I had a politics teacher who was very inspiring. So he showed me how to get an internship and I applied for one in Germany because I spoke German. So it was always just taking these baby steps. And then when I got there, who can I learn from now? Who can be my mentor now? And not being afraid to change and to say what’s next and what am I good at now?
Elizabeth Rossiello: And I think I just realized if you have these basic skill sets, if you have this kind of hustle and this curiosity, and you’re not afraid to communicate and you’re not afraid of the new, you can kind of step from one thing to another. What brought me to to finance was I went to a degree at Columbia University at the School of International Affairs. um Everybody was very international. You have to speak two languages to go there, or three languages, two foreign languages. um And I started taking school ah classes at the engineering school and at the business school.
Elizabeth Rossiello: And I realized that would be a great way to pay for my student loans. So I went into finance just thinking that. And then when I got there, I saw, oh, I can do this. I can do that. um So yeah.
Alejandro Cremades: So then how microfinance comes knocking to you, because it sounds like microfinance you know hot like got you hooked.
Elizabeth Rossiello: Yeah, well, remember, look, this was 2007. I was working in prime brokerage and sales and trading. I was in Zurich. um Credit Suisse was doing well then. I was working for a Swiss bank in Switzerland. You know, I had the languages under my belt. I was like rising star as an analyst. I was traveling back and forth, New York, London, Zurich. It was a great life, but I hated the way I was treated. I hated the way women were treated. I found the culture terrible. And even though I was excelling, I was like, I don’t like anybody here.
Elizabeth Rossiello: And, you know, my managing director was really cool and very kind to me and also from Queens, New York. But everybody else, I was like, I don’t know if I want a career with these people. So I was doing a lot of research online about what was next. And Muhammad Yunus had just won the Nobel Peace Prize in microfinance. And everybody was talking about this. And even Credit Suisse at the time had created a microfinance division to invest in this new class of finance, which could do good, but be profitable, right? So it was like a baby step. And that’s kind of how I got into it. And I just started interviewing secretly for jobs related to that. And I found one in in Nairobi that sent me there.
Alejandro Cremades: So then let’s talk about Africa, because i mean Africa is quite the yeah you know like a different you know place from Europe. so why so So walk us through the opportunity of going to Africa, because I know that Africa was quite pivotal in your journey to become a founder.
Elizabeth Rossiello: Yeah, and honestly, I applied for a job in Manila. So they sent me to Nairobi. It wasn’t originally my selection. So it was totally random that I got sent there. And you know, I’m a big Chinua Achebe fan, like things fall apart. I was like, why does Africa need me? You know, what is Elizabeth from Queens need to be going here? What can I show anybody there? um So I went pretty humble thinking like,
Elizabeth Rossiello: you know it’s I thought it was strange that Westerners or Americans were you know going to Africa. I always ah kind of identified it with like a miss missionary thing. And then when I got there, Nairobi was booming and there was so much going on and the financial sector was booming. And I was like, wow, this is really exciting. And you know I just did my little job, tried to help where I could.
Elizabeth Rossiello: And I just put my head down and worked and I went bank to bank all over the continents and I would do deep dives into their technology, into their risk, into their trading, into their portfolio, their product, visit their clients. I’d go to visit branches, you know, fishing people.
Elizabeth Rossiello: industrial people all over the continent. In Ghana, I would travel on a bus. In Malawi, I would travel on a motorcycle. I mean, it was really crazy. And then I’d go to the boardroom, and usually in the boardroom, it would be the local microfinance board, and then always a European board member.
Elizabeth Rossiello: And I’m like, what is this guy doing here? And I soon realized all of the funding was coming from Europe and the US in dollar and euro. And not only was it like this weird colonialism set up of like, you know, what was going on, but also it was really an efficient way to fund, especially when these little banks were on lending and local currency. So I found it super strange. And again, I just had that New York spunk where I was like, hey, this isn’t right. This is strange. This is weird. And so I started mentioning it in my research reports and people were like, shh.
Elizabeth Rossiello: And then I started mentioning it when I did trainings. And then I started getting side hustle gigs as like, you know, PwC would come down and do a training on microfinance and they’d hire me to lead it. Or the central bank of South Sudan wanted a trainer to go in and talk about legislation. So I started like doing all these things where I had a platform for talking about what I’d been learning. um And yeah, that became my niche for like seven years.
Alejandro Cremades: So then walk us through that moment where you decide to take reins of your own destiny, of your own future, and become an entrepreneur.
Elizabeth Rossiello: Well, I always say becoming an entrepreneur is a privilege in some ways because a lot of people don’t have the money to just not take an income and to be an entrepreneur. So you’re either a student and you’re broke anyway. You have some money you saved up or or you have privately wealthy because I couldn’t become an entrepreneur. I couldn’t miss a paycheck.
Elizabeth Rossiello: and I was just finished paying off my student loans and had been recently married and wasn’t getting any financial help from that. And I had had two kids right in a row. I had a one and a two year old and I lost my job. They put somebody else, they like closed the office and I i started doing consulting and I couldn’t really get enough consulting work. And I started talking about how everybody wanted me to work for free. They’d come and ask me questions. Oh, just come for a casual dinner and then pump me for information. Come for a little chat. We’re setting up an office here. Pump me for information. You know, all those coffees and and lunches and dinners, even like asking me for email, I was dumb and young and gave away a lot of free information.
Elizabeth Rossiello: And then finally, I met someone who said, you know, Elizabeth, you’re one of the smartest people I know. You have all this talent. Here you are. You don’t realize it. Why don’t you just do something for yourself? And there is no entrepreneur bone. You know, you can do this. So it was really a thought shift. And it came from other people, actually, and some good friends. And then I met a seed investor who was going around my Robie saying, I’m looking for entrepreneurs to start something. And he gave us a $50,000 check.
Elizabeth Rossiello: which not at once, but he paid the bills for like the first three months while they got up and running. And by month three, I had won another $50,000 check from the World Bank. And then a month later, I got investment from venture. So I think if I hadn’t met that original seed investor, I wouldn’t have had the luxury of of starting my own company. And so I think it’s important to say that especially for women, especially for women with children, especially for women who don’t have help, you know, that’s really what I needed to get going.
Alejandro Cremades: So why didn’t that are becoming the business model of the company?
12:46.64
Elizabeth Rossiello:
So right away, we were called Bitpasa at the time. We were the first company in the entire world to trade African currencies against crypto and definitely the first to trade crypto against mobile money. There was a kapochi, which is a really cool wallet that was there, but we were the first exchange and we launched it with a retail model. So Kenyan Shilling to Bitcoin.
Elizabeth Rossiello: delivered straight into the MPASA mobile money wallet. You could buy and sell in seconds. And it was up and running, I think by month three, we had it going. And yeah, we got a lot of international attention. We were were one of the first African companies in the space. I think Luno hadn’t started yet. And it was just a wild ride from literally month one.
Alejandro Cremades: And I know that they there were even some wild events happening on year one. What happened with the government?
Elizabeth Rossiello: So after, well, we had a great first year where the head of Google Kenya invested, Barry Silbert from DCG found me on LinkedIn and invested. I had, you know, calls with Nick Carey and Peter Smith from blockchain, you know,
Elizabeth Rossiello: Everybody like Charles Hoskinson from Adam, Skype called me, how funny is that? You know, all these crypto guys, these like legend guys called me and we were talking and I got flown to Necker Island. All these cool things were happening. And then lo and behold, the local Telcom, Safaricom decided they didn’t like that we were using their platform. Now we were paying the money. We were using their platform like everybody else. was if There was no regulation about it, but the Kenyan government got involved and they sued They sued us. um And so my advisor at the time said, it’s not a fight without a punch. Terrible advice. And and we we sued back and we went into court and I found out what it was like to sue the largest monopoly in Kenya, who holds up like 80% of the stock exchange and is government funded. We got, you know,
Elizabeth Rossiello: trashed in the press, full page ads from the central bank with our names in it. It was wild and we were young and dumb, but we survived.
Alejandro Cremades: Wow. And how do you think that builds you up too? Because I mean, I think that that helps to get that thick skin you know going as well.
Elizabeth Rossiello: Yeah, of course. I mean, it was so crazy, but at that time, you know, the blockchain, came the the crypto community was so, you know, values based, I want to say. We were like, let’s change the world. Everybody’s read the white paper. It was still very early days. And I had been in the system. I had worked in investment banking. I had worked in development finance, which I thought was kind of a scam. You know, like everybody goes there to save the world, but they’re just as, you know, profit minded and it was still a colonial mindset as anywhere else. And I was just like fed up. And I didn’t want to say that I was a libertarian because I’m still not.
Elizabeth Rossiello: But I was really passionate about what we were doing. And we said, we have customers. We’re getting attention all around the world. This innovation is amazing. It will help your own product. I didn’t really i didn’t really believe there was a logical reason why um we should be in so much trouble. I really felt like people were afraid of the new. And that fueled me.
Alejandro Cremades: So then talk to us too about capital raising because you alluded to it earlier, how you started getting investors and Barry Silver silver and you know speaking with other people like Peter Smith. and So all in all, how much capital have you guys raised to date and how how has it been the experience too of going through the motions of going from one financing cycle to the next?
Elizabeth Rossiello: Yeah, well it’s been very tough. First, as a female, where only 2% of capital is even available to me. um And as a female working in Africa, which becomes in and out of favor. And then with a crypto and a payments component, sometimes we’re more crypto or less crypto or stablecoin or not. So depending on the cycle. And now I’ve been doing it 11 years. So when I was young and shiny, you know even though I was a working mom and I didn’t look like a lot of the people people were investing in, I was like the only girl and the only person in Africa.
Elizabeth Rossiello: So very shiny and everybody gave me a seed investment and that round came together pretty easy and then a year or two later when we needed more to expand we got a top-up and Pantera joined us blockchain capital joined us and Then came the years where we were really building where we were saying, you know Everybody wants on and off Rams on this continent that takes time You know, it’s not like you just build in Europe. Even Circle at the time didn’t have a license in the UK and Europe. And in 2015, just two years later, we were licensed by the FCA, one of the first companies that had blockchain involved in their payments plan. And we got that license with almost no funding. And then we started to realize that venture has a short attention span.
Elizabeth Rossiello: So we had revenue, we were growing, you know we’re getting along there, but we were like, we need to go to West Africa. If you really want to do remittances to Africa, you can’t just be in one country. You have to really think about how do you do a pan-African network? And that’s what we started building. And then it became very hard to raise money. And we had a down round and we got non-crypto venture for the first time from Draper and Graycroft.
Elizabeth Rossiello: And you know we learned a lot of lessons through that. We got lean and we really started to grow. And then our revenue started to grow. We made the big leap of leaving Kenya um and my co-founder went to the UK and I went to Nigeria and our team stayed in Kenya, but we kept expanding. We ended up very successfully opening Nigeria, opening up the UK, moving on into other markets. But at the same time, we didn’t really see venture interested in building an infrastructure company.
Elizabeth Rossiello: They were like, we want to see the revenue. And we were like, well, what about the infrastructure? This would be a huge on and off ramp. Payment companies later on will want to build it. But we didn’t have that long-term financing. I think in emerging markets where people worry about risk, they want things done quick, quick. But at the same time, in emerging markets, things take time. So that was a bit of a struggle.
Elizabeth Rossiello: And as crypto came in and out of favor in different cycles, we would either attract crypto funding or be repelled by trad-fi or non-crypto. So it was a wild ride up and down. And then we were doing really well. We had you know huge revenues in one market in Nigeria. We were profitable. Things were great. And then the Nigerian government decided to shut down all international companies and stop the use of the local currency.
Elizabeth Rossiello: as a payments mechanism and they only allowed dollar payments and this was in January 2021 and we thought the world was going to end. We went from you know millions of dollars of revenue a month to hundreds of dollars of revenue in just one month and I think a couple of companies exited the market.
Alejandro Cremades: Wow.
Elizabeth Rossiello: Partner companies were calling, you know backstabbing, calling the regulator. There were a lot of crazy phone calls. you know there all this sort of jockeying for position. I remember it was over Christmas. Everything crazy always happens over Christmas break. And we were like, is this it? And then we realized it’s not it. This is not where we end. And we just dug deep, took the cash we had, bought a company in South Africa we had been working on buying, deployed all of our cash to open up new markets.
Elizabeth Rossiello: And just race into other markets with our really good team. And it was a lot of work and we basically rebuilt the company. So from being ah almost purely Nigerian company with a little bit of Kenyan business, we went into Ghana, Central Africa, West Africa, South Africa, and by that.
Elizabeth Rossiello: the latter six months of the year, we had regained our ARR. So going from almost zero revenue, gen to June, to doing you know over 10 million of revenue the second half of the year alone on all new markets. And after that, we were like, we’re invincible. We can do anything. um And then a lot of investors were like, wow, that was so amazing. No one could have done that. But you know you’re a six, seven year old company. yeah you know We’d rather invest in a brand new company.
Elizabeth Rossiello: So we really struggled with that concept because we had showed what it takes to build on this continent, what kind of resilience, what kind of know-how, what kind of team. And we didn’t really see investors understanding that. And we raised along the way, and that’s why we did eventually a partnership with FTX. um And we eventually got money from the Development Bank of South Africa. But I would say this whole process has left me quite jaded in what people and invest in.
Elizabeth Rossiello: And now, you know, we’re doing around right now. And I think we see from a lot of strategic partners, tons of interest in the infrastructure we’ve built. And they’re like, how did you possibly build this? But along the way, we didn’t see a lot of investors understand that journey or be there to really invest in that journey.
Alejandro Cremades: So, FTX, you mentioned FTX. I mean, that was quite a moment for you guys too. How did you navigate that day craziness?
Elizabeth Rossiello: Well, life has been crazy, so we were used to crazies. Like with any partner, we know who we are. Not to go back to, you know, not to be cheesy and loop it back to the beginning, but I know what my culture is. I know what my values are. Even if I’m communicating to other cultures and other kinds of people, I can’t change, you know, my own values. We stayed true to who we were as AZA, and we built things for them.
Elizabeth Rossiello: but we were very careful not to change the fundamentals of our kind our company. So when they would say things like, hey, let’s erase all the information on our Slack channels, we would be like,
Elizabeth Rossiello: Nope. you know That’s not exactly our company culture, and we’re not going to do that. We built a lot of barriers around us, um and we worked to launch them in a few markets, and there was a lot of press about it, a lot of you know noise, and we enabled their their entry into a couple of markets. so When they went down, it was rough.
Elizabeth Rossiello: We had to do a lot of repair work. We had to work with all our regulators, all of our advisors and authorities and clients, and it took a good year and a half to recover all those relationships.
Alejandro Cremades: so then So then in this case, um I guess you know it’s been quite a while, right? no You have the 16 crypto winters, you have 50X, you have those battles with the government. It’s crazy. But obviously, you know like when when you’re able to go through all these different cycles, it’s because there is a bigger purpose. you know There’s a bigger thing that you guys are going after. And I think that That also you know helps to bring on board investors, to bring on board customers, employees.
Alejandro Cremades: So if you were to go to sleep tonight, Elizabeth, and you would wake up in a world where the vision of the company is fully realized, what does that world look like?
Elizabeth Rossiello: i
Elizabeth Rossiello: Well, I think it’s just the support I think from, I think we need an, well, let’s go back. I think what we need in my own company and companies like ours is more debt investment. We have a lot of equity investment at the seed stage. We have some at the growth stage, but then we don’t have that debt facilities to help companies like ours really grow. It goes back to what I first started when I worked on this continent with all these microfinance institutions lending in dollar euro from far away lenders who didn’t understand their business models. We still have that same problem. We have development lenders on the continent. That’s really it. We have quasi private lenders who most of them get money from development lenders.
Elizabeth Rossiello: So their metrics are still not commercial. And and that’s really it. It’s very hard. to keep going. I don’t think the venture model works when you’re past growth stage. Now you really need debt facilities and we don’t really see that available. We were one of the first companies to take debt from partners. We were one of the first to take it from clients. We were one of the first to take it from alternative methods. We really find ourselves always as the first, really pushing our way on how We can keep this business model um going without the rest of the market being developed. And what keeps us waking up every morning is our clients. We have some of the biggest blue chip clients in the world. I have 34 of the largest remittance companies on planet Earth that trade with through me. And all this nonsense about, oh, blockchain for remittance, this and that, here we go. I’ve got them, 11 years. We also have 10 of the largest global payment companies. If I told you the names, it’s like every single large payment company works with us.
Elizabeth Rossiello: We also have some of the largest processors, credit card. We have some of the biggest corporates, everybody from Heineken and Procter & Gamble to Total. You know, multi-choice. So what keeps me going in the beginning was the passion for the idea. What keeps me going the last eight years is product market fit. Even if we don’t have the best balance sheet, even if we have, you know, bad press from who we dealt with, even if a market is going tough, clients are clamoring for this product.
Elizabeth Rossiello: because they don’t see anything else like it in the market. And they don’t see the kind of coverage we have, the compliance we have, the product we have, and that drives us through the rainiest days. And I would not be getting up and I would not be able to keep a team going with me through all these ups and downs. you know Forget cult of personality or you know team culture, all good things to keep teams together. But if they don’t see the product, they don’t hear clients go,
Elizabeth Rossiello: Thank gosh for you guys. I don’t think that they’re going to stick with you through ups and downs.
Alejandro Cremades: so then So then now that we’re talking about the future, I want to talk about the past, but doing so with a lens of reflection. you know If you were to go back in time you know to that moment that you know you were in Africa and and and seeing all the issues that you were seeing, you know let’s say we go back to 2013 and you have the opportunity of giving that younger Elizabeth one piece of advice before launching a business, what would that be and why, given what you know now?
Elizabeth Rossiello: It would be to network more with people you don’t like. Is that a crazy thing to say? I think I was like, ugh, don’t want to deal with these people. I don’t like them. I don’t share values with them. So I’m going to just ignore them. And then I needed their capital. And so then you’re like, oh, you know, I think take it or leave it. If you want a company that needs financing, you have to know the finding financiers.
Elizabeth Rossiello: you know You have to get to know these funds. You have to network these funds. And I don’t mean just once a year. I mean, you really have to be sending them weekly updates, calling them coffees, meetings, dinners, networking events, all the stuff that is really distracting if you’re a focused operator. And that’s what I would consider myself, a founder operator. I don’t like doing that stuff. I do a lot of press, but I always do it from my office. um You really do need to network because Capital is not fungible. Capital is not efficiently allocated. This isn’t a mathematics class. People don’t allocate capital by a mathematical formulas. They allocate capital through who they know and what they know. And going back to that first example, people only know what they’ve been exposed to. And it’s really hard for some people to see the vision or see you know the future when they haven’t experienced it.
Elizabeth Rossiello: I don’t care how many venture capitalists say they’re innovative thinkers, or they’re out there to seek the future. A lot of them can’t see beyond what they know. And they all look and have a lot of the same experience. So it’s very hard for them to understand. And you know I’ll get together with some other African founders, and we’re always talking about the same thing. Can you believe they asked us this? Or can you believe they don’t understand this? or So I think there’s still a need to communicate across from your special, and this could work if you’re like at the frontier of technology and you’re dealing with venture capitalists who don’t understand your technology. If you’re like in a medical device or you were in AI before anybody thought that was interesting or all these frontier places, whether it’s a frontier geography or a frontier product, it’s really important for you to communicate that in into digestible way and a non-intimidating way and really network with the people who you’ll need going forward.
Elizabeth Rossiello: I don’t always believe that. No matter what, even if you work in a dark closet, if you’re good at what you do, money will find you. You don’t believe that. And that’s something I think that’s a lie we tell founders. If you’re good enough, they’ll find you. No. You know how many really smart kids I met in Senegal or Nairobi who didn’t go to Stanford? They were brilliant, but Stanford didn’t find them. You know you have to go travel there, do summer camps, hire a consultant. Then you get into that school. So I think it’s a real misconception that
Elizabeth Rossiello: It’ll just find you. You have to actively build that road and network and put yourself out there.
Alejandro Cremades:
That’s amazing, Elizabeth. So for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Elizabeth Rossiello: um LinkedIn, Twitter.
Alejandro Cremades: Amazing. Well, that’s easy enough. Well, Elizabeth, thank you so much for being on the Dealmaker show today. It there has been an absolute honor earth to have you with us.
Elizabeth Rossiello: Thank you so much for having me.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at
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The post Elizabeth Rossiello On Raising $80 Million To Build A FinTech Company To Help Accelerate Economic Growth In Africa appeared first on Alejandro Cremades.
In the rapidly evolving landscape of fintech, few stories stand out as vividly as that of Colin Walsh, founder of Varo Bank. He has had remarkable accomplishments, including raising over $1B and running a company with a team dispersed worldwide.
Varo Bank has attracted funding from top-tier investors like Warburg Pincus, TPG, HarbourVest Partners, Lone Pine Capital, and Gallatin Point Capital.
In this episode, you will learn:
- Colin Walsh’s journey from corporate banking to founding Varo Bank showcases resilience and a commitment to financial inclusivity.
- Varo Bank was the first U.S. consumer fintech to receive a national bank charter, emphasizing its role as a regulated, tech-first institution.
- Varo Bank focuses on serving the underbanked, offering fee-free accounts, instant transfers, and automated savings tools.
- The bank’s diversified business model includes strong unit economics and a focus on responsible lending practices.
- Colin raised over $1B for Varo Bank, demonstrating a solid foundation and investor confidence in the bank’s mission and market potential.
- Despite challenges during the COVID-19 pandemic, Varo Bank efficiently scaled operations and enhanced its product platform.
- A strong, customer-oriented company culture is central to Varo Bank’s success. The bank’s mission is to change lives through accessible financial services.
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Your email address is 100% safe from spam!**About Colin Walsh:**Colin Walsh is the current CEO and Co-Founder of Varo Bank. Prior to this, they held various positions at Friends of the British Film Institute, American Express, Council of Mortgage Lenders, and Visa Europe.
Colin has always been passionate about finance and helping others, which drew him to their current position at Varo Bank. He has over 20 years of experience in the financial industry.
Colin started their career at American Express in November 2011 as EVP of Proprietary Card Services Europe. In this role, they were responsible for European Consumer and Small Business Card Issuing across European markets.
Colin was also a member of the American Express Global Management Team. They left American Express in March 2014 to pursue other opportunities.
In January 2011, Colin joined the Council of Mortgage Lenders as Chairman, holding this position until December 2011, when they left to join Visa Europe.
At Visa Europe, Colin served on the Board of Directors and was responsible for the P&Ls of the UK’s largest Retail Savings business. They also led Lloyds’s response to various regulatory challenges.
Colin left Visa Europe in September 2009 to join Varo Bank as CEO and Co-Founder. At Varo Bank, Colin has continued their passion for helping others achieve their financial goals.
Colin has helped grow the company into one of the leading online banks in the United States. Under their leadership, Varo Bank has served over 2 million customers.
Colin Walsh attended Cornell University.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty, hello everyone and welcome to the Deal Maker Show. So today we have a really amazing founder, you know a founder that day you know he has quite the story to tell. you know They are doing remarkable stuff, you know raised over a billion, 400 employees alone in the US, another 300 elsewhere. But we’re gonna talk about you know like what it feels to go from having under 15,000 people reporting under you to all of a sudden,
Alejandro Cremades: you know burning the midnight oil. We’re starting a startup and then also what inspired him to do this, ah how he raised you know all that money, um what differentiates them from other banks. you know Their solution is quite innovative. But again, riding a rocket ship and being able to talk about all the good stuff that we like to talk about, like building, scaling, financing, and so forth. So without further ado, let’s welcome our guest today, Colin Walsh. Welcome to the show.
Colin Walsh: Alejandro, it’s great to be on the show. Thank you so much. And I look forward to telling a little bit more about the borrow story.
Alejandro Cremades: So give us a walk through memory lane, Colin. you know You were born in Westchester. and So how was life growing up in in the New York area?
Colin Walsh: Yeah, it was a it was a great sort of place to grow up as a kid. And, you know, we the good schools and lots of lots of things going on. we We’re close to New York City. um You know, I worked from a very young age, actually. So so I was doing a lot of different jobs as a kid even as a kid. so ah But it was ah it was a very kind of vibrant place to grow up. and And then I went on to college in upstate New York. And so I stayed in the New York area for most of my early life. But then had the opportunity to branch out into the corporate world. I started with ah GE and and moved around a little bit with GE Capital. ah Did my first stint in at Amex in New York. and So back to New York. and and then um
Colin Walsh: I spent time out here in California, quite a bit of time with Wells Fargo, and it was a kind of exciting time to be at Wells. that was right after Actually, I came in right before the merger with Norwest. There was a lot of energy in the in the bank. I was growing businesses inside the bank, and so a little bit of a different world than from today. um And then I got the opportunity to go to London and and move to the UK.
Colin Walsh: spent almost nine years in the UK working at Lloyd’s banking group in the middle of the financial crisis and was able to do some really interesting I’d say challenging things at the time as as the ah banking industry was sort of teetering on the abyss and we had to buy our largest competitor and I played a big role in in integrating those two banks. and And then I got called back to Amex, and I did another tour duty at Amex, which was kind of my last role in the corporate world. But to your point, you know I was overseeing their European consumer business, had countries all across Europe that were ah
Colin Walsh: you know under my watch and it was an exciting interesting role but it was it left me with a real itch to do something that could help ah so many more people so I you know we were designing products for very affluent people in in Spain and in Italy and in Germany and and of and you know I wanted to figure out how to use technology in a way that could help the the so many millions of people that are just trying to make ends meet, that are they’re living paycheck to paycheck, that are trying to get more control over their lives. And so that ultimately is what inspired me to come back to the US and um and start borrowing. And we can pick up on all the nuances of that journey because it certainly has been exciting.
Alejandro Cremades: Absolutely. We will definitely you know dig dig dig into um the whole journey with Vara. Now, I guess you know before doing that, I’d like to ask, you know how do you think a really shaped you to be able to see the financial services world you know from different regions, from different locations? you know Because you were able to experience that in the US, also in the UK, working especially with Amex with different countries too. So how do you think that shaped your worldview and perspective?
Colin Walsh: Yeah, well, it’s certainly helped me understand um you a more nuanced understanding of different consumers in different markets, what they need, how the economics of these businesses work in different markets, how the regulatory structures work. ah But also at the end of the day, you know kind of build empathy for, regardless of where you are in the world, you know people have you know sort of fundamental needs. and and if you are able to help people kind of early on in their lives and and really at any point in their lives feel more in control of their money because that relationship with money is so essential to how people feel about themselves and kind of their own self-worth and and so being able to help provide the tools and the products and you know I had the Fortune of being good fortune of being able to build lots of different innovative products but they often tended to be for people who were already pretty well served and and so the piece that I felt like I could take all that years of Experience around how to make money in these businesses how to understand regulatory um You know how to navigate through regulatory structures
Colin Walsh: of understanding how to how to tap into sort of consumer interest and consumer demand to be able to do something that could really make a difference in many people’s lives. And so so I think it’s been it’s been wonderful to have had those experiences particularly early on in my career and being able to move into different geographies and different types of businesses. And so it gave me a strong foundation to to start this company.
Alejandro Cremades: so then So then let’s talk about a to ah going from 15,000 people to so no people. you know I’m sure that was quite a crazy you know shift.
Colin Walsh: ah trust
Colin Walsh: a lonely yeah exactly awakening when suddenly you know all your privileges of being able to you know fly in in in airport lounges and you know and and early boardings and all the other stuff, like you know all the trimmings and trappings of ah of a big corporate job but ah go away immediately. and Then suddenly you know you’re asking yourself, like wow, who’s going to who’s going to do this analysis? Who’s going to build this financial model? Who’s going to write code, who’s going to write policies, all of this stuff. You look you realize, like wow, you you really have to find that early team to do certain things, but you have to rely on yourself for so many things. And and you know fortunately, because I had those other experiences, I had a pretty broad network. And so I was able to reach out to people in my network, particularly as I was able to articulate what we were trying to do, the problems we were trying to solve, how we were going to go about it. um and then draw in both talent to kind of help get that early start, but also ah investors and and getting um finding folks that believed that the future of banking was going to be digital and that we were kind of writing history and on the right side of of history and and that the world was
Colin Walsh: but moving moving much more towards digital adoption, whether it’s the generational shifts with Gen Z’s or Millennials, or the the huge market of consumers that were just not being served well by the incumbent institutions. And so being able to tell that story, ah being able to demonstrate how that business could get traction by building a very fulsome product offering that was meeting the needs of of consumers much more broadly than just having a narrow app-based solution. And then the importance of of being in the regulated environment and and operating as a regulated institution. So all of those things were kind of in those early days, being able to tell that story, being able to get investors, get people ah excited about being part of the story and a part of the journey um we’re were kind of those first, I’d say the first year
Colin Walsh: uh, was very much, you know, just trying to kind of get all those pieces moving and, and, and go pointed in the right direction. So, and again, I can, I can unpack any part of that and, and then talk about sort of where we went from there. Once we actually had an MVP product, we had first investors in, um, and then how we started to scale the business.
Alejandro Cremades: So I guess for the people that are listening to to get it, what ended up being the business model viral bank? How do you guys make money?
Colin Walsh: Yeah, so we’re so we are of what I would call a challenger bank or a neo bank. I mean, we’re an all digital bank, but what differentiates us from um many of the competitors, particularly here in the US, is that we’re the first and still the only ah consumer fintech that is operating as what I would call a tech bank. So we’re tech first, but we are an OCC chartered national bank. We’re a direct member of the FDIC. We’re a direct member of the Federal Reserve. and We’ll talk more about why that’s important. um And we’re serving everyday American consumers, so people who are striving to get ahead um and and to get you to sort of feel more in control, have more agency in their lives. um And so our business model is about how to
Colin Walsh: create a platform that offers all the full suite of solutions. So if you think about banking, you know just having a bank account and having access to ah free services that you know you don’t have minimum balance fees, you don’t have overdraft fees, all the things that that have been fairly punitive to a lot of consumers. um Having payment options, so being able to move money quickly, and we have a range of ah ways to instantly move money in a secure and a free for fashion. um We offer savings products that are some of the best savings products in the country, so we have a base savings rate and then an elevated relationship rate ah that’s 3% and then it goes up to 5%. We have tools to help people automate their savings, so Save Your Change, which is a roundup feature, Save Your Pay. We offer credit building solution to help people who are either damaged their credit or just starting out and wanting to build their credit. And then we offer ah lending products and budgeting products, all integrated into a simple, seamless app solution. So we really have built
Colin Walsh: that full suite of ah products that a customer needs to get ahead. And as a result of that, we have very strong unit economics. So we make money on the flows. So when consumers deposit their paycheck, they tend to spend most of that money by the end of the until they get to the next paycheck. So it’s either going off the debit card or the credit rails.
Colin Walsh: um They tend to borrow because they might need a bridge or they might have an emergency expense. We also have a range of partners in our app where um folks can go for a number of different services that we might not offer directly so we monetize on the back of that.
Colin Walsh: So it’s a really quite diversified financial model. And over the last couple of years, we’ve been building out the lending side of the business, putting in place the right kind of risk management controls to be able to responsibly build lending. So that’s now a bigger part of our mix. And if you look at some of the other neo banks today, most of their revenue is coming on the back of merchant interchange and particularly debit interchange. um Whereas we have a much more diversified sort of source of monetization in the business.
Alejandro Cremades: What was that moment like when really you know like you felt like you guys had product market fit, where you know things were really working out and you were like, wow, I think that we’re into something here.
Colin Walsh: Yeah.
Colin Walsh: Well, and and in the early days, so we so I started the company. it was It’s going to be nine years ago at the end of October. ah But those first few years were um all about getting product into market. We worked with a sponsor bank. So we worked with a partner bank to be able to launch you know what was essentially a debit card with savings features and ah a range of sort of checking account features. And I almost would like to think of it as like a proof of concept, to be able to say,
Colin Walsh: you know my My hypothesis and the and the thesis was that there’s a large group of consumers who are going to benefit by having more of the low-cost banking solutions, you know all digital, you know available on their phone 24-7, want to have access to savings features.
Colin Walsh: um and that was very quickly adopted by consumers. And so that while we were in that sponsor bank model, we um you know continued to iterate on a number of features, but we could see that the product market fit was coming in pretty quickly because we were seeing the business scaling up. We had relatively low CAC.
Colin Walsh: um And so we knew that like there’s there’s a bear there, like right away. ah But also while we were in that phase of, you know, sort of let’s say testing the business through a ah partnership model, we went through a very rigorous process of applying to become a national bank. And that was a three and a half year process. And so so while we were scaling what I call borrow money at the time, we were building borrow banks. So not only did we have to to go through an approval process with all three regulators. We had to have the right level of staffing, building out the right risk management systems, and building out an entirely new tech platform. And so you kind of watch it got to watch what you wish for, because we got approved. you know And everybody in the world was like, oh, you guys are never going to get approved. But the regulators have never approved one of these. you know And and you know we had the right management team, the right understanding of what it takes to operate in a safe and sound environment. We had the capital backing. um And so we got approved. and then we had to
Colin Walsh: basically migrate that entire customer base onto the new platform while rapidly building out a lot of the product features that I’ve been talking about in terms of credit building and um lending solutions and budgeting solutions and payment solutions. And so all of that was has been built since we opened up our own.
Colin Walsh: in our own bank platform and had much more of that vertical integration. And the economics, the other advantage from the bank standpoint is that we were no longer sharing interchange or having the cost of having a sponsor bank. ah So it absolutely helped us very quickly um you know on the economic side.
Alejandro Cremades: So you guys have raised over $1 billion. dollars you know That’s ah a lot of zeros. So what had what was the journey of ah raising all that money like?
Colin Walsh: Yeah, well, like first, is having um strong conviction from investors who saw the importance of what we were doing and the role that we could play in the industry and the size of the TAM that we’re going after um and and really playing the long game. I mean, really understanding that this is ah this is a you know probably a 12-year journey to do this in in the in the best possible way to get the foundation in place, to get the regulatory ah approvals in place, to be able to build out a platform that could scale um and serving, again, this massive time of consumers. And so so finding you know strong early investors like Warburg Pincus and ah TPG and HarborVest and Lone Pine and
Colin Walsh: um Gallatin and we have a group of you know very impressive investors on our cap table that um are so they see the long term vision and the progress that we’ve been able to make as a company of now we’ve had to navigate through a lot of interesting sort of external.
Colin Walsh: ah factors So right as we’re getting our the final stages, we just got our FDIC approval. COVID hit. you know and Everybody went remote. Nobody knew what was going to happen. and know We saw a flurry of sort of competition because there was a lot of money flooding in for digital-only services. So we navigated not just through the pandemic, but sort of a period of hypercompetition where sort of CACs went up.
Colin Walsh: um And and that then you had this big change that happened you know at the end of 21 into 22 where the markets just really froze up. And so capital was ah you know much more scarce. There was the interest rates started going up. Then you had a bank crisis where several banks like SBB and um First Republic collapsed. and There’s like every sort of, should I say to the regulators, every stress scenario that we put into our original business plan we actually lived through.
Colin Walsh: And so kind of navigating through all of that, you know at one point, we scaled our marketing machine way, way back just to preserve capital and become much more efficient in terms of our acquisition economics, ah focused on our servicing. And we out outsourced and offshored a bunch of our servicing operations, went much more into chat-based and AI-based service operations. We embedded AI into pretty much every part of our customer lifecycle just to become highly efficient while we were continuing to build out this product platform that meets the full range of needs for the consumers we’re serving. And so so it really did take a lot of investment to get the business you know scaled up, build the platform, build the product set, build the technology suite um so that we feel like we are probably better positioned than ever um to become the next you know major player here at the US and in the digital banking market.
Alejandro Cremades: So the FinTech space you know definitely has a taken a lot of um excitement from institutional investors. know But obviously, there has been a lot of um ah lot a lot of newcomers, you know a lot of companies you know competing for the same dollars from those institutions. So I guess in your case, you know to be able to be able to ah to bring on board you know ah such caliber of investors How were you able to position yourselves ah different from perhaps other banks and other solutions?
Colin Walsh: Well, and I think the fact that we ah were bold enough to say that to win in the long run. you need to be inside the regulated system. like I think that was something that certainly resonated with our are big investors that they understood that you couldn’t really try to look for a regulatory arbitrage or have what you know I always described as a bit of an existential risk that if you’re working with a smaller bank and suddenly something happens to either that bank or another program that’s working with that bank,
Colin Walsh: that that then constricts or constrains your activities um for no fault of your own. like that is ah That is sort of an existential risk. And so we wanted to control our own regulatory destiny. We also understood the unit economics that you know by having more of that vertical integration about the tech as well as the banking, that we could deliver stronger unit economics. And yeah I don’t think there was any argument that there is just a massive TAM of consumers, both the folks that are in it sadly and this sort of the time frame that we’ve been doing this it’s only gotten worse for so many people who are living paycheck to paycheck trying to make ends meet they’re looking to lower their costs of banking they’re looking to access affordable credit options they’re trying to build small dollar savings to create more resiliency in their lives and this is just this is everyday americans everywhere i mean it’s the person that’s getting out of the
Colin Walsh: you know amazon delivery van it’s the person walking the dogs on the beach it’s the person stocking the shelves and walgreens i mean these are these are people everywhere in this country that need these solutions and so i think investors understood that there’s a real need here as well as you’ve got this sort of generational collision where you’ve got millennials that are now in their 40s, you’ve got Gen Z’s that are in their 20s that have grown up with a phone in their hands. So like, they’re they’re not going to go drive and wait in line to go to a bank branch. And so so that so that again, going back to the point I made earlier, like, this is kind of on the right side of history, like that, you know, borrow has been skating towards the puck from the beginning. And then just being able to support us to build out the solutions and the technology platform to be able to effectively serve these customers.
Alejandro Cremades: So you know along the same lines of of investors you know and talking about people, you guys have now 400 employees in the US s and then also 300 internationally. um Obviously, 300 is a lot you know outside of the you know where where you have the culture. right And then you have like all these different satellites of cultures you know going on. you know So how do you how do you manage that? How have you guys gone about having a united culture regardless of the location?
Colin Walsh: Yeah, culture is ah is such an important question to ask. And and you know for any founder, um you know regardless of whether you’re founding a company in your 20s or you’re founding your a company later in life, um you know it’s so important to get that right. Because you know for for me,
Colin Walsh: kind of having spent many years in other large institutions, you know, I could see the things that worked well, and the things that probably did not work so well and had an opportunity to sort of build something from the ground up that focused on a set of values that were very, very customer oriented. And so there’s, you know, our our number one value at, at borrowers customer first, and and then we, we talk about,
Colin Walsh: of taking ownership and having respect and and making it better, um continuing to stay curious and like sort of these are the sort of hallmarks and foundation of the culture we’ve built. And as we made decisions over the last couple of years to put certain pieces of our business in different parts of the world, ah being able to have, you know, culture carriers from from within the core of the company to kind of work with those partners to make sure that those values are still lived in those different operations those sort of more remote locations and i did a trip out to we have a group in india and i visited them actually right before the pandemic and they showed up they were all wearing borrow swag and they were like so excited about the things we were doing and that we were about to get the charter approved. And and so um I think it’s important, though, to make sure that regardless of where in the world people may work, that they feel very connected to the mission and the purpose and the values of the company. And that that is something that you know every founder has to work very hard to just make sure that that consistency is there at every step of the way. Because as I described before, you’re going to have lots of twists and turns. You’re going to get confronted
Colin Walsh: with a lot of challenges along the way that you know some you can anticipate some you cannot but it’s the culture that ultimately gets you through and that if you have employees that really believe in what you’re doing and they have a real strong sense of purpose that they are they can be very resilient.
Alejandro Cremades: Talking about believing what you’re doing. I mean, obviously that’s not just from employees, but then also that’s investors and that’s also customers. So if you were to go to sleep tonight, Colin, and you have this news of a lifetime, and you wake up in a world where the vision of VAR is fully realized, what does that world look like?
Colin Walsh: Yeah, to me that world is one where everybody… in this country and maybe at some point in other countries are asking themselves, why am I not on this platform? Why am I not using this solution? Because I think eventually, for me, it’s all about just that sort of mass adoption of of the solutions that we’ve built. Because you could look at our app, you go to the Apple app store, you know we’ve got a 4.9 rating. you know We have some of the best NPS scores in in the country of any bank.
Colin Walsh: um you know so You know, in Google, I think we’re at 4.7 rating. But the customers, you know, actually, it they will they’re telling us this is changing my life. And so when I wake up that morning and I think about what does the world look like, it’s everywhere you go, you see people using the product and excited about it and and, you know, raving about it. And that’s the piece that that that’s the excitement what gets me excited. And I feel like we’re we’ve come very far on that journey. And that’s kind of the next step for us.
Alejandro Cremades: So talking of the future here, I want to talk about the past because obviously you’ve been at it now for about nine years with the bar, which is a lifetime in the corporate world is like a hundred years. ah So let’s.
Colin Walsh: Keep in mind, wells fargo but Lloyd’s was around for 300 years. I think Wells Fargo is over 150 years when Amex, my other employer, is about 150 years. So so like it’s it’s a drop in the bucket and compared to some of these other institutions.
Alejandro Cremades: I hear you, I hear you, batte but hey, it’s ah it’s a long time to be the founder and CEO, like really you know steering the ship. Now, if I was to bring you back in time, let’s say to 2015 or 2014, where you were like starting to think about maybe doing something of your own, like entering the world of entrepreneurship. And let’s say you had the opportunity of having a chat with that younger Colin.
Alejandro Cremades: What would be that one piece of advice before starting a business that you would give to your younger self?
Colin Walsh: I would say it’s definitely not ever going to be a straight path. And to brace yourself for all the twists and turns that come with starting a business. And I think there are probably lessons learned around people. There are probably lessons learned around how to sequence a product build.
Colin Walsh: um Probably lessons learned around unit economics and what are the things that that will work faster versus things that might take longer. And so I think, you know, at ah there’s there’s probably a whole. I’ll write my book someday and you can read it. and You can see you got all all the lessons learned along the way. But ah but I think that the probably the biggest is just.
Colin Walsh: Prepare yourself for the long game and the long journey. And I think, you know, as I mentioned earlier, I think we’ve been very fortunate to have an investor group that that has a lot of belief in what we’re doing um and sees that long game and the long vision as well. but But I think that would probably be the biggest thing is that there’s no kind of, you know, maybe for some people there’s a quick, you know, you start something and then three years later you’re public. ah But I just don’t think that that’s the reality for most founders.
Alejandro Cremades: So calling for the people that are listening that would love to reach out and say, hi, what is the best way for them to do so?
Colin Walsh: Sure. i mean They can we think he first visit our our website at borrowmoney.com, um and they can check out our product and learn more about who we are and and and what we’ve been building. um And then you know I can be reached either through your platform or or through the colon at borrowmoney.com.
Alejandro Cremades: Amazing. well Hey Colin , thank you so much for being on the Dealmaker Show today. It has been an absolute honor to have you with us.
Colin Walsh: It’s been great chatting with you. Appreciate the opportunity.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at
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The post Colin Walsh On Raising Over $1 Billion To Build The First Customer-Oriented FinTech Platform In The US appeared first on Alejandro Cremades.
In the fast-paced world of entrepreneurship, few journeys are as inspiring as that of Christian Talmage, the founder of Oliver Space and Chief Product Officer of Dispatch Goods. From the rural woods of Maine to his rapid ascent in the startup ecosystem, Christian’s story is about the power of intuition and resilience.
Christian’s latest venture, Dispatch Goods, has attracted funding from top-tier investors like Climate Tech Circle, Congruent Ventures, Active Impact Investments, and Andreessen Horowitz.
In this episode, you will learn:
- Trusting your instincts and following your passions can lead to unexpected yet rewarding career paths.
- Entrepreneurship requires embracing uncertainty and taking calculated risks, much like the adrenaline rush of competitive sports.
- Listening to inspiring voices and learning from industry leaders can ignite entrepreneurial ambitions and reshape career goals.
- Resilience and adaptability are crucial in navigating challenges like the COVID-19 pandemic, which can create obstacles and opportunities.
- Building and scaling a business involves constant learning, perseverance, and the ability to pivot when faced with market shifts.
- Fundraising is a challenging process that requires a strong vision, persistence, and staying focused amidst rejection.
- Aligning impact with business value, especially in sectors like climate, can drive meaningful change while building successful ventures.
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Your email address is 100% safe from spam!**About Christian Talmage:**Christian Talmage, based in San Francisco, CA, US, is currently a Chief Product Officer at Dispatch Goods. He brings experience from previous roles at Neptune and Oliver Space.
Christian holds a Stanford University. With a robust skill set that includes Virtual Reality, User Experience Design, Product Design, Entrepreneurship, User Interface Design, and more.
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Read the Full Transcription of the Interview:Alejandro Cremades: alright Hello, everyone, and welcome to The Deal Maker Show. so Today, we um we have a really, really exciting guest. you know We’re going to be talking about following your instinct, unexpected events, you know how you do well by obviously you know aligning the impact also with business value. you know I think that really understanding the drive and the vision and being able to get those two is really incredible, especially in in the world today. um and And again, the building, the scaling, financing, i mean he’s done all types of good stuff. So without further ado, let’s welcome our guest today, Christian Talmash.
Christian Talmage: Hey Alejandro, it’s a pleasure to meet you.
Alejandro Cremades: So originally born in Long Island, but they fairly quick, you move to Maine. So give us a walk through memory lane. How was life growing up?
Christian Talmage: Sure, yeah, living up in Maine, you know, we lived in a pretty rural part of the the country ah back in the woods, very close to Sugarloaf Mountain ski resort that it’s really the only landmark up there. um And I’ve got to say, I mean, know I loved it. It’s a really special place, have a lot of near and dear friends, ah maybe not the most challenging school environment. um But, but yeah, a lot of wonderful things.
Alejandro Cremades: So tell us about your ski racing appetite, because I’m sure that that has shaped you quite a bit you know when it comes to really being an entrepreneur, getting out there, you know wanting to be number one, you know all that good stuff.
Christian Talmage: Yeah, definitely fosters an appetite for competition. That’s that’s for sure. And something I think there’s a a strong corollary between the the risk taking, ah the adrenaline rush of of skiing and putting yourself into these really difficult situations where ah there’s a high potential for injury and there’s a lot of things that can go wrong and you’re really trusting in your own own ability to see you through and I feel like building companies, starting companies, it’s a lot of that same leap. you know You really don’t know what the future holds and you’re taking an immense risk all under the premise that you’re going to figure this thing out and you’re going to pull it all together just in time and hopefully see a really exciting outcome. But um there’s a big uncertainty as you go.
Alejandro Cremades: So you went to ah to college, ah and obviously you had that day in law for math and science. So there was no other than some type of engineering, the degree. So walk us through what was the desire there.
Christian Talmage: Yeah, you know, there’s there’s a lot of career paths that I didn’t even realize ah were were options growing up. I felt like ah because I loved math and science so much and really excelled there, I had a deep interest in in art and design. I thought that meant that I was going to be an architect. I thought that was the only kind of viable career path. And so ah because I was so focused on skiing and the schools that had D1 ski programs I did not have architecture programs. I thought that the next best thing was like, okay, I’m going to study engineering. I’m going to study physics and studio art, and I’m going to leave with ah some some capable degrees and skill sets in those areas. And then I’ll go back and I’ll study architecture, and I’ll go on to you define my career with that.
Alejandro Cremades: So then in your case, you know you decided that the um being an architect or being in the architect world you know was the um the choice after getting your degree. I mean, out of all things, why did you choose you know that direction, that path?
Christian Talmage: Yeah, you know like i like I thought, it ah it combined a lot of the passions of that art and design combined with with technical capabilities and engineering. um And again, I think it spoke to just a ah lack of awareness of what all what the different you know career paths even looked like. um I do love spatial design. I do love ah thinking through structural systems. um But as I got into that space and I you know i really leapt into this this job with um You know, both eyes open, I joined early stages and just kind of through default ended up being promoted really quickly. Got firsthand experience leading, building a commercial, large scale commercial building and realized, wait a minute, this is not what it’s all cracked up to be. I think there’s there’s got to be other more interesting spaces.
Alejandro Cremades: And obviously there was a podcast there that they kind of like turned everything around for you.
Christian Talmage: but
Christian Talmage: That’s right. Yeah, while I was working and while I was busy, heads down, ah you know, drawing and and building construction details. um I was listening to a lot of different podcasts because it’s a great way to you know pass the time where you’re doing these kind of creative activities.
Christian Talmage: Uh, and I really fell in love with the entrepreneurial thought leaders podcast from Stanford. I was listening to folks like Drew Houston from Dropbox, uh, like Ben Horowitz from Andrewson Horowitz, uh, Larry and surrogate these people giving these really inspiring speeches. And it made me feel like, wait a minute. I love creative problem solving. I love technical problem solving. I really want to be building companies. I want to be an entrepreneur. This is, this is maybe what I’ve been looking for and it completely changed the course of my career rather than looking for grad schools and architecture.
Christian Talmage: I began looking at programs at Stanford. I ended up going there to study human-centered design, product design, and taking a lot of business classes along the way, so they just really stoked this entrepreneurial passion.
Alejandro Cremades: You know, it’s really interesting to that they you got the entrepreneurial passion and and and this this whole experience of Stanford It really got you more than anything into into joining the startup world. As a result of that, you started getting involved with the VR space with either ah investors you know on the investment side or with with River Studios or, for example, with Boom. But they ultimately, Boom became your segue into building Oliver Space. So walk us through the sequence of events that needed to happen for you to ultimately say, hey, you know what? I’m going to take ownership of my own destiny.
Christian Talmage: Yeah, it’s a great question. You know, I jumped into a couple startups immediately after school, got some firsthand exposure to what does it mean to build a company, all the good, bad and ugly involved. and it You know, it really takes a lot of will and there’s a lot of things you have to design on the fly. The analogy of putting together the airplane as it’s falling down couldn’t be more.
Christian Talmage: It couldn’t be more apt, um but it helped build confidence, I think, in in understanding what does it actually take to get a business off the ground. And I felt like after a certain period of time, why shouldn’t I just be doing this myself? I i feel like I know what it takes and ah you know have the skills to make this happen.
Alejandro Cremades: So tell us too about a following your instincts, because I know that you’re big into that, you know obviously many, many shifts and turns you know in your career in terms of spaces, industries, and and things. so So you always look at where’s the energy and passion. So walk us through that a little bit more.
Christian Talmage: Sure. I mean, you look at this career path, you see you know some very technical disciplines, some art disciplines, you see architecture, and then you see this trajectory of of different startups and and problem solving along the way. And I think it might feel a little circuitous. I don’t know that it’s necessarily like a clear linear trajectory.
Christian Talmage: um But the way I’ve made those decisions along the way has really been informed by intuition. It’s been formed by passionate and and focusing on the areas that I’m just finding the most energy. And I have to say, I feel like it’s served me really well over the years. It’s been a great way to make sure that I’m incredibly engaged in whatever I’m working on at the time.
Christian Talmage: And I know that whenever there’s a lot of energy derived from the activity, from the building, from learning, I tend to just do it and focus and obsess about it at a much higher degree. And then the rate of learning increases. And so I don’t know that you need to know what your five, 10, 15 year plan is to see really good outcomes along the way and have a great learning experience.
Alejandro Cremades: So then with this, you know essentially tell us you know what happened. you know how how do you How do you get into it with Oliver Space and and and and what was that journey ah to being like, you know this is this this looks like it’s going to be the business model for us.
Christian Talmage: Yeah, it’s ah it’s a cognitive leap for one. ah We jumped into the space, my co-founder and I, when there were already a couple of competitive products on the market, ah this is mostly in the category of rental furniture at the time. It was becoming this interesting space. We had seen folks like Rent-A-Center in the past have very high success with rental models, but what we said is like, wait a minute, this is an old, tired model that is a little predatory in nature, to be honest.
Christian Talmage: uh, with very high, uh, you know, very high rates. Um, can we modernize this? Can we make it a little bit more contemporary for today’s user? My co-founder and I, we both moved multiple times, uh, you know, every year, basically since we had left for college. And we said, wait a minute, your needs are constantly changing. Uh, the demands on your space are constantly changing. Maybe you’re adding, losing roommates, having children, modifying your home for all sorts of various reasons.
Christian Talmage: This model of buying furniture and keeping it for 10 years doesn’t quite make sense. And so the fundamentals felt really good. It felt like we were solving a problem that had a visceral need and it was really easy to look around to peers in every direction and see ah how this was applicable to them. And so we we set out with that problem. We had a couple of templates to work off of, but really the challenge at that point became how do we build something 5, 10, 15x better than what’s already out there?
Christian Talmage: And we focused on holistic design. We focused on incredible ah ease and convenience and user experience. And all of those things took investment. right All of those things were expensive. Fortunately, the margins and furniture are really high. So we’re able to take that, rather than offering sales, we’re able to take that return, put it directly into the activities that we were doing, ah but only to so much degree. So we really had to get scrupulous about how we manage our operations internally. And we helped add a ton of leverage and lower our OpEx by investing in technology that made it really easy to do all these activities.
Christian Talmage: And so that’s where I spent my the the vast majority of my time with the business. And we were able to see some really meaningful returns over a ah short period of time, four years, about 18 million ARR, things were growing fast.
Alejandro Cremades: So you guys also raised 56 million throughout the journey of the of the company. So what were the financing cycles like? How how was how was it like going through the motions?
Christian Talmage: Yeah, it’s it’s always hard. ah Anyone who tells you otherwise has either had a you know phenomenally lucky experience or ah doesn’t know what they’re talking about. um It never really gets easier. There’s always a lot of challenges with fundraising. Sometimes rounds come together, but um you know The stakes get higher, so you hit your metrics. Things are moving really well. You get really excited about the business, but the world around you, the expectations have all changed. And so every stage of the way, you’ve constantly got to prove yourself. You’ve constantly got to sell this vision, and you’re going to hear a lot of rejection. You’re going to hear a lot of no’s along the way. And one of the biggest risks that I see founders and entrepreneurs running into during that time is
Christian Talmage: Letting that become too discouraging, getting taking their eyes off the prize, losing sight of the you know intuition that they have about their customer and the problem that they’re solving, where the opportunity is, and immediately throwing that stuff out the window because some investor who’s looking at it at the for the first time says, I don’t think that’s going to work. Or or have you thought about this totally different aspect of your business?
Christian Talmage: And then before you know it, you’re changing gears, you’re changing product roadmap, you’re making a bunch of decisions based on ah really loose, informed data because you’ve heard a couple of people suggest it and you got to really stick to your guns, know what you’re selling, know your customer inside and out. And don’t let, for lack of a better word, don’t let the haters distract you from the end goal.
Alejandro Cremades: So in your case, you know in the end, um you know you guys, as as you were saying, you achieved the $18 million ARR, but there was a series of unexpected events you know that they hit you guys you know when COVID you know hit the fan. so So talk to us. What happened there?
Christian Talmage: Sure. Yeah, I mean, this comes back to the, it’s always difficult. we um We felt like we were in a very good position less than a year after our founding. We went out to raise our Series A again. We were already doing a million ARR, I believe within about eight, seven, eight months of launch. ah We had a super talented team. We had great customer reviews. A lot of things we’re all pointing towards. This is gonna be a monster round.
Christian Talmage: uh as we start to go out to market i remember distinctly i’d just gotten back i’d gotten married uh and we we didn’t go on ah we took a very like brief little couple day mini moon uh and then knew we got to come back and uh and focus on fundraising because we had such a great opportunity right then and there And we’re lining up meetings left and right pretty shortly thereafter, you know, this this growing rumors of ah something happening in China that felt very far away that seemed like it was problematic, but um
Christian Talmage: You know, not something that we would have to worry about here in the US very quickly became something we were worrying about in the US and it was scaling. We’re hearing a lot of reports about how devastating this was and meetings were just dropping off of our calendar left and right. Meanwhile, there’s all sorts of information. Everyone is very unclear about what’s going on.
Christian Talmage: There’s rumors that this is something that can live on cardboard and other surfaces for you know months at a time. All of our manufactured goods are coming from China at that time. And we said, we we took a hard look at each other and said, wait a minute.
Christian Talmage: Did we just lose this business because of some act of God that we never could have predicted, even though all the signals were pointing towards a massive success story? And it was humbling ah to say the least. It was a great reminder that ah you need to fight every single day. You can’t rest on your laurels. You need to reinvent yourself ah constantly if you’re going to grow and scale a business. And so we had to pause. We had to pause operations briefly. We paused our marketing.
Christian Talmage: Uh, we took a hard look at the world and said, like, what are we going to do? My co-founder and I took massive pay cuts, uh, to try to retain as much as the team as possible. But we frankly had no idea what the future was going to hold and.
Christian Talmage: only with the benefit of some time. We kept building some, we continued on building product. Our operations and marketing team said, you know, strategy is how white we operate in this new world. And ah shortly thereafter, we started to hear Wayfair reporting their best quarter ever. ah Amazon is starting to report massive furniture sales. And we said, wait a minute.
Christian Talmage: This is maybe our time to shine. So we started leaning back into it. We start to do so deliveries. We’re doing it in a much more like controlled manner. We’re not going into people’s homes in the same way. ah And soon we started to realize this is actually a huge tailwind for us. ah People are thinking a lot about redesigning their homes and and buying furniture. So um it was a ah dark moment and a scary moment. But again, perseverance pulled through.
Christian Talmage: And ultimately we were back to the races and and we ended up having a really good a couple quarters thereafter.
Alejandro Cremades: So then what happened, you know, next?
Christian Talmage: Next, you know we scale the business and we grew grew quite large. We started to run into a challenge of who actually is gonna acquire this business ah once you had become so heavily capitalized. ah Now all of a sudden there becomes a very real question. There’s relatively few buyers in you know the retail and furniture space.
Christian Talmage: And the question becomes, what are they actually purchasing you for? What is it that they’re going to get from acquiring you? Is it your customer cohort? ah It’s certainly not our catalog that have much broader teams working on their furniture selection.
Christian Talmage: much more refined strategies there. um Is it our operations? you know They have large distribution centers nationwide. And when we start to realize it’s it’s this underlying software tooling package that allows you to do ah returned goods very easily to build this compelling customer experience where people can shop online and have products swapped in and out very easily, where we can refurbish them and behind the scenes and then sell them again like new.
Christian Talmage: And so all of that technology was where we started to hang our hat. um We ran into some challenges because this was a a model shift. Uh, and when you are building a big retail oriented company, uh, the tendency is to raise a lot of venture debt so that you can finance that inventory, which we of course did. And we had, you know, compelling terms, but when we start to switch our business model, that became a point where a lot of these venture debt providers could actually say, well, this is something that we’re not comfortable with. We’re going to actually ask you to to pay off all of that principle. Um, and you got to think about the timeframe here. We’re in the middle of.
Christian Talmage: Late 2022, early 2023, financial markets are not looking very exciting. We’re seeing a massive market downturn, a very big correction across technology. ah And very shortly thereafter, we start to see big banks. ah We’re seeing bank runs. We’re seeing Silicon Valley Bank running into challenges. And so venture debt providers start to look wherever they can capture any sort of revenue. And so despite the fact that things were were looking very exciting, ah we start to get capital calls, people asking to pay down that principle, which we did not have enough capital in the bank to do.
Christian Talmage: And shortly thereafter, we’re forced to default. So like again, another one of those reminders that it never gets easier, no matter how exciting the project experience looks, no matter how good the metrics are. um It’s an act of perseverance and there will always be some major challenge that’s pushing against the success of the business, trying to fight with you ah to help you, you know, try to hold you down. So you’ve got to persevere through all this stuff.
Alejandro Cremades: What was that day where you guys decided that it was time to pull the plug? How was that for you?
Christian Talmage: Oh, it was terrible. It was, ah it was incredibly ah disappointing. I think, you know, after a certain scale, you start to think, you know, there’s a range of different outcomes that you might see, but you’re no longer worried about an outcome. You’re no longer worried about a complete business failure. um It really becomes a matter of economics. And, you know, is this going to be a really exciting opportunity for me and my family? Or is this going to be ah something that like we see meaningful return from, but,
Christian Talmage: to come to think that we were going to walk away empty-handed from this one was a big bummer for all of us.
Alejandro Cremades: No kidding. No kidding. so Obviously, the chapter comes to an end. and with when a new chapter When a chapter closes, a new chapter opens. and In this case, you know it ended up being dispatch, and with dispatch with dispatch goods. so why Talk to us about dispatch goods. What are you guys doing at dispatch goods? you know I know that you guys have raised the about $8 million. bucks um you know We obviously hope to hear something new that I know that is going to come out you know soon.
Alejandro Cremades: but they but But again, talk to us about what you guys are doing with dispatch groups and then also with aligning impact with business value.
Christian Talmage: Sure. Yeah, I mean, we’re very excited to announce some some recent round closures for dispatch goods. But for now, we’ll we’re not going to talk too much about any of those details. um Yeah, it was a very exciting business. After Oliver, I spent a little bit of time really focusing on climate and the different opportunities in that sector as a whole, which is really you know a microcosm of the economy as a whole.
Christian Talmage: And where were there really interesting places to play? Where were there interesting places where you could ah provide meaningful climate impact? You know, my wife and I, this is very important to us. We have children. ah We see the writing on the wall. There’s a lot of work that needs to be done on that front. How do you do that and how do you accomplish those types of goals while still wanting to build a successful business, still being a competitive entrepreneur, as we mentioned before?
Christian Talmage: and wanting to have a really great financial outcome. And I have to say there’s very few businesses that I’ve seen that actually fulfill both of those goals. incredibly well. You see a lot of very impact driven companies that don’t have economics that pencil out, don’t have they have major scalability concerns that are very much ah early kind of research oriented ideas that haven’t yet been proven in the market. And then you have great business models that are kind of cursory climate related
Christian Talmage: um Maybe they touch on it in a you know practical way or maybe it’s a lot of greenwashing and it’s difficult to tell sometimes until you really start to kick the tires. ah Dispatch for me was um you know one of a very short list of companies that actually fulfill both of those goals in a very compelling way.
Christian Talmage: Dispatch is taking a circular approach in the same way that we had applied circularity to Oliver as a mechanism for um you know eking out meaningful returns and and better utilizing inventory and ah products that have been you know mass produced. ah Dispatch has been doing a similar exercise with an industrial focus.
Christian Talmage: We’ve been focusing on secondary packaging, particularly in the world of cold chain, where these products are very expensive line items for any perishable goods. So think ah meal and grocery, DSC meal and grocery, ah home health products like Ozimpic and Wigobi. Any of these different products that are getting delivered to your doorstep that have temperature sensitivity, ah they’re all getting filled with gel packs, insulation, a lot of these products to help keep them at um at safe temperatures. And so all of this stuff has been optimized for a single use, right? ah You pack your your boxes and your packages with all of this extra material and consumer throws it all away. One, that’s an expensive line item. It’s about 10% of revenue for these companies. um Two, it’s a terrible customer experience. We talk to end users of our
Christian Talmage: enterprise customers all the time. One of the single things that they report the most is not the sustainability benefit of ah of reusing these things, but it’s the convenience of being able to just give it back.
Christian Talmage: and not having to think about what to do with these goopy chemical gel packs that they aren’t really comfortable taking apart and throwing away. ah There is a waste component. There is a guilt component to just using this product and throwing it all away. It’s a lot of material. And a lot of people just don’t even like breaking down boxes. They run out of space. ah They live in managed buildings or apartments where there isn’t that much room in their in their recycling bins. And so being able to give all this stuff back turnkey and knowing that it’s going to a good use and it’s going to get used again I think is very gratifying for people. So basically we can hit on three major bullets here which are ah cheaper for our enterprise customers substantially which they love obviously a better customer experience which their consumers love and so then they love ah and has all of this added green benefit just because
Christian Talmage: you know by nature of the business model, you’re reusing these things five to 15 times. It’s inherently far more sustainable than you know buying this stuff overseas, putting it on a ship, freighting it over here from China, and then throwing it away at the end of its cycle. ah So it really felt like a rare breed of business that actually has compelling economics, high potential for scale, and an exciting climate impact along the way.
Alejandro Cremades: That’s amazing. so i get say Now, you know let’s say I was to put you into a time machine, and I bring you back in time. you know Let’s say I bring you back in time to that moment that you were thinking about you know maybe starting all over space. It’s 2018. Let’s say you’re able to have a chat with your younger self, and you’re able to give that younger self one piece of advice for launching a business. What would that be and why, given what you know now?
Christian Talmage: One piece of of of advice before jumping into that business. One. I’d say it’s gonna be really hard. I don’t think that would have surprised me at the time. I don’t think I would appreciate what that actually means. It’s one thing to know. Conceptually, it’s another thing to live and breathe. When the book stops at you, um there are no more excuses. There is no more, I’m gonna look for another job. it becomes ah you know It becomes a huge part of your life. And so knowing that there is just that high degree of dedication,
Christian Talmage: Again, I don’t think I would understand, but I would want to hear it reminded to me. Maybe I would trust my my older self, my you know future self. um The other piece, you know maybe a good place to to think about is just the importance of culture, the importance of bringing on the right early hires. ah Talent is obviously incredibly important. That’s something that I think is easy for everybody to wrap their brains around.
Christian Talmage: Um, but that culture gets defined with every new employee and whether it’s implicit, whether it’s explicit or not, uh, there will be a culture. And so knowing who are these people who you really love working with, who are these people who you can throw a million problems at the wall and, uh, you know, spend late nights, weekends, just grinding through really difficult scenarios with and, you know, kind of trust with your life in a bunch of different ways. Um,
Christian Talmage: That’s what the people you want to be founding these companies with. That’s what’s going to help you be successful. I can’t say enough about what a game changer that kind of attitude is.
Alejandro Cremades: So, Christian, for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Christian Talmage: Sure. Shoot me a a message that you can respond to me either on LinkedIn, uh, or shoot me a message at dispatch goods, Christian at a dispatch goods dot.com. Um, especially if you’re interested in, we’re going to be hiring for a lot of new roles very shortly here. Um, everything across engineering, data operations, um, finance, uh, shoot me a message. I’d love to talk to you if you’re interested, want to do some very big impactful work. Um, yeah, that’s the best way.
Alejandro Cremades: I love it. Well, hey, well, Christian, thank you so much for being on The Dealmaker Show. Really, really appreciate it. you know It has been and really an honor to have you with us, so thank you so, so much.
Christian Talmage: Alejandro, thanks for having me. I yeah i enjoyed the conversation and and I love the podcast. Thanks for the help.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Christian Talmage On Raising $56 Million For His Furniture Company And Now Building An End-to-End Service To Offer Businesses Circular Packaging Solutions appeared first on Alejandro Cremades.
In the ever-evolving world of technology and startups, few stories are as inspiring as that of Ray Chohan, co-founder of Patsnap. This company has raised over $300M in funding and is now on a path to becoming a leader in AI-enabled intelligence platforms.
Patsnap has attracted funding from top-tier investors like Vertex Ventures, CITIC Industrial Investment Group, Shunwei Capital, and SoftBank Vision Fund.
In this episode, you will learn:
- Early career experiences in sales taught Ray the invaluable lesson of embracing rejection as a growth opportunity.
- Building a successful team at Patsnap was rooted in leveraging existing networks of trusted, talented individuals.
- Focusing on core strengths and simple strategies is crucial for sustained growth.
- Patsnap’s success in raising over $300 million was driven by strong organic growth and a compelling market narrative.
- Leading by example was key to fostering a high-performance culture at Patsnap, especially pre-pandemic.
- Ray learned that sticking with the original team can be more effective than hiring new leadership based on conventional advice.
- Patsnap’s future lies in becoming the leading AI-enabled intelligence platform for R&D and patent teams globally.
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Your email address is 100% safe from spam!**About Ray Chohan:**Ray Chohan is a Co-Founder of Patsnap. He leads efforts in mergers and acquisitions for the R&D-facing market and focuses on creating new partnerships and go-to-market strategies.
Before his tenure at Patsnap, Ray Chohan held several positions at Datamonitor, most recently as head of business development.
Besides his work at Patsnap, Ray Chohan is an investor and mentor at Outlier Ventures, where he focuses on investments in AI and LLM-enabled technologies.
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Read the Full Transcription of the Interview:Alejandro Cremades: righty Hello, everyone, and welcome to the Dealmaker Show. so Today, we have a really amazing founder, a founder of that you know basically has been at it now for close to 13 years with his company. i mean It’s really an incredible rocket ship. They’ve raised over $300 million. dollars and We’re going to be talking about, for example, like how you go about team building, how to think about product, you know and and and how to have that product focus. Then also, how to think about culture too, you know especially cutting through the noise, through what you hear out there, and really having the fundamental building blocks you know to be able to get that team involved, as well as some of the learnings you know and lessons learned, building the business, especially you know during the last years and how to think about the years to come. So again, brace yourself for a very inspiring conversation, and without further ado, let’s welcome our guest today, Ray Chohah. Welcome to the show.
Ray Chohan: I am Andrew, looking forward to it. I’m a big fan.
Alejandro Cremades: So originally born in London, and born in in in West London, and you had there a family you know where your mother was a seamstress, your father was a postman. Give us a walk through memory lane. How was life growing up for you?
Ray Chohan: Yeah, really blessed, really wonderful parents. My parents ah originally came from North India, so a district of India called Punjab. Their parents prior to that, well, on my mum’s side, her parents came over from India, I think, in the 50s and 60s. So that typical story Alejandro of kind of first generation immigrant, my parents being. And yeah, just a simple working class upbringing, but lots of love, loads of extended family. And yeah, I realize with age how precious growing up with parents like that, but also lucky enough to have extended family where you learn really good values and lots of lifelong learning lessons. So yeah, just a really simple upbringing and yeah, nothing to complain about. I feel very blessed.
Alejandro Cremades: So you got started you know with media sales out of all things. know so So how are those early early days for you in the and the workforce?
Ray Chohan: Yep. So I joined an organization called Sterling Publications. I think it’s now branded as s SPG Media. And that was a ah throwback organization. So like most young kids at 21, 22, you’re just trying to find your feet, dip your finger in a couple of pies where you think you might find a passion or some form of future. And so I ended up a media sales organization.
Ray Chohan: in the city of London in a part of town called Paddington and and just London as a location globally even till this day is the home of publishing so Sterling was a kind of a 70s 80s and 90s story of being one of the largest B2B publishers within Europe and the world at that time But that organization was a very hardcore, ultra hardcore sales environment where it was pure cold calling and you’re literally trying to get a hold of chief executives and you’re basically selling ad space in magazines, in B2B publications. And I ended up in the medical device space. So as a young kid trying to learn the industry, learn the personas, learn the latest paradigms within a space. but
Ray Chohan: I found that immensely difficult and actually that particular role i ended up getting fired. I remember it very clearly two days before my sister’s wedding. So I learned a ton. I had an amazing manager there, a chap called Andrew Lashu basically treated me like his son and allowed me to stay in his team for close to six months, even though I wasn’t really performing. But in that six months Alejandro learned so many lifelong learning lessons when it comes to commercial and framing a proposition. So that just that time and hint and his patience.
Ray Chohan: I have kind of lifelong gratitude for that period because that six month bootcamp gave me a tremendous platform to go on to a company called Data Monitor where I spent eight years and spent most of my twenties and and how ah had an absolute blast and and built some really really good meaningful relationships.
Ray Chohan: So that was kind of the media sales six months stint in my career.
Alejandro Cremades: Thank And I guess you know when you were doing all that cold calling, one of the things that is very interesting here is founders being exposed to rejection, and they especially during the first times you know that you’re rejected. It’s not easy. It’s not fun.
Alejandro Cremades: I guess when you’re cold calling, especially during the first calls, you know it’s it’s tough. It feels weird. you know You’re embarrassed. You’re shy. I guess, how was that you know for you of going through those motions of really experiencing people rejecting you and rejecting why you had to offer them or sell them?
Ray Chohan: Yeah, that’s a great question. I would say, yeah, that’s probably the most hardcore environment at those 10 years in your early 20s where you have to learn and in time and it’s painful, you start to learn how to embrace rejection. I think that’s the key part. Getting rejected just happens, right? It’s just a force of nature when you’re trying to cold call and reach out to senior decision makers. But then it’s that mental journey of going home and you’ve just got punched in the face 50 times where you literally haven’t got a hold of anyone, no one’s really listened, your colleagues around you can see you’re struggling, that’s part of it as well and then going on that mental journey over the weeks and months where you just start getting used to
Ray Chohan: and in a way ah appreciate the learnings of rejection and kind of learning that bounce back ability and and coming going in the next day with a fresh mind and still keeping that positive attitude. So I would say that’s a key part of it. I think those learnings Alejandro, stay with you throughout your whole career and generally just life because you’ve absorbed so much rejection early in your career on a professional basis.
Ray Chohan: you then get used to getting punched in the stomach generally, right? And you learn that like it’s not game over, it’s more of a ah learning opportunity. So that’s my view on rejection and why I think it’s such a blessing to have that experience, especially when you’re young.
Alejandro Cremades: So the most immediate step, you know, before you got started with becoming an entrepreneur was data monitor. no and And you there spent over ah eight years and you scaled for the ranks, you know, during this time. and And I guess, you know, this was part of the foundation of Pat Snap too. So what was what was the experience there and and how would you say that this you know helped you to get going, you know, with your with your entrepreneurial journey too?
Ray Chohan: Yet for me, that was my foundation. Without Data Monitor, I won’t be speaking to you today. ah Again, and it’s also a little bit of luck as well. The timing of when I joined Alejandro, the business was at a really exciting time. Also, the batch, the cohort I joined, that vintage, was now when I see them on LinkedIn, was an insanely good talented vintage. So during that organization in February 2004 and the cohort I was joining in were.
Ray Chohan: amazing. So that that organization, just to give you the color, what what that business did, that that was a market intelligence provider. So the current analog might be like a gardener, a forester, you might know those intelligence providers and in the IT space and and in the finance world, you might hear on Bloomberg. But basically, it was the information services industry. But what was really special about that company was when I joined I joined right at the beginning of a ah three to four year exit plan. So I joined the business where the chief executive is very talented and gone on to do currently great things was being mega aggressive on organic growth and trying to be really trying to expand market share. So what that meant is
Ray Chohan: but we’re being very aggressive on the sales side and also creating a very compelling, generous environment where if you’re good, you can have potentially life altering. And in some circumstances, for some of my colleagues, life changing outcomes in a relative Small space of time so what ended up manifesting is me working with a bunch of very hungry really talented guys and girls Having loads of fun every day Alejandro was an absolute blast I felt like I was at a cool university but getting paid to attend and then the learnings I was surrounded by so many talented people and some a lot older, some similar age, some younger. And I was literally just learning through osmosis, sitting sitting on a sales floor, learning and growing. And again, because the timing was very fortuitous in that company, opportunity to rise up the sales organization, get global exposure, get exposure to multi markets, life sciences, automotive, the academic markets. So all of that entire experience
Ray Chohan: gave me the foundation and confidence to when I met the founder and CEO of Pat Snapperchat called Jeffrey Tiong to have a lot to offer to joining a founding team and and a building a company. So yeah, Data Monitor was a life changing and I’m forever grateful.
Alejandro Cremades: how does it How does it happen you know with Patzna? Because I know that there was a little story there in Disney World.
Ray Chohan: Yes. So at my last ever business trip with Data Monitor, because the company prior to 2012 got acquired by ah by a large group called Informa, I was attending a convention that I went to every other year and just walking around. And at that time I was reflecting on, look, I need to do something different. I’ve got this entrepreneurial desire desire. I can’t code. I can’t program.
Ray Chohan: and I’m in a situation where I’ve got a really strong commercial background. I need to meet a product orientated stroke technical ah founder. So at this convention, I was just kind of cruising the floor and I walked past a booth and and that was a Pat Snap booth. And that’s where I met Jeff. We just started getting talking and he was like, look, I’m trying to build out the business, but commercialization and turning on the revenue has been a challenge which is typical for for most technical co-founders we just started getting talking so and off the back of that started building out the founding team so he was like like looking for someone more from a commercial background i’m saying i’m looking for more of a product guy i’d love to work in startup land and that’s where the kind of ah the engagement was consummated so i went back to the uk off the convention and basically started that the past that commercial
Ray Chohan: push from my apartment. And again, very fortunate was able to attract a colleague from Data Monitor. Again, he was very hungry, very driven, very talented to also join me to kickstart the commercial machine.
Ray Chohan: so So that’s the kind of genesis of PatSnap in terms of commercially scaling.
Alejandro Cremades: So what ended up being the business model? How do you guys make money at Pat Snap?
Ray Chohan: So before I joined the mission, it was a free public website at that time. And then when I joined the journey, the goal was to take it behind a paywall, classic SaaS Alejandro, annualized upfront payments and a pure SaaS subscription model. So, and we’ve stuck with that model literally ever since and earlier this year, we passed over a hundred million bucks in ARR and that kind of commercial business model hasn’t really changed since then. So pure SaaS.
Ray Chohan: typically annualnular annual upfront payments, and typically customers will subscribe for a year, and in some cases might go for a two, three-year contract.
Alejandro Cremades: so then So then for you guys too, you know like what was that? um And you were alluding to it. you know like How did you guys go about having consistency about building the team and and also not listening to the typical text VC advice?
Ray Chohan: Yeah, that story’s interesting. So the beginning thesis, If I look back was very correct. So I really leveraged my data monitor network to try to invite and get really talented people into the business early on. I was successful in kind of selling that story and getting people who are 10X better than me to join the business. And they’d done a great job. A bunch of them were were in the business for four, five, six, seven years orientated in commercials. Some done slightly different roles, but net.
Ray Chohan: me leveraging my existing network of people who are really capable and also I trust was like pivotal it from that kind of zero to 40 million bucks in ARR where I think we made the typical mistake and I’ve learnt now it’s quite a typical mistake is getting sucked into that kind of textbook advice of okay you’ve gone past your original team, you now need to hire someone who’s got said experience, said resume, more of a dashboard type revenue leader to scale to that next level. And my learning was, in most situations, but but I can comment on our context, that wasn’t the right decision. Like not continually backing your team, that got you there in the first place to the next stage.
Ray Chohan: is a great is is a painful mistake and it took us a good three, four years to get that momentum because during that time we hired a new management team in 2019, lots of change, a lot of the original guys started leaving the business and it was kind of a very transitional period I felt we really lost some of those original roots in the business and it was just a painful and expensive learning lesson so my takeaway is like think very clearly before you start thinking about making adaptations changes to the original team to help which helped get you there in the first place so and um and I see that similar mistake across so many startups who
Ray Chohan: end up running the same typical VC playbook and end up paying the price and and it’s an expensive price.
Alejandro Cremades: So tell us too about culture, you know because obviously we’re talking about people, let’s talk about culture you know and that foundation and also cutting through the noise to have the proper culture in place.
Ray Chohan: Yeah, I mean, culture to me now, I think about post pandemic. So leading up to pre pandemic, I would say 2012 to 2018 to 2019, we had a healthy, relatively simple, purely focused on high performance culture. So we did get to complicated and overbearing on sending culture messages. I think a lot of the culture was we had really talented people Alejandro and a lot of them led by example. To me that was probably the best way to create a culture right by doing and I was lucky enough to have some amazing people in the team in sales management, in customer success. We had small part of the product organization in Europe at that time as well. So people were just leading
Ray Chohan: By example, rather than hiring a flashy HR person and doing fancy ppts talking about culture so it was very much by example where things changed a lot was during lockdown where.
Ray Chohan: maintaining that performance, maintaining that rig of that pace became really difficult because you were trying to build and scale and manage a team virtually. And I think for us, we lost a lot of that original culture during that period, probably like a bunch of other companies right, because you’re recruiting and retaining basically in a virtual world, which was a new muscle for anyone to learn and flex during that period. So coming out of lockdown, when we started getting face to face,
Ray Chohan: we’d learn, holy shit, we haven’t probably hired correctly. And now we’ve got to rebuild again, but more in an in-office style and be closer to the detail. And again, from 21 to late 22, that was a body of work to realign and bring back that high performance culture. While managing all the hangover from the money printing, 2021 was peak woke, peak,
Ray Chohan: Oh, employees, there’s employees that everyone’s just challenged by the littlest thing. And as you probably saw, right, a bunch of technology companies going, God, we’ve got this debt now on just being too laissez-fait with our standards. So we spent a good one and a half years trying to bring back that accountability, that self-starter culture and and responsibility within the team. And I think now Touchwood going,
Ray Chohan: um i Look at 2023 onwards, I think we’ve brought a lot of those people might call it old school Alejandro, but some of those classic values back and that’s manifesting in the revenue performance for us.
Alejandro Cremades: So then, as we’re talking about people too and culture, ah let’s talk about VC, you know, raising money because you guys have raised over $300 million. What has been the, what have been the motions to and the cycles that you guys have gone through, you know, in order to to be able to bring those investors as part of the journey?
Ray Chohan: Yeah, I would say i mean if ah if I break it down into the early round, so if I look at our Series A and B, that was pure revenue-based investor attraction, right? like We had exceptional organic growth back between 2012 and 2016. And at that time, if you recall, all those kind of early stage investors Let’s face it, where they really lean in is looking at momentum and good compound quarteron quarter on quarter growth, stroke annual growth. And we had those numbers in the bag combined with a really compelling narrative.
Ray Chohan: of a fast-growing market, which had exceptional fundamentals. Well, I mean fundamentals. We sell into the R and&D and patent space, and that industry, literally for the last 30, 40 years, if you look at corporate R and&D spend worldwide, Alejandro, that number’s gone north for the last 50 years. It’s bulletproof, recession-proof. So we had good ARR growth.
Ray Chohan: backing into an industry and persona which has exceptional fundamentals. So from Series A to Series C, I would say that was the nuts and bolt bolts of attracting some really good brands in the venture markets. Post that, I would say during that pandemic period, and 2021 was a ah champagne year and crazy year for everyone, let’s face it, right? But we were able to somehow sustain meaningful organic growth during lockdown. So we were kind of trending right on the fairway of attracting great investors and we feel very lucky to have SoftBank on board as kind of one of our lead investors and and various other names. so
Ray Chohan: So I would say in 2021 it was that 2020 momentum and revenue still trending well and then being in the right place at the right time to raise a meaningful round at a meaningful valuation. And that puts us in really good stead this year and hopefully going into the future. So
Alejandro Cremades: I’m talking about the future. You guys have recently gone through the motions of what you know things are going to look like you know in the next decade. So I guess in that regard, if you were to go to sleep tonight, Ray, and and you wake up in a world where the vision of path snap is fully realized, what does that world look like?
Ray Chohan: Well, the ultimate north star for us is becoming the lead AI enabled intelligence platform for R and&D teams and also patent teams around the world.
Ray Chohan: We’re on that journey now. So if you look at our value proposition, we have a horizontal value proposition where we have customers from automotive to FMCG to aerospace and defense to advance manufacturing. But also four or five years ago, we’ve built a life sciences business, which sells to biotech and pharma, that part of the organization is an absolute rocket ship at the moment. So that whole AI-enabled drug discovery, drug delivery, we have some tremendous intelligence capabilities in that market and some very unique value edges in that space. Also, we’re doing the equivalent in material science. So again, stepping back,
Ray Chohan: we think this decade will be a spectacular decade when it comes to advanced materials discovery. So next generation materials which enable quantum computing, bringing back supersonic air travel at the price of a premium economy ticket, all of that are fundamentally material science problems. And again, we’ve got AI enabled intelligence intelligence tools attacking the materials market. So if i like if I hopefully projected to four or five years,
Ray Chohan: I’d like to think Pat’s that is considered one of the main AI enabled intelligence platforms which are the gold standard for R and&D populations and companies and also IP teams at technology companies around the world.
Alejandro Cremades: Thank you.
Alejandro Cremades: So talking about the future here now, I want to talk about the past, but doing so with a lens or reflection because you know close to 13 years that you’ve been pushing this you know gives for a lot. I mean, 13 years in startup world is like 200 years in corporate, right? So I guess you know throughout the cycles that you guys have gone through and all of that, imagine if I was to bring you back in time. you know Perhaps I bring you back to Disney World. you know Maybe you’re still in one of those rides, you know having a blast, you know wondering about the future and And let’s say you’re able to sit right next to your younger self, to that younger ray, and you’re able to give that younger ray a piece of advice, one piece of advice, before launching a business. What would that be and why, given what you know now?
Ray Chohan: Good question.
Ray Chohan: Focus. Keep it simple and execute well. One one learning I found, and I’m not a victim to this, I sometimes the instigator of this because it’s my personality, you can sometimes get attracted by shiny toys.
Ray Chohan: where you’ve got momentum in a particular market, things are going well, but human nature is curious, isn’t it? You want to do more, you want to amplify what you have. And I sometimes found when you lose focus and you get sucked into certain rabbit holes, all with good intention, the next situation can sometimes be negative because you’re going away from your core.
Ray Chohan: You’re going away from what’s giving you that momentum and that quality in the first place. So focus, focus, focus, and thinking long-term, I find yields healthier results.
Alejandro Cremades: So like keeping it simple, can you can you um double click on keeping it simple?
Ray Chohan: That would be a takeaway for me.
Ray Chohan: Yeah, so an example being, look at this current AI paradigm, right? Like there’s so many ways to slice and position yourself in this new technological wave we’re in, right? And I sometimes think even in this current AI enabled paradigm, many software companies are trying to be a lot more complex with what their AI capability can offer then the needs from the customer are required. So for example, let’s look at summarization, right? Like if you look at OpenAI and various other tools, people are completely blown away out of their chairs on summarizing long form text, right? I’m sure you use it in your media business Alejandro, and I’m sure you’re probably using some of it within your your your podcasting.
Ray Chohan: The opportunity within summarize ah workflow is huge. That’s quite a simple use case, right? And I think a lot of businesses, and probably one of them could offer that in their platform, but then jump onto the next thing without even going deeper on that part of machine learning and what that can offer the customers. So that’s what I that’s what i mean by double clicking on keeping it simple. If you have something good, spend more time with it.
Ray Chohan: like go deeper on the use case go deep from the technology don’t just jump and go okay we’ve cracked that because you haven’t cracked that the opportunity to grow revenues in that beachhead which is working there’s a lot more juice in the lemon a lot more and i think software companies in particular fall victim to getting momentum and then quickly jumping on to the next fruit on the tree not knowing they’ve probably walked away from
Ray Chohan: a piece of fruit which has a lot more juice and a lot more value to be created. but That’s what I mean by keeping it simple and executing well.
Alejandro Cremades: I love it. So, Ray, for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Ray Chohan: LinkedIn. LinkedIn is probably my go-to. So just Ray Chan and Pat Snap and you can find me. I’m not as active as I used to be, but in terms of checking in daily, yet always a big LinkedIn fan. So that’s the place to find me.
Alejandro Cremades: Amazing. Well, hey, well, Ray, thank you so much for being on The Dealmaker Show today. It has been an honor to have you with us.
Ray Chohan: Cheers, Alejandro, take care.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Ray Chohan On Raising $300 Million To Build An AI-Powered Innovation Intelligence Platform To Enable Better Business Decision-Making appeared first on Alejandro Cremades.
Carlos N. Escutia’s entrepreneurial journey is an exciting story of experiences drawn from diverse roles across countries, industries, and business models. It is a fine example of adaptability, resilience, and strategic thinking.
His latest venture, GroWrk, has attracted funding from top-tier investors like K20 Fund, Hustle Fund, Act One Ventures, and Allied Venture Partners.
In this episode, you will learn:
- Growing up in a family of entrepreneurs in the textile industry shaped Carlos’ problem-solving mindset and adaptability.
- Carlos’ exposure to U.S. and Mexican markets provided a seamless cultural experience and business understanding.
- Working in investment banking taught Carlos the complexities of large-scale business problems and the importance of pattern recognition.
- Carlos transitioned from investment banking to entrepreneurship, co-founding Banverde, a green bank focused on renewable energy financing in Latin America.
- The COVID-19 pandemic forced Carlos’ company, CasaOne, to pivot dramatically, highlighting the importance of flexibility in business.
- Carlos emphasized the benefits of bootstrapping GroWrk, focusing on sustainable growth and self-sufficiency over rapid VC-driven expansion.
- GroWrk’s mission is to revolutionize IT lifecycle asset management, providing global companies with AI-powered tools for efficient and informed decision-making.
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Your email address is 100% safe from spam!**About Carlos N. Escutia:**Carlos N. Escutia is the CEO of GroWrk, a modern-day furniture subscription company focused on serving businesses and urban dwellers who like to access and experience, rather than own, pretty much everything.
Prior to joining GroWrk, they were a partner at DG Energy Capital (now Banverde), the first private equity fund solely dedicated to finance the development of the residential and industrial solar distributed generation sector in Mexico.
Carlos also served as co-founder and head of business and operations at CasaOne from January 2017 to January 2020.
Carlos began their career as an investment banker with Wells Fargo Securities in May 2011 and later joined Results International Group LLP in November 2009.
In June 2009, they completed a summer associate program at Barclays Investment Bank. Carlos has also been involved with CAAAPITAL as a non-executive partner and investor since February 2015.
Carlos N. Escutia has an MBA in Finance, Entrepreneurship & Innovation from NYU Stern School of Business and a B.A. in Business Administration from Tecnológico de Monterrey.
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Read the Full Transcription of the Interview:Alejandro Cremades: righty Hello, everyone, and welcome to the Deal Maker Show. so Today, we have ah another founder that has done it multiple times, you know and successfully so. you know it’s It’s interesting how he’s done it from like the capital racing side, you know racing like crazy from VCs to then, you know maybe more the bootstrapping side of figuring out how to achieve product market fit. you know Also, we’re going to be talking about how to be flexible and adapt to the new changes, as well as building a fully remote team and the rapid changes in the market. So without further ado, let’s welcome our guest today, Carlos Escutia. Welcome up to the show.
Carlos N. Escutia: Thank you, Alejandro. A pleasure to be here.
Alejandro Cremades: So originally born in the US, you know family of entrepreneurs you know with roots out of Mexico. Give us a walk through memory lane. How was life for growing up for you?
Carlos N. Escutia: That’s correct. yeah no I was born into a family of entrepreneurs. ah you know Growing up ah ah you know firsthand, I saw my father basically building a business from scratch in the textile industry. And so because of that exposure, for me, it was kind of you know natural, right, just to be in in the place of solving problems and building something from scratch.
Carlos N. Escutia: And so yeah, that exposed me to multiple things. I had the opportunity to live in both countries, the US and Mexico growing up. And so it was kind of a seamless experience for me.
Alejandro Cremades: So then in your case, you know what what was it like the experience also of seeing you know the family going through the cycles of building and scaling a business?
Carlos N. Escutia: Yeah, it was interesting. you know For a lot of folks, sometimes that’s ah that’s a good thing. And for others, not so not so much. and And I think that I saw everything you know across the board. My family was in the industry and the in the textile industry space. And so with manufacturing facilities in Mexico and and when the Asian you know market ah entered a you know Latin American markets, basically, you plummeted the price the the prices of these products. and so Effectively, a lot of businesses went out and and that you know forced my family business to pivot. Hey, hey you know instead of manufacturing, we should get into trading and start building you know manufacturing relationships in China itself. and so That is kind of what expanded
Carlos N. Escutia: Just the capability to understand what the challenges are and adapting to those changes fast so that you can continue growing, I think it was a critical lesson you know at an early age.
Alejandro Cremades: So eventually, you you ended up packing the bags and went to New York where you did your MBA at NYU. And then from there, you went into the into the investment banking world out of all places. I’m wondering, like during the investment banking years, what do you think were some of the things that you learned more towards pattern recognition you know with companies that work versus some that don’t?
Carlos N. Escutia: Yeah, that’s a great question, Alejandro. And I think that, you know, the main thing for me was what it is like to work with, you know, 14, 500 companies, right? The type of problems that you have to overcome when it comes down to data, you know, security, ah and just processes altogether. Everything is a lot more complex. Everything is a lot more detailed than what I was used to. But but look, I mean, ultimately,
Carlos N. Escutia: It’s the understanding that there are just so many markets out there that you’re not even aware of. and Once you get exposure, at least you know when I was in investment in banking side of things to so many business models and the size of the markets and the problems that those companies have, you do come to realize that you know no matter what stage your organization is, you will always have problems.
Carlos N. Escutia: You have problems when you’re a small company, you have problems when you’re growing, you have problems when you’re a mature, you know, a publicly traded corporation. The nature of problems just evolves, right? And you just need to be able to figure things out and work with people that have that mindset of problem solving because they will always be there.
Alejandro Cremades: So then, so then in this case, you know, for you, you know, you ended up a, you know, working there, but then you saw the opportunity to go back to Mexico, you know, which was working for a corporate, they like relaunching their corporate venture fund of a hundred mill. I mean, that’s quite the, uh, the turnaround of events there.
Carlos N. Escutia: Yeah, for me, it was just marrying kind of both things, right? I had the entrepreneurial kind of side of things growing up and then the financial services exposure working in investment banking. So the opportunity came up for me to join a newly created venture fund in Mexico City. So I relocated from New York to Mexico City to get that going. And it was super interesting experience. I wasn’t really into the you know startup ecosystem in Mexico yet. So I had the opportunity to actually you know get to know it and and familiarize with what was happening there and make a few interesting investments in multiple industries. right ah but But really the the biggest thing was realizing you know this is the path. right I got to get back into an entrepreneurial path and that was kind of the springboard and know to do that.
Alejandro Cremades: So walk us through how did that happen? At what point do you realize, hey, I think I got ah i gotta to build my own destiny here?
Carlos N. Escutia: yeah Yeah, I mean, just being in the middle with a bunch of entrepreneurs, looking to solve problems, interesting problems, you just realize, hey, you know this is a lot more exciting than you know you know them where I am right now.
Carlos N. Escutia: And so I partner up with a couple of ah people from Chile living in Mexico to ah start what is now one of the what is one of the largest green banks in in Latin America.
Carlos N. Escutia: called Bamberta and so Bamberta really is an evolution of initially we were looking to provide financing solutions to you know large renewable energy infrastructure projects and then it shifted into hey you know there’s an opportunity with yeah you know solar distributed a sort of distributed projects where the financing is not there, the tax credits are not there like the ones that you see in the US or elsewhere. So there’s an opportunity to make an impact there and help in that transition. And so we launched this firm and we raised some capital and it is an ongoing concern. We are providing funding for small businesses to install
Carlos N. Escutia: you know solar panels and help them lower their energy costs and accelerate this transition from you know fossil fuels to renewable energy. So that’s that’s been a very exciting ride. and And so that’s what we did. I mean, right after I left the venture fund, I did this and then an opportunity came up to a join a startup from the very beginning in San Francisco in the furniture space. And and that’s that’s the reason why I relocated back to the States.
Alejandro Cremades: Now, it’s it’s it’s quite the phone call not that you receive because here’s the phone call you know for you to join you know this co-founder in this new chapter, but you’re also leaving behind you know a company that you also you know founded yourself. I mean, I’m sure that was not an easy decision.
Carlos N. Escutia: um for sure. but But one of the things that you know, you got to keep in mind is that
Carlos N. Escutia: There are certain things for certain people, and and you know I am one of those folks that really likes the challenge and is really always kind of tuned to where the opportunity is located. If it makes sense, you know not be afraid to chase it. don’t don’t really married to one place or one location. If you see an opportunity, if you really get make sense of the upside ah potential of doing something that is exciting, you know really go for it. right so That was really my decision. At that point, my thought process was, hey, you know we already got this off the ground. It’s ongoing. you know The value that I can bring to this project
Carlos N. Escutia: At that point, you know it’s it’s in a way limited ride versus joining a new thing from scratch that is exciting. right and so that’s That was really kind of the the yeah the thought process behind taking that step. and so I moved to San Francisco to get this going.
Alejandro Cremades: So what happened next?
Carlos N. Escutia: Yeah, so with so we we started a company and I joined this company as a co-founder and head of operations, a a company called Casa One. Casa One was a yeah furniture rental platform and that we were able to raise capital from actual partners and freestyle ventures and a bunch of well-known investors. and and Really, the objective was to provide a SaaS-like solution for furniture, right? Instead of you spending all this capex and furniture, especially for short-term hospitality companies, you know, turn it into an operating expense by leasing it from us with a tech platform.
Carlos N. Escutia: So that’s what we set out to do. We scaled this company really fast. We raised up you know a lot of money, about close to $70 million. dollars And you know where we’re where we’re serving customers like Airbnb and you know competitors to Airbnb in the same space, furnishing entire buildings all over the US. And so that then that business just scaled pretty fast and and everything was going very well right until the pandemic arrived.
Carlos N. Escutia: The pandemic arrived and it just stopped every single thing around hospitality.
Alejandro Cremades: So what happened then?
Carlos N. Escutia: And so our largest customers were in the hospitality space. And since we were not getting revenue from anywhere, you know that company basically hit a hit a wall. And it was not only us, it was every single competitor that we had.
Carlos N. Escutia: So ultimately, every every company had to pivot or shut down in that space. But as we were building Casa 1, one of the kind of issues that I came across scaling it is that we started hiring employees outside of the Bay Area, San Francisco to be precise, because it was a lot more cost-effective, especially in India. right and so you know I had to deal with a lot of issues of, how do you equip this you know key members that are not in office? and you know We still need to you know take care of them and ensure that they are.
Carlos N. Escutia: up and running at all times right and so then i just noticed that there were a lot of companies were doing exactly the same thing as i as i were hiring and you know asia land america europe because it was more cost effective this was all before the pandemic then the pandemic arrives and it accelerates you know.
Carlos N. Escutia: everything you have seen ah around remote you know distributed work from years to months, right? And so we were right there at the right time building this idea when we launched where now everybody is remote, now everybody needs to figure it out or work from home or you know whatever. And now you have to deal with all this IT t you know complexity. How do you manage the equipment, ah deliver it, maintain it, et cetera. So that is really but what put us on the map and we gained traction pretty fast early on.
Alejandro Cremades: So I guess before we dig deep into growth work here, but I want to ask you, I mean, and with Casa One, what um what a turnaround of events. So you go from raising 77 million like crazy growth, super success to all of a sudden.
Alejandro Cremades: all of a sudden COVID really, you know, hitting the reset for you.
Carlos N. Escutia: yeah
Alejandro Cremades: I mean, I’m sure that that was for you to, at a personal level, quite the roller coaster of emotions and and and and quite a journey for you. How how was that for you?
Carlos N. Escutia: that’s That’s a great question, and and it is true. i mean Ultimately, you do try to separate it, and I think in hindsight, you know you you see it kind of like, yeah, it was it was the best thing that could have happened, right? But at the time, you know it really sucks. That’s a reality. i mean you It sucks that you know customers you know are shutting down. you know you have to let go of people and just to try to survive and you know you have to manage expectations with your investors and deal with you know very difficult conversations, including with your co-founders. I mean, the infight and all that, that naturally happens when you know stress levels are you know that high, right? ah but But look, I mean, ultimately, you do what you can and and and at some point, you just need to
Carlos N. Escutia: take a call, right? Like, hey, this is gonna go somewhere or is it time for you to, you know, go in a different direction and just go for it?
Alejandro Cremades: So eventually you ended up going in a different direction and here we are with grow work for the people that are listening. What is the business model of grow work? How do you guys make money?
Carlos N. Escutia: Ah! So Growwork, again, was based out of like ah my own experience scaling custom one, right? and And really what we focus on is on providing IT t a lifecycle asset management solutions for companies of all sizes. We work with you know startups all the way to publicly trade a company with thousands of employees globally.
Carlos N. Escutia: right And so what we helped them do is that we helped them automate everything from IT equipment procurement to delivering these devices, these assets to ah their employees or contractors anywhere in the world in over 150 countries, as well as providing a help and support 24-7, logistics solutions, retrieving, delivering devices and storing devices, managing end of life,
Carlos N. Escutia: it you know ah It needs everything at the touch of a button through the grower platform. That’s in a nutshell what we do. It’s a big need. It’s ah it’s a growing need as more companies go global by hiring, you know, remote or distributed workers or contractors. And we are in the middle of it all.
Alejandro Cremades: Now, you’ve taken a different direction with grow work when it comes to financing the business, you know especially having been used to raising all that money with Casa One, 77 million as we were talking about.
Alejandro Cremades: You know you are now you know used to, ah let’s say, the um the the VCs, the top VCs, you had the relationships. Why not going the hyper growth route again?
Alejandro Cremades: Why did you choose the bootstrapping route?
Carlos N. Escutia: yeah Yeah. No, I mean, and then it’s one of those lessons, right? ah Going back to your your other question of of what what was it like, right? Going through that rapid growth and then, you know, hitting a wall. I wanted to make sure that With good old work, we, in fact, were building a business that could sustain itself, that did not depend on investor money or external you know capital to to make it work. That was the first thing. so Instead of going out of market and trying to raise as much as we could early on, yeah we knew that this solution was a lot more complex. And and and actually, you know, it goes hand in hand with with my previous experience, because with GrowWorks, we deal with logistics, right? We do have a SaaS platform, there’s a lot of software in involved, but you do deal with the real world. And that was my experience with CasaOne, where we’re dealing with the real world of managing
Carlos N. Escutia: you know, furniture, storing furniture, delivering furniture. It’s the same thing, but now in the IT space, we’re managing the assets, the actual laptops, you know, monitors and all that stuff in 150 countries. So that is kind of the parallel to what we’re doing. But I wanted to make sure that in fact, you know, this was self-sustainable and we did not depend on any external capital. So that was my focus early on. And we really, for grower, cannot raise that much capital within bootstrap, almost bootstrap. ah from early on and and we’ve been scaling you know pretty nicely. We are you know we have been cashflow positive on and off. you know We are a 100 plus team you know globally distributed and you know continue to rapidly accelerate our road. So it’s it’s just a night and day which
Carlos N. Escutia: you know As you know, um the market has shifted radically from the time when we were when I was at Casa 1, where it was easy to raise tens of millions of dollars. Now, you know and in today’s world, it’s so difficult that you know unless you’re an AI and have a nice story and experience,
Carlos N. Escutia: do you do see those those funding rounds, right? But now it’s a lot harder to raise capital. And so that is that place in our favor, because we build a ah business that you know has a great unit economics, you know it’s capital efficient. And it’s pretty easy to establish a conversation with a growth equity investor, venture fund or strategic and just show them, hey, this is what we’re building, this is what we’re doing, this is how big the market is and how we continue to expand. So if we wanted to raise capital, it’s just a lot easier these days. And the fact that we didn’t raise at a ridiculous valuation early on, you know, also makes that possible, right?
Alejandro Cremades: How do you go to about managing risks when you are a bootstrap company? Because when you have um you know VC money, you have a little bit more in the bank you know to take risks. What about when you know you don’t have those resources? How do you go about managing risk and making sure that you’re not making the mistake? Because mistakes you know when you’re bootstrapping you know could be lethal.
Carlos N. Escutia: Yeah, for sure. Look, I mean, there’s there’s level of, um we’re not 100% bootstrap, right? We did raise some capital. I think the biggest difference is you just don’t go out and raise a big round or as like um the biggest round possible early on, right? You actually go the other round, you try to raise, you know, 250, 500,000, you know, just to prove and make sure that you have a business that there is value, right? And once you have that, you know, you got the data, and you’re able to prove that there’s something there, then you know, you can figure it out and and and determine whether it makes sense to race more, right? And in a more conservative way, instead of the traditional route of just race as much as you can, and you’ll figure it out, you know, how to how to justify, you know, the
Carlos N. Escutia: those rates were hitting those those expectations, right, that growth expectations. So now, you know, the world has shifted in that it’s not only growth what you’re pursuing, it’s actually, hey, are you making money? Are you actually going to be able to make money anytime soon, right? And so that has been our focus from day one. And because of that, we haven’t been in the necessity to raise more capital since we have been organically growing from the same growth that we’re generating.
Carlos N. Escutia: So I think that’s the biggest shift right now. So what we but we have done, it’s kind of what’s happening with most companies these days where it’s not really grow at all cost anymore. and It’s like, hey, can you make money, right? And and and and that’s really what the the focus for investors is in today.
Alejandro Cremades: Got it. So I guess for the people that are listening too, how do you go about hearing the um vision? So if you were to go to sleep tonight and you wake up in a world where the vision is fully realized, what does that world look like?
Carlos N. Escutia: Yeah, look, at specifically specifically about Growwork.
Alejandro Cremades: ah work
Carlos N. Escutia: So look, we’re building a next generation IT lifecycle asset management platform. What does that mean? It means that every single company is shifting to a cloud solution to automating as much as possible of their day-to-day processes that they typically have to run you know internally and that costs a lot and it’s very and are very inefficient. right So what Growwork is doing is that we’re building a platform that is AI-powered with the capability to predict what your needs will be in the near future so that you can always optimize your capital expenses and be a lot more efficient with scaling your company
Carlos N. Escutia: ah the in a way that you know provides a great experience to any employee or a contractor, no matter where they’re working from. So you know really solving for what we do with an IT, t it’s it’s important for global companies today. And so you know the the the vision that we have at GrowWork is,
Carlos N. Escutia: you should have 100% control over every single decision and that you make around your IT t infrastructure without any gaps. right What that means is you should have all the data that you need in front of you and you should be able to take informed decisions to guide multi-million dollar investment decisions with the highest confidence possible. So that’s what we we focus on. Every single customer that we serve, you know their budgets for IT are in the tens of millions of dollars. So it’s not a small thing. and And by us making that more efficient, we make a big difference in the trajectory of their growth.
Alejandro Cremades: And what about building a fully remote team? you know There’s probably a lot of people that are listening now, having you know distributed teams, maybe not even an office.
Carlos N. Escutia: just
Alejandro Cremades: you know How do you go up about that?
Carlos N. Escutia: Yeah, I know. that’s ah That’s a great question. And actually, you know I would say that one of the reasons why a lot of companies are embracing distributed work in a way, um you know hybrid work, it’s because it’s just cost-effective. right you know You will see this, and you you see this every every day with our customers, or anecdotally, if you talk to other founders, you will know that there are hiring team members in Asia, Latin America, Europe, do things that traditionally the US would cost you hundreds of thousands of dollars right ah for that same level of skill. And you know increasingly, organizations are just empowered to do that simply because the tools exist today to enable that. And we ourselves are part of that ecosystem right of a number of solutions out there in the market that enable companies to do this today.
Carlos N. Escutia: The nature of work has shifted dramatically. Its flexibility is demanded by employees, right? And it it just makes sense from an economic standpoint for an organization to embrace that as well. And so that is the reason why no matter how much you hear about this efforts to return to an office, there will always be this remote flexibility, right? It just makes sense from an economic standpoint and from an attraction and retention standpoint ah yeah of ah of of the talent that you need.
Alejandro Cremades: So then so then for this as well you know what about adapting to changes you know because right now market is crazy you know coming out of Kobe crazy valuations you know things are shifting. What about adapting to changes. how how How should a founder think about that and also how have you guys gone about that.
Carlos N. Escutia: Yeah, no. And I think get up going on what I was saying earlier, you know that that change that we have seen in the market really has fueled a lot of this you know flexibility that we’re seeing. yeah So one of the use cases that we see commonly with our customers are Companies in the US primarily that you know are downsizing in the US simply because their costs are significantly high and they need to restructure those costs. And so what they do is that they just hire in lower cost economies. And that’s just the reality right of of the world we will live in.
Carlos N. Escutia: And so you know the the flexibility to adapt to a new world where your skill level has to be on par at a global scale, and you know you need to be competing with the best of the best at that level, you know it’s a big change for a lot of people, especially white collar workers in the US.
Carlos N. Escutia: ah So, you know, you need to really adapt and and and and understand now that, you know, opportunity is everywhere and this applies to companies and to individuals. And, yeah you know, that is what helps you to adapt to whatever, you know, is thrown at you all of a sudden, such as the market you know downturn, right, where you’re just forced to do this. and so a you know, just change and flexibility to change and adapt fast is really what, you know, makes or break anybody. And I’m trying to tie it to this idea of remote work because it’s really what’s fueling what’s happening in today’s world.
Alejandro Cremades: So now, if I was to bring you back in time, let’s say to that moment where you were getting out of the corporate venture you know arm and and going at it as an entrepreneur, let’s say you had the opportunity of having a chat with your younger self and being able to give your younger self one piece of advice before launching a business, what would that be and why, given what you know now?
Carlos N. Escutia: Yeah, that’s a great question. and the The answer would be, you see a lot and you read about a lot, a you know, how do you prove your ideas, right? And how do you get something to market and and and and the most valuable data that you can get is just really being out there in front of prospective customers ah as fast as possible.
Carlos N. Escutia: right? ah And really, you know, sell them an idea and understand what their problems are. We’re trying to figure it out. What are the best possible solutions for those problems that they’re facing? The big disconnect that sometimes happens is that you you think of an idea, oh, this is going to be great. And but you don’t you don’t even know if there’s if if what problem this is specifically solving, right, ah without talking to those potential customers. So The sooner you can get to that point, you know the better. I guess a big difference in connecting it to what we have done is that in my case, you know I was scratching my own itch when I started you know grow work right based on my own experience. so Now you can just bridge that gap by just going directly to where you see the problems that you think you can solve with new technologies and you know really test those ideas out before doing anything else. Otherwise, you can spend a lot of time and money ah just to realize that you know but they didn’t even make sense to begin with.
Alejandro Cremades: Absolutely. So Carlos, for the people that are listening, I would love to reach out and say hi. What is the best way for them to do so?
Carlos N. Escutia: Yeah, you can reach out LinkedIn or Twitter. I’m on both a channels. but Yeah, Carlos is good. Yeah, you know, growwork.com also. Yeah, feel free to reach out and and look, I mean, ultimately, you know, I’m always happy to connect with the with founders who are just getting started or, you know, I myself,
Carlos N. Escutia: I’m part of multiple groups here where we just exchange ideas and you know think about you know problem solving all day every day. right it’s It’s what we do.
Alejandro Cremades: Amazing. I love it. well Carlos, thank you so much for being on The Dealmaker Show. It has been an absolute honor to have you with us today.
Carlos N. Escutia: Thank you, Alejandro.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Carlos N. Escutia On Raising $70 Million For His Furniture as a Service Company And Now Bootstrapping An AI-Driven Platform To Streamline IT Asset Management appeared first on Alejandro Cremades.
Richard Schenkel’s story reflects the power of resilience, strong work ethics, and a boundless entrepreneurial spirit. He has been a founder and has now turned into an investor operator. In this exclusive interview, he talks in detail about building, scaling, and financing his companies.
Richard’s latest venture, Phoenix3 Holdings, has invested in top-tier companies like Infuse Hospitality in Chicago and Fairgrounds Coffee & Tea.
In this episode, you will learn:
- Richard Schenkel developed a strong work ethic from a young age, working in his father’s luncheonette from the age of eight.
- His entrepreneurial spirit was evident early on, with ventures like selling printed business cards door-to-door as a child.
- His corporate experience at Marriott gave him invaluable lessons in culture, operational control, and financial management, which he later applied to his ventures.
- Schenkel took significant calculated risks in his 30s to transition from corporate roles to entrepreneurship, leading to the founding of multiple successful companies.
- He emphasized the importance of resilience, particularly during the challenging early years of building a business when resources are scarce.
- Schenkel believes defining and permeating a robust organizational culture is crucial to a company’s success.
- Timing and market conditions were key factors in Schenkel’s decision to sell his company, leading to a nine-figure exit and subsequent ventures.
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Your email address is 100% safe from spam!**About Richard Schenkel:**Richard is the Founder, CEO and managing director of Phoenix3 Holdings LLC, a strategic growth partner that elevates lifestyle and distributive services companies in senior living, health care and corporate sectors. Richard launched Phoenix3 Holdings in the Fall of 2023.
As the Founder and CEO of Unidine Corporation (est 2001), Richard established himself as a disrupter and insurgent within the senior living, behavioral health, corporate, and healthcare verticals.
In 2017, Compass Group USA partnered to acquire Unidine, bringing it under its umbrella as a world leader in food service management. Richard led Unidine through the full life cycle of business development from privately funded to private equity to capital group.
Richard is a visionary who has been recognized by team members and industry leaders throughout his dynamic career. In 2011,
Richard was named an Ernst & Young Entrepreneur of the Year. He personally received recognition from The Rodale Organization as one of the 100 people changing health and wellness throughout the world.
Richard sits on several boards and boasts a strong track record of active involvement in companies as a leader, mentor, and strategic industry disrupter.
Richard graduated from the University of Wisconsin with a Bachelor of Science degree and majored in Food Service Administration.
After college, Richard worked at the executive level for industry giants Aramark and Marriott Corporation, where he gained valuable industry experience that laid the groundwork for his future disruption of the industry.
Richard and his wife live between Miami and the Massachusetts area. He enjoys skiing, biking, and spending time with his children and grandchildren. He is a collector of wine and enjoys traveling.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty. Hello, everyone, and welcome to The Deal Maker Show. So today we have a really exciting founder, founder now turned the investor operator. We’re going to be learning a lot about building, scaling, financing, and his story is remarkable. you know He got to work you know very early on at eight years old, ladies and gentlemen. So really a spectacular journey, very um inspiring you know career as well.
Alejandro Cremades: And I think that you’re all going to be very much enjoying the conversation today. So without further ado, let’s welcome our guest today, Richard Schenko. Welcome to the show.
Richard Schenkel: Thank you so much. So excited to be here.
Alejandro Cremades: So raised in New Jersey, sorry. So Southern Northern New Jersey. Now, give us a walk through memory lane. I know that the you got to work quite early in your life. So tell us, you know, give us a little of a walk through memory lane there and and how is life growing up over there.
Richard Schenkel: Gosh, you’re making me feel old now when I got to go down memory lane. I grew up in no Northern New Jersey in a town called West Orange, New Jersey. ah And went my dad had a luncheonette in editin Newark, New Jersey, and at the ripe old age of eight, ah the expectation back in those days where we need help in our family business and got to go to work for him on Saturdays and Sundays ah until ah I was 15 years old. So I think ah when I look at my work ethic,
Richard Schenkel: I think it certainly was strongly influenced by him. oh So on that end and now have ah two other siblings and grew up in a kind of a middle-class type of home back then.
Alejandro Cremades: so So you got started, you know, quite early with working, you know, at eight years old at 2 a.m., you know, on the weekends. so I mean, that sounds wild.
Richard Schenkel: ah Yeah, I don’t think my kids would probably and be very excited about doing that. I think it was a different day and era back then. ah that you didn’t have you you didn’t have as much choice as we give our kids today.
Richard Schenkel: it was in I would say, Alexandra, there was no choice. it’s cut you’re You’re going to work, and when I finished, my brothers filled in, and I think it was a typical family-run business by my dad, and he needed all the help.
Richard Schenkel: I mean, and it it was a different era, for sure.
Alejandro Cremades: So what quite early on, I mean, even even at that time of you when you were when you turned 15, you were working at um ah at a different place. you know In this case, you know it was, I believe, what was it?
Alejandro Cremades: Like a nursing home? Or what what was the place where you were working at?
Richard Schenkel: Yeah, yeah good good memory there.
Alejandro Cremades: 15, no?
Richard Schenkel: oh I had ah left my dad’s employment, which I think was a good thing, to kind of spread my wings and went to work at a ah skilled nursing facility in West Orange, New Jersey called Daughters of Israel, which ironically is still there.
Richard Schenkel: ah so i know went in there applied for a position and I never forgot this at like 15 and met with what was then called the food service director and said I’d like to know more about what it’s like to work in a ah you know a senior living facility. I spent a number of years working there all trying to well have someone as a mentor back then to teach me things And, you know, never regretted it. And I think that’s why I wound up spending still to this day, lots of time in the senior living vertical.
Alejandro Cremades: So at what point do you realize, because I think it was quite early on, one day I’m going to be an entrepreneur.
Richard Schenkel: Oh, I will tell you, I think it’s in your blood at a very young age. And I remember at the ages of nine and 10 and 11, going out door to door, and I had a printing press in my basement. And I would print business cards stationary and sell it to the neighbors. ah And that that’s how I you know earned extra dollars. And that was one business. ah Then did a multitude of, then started a yeah dry cleaning organization. I just think it’s either in your blood, in your risk taker,
Richard Schenkel: You can’t make somebody an entrepreneur. They either want it or not. And they they understand they that there are no rules.
Alejandro Cremades: you
Richard Schenkel: There’s nobody telling them what to do. they They’re their own boss. And they’ve got to have that motivation and work ethic to really do it.
Alejandro Cremades: So then for you, you know you ended up going to school, you went to Wisconsin and there you studied the food service administration. And then from there, even though you had an idea that they one day you wanted to be a entrepreneur, you decided to take a different direction and and you went more into the corporate world.
Alejandro Cremades: I mean, that’s quite a different path to follow.
Richard Schenkel: Yeah, absolutely. But what I will tell you, I think it it gives you a great backbone of experience in systems operations, oh culture of sophistication that fortunately for me allowed me then to break away later on with that expertise to allow me as an executive and an entrepreneur to build an organization from zero to one point something billion with 17,000 people as the founders and never have to relinquish or felt I had the organization outgrew me.
Richard Schenkel: which is very unusual for an entrepreneur entrepreneur. A lot of entrepreneurs get outgrown very quickly. And, you know, we’ve seen them in deals we’ve looked at recently, you know, some of them at 25 and 50 million are, you know, over their skis already where you then need to bring in a professional CEO. So for me, I think I’ve got the best of all world academia, then corporate experience, then going out on my own and taking all that.
Richard Schenkel: and allowing me to learn and take those best practices of what to do.
Alejandro Cremades: So I mean, you you did quite ah quite a bit too. I mean, whether it was in the healthcare care sector or also you know in hospitality, you know before you even you know thought about the the idea of starting your own thing.
Alejandro Cremades: no So what were some of the things you know that you learned you know during this time you know about people, about you know the space, and about business?
Richard Schenkel: Yeah. Well, I can tell you, well I have spent a large part of um my pre-entrepreneurial ventures at the Marriott Corporation. I’ll tell you what I learned. A family organization is a family organization, and that’s why their name was on the door. And they take it very seriously how the business operates, even as a public company ah that It’s just ingrained inside the organization. ah Number two, I think the sophistication and culture that I experienced was second to none. Never experienced it at a number of other companies, but that culture really shapes an organization of how you treat people, what the values are, what our core business is, and how we take care of the guest.
Richard Schenkel: ah Number three, I think the operational controls and financial management have got to be top priorities. Otherwise, you cannot run an organization. And number four, looking for marketplaces that had a huge amount of white space to be able to grow in. So I would i would look at those would be the things
Alejandro Cremades: So what do you think needed to happen for you to ah finally activate the entrepreneurial mode?
Richard Schenkel: um I had been ah activating it even when I was working there, but in a lesser, as an investor in certain businesses and now providing advice, I think when I had ah left one position that I’d moved to Mass for, I had always said, I need to be responsible. I think I’m bright enough to do it on my own, um but I need to figure out how I’m going to build an organization and what it will be in.
Richard Schenkel: and ready to take the risk because taking it’s it’s a huge risk when you go out on your own, both from a financial, a family, and a time. And you you got to understand all those things will suck the energy out of you. And I think it was right timing. I was in my 30s. And I just said, I’ve got to do it.
Alejandro Cremades: And the first day time that you went at it, that was in food management. you know You build a company around that.
Richard Schenkel: Yeah.
Alejandro Cremades: I mean, well what was that exactly?
Richard Schenkel: Well, there was a company prior to the yeahle company Unidine that I started, a company called Republic that I had ah purchased in from the former founder to build it up. And, you know, it was a smaller company focused on different verticals, um operating verticals. And we wound up being very, very successful growing it to a much smaller extent and then being approached by one of the large companies. Were we are looking to sell it?
Richard Schenkel: and we did an M and&A deal within with another company and it was lots of fun. ah You know I can’t explain it like to me working hard is one thing but working hard and having fun at the same time ah that’s what entrepreneurial people look for and growing people.
Alejandro Cremades: So in your case, I mean, you had been, with your prior experience in in doing corporate stuff, you had to looked at M and&A. But I guess this was your first rodeo being on the sell side, not on M and&A. So I guess, say how was that how was that experience, too?
Richard Schenkel: Oh my gosh. Oh, I still remember as we went through the transaction, I thirst for education. And when you do your first one, it’s like doing an IPO. The first one’s the toughest. The next couple get to be easier when you start doing M and&A and acquisition work. And for me, it was just ah so much fun. Oh, and I remember reading through legal documents, which, you know, back then it was like, wow, what an education.
Richard Schenkel: And I thrived on it personally.
Alejandro Cremades: so Out of all things, you know once you’re done with with this food management company, you go into the dating world. i mean That’s quite the shift there of gears.
Richard Schenkel: but Well, you know we had sold off that company. I wasn’t sure what I wanted to do. I had been going through a divorce. And there was certainly voids in the late nineties in the dating world. The apps then were not like they are today. There was no way to take.
Richard Schenkel: um how you meet people having like-minded interests and we had created a ah technology dating dating app that we thought would be very very different than some of them on the market but unfortunately it’s like any entrepreneur the best idea ah you still have the marketplace is dictating and I think as I said to you before and in 1998, 1999, 2000 if people remember it everybody Technology went out. Nobody was going to invest. The markets plummeted. Google’s going away. oh That was when AOL was prevalent. Facebook had just launched and Amazon was nothing more than a book company.
Richard Schenkel: and You know, everybody said there won’t be technology. And we look today, it’s the complete opposite. oh Had I started that company and we had really launched into the markets, I probably wouldn’t have been in the food and dining management service world again.
Alejandro Cremades: So then what, what, what ever happened here?
Richard Schenkel: So yeah.
Alejandro Cremades: Because obviously this was the, uh, segue that got you into unit unity.
Richard Schenkel: so So, you know, it’s funny.
Alejandro Cremades: So.
Richard Schenkel: oh Once you launch one company or two, it’s in your blood. It’s something you can’t you can’t explain. like what would start why If you had one that didn’t so succeed, why would you start another one? and I think entrepreneurs know they’re not going to be successful in every company they launch. oh That’s an unheard track record. I’d always seen another opportunity and always thought I would never get back in the food and dining services, but the senior living market was a very
Richard Schenkel: large marketplace with very few providers ah in the food and dining management service space with a different approach. And when we launched Unidine officially in 2001, our approach was culture. It was all about people. It was about fresh food, which was unheard of in senior living. It was like, why do we have to cook the food?
Richard Schenkel: And if you recall back in that time, that’s when Whole Foods really took some grips in the market of organics and fresh food, which is only, you know, 24 years ago, approximately. So, you know, I just took it and said, um we’re going to launch, I’ll put capital in and let’s see where it goes. And started hiring people to grow a company with no clients.
Alejandro Cremades: So then what happened next?
Richard Schenkel: ah Well, in 2001, as you might remember, that was when ah we had our active challenges September 11th. And that was when we had our first client come aboard right around then. And, you know, we just started building out the infrastructure with very few people. And we went out selling our management services to prospective clients. And I think the first year we had five clients by December.
Richard Schenkel: and then the next year we added 12 or 15 and the rest became history that we found a a very strong niche in the marketplace in senior living and in corporate dining and then in health care and we became a real boutique company ah that continued to prosper and grow until 2017 when we did a transaction and continues the company continues today to be out there in the marketplace at Unidine.
Alejandro Cremades: So what what ended up being the business model of Uniden? How were you guys making money?
Richard Schenkel: So the business model, we provided food and dining management services. We were reimbursed. We would work on management fees and other fees. And basically, ah whether it was a profit loss arrangement or a management fee approach, oh we would would make money.
Alejandro Cremades: so then So then for you also, it’s not like you raise money right away. I mean, you were funding this whole thing you know for the first initial years. I’m sure that was quite a but quite stressful for you.
Richard Schenkel: Oh, very stressful, especially when you have a son who’s going to be going to college during that time frame. But I had put enough money aside to hopefully make it. all But I think what you learn as an entrepreneur, whatever you think it’s going to cost, there isn’t an entrepreneurial overestimate. They typically under, and I was one of those.
Richard Schenkel: And I guess in year five, we knew in order to grow, we were going to need some external capital and went out in the marketplace raising capital ah because part of the business model for Unidine was to scale the business to, you know, 500 plus million. And for that, it was going to take some capital and we raised some capital back then.
Richard Schenkel: And the rest became history of our growth, uh, our boutique approach, uh, our best in class and the company continued to prosper. Uh, we would look for the right individuals to join and you know, the rest was history.
Richard Schenkel: So, Oh, I think we were at the $75 million dollars mark we had brought in in capital.
Alejandro Cremades: how much How much did the company raise prior to the acquisition?
Alejandro Cremades: And obviously, the first years, as you were saying, you know were really, really rough you know until you were able to really get that $75 million in place. So you know for the people that are listening to how does an entrepreneur stay resilient you know in writing those roller coasters, especially when you are like you lacking oxygen?
Richard Schenkel: Yeah. ah You know what I tell people, you got to take a deep breath sometimes. Nothing straightforward. I mean, you you think your revenue is going to transition to these levels and your your sales general and administrative costs are going to decrease. It never happens. It’s the complete opposite. As a business revenue grows, there are larger requirements on your ah SG&A.
Richard Schenkel: And I think that’s the learning curve you take out of it until there’s that inflection point of depending on the industry of when the revenue exceeds your SG&A in terms of percentages, that’s when you start profitable growth. And so certain business lines do not have profitable growth, very unusual at the beginning. It’s just a reality. it’ It’s so you’re building a business, you’re not leading a business at that point.
Alejandro Cremades: so then So then in this case for you, Tua, when we’re thinking about the $75 million that you guys raised, let’s talk about capital requirements here. How do you think entrepreneurs should be talking about should be thinking about capital and and and also how much they’re going to need and how to go about it?
Richard Schenkel: Yeah, I think you need to do it in different rounds. I don’t think you to ensure that the equity is retained. The only way, in my opinion, you do it is a seed round, friends and family, a seed, then in a series A, B, C, because you’re trying to drive valuation and it’s very tough with a concept to raise a heck of a lot of money. There’s so many great concepts out there and I see them come across.
Richard Schenkel: To me, that’s almost gambling money because of those 10 or 15 that you look at, very few of them ever get to fruition or they start, they don’t have the burning in the belly. Everybody thinks it’s easy. And then they realize, wow, this, this is not so easy. And, uh, I think you need to overestimate your capital needs, but do it in phases would be my recommendation.
Alejandro Cremades: So then, in your case, eventually the um the acquisition happened. you know Obviously, you were writing this for 21 years, i mean close to 22 years. At what point does it become evident that it’s time to turn chapter?
Richard Schenkel: You know, we had one other major shareholder and I knew it was kind of timing in the market. Like there’s never, you know, I tell people, if you think you’re going to catch the upside, if you knew that you shouldn’t be doing what you’re doing. And the years had grown. We had a lot of inquiries and we then brought in our investment bank in 2016 and 17. And it was just a very strong,
Richard Schenkel: marketplace, both in private equity and in strategic. And we we just felt it was the right time. We were at the right inflection point. oh and And there was never any mention of the people leaving. It wasn’t like we were going to do an M and&A deal, whether it’s strategic or financial. And everybody would be leaving that people were going to stay on. And especially if it was going to be a financial buyer, it was going to be a requirement of it was a strategic, I think we had a little more flexibility. And Alexandra, I can’t tell you that we thought it was the best time, but I think 17 was a really strong year and it was just timing. oh And some of it’s luck, you know, being in the right place at the right time.
Alejandro Cremades: A hundred percent. So we see nine figure exit. So that was pretty, pretty amazing. Now, as they say, once an entrepreneur entrepreneur, always an entrepreneur. So instead of like launching another company, you decided to join another one, you know, before what we’re going to be talking about now, which is what you guys are up to with Phoenix three holdings. But why joining another operation?
Richard Schenkel: ah When you, you mean right after with starting Phoenix again?
Alejandro Cremades: That’s right. That’s right.
Richard Schenkel: all When when i yeah when i went when i I joined Compass, which was the acquirer ah that we did our strategic acquisition with and stayed on, all because I care about our people.
Alejandro Cremades: With compass.
Richard Schenkel: they were we I had selected most of them. Culture was always important to me and I would interview almost the majority of the exempt corporately I i interviewed everybody who was in it. I just think it sets the culture when the founder interviews. all And at Compass we had certain requirements that’s part of our alliance with them and we just grew that business even under Compass and it was a lot of fun.
Alejandro Cremades: How many people did you have at the time of the acquisition?
Richard Schenkel: Oh at the time I think we had six to seven thousand
Alejandro Cremades: Oh my God.
Richard Schenkel: Yeah, so it was a very large enterprise.
Alejandro Cremades: Wow.
Richard Schenkel: Remember, we we were a distributed employee type of operation. So think of UNIDAN as a restaurant company with 200 or 300 locations. So very strong with a decentralized workforce.
Richard Schenkel: And at Compass, we wound up growing three organizations internally that we put together ah that I created. And when I left so in 2022, I think we were tracking at 1.3 billion, and I think it was 15,000 plus employees. So a very large enterprise, but i I think what you realize as an entrepreneur, ah you’re not an entrepreneur at those numbers. You just can’t be.
Richard Schenkel: And I love being an entrepreneur and watching things grow. It’s kind of like planting a seed and watching it grow. It’s a lot of fun watching people grow, watching the company out aspire and hit those needs, and also how you lead and manage the l clients as well. It’s very different.
Alejandro Cremades: So talk to us about culture. What would you say? Because obviously, that’s a lot of people. you know And I’m sure that you guys you know were really careful about culture. What would you say are the three key components of a successful culture?
Richard Schenkel: oh Number one, defining it correctly, what it is. oh And I happen to write all of the culture because i as a founder, it was my organization. And we had done that in the first couple of years of the company. I did it. So I think you number one, what is the culture? um I think number two is how you’re going to permeate that organization with the culture.
Richard Schenkel: I’ve worked at many companies even prior where they gave a wallet card and said, here’s our culture. That was the mention of it. That’s not culture. Culture is something that has to be practiced every minute of the day by your associates, team members, whatever the word is. And it has to be front of mind. And you know, what we realized oh immediately, UNIDINE,
Richard Schenkel: It had to be practiced by all the hourly team members as well, day to day. They had to buy into it, understand it, and it had to permeate the organization twice a day in a formalized setting. It’s kind of like the, I use the analogy, the Pledge of Allegiance.
Richard Schenkel: The Pledge of Allegiance doesn’t go away. You may say, I know it now, but you just kept using it. And I think culture is the identical thing. And we had a whole process of things people would have to do to understand it. And I think the third thing for any organization is selecting the people, not just on technical skill, but on culture fit.
Richard Schenkel: I have seen so many times you might have the brightest person in a role, but they are the wrong cultural fit. They’re not an entrepreneur. entrepreneur they They don’t value their work ethic isn’t at the level. And if those are requirements of the culture, you can’t deviate. You just can’t. And I think that’s where a lot of organizations fall down as they grow because they put it to the side oh And I think the last part is culturally growing with the right clients. You know, at the end of the day, our business was about clients and the guest. And if we didn’t select the right client or the right type of market that we wanted to play in, it was not a good culture fit. And I think when you’ve put all those things together, you you just can accelerate the growth of that organization.
Alejandro Cremades: and obviously quite the acceleration you know from 0 to 400 million and not bad, a nine figure exit. So after you do that the integration, you know after you worked with Compass, making sure that everyone was taken care of, then you decide that it’s time to go at it again. And that was with Phoenix 3 Holdings. So what are you guys doing at Phoenix 3 Holdings?
Richard Schenkel: Wow. Great great question. Oh, we’re having a lot of fun. Oh, you know, we’ve got about 15 or 18 people working with us right now. We’ve got one company we’ve made a major investment in infuse hospitality out in Chicago, who is a onsite food and dining service company focused on the commercial market, as well as fairgrounds coffee, where we’re helping that organization grow in the markets they play in.
Richard Schenkel: ah We’ve got a couple of ah new codes that we’re funding as well that will be out there in the near future with though great founders. And you know we look at different investments in ah senior living, all healthcare care and business services and distributed service companies or lifestyle companies where we feel we can make a difference by our expertise of operating people.
Richard Schenkel: as well as, by the way, we have capital to invest um in typically founder or family-based organizations to help them grow and avoid the pitfalls of what other entrepreneur entrepreneurs go through.
Alejandro Cremades: And I believe that the capital under management is about 100 million. So I guess say when you guys get involved with competition, what’s the yeah ideal profile of a company?
Richard Schenkel: ah Under 100 million, um must be ill have 10 million plus of revenue. So that’s a big range. Must be approaching positive EBITDA or have a plan. all Has to have sticky revenue. um Has to have strong retention in the marketplace. Must be family or founder based. And the number one thing we look for, honestly, is culture fit.
Richard Schenkel: ah you know you You know by walking in the door what culture is like, you just’s it’s kind of ingrained in you. And when our team works with that other team, if we see it’s so dysfunctional, we we’re not there to change dysfunction.
Richard Schenkel: We’re there to help improve results. And if it’s not the right team, what we we won’t invest in it. So those those are the major criteria.
Alejandro Cremades: So imagine you were to go imagine you were to go to sleep tonight and you wake up in a world where the vision of Phoenix Three Holdings is fully realized. What does that world look like?
Richard Schenkel: oh that the company we invested in has started its acceleration, high growth of 30, 40% a year, ah retention of the founder and growing that founder. um And that company is ah becomes a boutique company as the best in class in its industry.
Alejandro Cremades: So now let’s talk about the past, but doing so with a lens of reflection. Let’s say I bring you back in time. you know I bring you back in time to the moment where you are now, you know let’s say, about to launch, let’s say, UNIDINE back in 2001. Let’s say you’re able to have a chat with that younger self, that younger Richard, and you’re able to give that younger Richard one piece of advice before launching a business. What would that be and why, given what you know now?
Richard Schenkel: Oh, it would be have enough capital to hire the best people that are overqualified to begin the journey with you.
Alejandro Cremades: I love that. so Richard, for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Richard Schenkel: Oh, they can send me an email to our S-C-H-E-N-K-E-L at phx3.com. They can go to the Phoenix 3 website, which is phx3.com, and there’s a contact us. And happy to have any opportunities that are presented or even any questions to help them grow. It would be my pleasure.
Alejandro Cremades: Well, you say enough. Well, Richard, thank you so much for being on The Dealmaker Show today. It has been an absolute honor to have you with us today.
Richard Schenkel: Well, an honor to be with you as well and have a great holiday weekend and enjoy and thank you for your time too.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Richard Schenkel On Selling A Company With A 900% Return To Shareholders And Now Creating A $100 Million Fund To Support Growth Companies appeared first on Alejandro Cremades.
In a captivating conversation with John Clendening, we delve into his incredible journey from the beaches of Florida to leading multi-billion-dollar companies and venturing into the startup world.
John shares his unique perspectives on leadership, the art of bringing differentiation in segments, and his experiences in corporate giants and agile startups. He also talks about raising $200M for his startup from top-tier investors like Juxtapose, Hudson Structured Capital Management, Summit Partners, and Silversmith Capital.
In this episode, you will learn:
- John Clendening gained invaluable confidence and problem-solving skills through his diverse consulting experiences, enabling him to adapt to new business environments rapidly.
- His time at Pepsi and Coca-Cola taught him the power of deep consumer understanding and differentiation in competitive markets.
- Transitioning from large corporations to startups allowed John to embrace speed, innovation, and the importance of timely decision-making.
- Working alongside Chuck Schwab reinforced the importance of bold moves, positive culture, and visionary thinking in driving business success.
- His turnaround experiences highlighted the need for resilience, optimism, and a consumer-first approach to revive struggling businesses.
- His banking and financial services experiences inspired the vision for Earned Wealth, emphasizing a holistic, client-centric approach to wealth management.
- John’s career reflects a continuous journey of learning, adapting, and applying diverse experiences to create impactful business solutions.
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Your email address is 100% safe from spam!**About John Clendening:**John Clendening is the founding CEO of Earned Wealth, the first comprehensive, tech-enabled financial services firm exclusively for healthcare professionals and medical practices.
John recently served as CEO of Blucora, Inc. (NASDAQ: BCOR), a leading innovator in driving tax-smart outcomes for consumers, where he delivered double-digit annual growth in revenue, EBITDA, and EPS and drove a total Stock Return of 66%, placing BCOR in the top 3% of the Russell 2000.
Previously, John was a senior executive at Charles Schwab for over ten years. As EVP and Co-Head of Charles Schwab’s US and International retail division, John led a team of 5,600 to 71% profit growth over three years.
During his tenure at Schwab, John played a leading role in transforming the firm from a transactional, reactive-service model into the leading omnichannel wealth manager with modern digital experiences and an industry-leading suite of advisory services. John also served as CEO of Schwab Bank.
His career began with senior roles in large companies and start-ups, including eMac Digital, living.com, First Union Bank (now Wells Fargo), The Coca-Cola Company, and PepsiCo.
John currently serves on the Board of Feed The Children, a global NGO. His prior board service includes Charles Schwab Bank, Silicon Valley Bank and Betterment Holdings, Inc., the largest independent Robo-advisor in the US.
John earned his MBA from Harvard Business School and a BA in Economics from Northwestern University.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty, hello everyone and welcome to the Deal Maker Show. So today we have a really incredible founder, you know a founder that he is right now riding a rocket ship. We’re gonna be talking about it in detail. you know There’s gonna be great stuff there we’re gonna be touching on ah during the show today. We’re gonna be talking about why he got himself perfectly situated to be able to ride this rocket ship, how he thinks about raising money. I mean, in their case, they’ve raised over 200 million So a really remarkable space, especially given the times that we are in. And they just say recently announced their last day raise, which was 200. And then also bringing a differentiation, you know, when it comes to a segment, you know, where there is like massive players that are already operating. And so again, super inspiring conversation. So brace yourself for it. And without further ado, let’s welcome our guest today, John Clendenin. Welcome to the show.
John Clendening: Great to be here, Alejandro, thank you.
Alejandro Cremades: So originally born in Alabama. So give us a walk through memory lane. How was life growing up?
John Clendening: Oh gosh, ah early days, Alabama, um and then after a year there, then Florida on the beach. I just remember being super hot, not wearing shoes very much, and weekends spent kind of roaming around what today is, Destin, in Florida. It was a nice place to start and great place to go on vacation after he moved after my dad moved the family up to Wisconsin.
Alejandro Cremades: So the whole thing about business, you know, I mean, obviously you went to Northwestern. You also did your MBA. I mean, did this is love for the business world. Where does that thing come from?
John Clendening: You know, i I was one of those people that thought to themselves in high school and and early college that I wanted a career in business before I even knew what it was. um My dad was a lawyer, went into social work. ah Mom stayed at home at that time, pretty common. ah But I was fascinated by brands. I was fascinated with the stock market, played a stock market game when I was in junior high school, now middle school, I guess. And I was just thinking, like, what an amazing world that must be to be a part of a big company that’s growing. and and then that so stock market element as well. ah When I was at Northwestern, which I chose on the basis of really wanting the underpinnings of a true classical education, I started to get the itch to like really jump into business in a serious way, led me to consulting after that. But at that time, right i I thought it was like super cool to be able to study the classics. I get in touch with language, took Spanish for a couple of years, really broadened my horizons from
John Clendening: my upbringing in ah in the in the South and then in Milwaukee, Wisconsin. ah But the inspiration for business like took root when I was at north Northwestern. I was part of a small group called the College of Commerce and Industry where its speakers come in and talk about, what’s it like to lead? What’s it like to innovate when you’ve got the ability to influence lots and lots of people, not just consumers, but also people that are in the company? And that aspect of leadership really began to fascinate me.
Alejandro Cremades: So then, in your case, i mean you’ve um jumped quite a bit you know when it comes to ah companies and segments too. I guess you know you did quite a bit the um consulting, consumer, then banking. you know Obviously, you did it on large corporations, smaller smaller corporations. I guess the first thing is, during your time in consulting,
Alejandro Cremades: What do you think you got about problem solving? How do you think that has helped you into maybe thinking about big problems, breaking them down into small problems and tackling them? I mean, what kind of strategy did that experience give you into thinking about problem solving?
John Clendening: I think the the main thing it it gave me was an ability to go into any type of situation, different businesses, different projects and and that sort of thing, and have the confidence that you’ll be able to size it up. You’ll be able to jump in, ah put some deep thought into what will be necessary to get up the learning curve rapidly, i’ll learn about that new business really rapidly, but that confidence and the framework around that ah was really useful for me, and it’s that self-confidence element I want to emphasize until you’ve done it a couple of times. and I’ve been like not in an undergrad B school, and in consulting, as you know, right they just sort of jump drop you in and like, here’s your stuff to go do.
John Clendening: um but But developing the right toolkit to really size up a business deeply in terms of its people, in terms of its products set or services set, ah in terms of its economics. It’s sort of amazing as a side note how few people sometimes in a company don’t know how the company makes money, don’t know how the consumers regard the company, don’t know what is coming around the corner ah that might disrupt that company.
John Clendening: And consulting allowed me to, I think you’re right in calling it problem solving by the way, ah much more that than true like big picture strategy. um But it gave me the confidence that I could go into anything and ah put my mind to it in the right way, tap into the the people of the company in the right way and get up to speed quickly. And that also enabled me to feel okay changing companies in the early part of the career pretty rapidly as well that I could go in and make an impact relatively quickly.
Alejandro Cremades: I mean, then you went to the consumer side, you know and quite interesting that you decided to work for the two biggest players, biggest competitors that one can think of, whether it’s a Pepsi or Coca-Cola, but I guess the, um I mean, unbelievable, unbelievable. Now, I guess this experience too gave you the exposure to direct marketing. So how was that for you?
John Clendening: It is crucial for me to go into packaged goods and and as you mentioned, the two big competitors, Pepsi and and Coke. And I learned so much around the idea that you’ve got to spend a lot of your time, like a dominant part of your your time, thinking about the consumer and what do they regard as unmet needs.
John Clendening: and on top of that, like dig really, really deep for differentiation. Now, I’m in a business today where I think differentiation gaps are huge, but in packaged goods, right they’re pretty narrow. In reality, right what’s the difference between a Coke and a Pepsi? Well, if you’re a big fan, you may see some, but most don’t. and that The marketing teams or the brand teams or the CEO in companies like that are spending so much time for the the smallest of edges, but all grounded in the idea that if we know the consumer more deeply than the other other player, we can find a way to win. Also super sharp at segmentation, all of which these comments and concepts, by the way, I think are largely lost on financial services farms, um but really developed a sharp edge and an orientation
John Clendening: ah toward toward differentiation built on understanding unmet need across a segment of consumers as a way to get sort of deeper and deeper and closer and closer to what could be ah better for that ah that consumer. I also learned a lot about leadership, just worked for some awesome people there. And the way I got to to Coke, by the way, from Pepsi was I followed the one executive that Coca-Cola had ever, at that time, recruited ah from PepsiCo that businesses don’t like each other. The rivalry is massively ah strong, um but they had the insight at Coke to bring over this guy who I was working for at Frito-Lay, and I was the the one person he brought with him. So it was pretty cool to be able to see the differences between the two companies.
Alejandro Cremades: So then you went into startups. you know That’s sayingin quite an interesting segue. know You go from like massive companies to startups. So how did you enter the startup world?
John Clendening: Well, i’d I had actually been in a bank for a little while, ah and it was ah one of my worst decisions I’ve ever made, not having done my diligence on what the culture would be like there, but it was ah an opportunity to you know do some data-driven marketing versus mass. at like like ah Package Goods Company, long story short, a group of us decided we’d start our own business and spend some time on the weekends. This is like 1998, by the way, so e-commerce is beginning to explode. It’s looking like if you don’t jump into the new economy, you’re going to be a dinosaur.
John Clendening: And you know, I was 35 or 36 or whatever at the time and I was really feeling that way that I needed to find a way into the new economy. And so I had some great concepts. I ended up bounces off an individual who I had worked for at Frito-Lay and he had just become CEO of this really, really cool company doing great things.
John Clendening: ah In that era and brought me into his company with with the team I’ve been working with so in my mind What a great shortcut into a neat business that that was already a couple rounds in to capital raise or I’m like I don’t know like version 9 of the website is all about the website back then of course and and sort of jumped into that. I had some great backers in Benchmark Capital, Austin Ventures, and I got in because I felt like I wanted to be part of that group because things are quite quite unknown. like How are you going to win an e-commerce? There’s no playbook for it. like Package goods, there’s a playbook. Take the playbook, learn how to deploy it.
John Clendening: There wasn’t anything built yet at that time. It was a bit of a Wild, Wild West feeling, but a like ah ah ah total shortfall in conviction on what are the things you need to do to truly win and build a sustainably ah profitable business, not known, not yet built out. and so The single biggest motivation I had was that. um The second would have been to keep the career moving, keep vibrant by jumping into what looks to be the next ah wave. And that certainly was my experience, that both of those were true, that there’s an opportunity to sort out how to compete as an e-commerce business. And on top of that, sort of like boost myself into a level of understanding I couldn’t have gotten at some big traditional company. I had to go to a startup to get there.
Alejandro Cremades: So then in in this case, i mean you ended up in after doing you know the startup life, you ended up going back at corporate. i mean it’s That’s interesting because typically once you experience startups, it’s tough to get you know back to corporate. So what triggered that?
John Clendening: So I think you’re right, by the way. It’s it’s it’s tough to leave. And it’s it’s been a lot of years since I was able to get back at it, about 15 years. And what I loved about startups, because I think it’s salient to this, is I love the speed. I love the concept of um time-box decision-making versus letting things like trundle on forever, which is common in Big Co.
John Clendening: I really enjoyed leading high-energy, like massively committed people um to a person at these startups, massively committed. It’s a lot easier to lead in that environment right other than a place where maybe you got like half the people are engaged, other half are not.
John Clendening: At the same time, I had done two startups. ah One was Living dot.com and in Austin, couldn’t raise capital, not a penny, after setting records for fundraising previous to that as the dot-com bust took root. Second one was a bit of a bunt single, the venture firm did okay, the rest was not so much. And so I wanted to get back to a bigger platform and re-establish my career.
John Clendening: But I was also motivated um by applying what I had learned in those four or five years in startups and seeing if I could bring that into a bigger platform. And that platform was Charles Schwab in 2004. But I was excited about um taking that application into what was then a turnaround situation at Schwab. They also had not yet recovered from the dot com bus where trading velocity just collapsed and had no shown no signs of of ah improving. I’d done a couple of turnarounds.
John Clendening: And ah crucial to this was some learning at the at the first startup in particular, and strong conviction that the winning client experience model is not an either-or, it’s not either electronic or a human-led. It’s gonna be, what’s like what’s the best way of mixing those together? We had done some experimentation at the startup in that vein as we struggled to grow volume, sales volume and client volume. And I felt like Schwab would be an awesome place ah to apply some of those techniques in a firm that had already, right, they had then sort of perfected online transacting. ah They had not perfected much more than that. I mean, great company, great brand, right, the brand, I’d say the brand in financial services, but there’s a lot to go fix there. But that was the reason. I felt like i could I could apply some things, bigger platform in a turnaround situation. It was also a nice chance to get to San Francisco. It had already been on my wife and I mind to to see somehow get to the Bay Area and
John Clendening: That’s where they were headquartered at that time. So jumped into it, a chance to turn around a business. And lo and behold, Chuck Schwab comes back in six months. It was an amazing ah you know set of circumstances that brought him back to the company. And what good fortune for me to be around so a true business icon, an amazing leader ah in that space, a true innovator.
Alejandro Cremades: What do you think made him such an incredible leader? you know I mean, having the opportunity to to work you know alongside someone of that caliber, you know I’m sure that that shaped you quite a bit.
John Clendening: Hugely, I’d say a couple things about Chuck um first is he he um He believes in moving boldly, like doing a few things, big things, in very bold fashion. It’s what started the company, right? Deregulation hits commission pricing. Everybody raises their prices. he’s and um that’s That’s Wall Street, right? You deregulate the price. People take it up. Chuck goes way down and applies just the right amount of insight to help people trade. So he’s carried that philosophy with him over time.
John Clendening: And I think that I’ve linked that then to work that that that firm has has done the last 10, 15 years, which i part I was part of in the early days, ah moving the company into a new version, transforming. Like, what’s the new big idea? Well, the big idea ah needed to be, we’re going to become an advisory firm ah that taps into our lower cost structure, our multi-channel model, those sorts of things. But big picture one is is moving boldly ah where other firms don’t seem to be prepared to go. Second thing I’d say around Chuck that’s made him an awesome leader is, man, that that individual knows the power of a positive culture in driving business outcomes. ah it’s you know Chuck’s all about culture. There there are people at that firm
John Clendening: that will never forget having met him and how they and how how Chuck instructed them on putting that client at the center. So for that company and for Chuck, let’s keep it to Chuck, the idea of being consumer centric is not on a piece of paper or a placard or whatever. It’s how he’s how he’s convinced himself, rightfully so, that if you really can do that and the culture is all around that, you can go through anything. You can go through like the hell that was the early 2000s.
John Clendening: and You can go through a change process. It’s a really big change process where people’s roles are being upended because you’ve kept that ah that client, ah that customer at the center. and There’s a third thing about Chuck I’d say that makes him an amazing leader is his is raw business insight. ah There were many times where I had to go back to my office after Chuck would sort of imprompt impromptu call me in and I could really think hard about what do I think Chuck was saying there? Because he’s he was like four or five steps ahead and it it it was it was worth my time to really think about it, go back and talk it through. so that’ sort of He’s not a linear thinker, right? This is a discontinuous individual that like looks like way ahead. ah He predicted zero trading um prices like way before Robin had went there as an example.
John Clendening: And perhaps that company began in staging for that long before they ultimately got there. But that sense of vision combined with culture and the the confidence of moving boldly, I think those are those are all amazing and remarkable traits of Chuck. And I’d be lucky if I could emulate some of those to some degree, and I’d try to.
Alejandro Cremades: So in this case, you obviously learn a lot about operations, about management, leadership, and also turning things around. And in fact, you know, that’s a kind of like what ended up being your next chapter with a blue Cora when you got recruited, you know, to, to do such things. And, and, and funny enough, this was the most immediate, kind of like segue, you know, for, for you getting going with earned wealth. So, so turning things around, that doesn’t sound very, very easy, is it?
John Clendening: It’s not. it It does require all the tools in the toolkit. ah It also requires right right some discernment around, is the situation fixable? what’ like Why is this this is this like a fatally flawed business? Or is it some things that we get some degrees of freedom to to fix it? I think the main thing I’ve learned in those turnaround situations is um you know a couple of things. One is the power of resilience and being able to work through difficulty when things seem like they’re getting darker they tend to get a bit darker before the business ah is performing again it’s really serving well. ah Here in the last three and a half years on given you the fundraising environment and just how hard it is so to start funding from zero. And the the second thing is i think orienting the team around optimism the idea that we can find a way to win.
John Clendening: It may have been tough, it may be tough right now, but ah let’s think about what that destination is, what what is it going to feel like when we get there. And let’s work together on a path to get there. And and keeping ah you know keeping that optimistic element, not to say you’re like misleading yourself or others, you have to be objective. But ah having ah an optimistic edge is necessary in those environments also has served me well, as noted in in this sort of situation. But I’ve done those, and there’s a framework for it. I would like go right back to the consumer and sort of refiguring out what’s important to the consumer.
John Clendening: And taking the philosophy, which I learned it freely actually, which was sort of align the business model to the consumer and leave it to you. I mean, make sure it’s your accountability to make it profitable. But if you don’t start with a consumer, you’re screwed. If you try to like work your way into something that can work OK, but it’s awesome economics for you, that’s not going to be a real business. though That won’t last long. um But it’s going back to basics, typically, in the turnaround situations.
Alejandro Cremades: So then at what point does the idea of earned wealth come knocking to you?
John Clendening: You know, it it actually, I think the like the route around earned wealth, a truly differentiated approach to to building in and protecting wealth, in our case for doctors, it goes right back to that that experience I briefly mentioned at a bank. So I’m at a big bat bank and I had done poor diligence. I’m wondering why am I here? I’m a cultural misfit, obviously. And I think they say the same thing about me, right? They didn’t like me either.
John Clendening: ah but You’re realizing, oh my gosh, for the bank, a consumer is a set of digits in a flat file that’s associated with their profitability today. There’s no sense of what’s the right thing to be done with a client. How do we help the client out? What’s the value added we’re uniquely providing? There’s no sense of segmentation. Really, it’s like the bank seemed to exist for the benefit of the bank versus the other way around.
John Clendening: And when I combine that with um some of the other experiences right at at Schwab, great investment company, ah you know but pretty limited and investment in a bank.
John Clendening: um not able to take into account taxes when advising. It’s an interesting thought where you’re advising someone on maximizing their wealth, but you say, well, I’m not going to pay attention to your tax drag that I’m causing for you. It’s like, wow, um just this idea that a fragmented approach as good as a company could be, but a fragmented approach ah wouldn’t lead itself to the best results. And today that’s how consumers really live, right? They have an investment advisor, they get a tax person, they’ve got this or that.
John Clendening: And so I learned that at Schwab that you needed to combine things to be more successful. And and um then at Blue Quora, we’ve been experimenting with, can you um build technology, turns out you can, ah that can empower a channel of CPAs, but can you build the right software to capture tax alpha or tax advantage across the entire life of a consumer in ways that, you know, Robo had done it, but inside one account.
John Clendening: And so you know we made a lot of progress there. We could generate massive value for our consumers. All that’s to say, Alejandro, is that I sort of ladder up all those experiences together. And what we’re doing has a link to all those sort of career stops. we’re the you know we We will be the sort of defining segment-driven financial services firm. so As I mentioned, right we’re focused on on doctors. The reason for that is that their needs are unique. They’re a real segment. We can build bespoke products and services because
John Clendening: Doctors have a unique career trajectory that impacts every aspect of their financial life. We do everything for the doctor. um Whatever it takes to improve that financial situation, we’re not there yet. I’m not going to oversell you. But our vision is to be able to ah work holistically with that physician, solving for every single need in their practice life, in their individual life. And then lastly, ah we’re building and leveraging deep technology to essentially automate um broad advice giving so that we’re optimizing across these interconnected decisions of
John Clendening: um investing but doing it in a tax-smart way or getting the right insurance that links to the assets that you’ve got, that understands where your career is going critically, ah advising on um how do yeah how do you optimize the sale of your practice? A lot of physicians and dentists are doing that. They have no idea what their practice is worth. And once they do make that big change, they really struggle with re recalibrating their entire financial life after that. So one segment, do everything, really crush it for them.
John Clendening: do everything and leverage tech to make it reliable, predictable, and scalable.
Alejandro Cremades: So in this case, how are you guys making money? you know For the people that are listening to get it, how do you how do you guys make money here?
John Clendening: So our revenue model is essentially a percentage of assets model for personal wealth management, not dissimilar at all to a large registered investment advisor. The difference is ah we do everything ah for that client. So we’re going to do taxes for the client. We’re going to do insurance optimization for the client.
John Clendening: on our roadmap is to do trust and estate planning, triggering when the wills need to get redone and that sort of thing. ah We optimized today for the balance sheet, like what should be your loan profile versus opportunities to invest, that sort of thing. So it’ the difference is sort of that same basic fee, but we do a ton more.
John Clendening: Then on the practice side, we do taxes and financial statement preparation. We do ah retirement planning all around distressing the doctorate in that situation, optimizing their financial life as relates to their practice. Key thing here is right we’re all about, can we increase the cash flow of that practice so that they can have more to invest in the markets or or in alternative investments, let’s say, ah so that over time they can double, triple,
John Clendening: maybe even more, they’re not worth that retirement.
Alejandro Cremades: so then So then you guys have also raised quite a bit of money. you know I know that the last day around was announced very recently you know at a time where it’s not as easy to raise money, but you guys made it seem easy with the amount that you raise. So how much capital have you guys raised to date and what has been the emotions there of going from one cycle to the next?
John Clendening: Yeah, yeah, so um total we’ve raised about $220, $225 million. dollars ah We were back at the seed stage um by by a design studio juxtapose, A round led by Hudson Structured by a year and a half ago. And then Summit and Silversmith growth equity firms um have been our you know decided to back us in that $200 million dollars raise that we completed about two months ago.
John Clendening: I mean, experience, you know, it’s it’s a lot harder than I expected going in, honestly. I started the company in a different world. It’s hard to know when you’re in a bit of a bubble. We were in a bubble. Shame on me. I’ve been in a bubble at living.com too in 1998, 1999. But the experience that overall has been been really positive and and in some ways affirming of what it feels like to work with awesome investors, whether it’s juxtaposed and Hudson structured, like in those ah those quarters where it was still unclear our path to but getting
John Clendening: big enough, growing fast enough, like super supportive during that timeframe. And then fast forward to to this situation. it’s been ah It’s been a handful of quarters that we’ve been working with initially Summit, now Silversmith, ah prior to getting the round closed. We took our time on our end ah to make sure that ah the firms we were considering working with ticked all of our boxes.
John Clendening: And we wanted to be, despite the environment, we didn’t want to lower our bar. We wanted to work only with awesome investors like our first few. And on top of that, they’re scrutiny on us. I think fair enough was pretty deep too. And so that’s why it took some time ah to get there. but ah In our situation, we pivoted from venture-backed, having gotten to the Series A, into a ah pretty good size growth equity round on the strength of the unique approach that we are taking. right It goes back to differentiation, and we’ve talked about that a lot here, but Summit and Silversmith readily saw that we’re really different than other other opportunities that are in the marketplace today.
John Clendening: ah certainly around financial services and FinTech companies, because of that verticalized approach. And in addition, they have to be healthcare care investors, both ah both ah Darren and and Jeff, who we work with in those firms most closely. And so they really understood the thesis. They understood very deeply from the many hundreds and hundreds of doctors that they know and work with.
John Clendening: ah that they they need better than what they’re getting from financial services firms. So my experience centers on an idea that we took time to build trust in one another. ah We certainly wanted to dig as deep on them as they ah dug into us, but that alignment around vision, mission, like our unique purpose in the world, like why why would the world be worse off if we’re not there? ah they They totally got that. And we ended up you know some time ago with a handshake agreement that if you guys over at Earn, Do,
John Clendening: X, Y, and Z, then we over here at Summit and Silversmith are gonna come through with the right investment, and that’s what happened.
Alejandro Cremades: That’s incredible. And i mean it’s it’s it’s also interesting how you end up raising such a big of an amount on the second race, especially during the times that we’re that we’re in. no i mean How were you guys able to arrive to that number? And and and how were you able to like make that happen? Because i mean right now, the market is is is not as favorable.
John Clendening: Yeah, it’s clearly a tough market. We worked hand in glove. The teams there, ah my teams, we worked hand in glove to build out the thesis on an acquisition driven strategy go forward ah that would accelerate our vision to be fully comprehensive, have the capital to build up the tech and those sorts of things, extend our reach into many, many thousands of additional doctors. But working hand in glove with that team enabled us to get to know each other really well.
John Clendening: But it also made it um a natural conclusion that this opportunity is big enough ah that we need to put in a substantial amount of capital to make that vision a reality. um And so I think those those two work together, right? So their conviction level as high as ours, if they were on the on the podcast here, I think they’d say, well, this this has been our thesis too. We just didn’t meet a company that could sort of activate it for us. um But it comes down to how much capital do you need to be able to go and and build an awesome business with that strategy?
John Clendening: ah Fortunately, these are like we we we have deep-pocketed um investors. They can go far higher if the situation warrants it. But we all agreed that this is the amount of capital that we needed to um make the run that we’re going to make over the next couple of years to get there.
Alejandro Cremades: So then, obviously, when investors say putting money, they believe really on a vision, right? on on and And that’s not just the investors, also you know the team, and you know customers, and and you name it.
Alejandro Cremades: So I guess when it comes to the vision, imagine you were to go to sleep tonight.
John Clendening: Yeah.
Alejandro Cremades: And you wake up in a world here where the vision for earned wealth is fully realized, John. What does that world look like?
John Clendening: Awesome. I love ah love that. i I think about that all the time, honestly. And it takes me back to May of 21, thinking about this the same very topic. Here’s what it looks like, right? So what it looks like at like point one is doctors ah feel far more confident that it made sense to become a doctor.
John Clendening: And if if ah you’re you’re young and considering the profession, you say to yourself, you know what, because of what earned can do for me. Literally what earned can do for me, I feel like I can become a doctor and that’s gonna be a good decision for me. When today a lot of folks are regretting it, the financial stress, the financial strain is too great. You have so many people that get through med school and opt out of actually getting into clinical care. So they worry about having 350K and dead and that sort of thing. So at the highest level, the profession is considered an awesome profession once more and the best and the brightest are back going into
John Clendening: a career as a doctor. Underneath that, ah what’s happening to our clients what’s happening to our clients is they’re feeling like their financial lives are in awesome shape. They feel the peace of mind that goes with that.
John Clendening: They’ve got independence ah that also goes with having made the right choices with us at their side. And so they’re achieving two, three times what they otherwise would have achieved in terms of net worth. But again, critically, there they’re feeling like their wealth is is higher, but their well-being is higher too. They’ve got peace of mind about where they are and their financial lives, which ah can be transformative in how someone thinks about their career.
John Clendening: So alongside you know clients and and their outcomes, which is most important, I think in that vision when I wake up, it’s also going to be things like ah the very ah most capable, highly committed people around anything to do with finance want to come to earn. ah They see that because of the unique things that we do for clients, we’re the number one choice. We’re the people we’re the place that people want to work um because of the the purpose and what we’re achieving for our clients.
John Clendening: And from a brand point of view, ah that vision would include being considered the only place that a doctor would go around their personal life, their family’s financial life, around the practice, the only place they’d ever consider going or need to go around anything to do with with their financial life. Those would be the main elements, I’d say for me, on achieving a vision.
Alejandro Cremades: So we’re talking here about, the a obviously, the future. But I want to talk about the past with a lens for reflection. So let’s say I was to put you into a time machine. And let’s say I bring you back in time. you know let’s say Let’s say maybe the yeah the late 80s. And when you were completing your MBA you know at Harvard, and you had some friends that were going to start their own companies and stuff like that. and Let’s say you had the opportunity of going back in time there, and let’s say you know you had the opportunity to give your younger self one piece of advice as you would embark in your professional career and in your journey. you know and That advice would be, one, before you were to get started, maybe with launching a company down the line. What would that be and why, given what you know now?
John Clendening: awesome. I think for me that one piece of advice would be to check in like all the time around am I loving what I’m doing and am I highly like respectful and motivated by the purpose of this place and my colleagues and you know what we’re doing together for clients. ah So I found myself in situations, early career Alejandro, where I was sort of solving for, well, I want to learn a lot. That’s admirable.
John Clendening: I want to get up, you know, quickly learn like analytics and whatever it might be all admirable, but I traded off at some points. mean I mean, am I truly deeply passionate about this? And am I loving you know enough of everything around it for this to be highly motivating for me?
John Clendening: And I call it out because having gone through a few turnarounds, having made a mistake or two in job choice, I can go right back to the root that the reason I i made that mistake was I wasn’t paying attention to those factors. And, you know, I learned later too that if, if those things are in place, man, I can do my best work. I’m going to show up better for my teams, my colleagues, I’ll show up better for clients. I have a lot more fun doing it. I’ll be better at home.
John Clendening: if that’s true, too. um But ah you know early in the career, I wasn’t as focused on those elements. I was focused on other things, and I would definitely change that. i’m not There’s a few things that would have done differently as a consequence. That’s absolutely true.
Alejandro Cremades: So, John, for the people that are listening, I would love to reach out and say, Hi, what is the best way for them to do so?
John Clendening: The best way is probably just to drop me a note, you know either LinkedIn. You can find me there, obviously, or John at EarnedWealth dot.com. Happy to chat with anybody.
Alejandro Cremades: That’s right. That’s right. Well, amazing, John. Really appreciate the time here. Thank you so much for being on The Deal Maker Show today. It has been an honor to have you with us.
John Clendening: It’s been my pleasure, Alejandro, thank you.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post John Clendening On Helping Scale Schwab Bank And Raising $225 Million To Build Earned Wealth, A Tech-Driven Financial Services Firm For Doctors appeared first on Alejandro Cremades.
In the world of startups, where every decision can lead to success or failure, the stories of resilience, innovation, and purpose often stand out the most. Mark Swanson, an entrepreneur with a journey spanning several decades, exemplifies these qualities.
Mark’s latest venture, Vu Technologies, has attracted funding from top-tier investors like Accenture (NYSE: ACN), Lane Five Ventures, Topmark Partners, Jacques Fu, and ADX Labs.
In this episode, you will learn:
- Entrepreneurship can be born from unexpected experiences, like Mark Swanson’s journey from military leadership to startup culture.
- Being ahead of the curve in technology, as seen with Swanson’s ventures in the early days of the internet and cloud, can be both a blessing and a challenge.
- Resilience and adaptability are crucial in entrepreneurship, especially when facing unexpected setbacks like losing a major investor or surviving the dot-com crash.
- Building a successful startup often requires creativity and resourcefulness, as illustrated by Swanson’s early fundraising and strategic hiring tactics.
- As Swanson did with Telovations in healthcare, targeting a specific niche market can lead to rapid growth and market leadership.
- Transitioning from a technical to a business role can be rewarding, especially when viewing business operations as a form of engineering.
- Helping others succeed can become a fulfilling purpose after years of entrepreneurial success, as Swanson discovered through mentoring and startup coaching.
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Your email address is 100% safe from spam!**About Mark Swanson:**Mark Swanson has an extensive work history in various leadership roles and is currently the Chairman and CTO at Vū Technologies. In 2001, he co-founded and became the Managing Director of Lane Five Ventures, a technology consulting and angel investment firm.
Mark has also been the owner, co-founder, and CEO of Bacchetta Bicycles, a leading recumbent cycle manufacturing company, which he sold after 20 years. Mark served as the CEO of Spheriance from 2020 to 2022 and was the Chairman of Diamond View in 2021.
Additionally, Mark has held positions such as Lead Consultant at Jabil and USSOCOM, where he led technology innovation projects. He also served as the Vice President at Bright House Networks, responsible for strategic initiatives and managing voice services.
Furthermore, Mark was the Co-founder, Chairman, and CEO of Telovations, a Cloud Telephony Company. He invested in and turned around a marketing firm, Boost Branding, where they served as Chairman.
Mark has a track record of creating transformational business initiatives, building new service lines, and driving revenue growth. He has also been involved in projects involving Israeli Fintech startups, blockchain applications for real estate, and broadband infrastructure solutions.
Mark Swanson earned a Master of Business Administration (MBA) and a Master of Science degree from the Georgia Institute of Technology, specializing in Management of Technology (MOT). He completed this program in 1994.
Prior to that, Mark attended the United States Military Academy at West Point, where he obtained a Bachelor of Science (BS) degree in Computer Engineering.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty. Hello, everyone, and welcome to the Dealmaker show. So today we have a founder that has done it so many times that they you know it’s a it’s kind of dizzy. And just to think about all the startup stories, the startup war stories, we’re going to be talking about building, scaling, financing, taking companies public.
Alejandro Cremades: you name it. So again, prepare yourself for a really powerful session today. We’re going to be talking about finding your purpose. We’re going to talk about you know also how to get ah out of like crazy deals where things you know happen last minute. you know We see that a lot when it comes to fundraising as well, why he was for a few years without starting a company after having done a few before that. And again, a lot of the good stuff that we like to hear. So without further ado, let’s welcome our guest today, Mark Swanso. nWelcome to the show.
Mark Swanson: I’m great to be here, Alejandro.
Alejandro Cremades: So originally born in New York, and also you know to a family full of teachers. So give us a walk through memory lane. How was life growing up for you?
Mark Swanson: Well, it was great. I had very um attentive parents who really focused on education. and So both of them were, my mom was an elementary school teacher. My dad was a high school teacher. And so learning was very important to me. um Fortunately, they moved from New York when I was ah just four years old. So I didn’t have to shovel snow growing up. And I ended up growing up down in the Tampa Bay area of Florida.
Mark Swanson: and ah really had a good good childhood there and played sports and did all the things that young young boys do ah growing up.
Alejandro Cremades: Now in your case, you ended up in the military and today that’s actually where you ended up learning entrepreneurship.
Mark Swanson: Yes, I did.
Alejandro Cremades: I mean, it’s quite the place to be learning on entrepreneurship. so why So how did this happen?
Mark Swanson: Well, in high school, I was trying to figure out where I was going to, you know what I was going to do and where I was going to go to college. My parents encouraged me to apply to college, but we didn’t have a lot of money. So I applied the military academy, which you can get us everyone gets a scholarship in, and I was lucky enough to get accepted. And it’s a great education, and it was a great experience in leadership, which I think I took that with me into my entrepreneurial career.
Mark Swanson: But upon graduating, well, first of all, I was there studying computer science, which wasn’t called that way back then. um But I ended up um graduating with a degree of engineering and and focused on math, which I ah really enjoyed math more than writing, but I’ve since learned to write a lot better and no recognize the importance of that. So I went in the military as an aviation officer. I was lucky enough to to command two aviation units, including
Mark Swanson: the first one, which was the the first activating troop of Apache helicopters. And so unlike most military units where you join and everybody had been there, I was the first person to show up to the unit and ah they assigned to me all these different pilots and maintenance people and stuff. So I had the first opportunity to really shape a culture of an organization ah from the ground up without having to inherit something.
Mark Swanson: And that experience was tremendous for me. I mean, it felt really like a startup in the military. So because we were inventing manuals, we were inventing tactics, we were trying to figure out what works in terms of gunnery. And being the first and trying to start up that unit, it was a formative experience in my life and I wanted to have it again. And I remember my commander, when I i left command, he said,
Mark Swanson: You know, you did a great job, Mark, but you’ll never have this experience again of of forming a unit. And I’m like, why not? And so that led my inquiry into entrepreneurship. And I decided I later became a test pilot. I really didn’t like that that much. So I decided to get out of the military and pursue an entrepreneurial career. I wanted to be an entrepreneur of the day I got out of the military.
Alejandro Cremades: So that’s what happened. You went to Georgia Tech you know to polish the business skills and also the computer skills. But right out of that, you started Swann Interactive.
Mark Swanson: yeah
Alejandro Cremades: And you know out of all things, you know you started doing your fundraising rodeo there, and something really, really crazy happened. So I guess first and foremost, what were you doing at Swann? And then what happened during that fundraising journey?
Mark Swanson: Well, i learned I got lucky at Georgia Tech and learned a lot about 3D graphics and especially the internet. I didn’t know that. And that was in the 92, 93 time frame, which the internet was only there. so But it really wasn’t a there was no business opportunity that early on. But what I ended up doing was I i started doing some multimedia projects ah while in school. I did some freelance programming, but um I was able to recruit a couple people there. and Initially, it wasn’t even a company, but and through that work and through the team I started building, it was we incorporated in early 94.
Mark Swanson: and and then and started that business. and it was ah I didn’t really have much money, so I had to ah really be very creative on the ways that I was able to to start growing that company. So a good example of mike of the creativity was I had a guy I really wanted to employ. He was my first business development guy, but he was moving to to Atlanta, and that’s where I started. it And he could not ah Ford, the salary, I wanted to pay him. I was paying him two grand a month, but I gave him a deal where I said, you could live in my basement and for free, and I’ll pay all the the expenses there if you come. and and He really wanted some entrepreneurial experience, and and he joined the team.
Mark Swanson: Well, that company started growing, and and I needed some money. So my sister-in-law introduced me to the guy that invented super glue, which is a company called Loctite, a guy named Dr. Robert Krebel. So I went out and pitched to him on my yacht, on his yacht. I didn’t have a yacht then.
Mark Swanson: And he wrote me a letter back and said, hey, I’m really interested and I want to put together a group of my friends or he has a group of his friends that invested. So I went up there and pitched all them. And you know this was a six month process and I was still growing. I’m pretty much out of money. But we fortunately signed the deal.
Mark Swanson: And then what ended up happening was we came back and we had a closing dinner on Friday night. This was in the spring of, ah I think 97 or winter of 97. And that weekend he had a heart attack and passed away. So I had a really odd situation where I had already, you know, the, the, the, these deals come together very long. So I’m already a hiring ahead of time. I’ve got people that I couldn’t make payroll in in at the end of the month. And yet this money that I thought for sure was coming in was held up and and would go into probate. So I ended up having to figure out a way to do that. And I knew ah but of a guy that
Mark Swanson: in He had sold his ah television stations and was looking for companies to merge with. He had ah recently purchased a company that did video production and and also graphic design and really needed some engineers.
Mark Swanson: i um basically went there and explained my situation to him. I had lunch with him and and come to tell, you know, I found out he had the exact same experiences. His co-founder dropped dead. So he and I um struck up a partnership. We merged our companies together and I was able to go and take the CTO role on that as he was um putting these companies together to go after the internet. So um
Alejandro Cremades: Well, I mean, that was quite the shift because say the company ended up going public. you know I’m sure that it was saying crazy times during that dot-com craze.
Mark Swanson: and Yeah, it was very crazy. i mean we In when I was still at Swan Media, I had been preaching about the internet and the great things. And a lot of people, if you can imagine this, in 1995 and 1996, a lot of people thought it was a fad a technology fad.
Mark Swanson: um But all that business I had been developing for a year or two came back in 96 and i couldn’t you know that I had way more business that I could possibly do. So everybody was interested in it then and then it only blew up from there from 96 to 99. It was an incredible run.
Mark Swanson: And we we grew that business ah from $7 million dollars the first year up to $150 million dollars within within four years. So it was you you know just unbelievable.
Alejandro Cremades: Wow. What was the valuation? At the peak of the company, what was the valuation?
Mark Swanson: ah Over $2 billion.
Alejandro Cremades: That’s unbelievable.
Mark Swanson: Yeah.
Alejandro Cremades: That is unbelievable. So obviously, in this case, you know you had the the success experience, right? I mean, in quite a remarkable journey. ah But then the the next time around, you guys say did the same rodeo with Abgenesis, but you did it in this in Silicon Valley.
Alejandro Cremades: You raised about $70 million. bucks You were competing with the likes of Marc Andreessen with Netscape. But they obviously, you know, the
Mark Swanson: Well, no, it wasn’t with Netscape, it was with LoudCloud.
Alejandro Cremades: With lab cloud, but but that was the time of the dot com bubble, you know, ah bursting.
Mark Swanson: his
Alejandro Cremades: So how was how was going through that?
Mark Swanson: Well, you know, you’re at You’re at a point, it’s kind of like now, I feel like, where we have the AI bubble and you feel like it’s never going to end. um But I think you know it’s inevitable that the expectations exceed reality. um But we you know it’s it’s kind of hard to see it when you have you know customers asking for your product and services like that.
Mark Swanson: and ah And also, the the the sums of money you know that are being invested in these things are so big, they give you a lot of runway. um But it’s it’s one of those things where you you you’re not getting much sleep you know two or three hours a night, it seemed like, and you’re just trying to take a mo advantage of a moment in time. But unfortunately, with AppGenesis, we raised all that money in late 99, 2000 timeframe.
Mark Swanson: And you know the the bubble was just starting to to peak right around then. And so the biggest problem we had, you know it I felt like it reflected at the board level, the board didn’t understand why were our revenues going down, but our business, which was an infrastructure as a service, was very appealing to startups.
Mark Swanson: and ah And when all these startups started running out of funding, it wasn’t that our customers were leaving us, they were going out of business. So we had probably 60 to 70% of our customers in six months went out of business. And so it became, and and when they do that, they leave you with a long trail of of unpaid bills and you know invoices that they won’t ah respond to. And so it becomes becomes a very difficult situation in a very short amount of time.
Alejandro Cremades: So then in this case, I mean, you end up a turning page with a company. You move to Florida ah to take care of your mom. And also about three years, I believe, go by until you end up being going at it again you know with another company. You were involved with a bunch of stuff, with your brother-in-law, with your neighbor. But three years without starting a company, that’s ah a long time.
Mark Swanson: Well, I didn’t, i I felt a little, you know, ah burned out to be honest with you when, when I threw the app chance to experience. So that had been about a 10 year stretch of just really going at it hard. um But I really felt like I, the skills I gained really were applicable to helping other people.
Mark Swanson: um so I tried to do a couple of startups then, and I helped out too. My brother-in-law, he was a passionate biker and he was a bike designer. He did this in his garage. so I helped him start a business and we grew that to the largest recumbent bike manufacturer in the world.
Mark Swanson: And then I was helping a neighbor who his business because of a regulatory change had dramatically plummeted. And so I helped him execute a pivot. And that was an enjoyable reason. I became the chairman of that company. I brought in a new CEO and was able to to turn that company around. We sold that to Halo.
Mark Swanson: and you know and but i still really and By then, I kind of missed it. um And then I wanted to get back into it. And i in the bike company, I was noticing how expensive phone systems were. We were we were a very small business. And I started getting really interested in voice over IP. So i I spent about a year playing around with messing with soft switches and trying to figure that out. and And then I ran into somebody with a telecom industry, and I said, hey, let’s start a business doing this.
Alejandro Cremades: So, at the end of the day, you know, you ended up doing a company called Telovations, if I get that right.
Mark Swanson: Yes, televations.
Alejandro Cremades: Telovations, Telovations, oh.
Mark Swanson: Yeah, televations.
Alejandro Cremades: so So talk to us about televisions, because now you know it was a few years have gone by you know before you actually were operational.
Mark Swanson: and wait
Alejandro Cremades: So how did you go about you know looking at things differently? Because before televisions, you had success. You had you know more unfoldings that were not expected, but you were able to learn a lot.
Alejandro Cremades: So what do you think you did differently with televisions from other experiences?
Mark Swanson: Well, I think um the good thing about televisions was that I spent about a year incubating the business in in my head and also with my hands, you know experimenting with different technologies, specifically Asterix.
Mark Swanson: And so the key lesson that I’ve learned in in the past was that I had tended to be ahead of the curve in terms of the business opportunity. So when the internet came around, I mean, I thought everybody was going to see what I saw, and they didn’t. I thought everybody was going to see the advantage of cloud service, cloud infrastructure, and ah big companies just weren’t buying it. you know And so just that experience, and I think one of the big takeaways I take away from this conversation is an entrepreneur often overestimates the response of a market um because they have a unique perspective. And I would say probably they underestimate the the size of impact and the opportunity. I mean, I had no idea that the internet would be this big, no idea that cloud would be this big.
Mark Swanson: um And so, but it’s just that you don’t want to jump the gun on there, which is what what I did. So incubating that and realizing that voice did not work out um on, you know, wasn’t working at the time on the internet, but I knew it was coming.
Mark Swanson: So we we waited till the right time to start moving into a business that you know allowed you to get some traction much quicker. So we had within six months, we had 100 customers and we were not even, we hadn’t even built our service yet. We rented infrastructure and got these customers and then we um developed our own soft switch technology and stuff like that. so And then the other innovation, the the second thing would be we I was much better at targeting a very specific group of customers. So we were a leader in voice over IP, connecting multi offices and health care, which is a very good niche. And then we expanded from there. So that business grew really by following a more traditional strategy of a market penetration and a niche and then growing from there, getting a beachhead first.
Alejandro Cremades: Now, in this case, you know you experience it more as a CEO, you know given the fact that you are a technical person. So I guess, how how has it been to that transition from the technical side to the business side?
Mark Swanson: Well, I think my nature is to look at a business like ah and a work of engineering. um And I think, you know, your newsletters are the same way. You know, you look at it from a a prospect is, you know, how do I design and operate this machine in the most efficient way possible?
Mark Swanson: And I think having that ability to do abstract your business and and really take it away from your identity um is is a powerful thing because you probably aren’t you know the right person for every job in the company. And I think if you learn how to operate as a machine and find the exact right person to operate that piece of the machine, the whole thing is going to work better.
Mark Swanson: um And so um that engineering, I actually didn’t enjoy the first go around when I became more business in the internet days, because I left the tech space. But by ah thinking of it differently and in enjoying the nature of building a company as an engineer, ah thinking it like that, it’s it’s actually a very rewarding experience.
Alejandro Cremades: Now, ah with with this company, with Televations, the company ended up getting acquired by Bright House. I mean, obviously, at this point, you know you’re quite a CSUN guy, you know having done you know a bunch of liquidity events. So how did the ah the whole transaction with Bright House come together?
Mark Swanson: Well, there’s an interesting story and and the I’ve already told the guy to do this, but um my ah I ended up having some health problems and we were right around the time we we needed to raise some money.
Mark Swanson: And so you have a very important juncture, whether you raise a bunch of money Series B and get diluted, or do you you you see what you can get now? So I knew, I looked at potential, who would be in a potential inquirer or acquirer of the company.
Mark Swanson: And so I called like an industry pundit, a guy that blogged all ah all you know, it was his life to blog about voice over IP and the transforming of the telecommunications industry. So I called him up and said, hey, I’ll give you some money if this if this closes. Actually, I think I paid him outright. But can you put a bug in the ear of somebody at Bright House because he knew everybody ah that our company might be open for acquisition and and know They don’t have an offering like ours. And I really think that the strategic fit there would be good. So he did that. And sure enough, a few weeks later, I got a call from them, unsolicited. you know and And so he asked me if we were entertaining any offers or about the business. We ended up talking. He referred us. It was the head of the sales did this ah in Florida.
Mark Swanson: And then he referred us over to the guy that ran acquisitions and we developed a relationship. And sure enough, it was a it was a great um fit. And I think it was a great fit because we knew a lot about their business. We were a partner with Bright House. And it was also something that we had spent some time modeling and figuring out how would we do that. And we had a ah great I think we had a good internergate integration plan, and and the acquisition really worked out for them. And I’m still um best friends. And the guy who’s on my board, the guy that did the deal, who was the head of strategy for Bright House, um and I are still close friends and and business acompes accomplices, I would say.
Alejandro Cremades: So you eventually find your life purpose, which he is saying helping others succeed. you know And you became also a startup coach, which led you to to getting involved with VU technologies.
Mark Swanson: Yep.
Alejandro Cremades: no So how did that life purpose, that hit that thing that hit you you know how did that happen?
Mark Swanson: Well, I remember um you know my goal when I was young was to be, ah when I started, I said, I want to be a millionaire by the time I was 40. and And I accomplished that. and so But when you have you know I really didn’t have any thinking or any plans after that. And so I kind of wandered for a round during that period in the beginning of the 2000s. And so after the televisions exit, and I had to put in ah two years with Bright House
Mark Swanson: um i I said, hey, you know i I had thought a lot about what I wanted to do. And I felt like you know’ve I’ve learned enough now that I could be valuable to help others succeed. And so I did some consulting jobs with a couple of um organizations. And then my most recent one was a you know I was an advisor. I talk once a month to the CEO of a video production company, and they they were a client of mine, or I was a client of theirs at Bright House. um And they ended up, when pandemic hit, I got a call from the CEO there, and he was like, hey, what should I do? And i we talked about the PPP and turning his company into ah more of an R and&D shop. But he went out and found this technology called virtual production. It came from the movies.
Mark Swanson: And he built a stage on his own and borrowed some money from the government then. it was It was very low interest and called me up and said, hey, I’d like you to come by and see this. So I was pretty blown away by what he had done. And he’s got a great team. So I ended up, we he said, hey, can you help me come on and turn this into a business?
Mark Swanson: Maybe it’s a in the inside my company now, or maybe it needs to be spun out. So um I helped him write this him and his partner write this spin-out plan. and And then we ah spun the company out and raised money for that. so And it’s gone really well. We spun it out in in early July of 2021. And we’ve already had well over $30 million dollars of cumulative revenues in the company. so
Alejandro Cremades: And how much has the company raised to date?
Mark Swanson: it’s Well, we raised $17 million as a seed round. So that allowed us to buy all this infrastructure.
Alejandro Cremades: Wow.
Mark Swanson: It was it was a highly cap capital intensive business. And then we raised another $3 million. So we got about $20 million dollars into it right now. And then we we haven’t gone out yet for a Series A.
Alejandro Cremades: That’s incredible. Now, let’s say let’s let’s let’s talk about here about the the past, because obviously, what you’ve done is remarkable. you know Now, obviously, you know at VU Technologies, you have an executive chairman role. ah So I guess say you know even though you are operational, you know I’m sure that you have some time to, to perhaps now, you know to spend time with me and with us and and to be able to reflect together. So I want to put you into a time machine.
Alejandro Cremades: and I want to bring you back in time, Mark. I want to bring you back in time to that moment where you were coming out of Georgia Tech, and you were thinking about starting a company, which ended up becoming Swan. But let’s say you have the opportunity of having a chat with that younger self, that younger Mark, and being able to give that younger Mark one piece of advice before launching a business. What would that be and why, given what you know now?
Mark Swanson: Well, I think there’s always a feeling amongst um new entrepreneurs and there should be a sense of incredible urgency. You’re immersed in your own little bubble and and there’s an opportunity there and other people see the opportunity too. And so you’re looking at, and you probably do know peers and you’re looking at these other people and you always feel like they’re ahead of you.
Mark Swanson: And because companies, I’ll tell you, look a lot better from the outside than they do the inside. So um you you feel incredibly rushed. And I would think that um my you know I wish I had told my younger self that, hey, be better prepared for for success, not you know rushing headlong into a business and and having to answer the questions on the fly while you’re trying to operate a business at the same time.
Mark Swanson: um So, because if you have a good plan and you’ve done your homework and especially do scenario analysis and what happens if this happens, what happens if that happens, do that. And we did that at um at Vue. We actually looked at, we drew a ah quarterly roadmap out for three years. We did, tim Tim John and I, the three founders of the company.
Mark Swanson: and And we spent a lot of time in the beginning, three months just planning the business and in laying it out. And I am am really kind of shocked to see that almost every quarter we’ve we the business has evolved the way we thought, with the exception of AI. That was about that came out about two or three quarters early. um But as a result, we did ah we were able to handle ah a very big pivot because we knew it was coming.
Mark Swanson: And we became we’ve now at Vue become the first company really to develop a ah video production system and workflow that’s fully enhanced by AI. And that’s a big system we’re selling into corporate America. And I think if we hadn’t gone back and recognized that at the beginning, we’d be we would have scrambled. And we built this system when we pivoted in about three months, which was an amazing I actually thought it couldn’t be done. But the the team there is fabulous and and was able to respond and make that happen.
Alejandro Cremades: That’s incredible. So Mark, for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Mark Swanson: Just my profile, I guess I’m assuming you share that. um I respond to to most of my requests on there, um unless you’re trying to sell me something.
Mark Swanson: But and and people what?
Alejandro Cremades: And that’s on LinkedIn, correct, Mark? LinkedIn is the platform I use the most.
Mark Swanson: Yeah, linkedin.com. I was i was the 500th member of LinkedIn, so I got the slash Swanson. LinkedIn in Swanson.
Alejandro Cremades: That’s amazing. There we go. There we go. That’s awesome.
Mark Swanson: All right, thanks, Alejandro.
Alejandro Cremades: um Well, Mark, well, thank you so much for being on The Dealmaker Show. It has been an absolute honor to have you with us. Thank you.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Mark Swanson On Helping Build A Company To $2+ Billion Valuation And Now Building The World’s First Virtual Studio Network appeared first on Alejandro Cremades.
In the business world, some stories stand out not just for their success but for the bold decisions and risks that paved the way.
Michael Marks, founding partner at Celesta Capital, is one such figure whose journey from Missouri to Silicon Valley is about the spirit of entrepreneurship and the transition from operator to investor.
His career, marked by strategic moves and seizing opportunities, offers invaluable lessons for entrepreneurs at every stage. Celesta Capital has funded top-tier companies like Aurascape, Auradine, Recogni, and Agnikul.
In this episode, you will learn:
- Always be prepared to seize opportunities, even when they come unexpectedly, as demonstrated by Michael Marks’ acquisition of Flextronics.
- Sometimes, taking risks—like relocating to Silicon Valley without a job—can lead to remarkable career transformations.
- Building and leveraging a strong network is crucial, especially in vibrant ecosystems like Silicon Valley.
- Success often comes from being in the right industry at the right time, as seen with the growth of Flextronics during a manufacturing shift.
- Knowing when to step down and bring in fresh ideas is key to sustaining a company’s growth.
- Transitioning from operations to investment requires a shift in mindset, but staying connected to operational roles can be more fulfilling for those with a hands-on approach.
- Maintaining a focused, smaller venture fund allows for more meaningful involvement with portfolio companies, leading to potentially better outcomes.
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Your email address is 100% safe from spam!**About Michael Marks:**Michael Marks has been a technology investor and operating executive for nearly 40 years. He is a Founding Managing Partner at Celesta Capital, a deep tech venture capital firm headquartered in Silicon Valley.
Before Celesta, Michael was a Founding Partner at Riverwood Capital, a private equity fund specializing in growth-stage technology companies, and a partner at KKR.
Michael spent 13 years as Chairman and CEO of the technology manufacturing company Flex, growing revenues from $150M to nearly $30B over that time. Michael served as Interim CEO of Tesla and Adjunct Professor at Stanford Graduate School of Business for several years.
Michael also co-hosts the TechSurge Deep Tech Podcast, which explores emerging technology, business building, and venture investment topics.
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Read the Full Transcription of the Interview:Alejandro Cremades: alrighty Hello, everyone, and welcome to the Dealmaker Show. so Today, we have an amazing you know an amazing guest, you know really you know someone that has gone from the operator side now to the investment side very successfully. so and We’re going to be talking about all the good stuff that you are all dealing with, you know whether it is how to think about fundraising, how to build your team and the management team, and what’s important when you do so, ah product market fit, what does that look like.
Alejandro Cremades: And then also how to think about outcomes you know for companies, which I think that that’s essential because always the end i mean the beginning needs to to start with the end in mind know and how you reverse back engineer to where you are right now.
Alejandro Cremades: So again, a very inspiring conversation in front of us. So without further ado, let’s welcome our guest today, Michael Marks. Welcome up to the show.
Michael Marks: Thank you very much. Happy to be here.
Alejandro Cremades: So originally born and raised in Missouri. So give us a walk through memory lane. How was life growing up over there?
Michael Marks: Well, it’s funny. ah you know I always like to say the Midwest is a good place to be from. I mean, it was a wonderful place to to grow up, you know community and all that sort of stuff. Very different from from the way I live today in Silicon Valley, which is you know just high energy, lots of new things happening, all kinds of cool people. i mean so it was a bit It was a bit quieter in the Midwest growing up.
Alejandro Cremades: So how was that transition from psychology to the world of business? You know, that’s quite a shift.
Michael Marks: Well, like a lot of people in college, I didn’t really know what I wanted to do. And psychology was interesting to me. you know It just wasn’t really ah really much of a profession to get into. So like a lot of people, I went to business school to get some real training, broader training, so that I could have a lot of other opportunities. That worked out great.
Alejandro Cremades: So what was that moment in time? Obviously, you know you do the MBA in Harvard, and I’m sure that opened up your eyes you know to the the world of business. But what was that moment where you realize, hey, I i need to pack the bags and go to Silicon Valley? I mean, you already had family at that point, so I’m sure that was say not an easy decision.
Michael Marks: No, it wasn’t, and and it’s funny, you know, I was in St. Louis, my kids were young, I was 37. I had been working in small technology companies, which is all there was in St. Louis, and it’s the case in most of the Midwest. And, you know, my customers were in were in Silicon Valley, you know, some of our employees were there. And, you know, we just said, look, you know, we’re adults, we have a choice, why don’t we just go where the action is for the kinds of stuff that I’m interested in.
Michael Marks: And you know a lot of our friends said, like you know what are you doing? You don’t have a job. You’re just leaving. I go, look. um it’s just It’s just an adventure. We can always come back. And it turned out to be a pretty good adventure.
Alejandro Cremades: So then let’s talk about that adventure because you land there in Silicon Valley without a job, you know doing consulting. How does that transition into getting to work for other companies and being part of that Silicon Valley you know ecosystem?
Michael Marks: Well, that’s a good question. you know It’s just so much fun to be an entrepreneur in Silicon Valley because you know what I what i and tell people, one of the differences between the Midwest and being in Silicon Valley is that you in the Midwest, if somebody would make an introduction, you know you should go meet this person. People don’t really do it because it’s just no it’s not interesting. It doesn’t lead to anything.
Michael Marks: You know, in the Bay Area, people are making introductions and everybody does it because your paths are interwoven and you’re always meeting in different places. And so just just meeting people turns out to be something that that is very reinforcing for the climate that, you know, for the but the business climate. And it was just fantastic. And so it was easy for me to get jobs. I mean, you know I knew some people there and they would introduce me to other people and say, hey, why don’t you come and do some work over here? And it was just so energizing. I just had a smile on my face every day.
Alejandro Cremades: So then so then at that at at what point, because I think that flextronics was a pivotal moment for you and you ended up pay going and working for them, but they how did they how did the the whole idea of of of being and and working there to then all of a sudden having an opportunity to buy you know the company?
Michael Marks: Right.
Alejandro Cremades: I mean, that’s that’s quite the ah the the the sequence of events there, Michael.
Michael Marks: Well, it is. And thanks for asking that question, because I think, you know, I think for your listeners, there’s a good message here, which is, you know, being prepared for the moment when when you can you know, really take action as important and then taking it when the time comes. So the story was I moved to Silicon Valley. I did ah had a consulting project at Flexronics and I had a ah consulting project at Electronic Arts and both of them offered me full-time jobs.
Michael Marks: So I went to, like I took the FLEXtronics job and I was a plant manager there for a year and the company was struggling and and I still had this offer on the table to go to Electronic Arts so I went over there for for a year which was really fantastic. I was then asked, FLEXtronics was a relatively small company and and through a series of events they asked me to join the board so I was actually on the board of FLEXtronics while I was off running ah a small company then I took a three year gig running a company called MedCal But I was on the board of electronics, and and what happened was the company was struggling. The banks that had the loans were planning to sell the company to to you know recover their loans. And I asked them what they were going to sell it for, and they said $8.5 million. dollars So then I went and raised money from Sequoia and Kleider Perkins and NEA, and raised the $8.5 million. And we we bought 55% of the company, and then I was installed as the CEO.
Michael Marks: And it was just an opportunity in time. I was there. I knew the company. i I knew the management team. They wanted me to be the leader at that point. And I just i just went for it. I mean, literally, when the banks told me what they were going to do, I resigned from the board the next day so I wouldn’t be in a conflict, and then put together a group that bought control of it. Look, when i when when we did that, this was a relatively small company. It was $90 million of revenue. But in the manufacturing space, that’s not a lot of revenue. That’s actually a small amount. That would be a lot in the software business.
Michael Marks: But wait you know my idea then was was to build it up to a couple hundred million dollars and sell it and and move on. And through a series of ah you know very you know lucky fortuitous events, we got the opportunity to to to stay and play. We became a public company. And when I left in 2005, it was $25 billion. So it was quite a ride, but it was unexpected.
Alejandro Cremades: No kidding. Now, for how long were you involved with the business when the opportunity comes for you to to put the group of investors and and strike a deal? ah
Michael Marks: Yeah, so i I had worked there full time for a year, and then I’d been on the board for three years. So I knew the company pretty well at that point. And then the opportunity came just because the banks decided they were going to move in and take over.
Alejandro Cremades: so
Alejandro Cremades: And why was that going to be the case?
Michael Marks: Because the company was struggling, and there wasn’t a good they they there wasn’t a view towards a good outcome for the banks. Like, how am I ever going to get paid back? So they just wanted to go sell their stock. They had stock and security for the loan, and they just wanted it take over the stock and then go sell it and get their money out and move on.
Alejandro Cremades: So how did the the conversation unfold? you know I mean, obviously you were not a deal maker up until that point, right? ah But here you are, all of a sudden, you know structuring things, getting the deal to happen, and buying you know that piece of the company.
Alejandro Cremades: So walk us through how those you know ah events unfolded you know until the transaction finally gets a gets finished.
Michael Marks: Sure, sure. Well, so what happened was I was on the board. So it was a small group of of ah board members. And some of the board members were in Asia, because at that point, the company’s headquarters were in Singapore and the operations were all in Asia. The bank was in Wisconsin. And and so, you know, they they called I was in the US and and and I met with them and they said, Look, we we don’t see a good outcome here. We just want to take over, you know, convert our our debt into the equity of the company. We have the right to do that. It’s 55% of the company. And then we’re going to sell our stock. And I said, well, what are you going to sell it for? And they said, $8.5 million, because that’s how much they were owed. And I said, OK, I’ll be back to you. And then I thought that was going to be a fantastic opportunity. I knew a bunch of the venture capitalists in the Valley. So I resigned from the board. I went to visit ah you know these venture capitalists and said,
Michael Marks: For eight and a half million dollars, we can have 55% ownership of this company, and that’ll be a steal. We can really make something out of it. And so you know I was able to raise the money. and And then I went back to the banks and said, we’re just go to pay you the we’re going to take over the 55% of the stock. We’ll pay you the eight and a half million. I i was installed as the CEO. The bank went away. And then we just started running the business. And it was it was a great moment in time. And you’re asking a really good question because, you know,
Michael Marks: when when When an entrepreneur gets an opportunity and knows how to deal with it, I’d already worked at the company, so I understood the business, and and here was an opportunity to get in and have a real equity stake for not very much money. And I’d already gotten to know some of these venture firms because of my time in Electronic Arts, because they were invested in Electronic Arts, that’s how I knew them. And they just said, you know, seems like a good guy, did a good job of Electronic Arts, decided to back me, and you know, the rest is history, as they said.
Alejandro Cremades: That’s unbelievable. So how, how, how, what was the value of the company when the transaction happened?
Michael Marks: was eight and a half million for 55%, so roughly 15 million for the value of the company.
Alejandro Cremades: And then when you turn chapter, you know it was 25 billion. So that’s quite the ride, Michael. So what do you think what do you think needed to happen you know um for for that incredible rocket ship to you know from a company that is struggling to all of a sudden, it gets transformed into a rocket ship and it goes all the way to 25 billion?
Michael Marks: oh
Alejandro Cremades: I mean, what were the key ingredients that allowed for that journey to happen?
Michael Marks: Yeah, so this is one of those those times where one of those things where you say, you know, better to be lucky than good. I got involved in that business at a time when the industry was taking off, which is not the way it is today. Today, it’s very mature. You know, in so this is 1993, when most companies did their own manufacturing. You know, today, nobody does their own manufacturing. So we were at the We were in the forefront of ah of a great opportunity. And entrepreneurs you know need to always be looking at that, as we call product market fit, which we can get into later. but But the fact is companies were looking to get out of manufacturing. And we we were just in the early stages of that. Now, that hasn’t been said. That’s opportunity. There’s lots of big markets in the world. And we got the opportunity to get into plexronics. But there was a lot of expectation involved. And we can go talk about with that.
Michael Marks: What that’s about, but in terms of building a management team, it was a global company. When I left, we had factories in 26 countries. That is not easy work. and and But we had the opportunity, the the market opportunity was there. And so we’re in the right place at the right time. That hasn’t been said. We had to be very aggressive in driving costs down and increasing our services to the customers to get permission to continue to grow. And and fortunately we were able to do that. It was a huge success.
Alejandro Cremades: so then So then, obviously, you know you build it up to 25 billion, remarkable journey. At what point do you decide you know the chapter is coming to an end and it’s time to turn page?
Michael Marks: Well, that’s ah another good question. Thanks for that one. um You know, and and we have a we have our our own podcast called Tech Surgeon. I interviewed recently, Indra Nooyi, who was the CEO of Pepsi.
Michael Marks: She did that very much like me, went out on the top. And one of the things we we talked about that is that, you know, companies’ management gets stale. I was the CEO for 13 years. I think Ender was 12 years. It was very similar. But you get to the place where you need new ideas and fresh ideas. and And the way you get that is by taking younger people who have different ideas because the tools change. We all know just look at cell phones that didn’t, you know, even exist, you know, back you know, back when I started in flexronics and the way information is ubiquitous and all kinds of stuff. So it takes it takes younger people who have a different view to keep a company growing. And, you know, it’s 55 and it wasn’t the end of my career by any means, you know, I’ve gone on to do all these other things.
Michael Marks: But I really felt it was that I was getting stale. I tell a story about this. you know I went to Davos for four years. And I was on you know panels with you know important people and blah, blah. And you know when my marketing manager came to me and said, it’s time to plan your trip to Davos again this year, that was the moment I decided it was time to move on. Because I didn’t want to go to Davos again. I’d already done that. And I wanted the CEO of the company to be excited about doing that.
Michael Marks: And I had a i had a ah great chief operating officer, and it was time to hand over the reins. And people would say to me, you’re too young to retire. And I go, I’m not dying. I’m just going to go do some other things. And it’s turned out great.
Alejandro Cremades: Well, one of those other things was becoming the interim CEO of Tesla. and What an exciting chapter. and i mean what What Tesla has become today is absolutely unbelievable. But how did that happen?
Michael Marks: Well, one of the flextronics executives went over to Tesla was running R&D over there and said, you ought to come and see this company. This was before there was even a car, right? It was very early days. And so I went over and visited. It seemed kind of cool. And I put some money in it. I had a little sort of a private venture fund that I had started.
Michael Marks: I put some money in it and I was hanging out over there. I got to know Elon. He used to stay with me when he was coming up to visit from from Southern California. and he He really wanted more professional ah operating management, which I was not in a position to do because I was i had started this this growth capital firm, Ripwood Capital.
Michael Marks: um But he asked me if I would step in for for a few months, which I did. And I had a pretty big impact. he he he He acknowledges that. But by no means do I want to lead any of your listeners to believe that that I’m in the ballpark with Elon Musk. I mean, that’s a brilliant guy who pushed the envelope in so many directions. And i I couldn’t be more excited for what he’s done for the world, honestly.
Alejandro Cremades: So I mean, here you are an operator that decides to um go to the other side of the table, and to the investment side.
Michael Marks: Right.
Alejandro Cremades: So what what I would say triggered that transition.
Michael Marks: Well, you know, I was I was really, you know, I had a lot of connections in the world because of flex products. I mean, I had friends all over the world and friends in high places and all that kind of stuff. So, you know, I thought I was just planning to when I retired from flex products just to be a ah ah personal you know investor like many people do, you know, after after having had a successful career.
Michael Marks: um And I got recruited to to join KKR, which I was not planning on that. I didn’t know if if that was something I wanted to do. It was, ah you know, the headquarters out in Silicon Valley was was very close to where I lived. I go, why don’t I give it a try? You know, and I did that. I didn’t find it particularly interesting for me because in in these very large buyouts and it and subsequently it at Riverwood,
Michael Marks: You know, it’s more financial management, which just wasn’t that interesting to me. I’m an operator. And as I as i have have have moved into the venture business, that’s way more interesting for me because because there’s so much operating so many operating issues that it takes to try to create a valuable company. when you’re you know When you’re buying a giant company, you know you’re just you know You’re just doing financial management.
Michael Marks: Nothing wrong with that, not being critical of that.
Alejandro Cremades: you
Michael Marks: It just didn’t fit me as an operator. I wanted to spend more time working directly with entrepreneurs, working with with companies that are just getting started, help them figure out product market fit, help them figure out how to do management teams.
Michael Marks: And I love it. It’s great.
Alejandro Cremades: So obviously that they ended up getting you into what you’re doing now, which is Celesta Capital, which was the spinoff of Riverwood.
Michael Marks: Right. right
Alejandro Cremades: But on Celesta, tell us about Celesta. What are you all doing at Celesta? What companies are you excited about? What’s what’s really the the purpose you know that gets you guys you know out of bed every morning?
Michael Marks: Well, thanks for asking that question, because I’m really, really excited about it. So happy to answer that one. but We’re an unusual firm, because the the four the four general partners have all had big operating jobs. So you know I ran Flexronix, as we just discussed. ah Nick Brathwaite, one of my partners, was a chief technology officer at Flexronix. Sri Ram Viswanathan, our other partner, ran ah ran a big operating business at Intel, and then was was instrumental in the starting of Intel Capital.
Michael Marks: And the fourth one, Matt Marsh, who’s our CFO, was the CFO of a publicly traded company. So we are an unusual group of characters. We’re also older. And um we we are very hands on in our companies. Each one of us has been CEO of one of our companies at a time when we needed you to step in. and Excuse me.
Michael Marks: but um What’s exciting about what we’re doing and and different from the other. First of all, the the results in the venture business have not been very good of late. There’s a lot of articles being written. you know The results aren’t very good. And part of the reason for that is that the venture firms have gotten really large. And in fact, all the companies have gotten really large. The growth capital companies, just you know the KQR and TPGs of the world.
Michael Marks: And when people have lots of money, they have to do really big deals. And venture, is venture as it was always constructed, is smaller deals. And if you have a $10 billion dollars fund, you’re not in the venture business anymore. Because you can’t put $10 million in a company and and and hope for a $100 million return. Because you have to return $30 billion. That doesn’t do anything for you. We’ve stayed small.
Michael Marks: now what’s What’s differentiated about us, and part of the reason our results are, you know, all of our results are top quartile and top decile and a couple of the funds, is because we we’re we’re hardware guys. You know, we did the we we did all this hardware work, we did it in flexronics, and you know, everybody started thinking that hardware is capital intensive and software is not, everybody should go do software. In the last 25 or 30 years, it’s all been about software, which by the way, is very capital intensive. It’s just a different kind of use of capital.
Michael Marks: because it takes a lot of money. If you’re in the enterprise software business, it takes lots of capital too you know to build these companies. So here we are doing semiconductor deals and you know and storage deals and and and data center activities and so on. And all of a sudden, AI comes along. It explodes on the scene. And what’s happening is, of course, there’s lots of great software things to do in AI. But what it turns out is that Artificial intelligence, in order to use it, takes so much computing power that the entire hardware system in the world now has to get remade.
Michael Marks: which is why, you know, the most valuable company in that top companies in the world are, you know, Nvidia is a hardware company. I, gosh, I knew Jensen, you know, love the guy knew him when he had, you know, 15 people in Santa Clara and a little office trying to design, you know, graphics processing units. And now it’s like the most valuable company in the world. It’s like, awesome. I send him texts once in a while. Cause I see him on TVs become so famous, but we we had this group of people, hot tan at Broadcom, you know, Sanjay Marotra, at Micron. I just had him on one of our podcasts as well. um And now the entire hardware system has to get remade because it uses too much power and is too expensive. And so, gosh, it is you talk about a target-rich environment for an investor. And so you ask the question, what what are we excited about? We have two processor companies, Auradine and Recogni. Both will likely be public companies before too long you know that are exploding on the scene. We have all kind of we have a company that
Michael Marks: Stothera that makes a timing chip you know at a hundredth of the cost and a hundredth of the power and so on. There’s there’s there’s opportunities everywhere and there’s so much demand. So when you talk about we talk about product market fit, I mean right now everybody is in the market for for products that run faster and use less power. And so we just we’re just kids in a candy store right now. It’s just really fun.
Alejandro Cremades: So how many investments have you done and what’s the assets under management right now of Celesta Capital?
Michael Marks: We have about 70 active companies. We had about 100 altogether. We’ve exited 30 or so. And we’ve had some wonderful exits lately. We had a public offering in India and one in the United States in the last 18 months. It’s been great.
Michael Marks: Yeah, we have a lot of companies. We probably have too many. We we need to shrink it down a bit and put more heft behind some of them. But part of that’s because the opportunity has gotten so big, Alejandro. I mean, when you look at and you know processor companies, we have this one company, Auradine.
Michael Marks: It’s two years old. We already have $400 million dollars of orders. That’s pretty unusual for a venture investment. It’s fantastic.
Alejandro Cremades: No kidding.
Michael Marks: Yeah.
Alejandro Cremades: No kidding. Now, now obviously, you know to that point too, let’s double click on product market fit.
Michael Marks: Sure.
Alejandro Cremades: What does product market fit look like and and what kind of advice do you have for the founders listening?
Michael Marks: Well, thanks for that question. It’s really important ajandra for for founders because you know we look at deals all the time and and and companies very frequently do not have product market fit. What that means but it means to have product market fit is that whatever it is you’re going to create or you’re in the business of creating, there is clear demand for it. There is an ability to stand out from from competition.
Michael Marks: and and that you bring the right the the right skill sets to make that fit. Let me give you an example of of how, because i look I tell entrepreneurs this all the time, i I meet them, and they always go, the market is X, and they always, always overstate the size of the market. In fact, you know one of my little quips, as I say, the three mistakes entrepreneurs make is they overestimate the size of their market. They overestimate the amount of it that they can get.
Michael Marks: And they underestimate what it’s going to cost them to get it. And I’m giving this speech to entrepreneurs all the time, which is, and let’s, let’s use the most, you know, the the most well-known example in the world is Tesla Motors. Okay. So if Tesla says my market opportunity is, and then they define the entire auto business, that isn’t true because they’re making, ah you know, they come into the market with a relatively high cost.
Michael Marks: electric vehicle. The market isn’t the entire auto industry. The market is which investors, which which customers are going to pay more than they could for another car and and have an electric vehicle, which means they have to have a ah charger in their garage and all kinds of stuff. It is very, very classic for for entrepreneurs to say, my market is the whole market, which it never is. It’s always some subset.
Michael Marks: So what i when I always talk to entrepreneurs is when you’re looking at your product, market fit, so what is your product and what market can it truly address? Let’s not get overly excited. Let’s not say we can address, you know, we’re we’re going we’re going to do financial software. Your your opportunity isn’t ah every bank in the world because that can’t possibly be the case. So so it’s very important for entrepreneurs to two to organize their thinking around a smaller market that they can be a player in.
Michael Marks: and not try to take on you know try not try to take on a huge industry because they can’t. They’re they’re they’re small. and So this is very important and done poorly a lot of times. So that’s how I think about product marketing.
Alejandro Cremades: So what about fundraising? you know Because right now, obviously, we’ve gone through the motions, through different cycles, different markets. So obviously, one thing is to get product market fit, and then the other one is to support you know growth you know as you continue to ah to ah to go with the business. So how should founders think about about fundraising?
Michael Marks: Well, this is a really important one, and this is another speech that I give all the time. Entrepreneurs, when they’re raising capital, first of all, this this is a very tough time to raise capital. It’s a very tough time for companies to raise capital. It’s a very tough time for funds like Celeste to raise capital. These are cycles. It’s tough now because results have been bad, as we talked about earlier, and the fund size. and And because there’s been so few distributions, investors are not actively looking for companies to invest in. So it’s it’s it’s a it’s a bit of a desert map. What entrepreneurs get wrong all the time is that they get focused on how much money they they they want to raise and at what valuation. So the valuation I tell entrepreneurs all the time, get the money.
Michael Marks: Get the money, and don’t worry about it valuation. You know, over time, if you’re successful, you know, you’ll do up rounds, you can buy back stock if you want to, whatever it is. um It is very important for entrepreneurs to be focused on not the valuation, but the cash. Get the cash. And it’s hard for entrepreneurs, because they have, you know, visions of sugar pumps, as they say. You know, they want to be be ah Mark Zuckerberg, and you can’t be. When you’re in an early stage, you have to take the money,
Michael Marks: it And I see this all the time, ah hundredra honestly. I mean, on boards that I sit on, you you know, where the where the next round, you know, the last round was at, you know, 80 million, the new round has to be at 150. And I go, why does that have to be at 150? Why shouldn’t it just be at 80 or even at 50? Whatever it takes to get the money done. And because capital is necessary, but not sufficient. Obviously, you have to have capital run the business. The other thing that drives me crazy and is is a recommendation that I give all the time is do not spend money on things that you don’t need. It’s amazing these companies. They’ll be sitting here with a you know burn rate of $2 million a month, and then the money starts to run out, and they go, oh, crap, we got we have to cut costs. And all of a sudden, it’s $500,000 a month instead of $2 million. Well, what took them so long? you know It’s like, why don’t why don’t we we run the companies as efficiently as possible with as little money as it takes to be getting
Michael Marks: their product ready for market. And it’s amazing how how how lean companies get when they have to, right, before they go out of business. So I’m always preaching that. Get the money, whatever price it takes, and run the business as efficiently as possible from the first day.
Alejandro Cremades: Well, as they say, money in comes with expectations of money out with returns. So how should founders also think about outcomes and exits and stuff like that?
Michael Marks: that
Michael Marks: Yeah, well, that’s important. and ah and And it goes to some of the other things we’ve we’ve already talked about, like, you know, what’s the size of the market we’re trying to address and how do we get to be successful there? It is very unusual, rare. It’s not unusual, I guess isn’t the right word, but rare would be the would be the right word for companies to go public.
Michael Marks: And so, you know, if you happen to get into a business like in flexronics, we got lucky, we got to be big enough, all of a sudden the ip the IPO market was an opportunity, but most companies are are going to get sold. And it goes back to thinking about what is the business we’re trying to create here? How do we dominate a sector? And you really want, if you’re a small company, you want to dominate a smaller sector because when you do, you become a very attractive acquisition candidate.
Michael Marks: So then the big companies can go and say, okay, these guys, you know, dominate the sector and we’re the big guys. We have big sales, you know, sales ah engines and we spend a lot of money on marketing and we can turn this company into a very big company. And that’s how most companies, that’s that’s what most exits look like. And the big companies know that they’re not very innovative, that they have to create an innovation by you know, by buying up companies that are small and quick and and and and are forward thinking. And that’s generally the way it should should be done. And it goes right back to capital raising and product market fit, which is what are we trying to accomplish here? What we’re trying to do is build a business that has a ah really nice market opportunity. We have good growth in the opportunity. And at the right point in time, a bigger company is most likely going to come along and and and and make us a part of their business.
Alejandro Cremades: So, Michael, you go to sleep tonight, okay, and you have the snooze of a lifetime, and you wake up in a world where the vision of the celestial capital is fully realized. What does that world look like?
Michael Marks: You know, you ask good questions, unusual questions. I haven’t been asked that one. You know, what we what we live and breathe, Alejandro, is building successful companies that we can be proud of. You know, I had, ah you know, I did my share to make Flextronics a successful company. I’ve been gone for nearly 20 years now. I still like to look at the stock and see that they’re doing well and they’re doing really well over there. You know, I had my little bit in in Tesla that, you know, interested forward and now it’s become this big successful company.
Michael Marks: We have wonderful companies at Celeste. Some have gone public. We had Credo, which went public last year, has done really, really well. We had a company we’re very excited about, Idea Forge in India, that went public about nine months ago. Very successful. We’re proud of these things. it’s you know It’s not the money. We don’t get up in the morning and go, how do I make more money? It’s like, I get up every morning going, how do I help these companies be more successful?
Michael Marks: and have really and you know create great jobs and have you know entrepreneurs who’ve been successful. That’s what really drives us. And you know I’ve had a big career. I’m not trying to create some big new career. I’m trying to help um how trying to get these companies to take advantage of what I know how to do. And that goes for my partners and our other investors. you know How do we make these companies successful and turn into things we can be proud of? That’s really what drives us.
Alejandro Cremades: So Michael, let’s talk about the past now, because obviously you know we’re talking about the future, but I want to talk about the past with a lens of reflection. I’m going to bring you you know in a time machine, and I’m going to bring you back in time all the way back to, let’s say, 1992.
Alejandro Cremades: You are at the boardroom, where now it’s being discussed you know with the banks, you know what’s going on, and and the idea you know comes to mind of potentially doing a deal. Now you resign. And let’s say you are um on your way to meet with the Sequoias and everyone in Sun Hill Road. And right there, you know while you’re in the cap, you’re able to sit down with a younger self.
Alejandro Cremades: And let’s say you’re able to give that younger Michael one piece of advice before going at it, you know, now as a CEO, as a founder too. What would you tell that younger self? What would you tell? What would that one piece of advice that you would give to that younger self before embarking in the journey?
Michael Marks: Be fearless. Be curious. Be open to ideas. Listen to these other people. You’re going to talk to these, the Sequoias and NEAs, the designers of the world. They know things I don’t know. I shouldn’t go in there going like I have all the answers. I need to go in there and go. I have an idea, but I You know, I am open to any ideas you have ah of how I can most likely be more successful. I’ll relate a story that happened later in life that that is that is the advice I would have given to myself younger. I had a guy in my office from Dell, and and I was asking him how do they manage some logistics thing. And he goes through this whole thing, puts it on the board, draws it all out, and he turns to me and he goes, so that’s how we do it unless you have a better idea. And I’ve never forgotten that in my life.
Michael Marks: And so if I were giving that advice to myself on my ah way over to Sequoia is my ideas are good ideas because they’re my ideas, but surely they will have ideas that will make me better and I need to be open to that. That’s the advice I would give.
Alejandro Cremades: Love it. So, Michael, for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Michael Marks: You know, I, I am very open. So Mark’s M-A-R-K-S at celesta.vc. um My phone number is 408-209-6967 send me a text.
Michael Marks: I am real-time answer everything Well this the honor is all mine, thank you for having me
Alejandro Cremades: wow you see know Well, hey Michael, thank you so much for being on the Dealmaker Show. It has been an absolute honor to have you with us.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Michael Marks On Scaling A Company To $25 Billion In Revenues And Creating A $1.1 Billion AUM Deep Tech Venture Fund appeared first on Alejandro Cremades.
Steve Magami was born in Tehran and raised in the sunny suburbs of Southern California. His journey is about determination, adaptability, and the spirit of innovation.
In this exclusive interview, Steve talks about raising more than $500M and scaling a company in an industry where he was an outsider. He also talks about culture, team building, and moving to the other side of the table as an investor.
Steve’s company, Agrovision, has attracted funding from top-tier investors like Avenue Capital Group, Steve Kaplan, Aliment Capital, and KuE Capital.
In this episode, you will learn:
- Steve Magami’s competitive spirit, shaped by his experience in sports, drives his relentless pursuit of excellence in business.
- Growing up in a household with entrepreneurial parents, Steve was influenced early on by the challenges and excitement of entrepreneurship.
- Despite an initial path toward medicine, the allure of venture capital and private equity led Steve to pursue a career in business.
- The success of Agrovision hinged on attracting the right talent and blending industry insiders and innovative outsiders to build a globally scalable business.
- Agrovision’s transformative approach to the fruit industry centered on enhancing the consumer experience, making healthy snacking enjoyable and accessible.
- Overcoming the significant hurdles of raising capital and entering a traditionally insider-driven industry was key to Agrovision’s success.
Steve’s belief in the limitless potential of healthy consumer products fuels his vision to revolutionize the produce aisle globally.
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Your email address is 100% safe from spam!**About Steve Magami:**Steve Magami has led a career building companies and developing projects.
He has generational roots in agriculture and has been active in agri-business, land acquisition, water, and infrastructure in Peru since 2007 when he co-founded his first Peruvian company (sold to a $3 billion private equity firm and later to British Petroleum).
Steve Magami previously served as a Principal of Lovell Minnick Partners, the private equity arm of Putnam Lovell Jefferies, responsible for $1 billion in Private Equity partnerships focusing on executing buyouts of middle-market financial services companies.
Steve has served on the boards of numerous private equity, hedge fund, and venture capital-backed companies.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty. Hello, everyone, and welcome to the Deal Maker Show. So today, we have a very exciting founder. you know where We’re going to be talking about all types of good stuff that we like to hear, but building, scaling, financing. you know We’re also going to be talking about how he went from one side of the table to the other. i mean What he’s doing right now, i mean he’s literally in a rocket ship. They have raised and invested over $500 million in what they’re doing in super exciting stuff around culture, ah team building,
Alejandro Cremades: ah how to really scale something in an industry where you have no idea and that you’re an outsider. I mean, everything that you can think of. So, brace yourself for a very inspiring conversation. And without further ado, let’s welcome our guest today, Steve Magami.
Alejandro Cremades: Welcome to the show.
Steve Magami: Thank you, Alejandro. Great to be with you.
Alejandro Cremades: So, originally born in Tehran, but you moved to the US, s to California, you know, quite early. So, give us a walk through memory lane. How was life growing up?
Steve Magami: Life was awesome. i moved I moved to California when I was about a year and a half old. My ah my father had had been completing his PhD in computer science at at USC, grew up in a humble area within Orange County, grew up with two brothers.
Steve Magami: um In a household that where you know, we were playing sports a lot of sports a lot of adrenaline um healthy healthy food a fruit culture which which is relevant to the conversation today and um Really kind of simple simple upbringing nothing fancy and and and and what was interesting I think and relevant is With a we know with with very entrepreneurial parents very open-minded parents my my father went from working at IBM to starting his own software company and grew up in a house with an entrepreneurial kind of a vibe in in the house and um pretty pretty normal otherwise.
Alejandro Cremades: now In your case, i mean you were into sports, and you ended up even playing competitive tennis. How do you think that competitive spirit has shaped you up, you know especially now being an entrepreneur?
Steve Magami: Well, I like to win. I’ve always liked to win. Um, it was, I had a blast playing competitive tennis growing up. Um, obviously growing, up growing up in California, Southern California is, uh, it’s quite, quite helpful in terms of weather and in terms of, uh, the competitive landscape out here. And so, um, had a blast. We, uh, I learned, learned kind of the value of the work you put in the reps, you, the reps you get and what you get out. Um, you know, and, and, uh, you know, I think took many lessons from that.
Alejandro Cremades: How does someone that they study and biology in the University there of Santa Barbara, you know, gets into business? That’s quite a, you know, interesting transition there.
Steve Magami: So graduating in the late 90s at a time when the you know the internet heyday was was upon us, was materializing as we approached the late 90s, certainly was an exciting and dynamic time. And I was fortunate to be surrounded by enough people to get drawn into um venture capital ah really while I was still in college as an intern. And dipping my toe in the water and getting you know getting my feet wet a little bit and seeing what was out there in in terms of tech and growth and startups um really drew me away from where I was heading, which was med school. And I um i ended up in ah in private equity out of out of college.
Steve Magami: and learned um learn business really kind of um on a fast track from some brilliant bosses and and colleagues and was blessed to work with a really strong team and a supportive environment that helped me ah yeah that helped me kind of come up the curve quickly.
Alejandro Cremades: Thank What about there? i mean During the um the years where you were doing the internships in VC, ah being involved in private equity too, i mean you were part of the of the spinoff there of Lobels, which was the investment bank that they you know you were you became a principal quite young there. I guess when it comes to private equity and to being on the other investor on the other side of the table, being an investor, I’m sure that you learned a thing or two when it comes to pattern recognition and to seeing you know the good from the bad from the ugly. So, what were some of those things that you learned during the days of being an investor?
Steve Magami: So talent the importance of talent was one. I would say due diligence was another. you know Identifying value and going very deep to understanding the risk-adjusted potential that that that would exist. um Going very deep on diligence and not only industries and markets, but market opportunities, products, services. um And ultimately, the difference between kind of from our experience, the difference between winners and losers, were really a combination of those things. um The right talent, the right diligence, the right risk management, um amongst amongst other things.
Alejandro Cremades: Now, in your case, you know after the Lobel’s chapter, you actually even did one deal of your own you know where you helped with structuring things up, and and that company ended up selling for a billion ah-plus valuation. So I guess when it came to um to the deal-making side and being more active and taking more of a lead role when it comes to that day ah deal side of things. um what What was that journey like? What was that experience for you in seeing something you know at the beginning and then seeing something you know more mature and and selling for such a hefty price?
Steve Magami: Well, we ah you definitely I definitely saw the the the you know dynamic moments in the market. um We definitely saw during the heyday of renewable energy you know where valuations went. And we definitely saw you know the rise, and we definitely saw the what happened after 2008 with that industry. um we We saw, though, that one of the things that I saw and I learned you know from from those experiences really was around the tangible value of building a business that has a real sustainable um you know value to to provide to the to the world. And so that was that was um that was a very interesting experience. And I think I took a lot of lessons from the dangers, though, of market cycles and the dangers of of ah of capital requirements.
Alejandro Cremades: Now, for you, I mean, you ended up being going at it with Aggravision, which is the um yourre your baby, right? you know And we’re going to be talking about that. But one thing that is really incredible that team but I like to touch on, you know because obviously, I’m an immigrant, and you know and I feel very compelled with with other stories of immigrants is the impact that your father had on you, right? Because you guys he came here to the US you know to build a better future, a better tomorrow you know that your parents wanted to have for you guys, for you and your brothers. And also your father was an entrepreneur himself. So I guess, did you know early on that you were going to go at it and and start your own company eventually? or Or what did you learn from that experience and and seeing your dad going through the cycles too?
Steve Magami: No, definitely didn’t didn’t didn’t know. I felt I had something, I felt the spirit within me, but definitely came came from a culture where you were guided to be a doctor, a lawyer, you know you were guided towards certainty and stability. um And certainly having certainly saw the challenges of of of entrepreneur you know entrepreneurship firsthand from my father.
Steve Magami: But I also saw the excitement, the exciting parts of that. And um so, you know, it was absolutely a ah one of those stories where we we lost everything. my My father lost lost, you know, all of his family’s kind of, um you know, wealth was lost in in the revolution. He came here with nothing had to rebuild. um We grew up with a mentality that you know the world is, um we have a new opportunity here. This is an incredible country. We this was we saw the American dream. We dreamed that a little bit. And I think I dreamed that a lot as a kid and saw the struggles of my parents having come here to an entirely new country, an entirely new place without family, without friends. And I saw their struggles and i you know that that certainly left left an impact on me.
Steve Magami: And I think that certainly i’m i’m ah um ah who I am today is is kind of the fabric was was woven from those early years to ah to a great extent.
Alejandro Cremades: So at what point then do you realize, hey, I think it’s is my time. My time has come to to go at it because obviously that ended up coming with aggravation. But how did the whole idea of aggravation come to you in that moment where you’re like, let’s go?
Steve Magami: Yeah, the life journey and the life graph is really interesting. So there’s a point where I put the MCAT books down as I’m graduating UC Santa Barbara with a major in biological sciences. And i I decide, you know what, I’m going to go for it and go into business. um and i And I was fortunate to to land in private equity um shortly after after graduating at a very good firm at Putnam level.
Steve Magami: um and working for an incredible boss and in Jeff Lowell. There was another moment where I saw the opportunity with AgriVision. There was an opportunity, a small window I saw you know in renewable energy, but the largest one I ever saw was with AgriVision, was the opportunity to truly transform the consumer experience with Superfruit in a way that would not require the consumer to want to buy fruit for health, but to actually want to buy super fruit and fruit for snacking, for enjoyment, pure enjoyment and pure snacking. And that was a real, that was by far my largest aha moment in my career.
Alejandro Cremades: So then talk to us about aggravation then. you know like How does aggravation come together and what ended up becoming the business model?
Steve Magami: Yeah. Well, we saw this. We saw that that this was a growth this was a growth opportunity. What I mean by that is we saw the the what we call the Barry Roulette.
Steve Magami: the the the purchase at the shelf of blueberries or berries was such a spotty experience. There was such a um frequent dissatisfaction with the product. You wouldn’t want to go back and buy more. And that is statistically what what what we found was happening. Consumers did not go back and buy more. And that was happening with other produce products as well. And so when we saw the opportunity to take really unique particular microclimates globally, ah play plant and produce very particular varietals and apply a lot of tech
Steve Magami: and a lot of operational excellence and and business systems um and integrate that into to to carrying a certain quality all the way to the controlling that quality, creating a quality and controlling it all the way to the consumer and putting that quality on the shelf. That was a different product. um If you’ve ever had, I mean, if you’ve ever had golden Kiwis,
Steve Magami: Alejandro, I don’t know if you’ve had them.
Alejandro Cremades: I have, I have.
Steve Magami: You probably don’t want to have green kiwis anymore if you could have a golden kiwi. That was exactly the experience we saw with berries, that if we could create a whole new level of eating experience using this entire chain that I just described and this entire stack of tech, we thought, wow, what could be what we what we could do in terms of health in the world and what we could do in terms of transforming that consumer experience year-round would be incredible, particularly if we could do it every week of the year and not on a seasonal basis. And that is really the definition of kind of the the platform we built in AgriVision.
Alejandro Cremades: What do you think were the, um I mean, obviously here you are you know executing you know at the beginning on an industry that you were an outsider. What do you think were the biggest day hurdles that you had to overcome and what kind of difficulty are are we talking about?
Steve Magami: um enormous hurdles so well first of all to get to where we are we have we’ve raised and invested over a half a billion dollars um but I would say just as difficult as that coming as an outsider into an industry where no one believed we were going to be disrupting this industry right this is an industry where it’s an an insider’s industry right um produce I’m talking about in and agriculture um but it had to be a business that was built globally with operations around the world. So startups are hard enough as they are. Raising huge amounts of capital, that’s hard enough as it is. But to then have to do that on the basis and only on the basis of having to have a
Steve Magami: by design a particular geographic footprint globally that was required to be successful and to attract the talent and to to develop the you know the centers of excellence and to transmit and transfer those centers of excellence at a speed to allow us to pull this all together with was difficult.
Alejandro Cremades: So what what was the most difficult part of, let’s say, you know something like this, as you were saying, very capital intensive, but let’s say on the teams, on having teams you know in many locations.
Steve Magami: Yeah.
Alejandro Cremades: you know How do you go about that? Because obviously the the culture piece there is a big one, you know because every location has its own culture, so to speak. so So tell us about that too.
Steve Magami: So attracting the talent for building this business in this industry, in the geographies we built it incredibly difficult. We had to, it took us years to build up the talent to where we were really ready to scale. And so if you look at the last, you know, we’re we’re a little more than 10 years old, but if you look at the last 10 years, our growth has been just exponential in the last four of the 10 years.
Steve Magami: And the reason for that is because those first six years were extremely difficult. And getting the the building the platform, building the flywheel, building the talent, and creating that DNA throughout the whole organization that was required to truly scale at this pace, very difficult. um And bringing a combination, the perfect complementary combination of talent from inside and from outside. um Not only executives and leaders, but talent on the front lines, in some cases, were as important as as the leadership talent. And pulling that all together in a way ah in a way that was needed with as diverse a footprint geographically, globally, as was needed was, I think, compounded the the challenge.
Alejandro Cremades: What about the raising itself? Because, I mean, raising half a billion is say quite a lot of money so and not easy. So how has it been to going through the different motions and the financing cycles in order to raise all that the allla capital?
Steve Magami: difficult um investors were, you know, i have I have friends who were, you know, running funds at large in investment firms, one of the most prominent investment firms in the world that we’ve been friends now for five or six years. And we laugh because they, they passed up an opportunity to invest six years ago, they pass up another opportunity to invest three years ago, they pass up another opportunity to invest a year ago, and they have just you know, seeing the rocket ship that we’ve been building and the truly kind of impactful and disruptive, positively and disruptive business. So it has been a, it has been a an absolutely a kind of a, you know, a challenge to
Steve Magami: build the the the faith in in investors who, again, we’re only used to seeing insiders build companies that’s successful within this industry. um And there’s ah you know there’s a couple great examples of really old world industries where outsiders came in with that outsider’s mindset and really built something with a lot of capital. um But we had I was fortunate to start with some visionary investors, partners, co-founders that you know as we as we built this, we were able to bring in other visionary investors and other visionary investors at each point in the chain.
Steve Magami: And fortunately, now it’s with where we are now, I think we um were in a totally different world where we have um um reached a place where we’re finally um we’re we’re finally, even though the markets are very difficult, we’re finally in a completely different world of access to capital.
Alejandro Cremades: So what was that moment for you guys where you realized that you were into something where you were seeing the light at the end of the tunnel here?
Steve Magami: the The light at the end of the tunnel for us really, really was clear when we saw the consumer reaction to our product, the consumer’s reaction globally to our product. And when we saw that, when we saw the the the youth, the youth preferring our snacking on our product and our super fruit over you know unhealthy snacking or over other snacks for You know, again, for that, that youth, those youth ages, I could tell you from, from, from the standpoint of, of, um, whether it’s my children or other, other consumers, children who’ve sent us to their, their kind of experiences. We’re talking about one year olds, five year olds, 10 year olds, 15 year olds, the spectrum of youth that have, um, that have all kind of found this product to be incredible.
Steve Magami: I’m talking now about our our our real proof of concept, our real first product that that where we proved the concept, which was blueberries and our premium blueberries and are our um premium jumbo blueberries and and Alejandro, I hope you’ve you’ve been able to enjoy those. But we have seen, when we saw that reaction, when we saw, when we put our product on on the table next to a traditional snack and we saw them have one and then two and then they took the clamshell and walked away and left the bag of chips or the chocolate or the other snack on the table, the light went on. This is a $100 billion dollar industry, the snacking industry. And the amount of um the amount of health impact we could make in the world to transition consumers to healthier snacking, that was truly ah you know a light bulb moment.
Alejandro Cremades: I think that timing is everything. you know When you’re building a company and and being at the right time in history is really what makes a difference too. know When you’re a founder, I guess, how do you think has impacted you, the um the whole consciousness you know around the eating healthy? and i mean it’s quite It’s quite different you know from maybe like years ago that it was all about fast food and people didn’t care. i mean Now people are really conscious about what they put into their body.
Steve Magami: Absolutely. We have greater health awareness today and it’s um it’s certainly leading to increased you know penetration of our our products and and growth and consumption of our products. ah we have the We have consumer tailwinds in terms of consumption potential, rising middle classes. It’s not just you know the traditional history of population growth.
Steve Magami: and and health. um But it’s there’s a whole different wave taking taking hold today. you see um you know You see now some of the hottest beverages, some of the hottest sodas are probiotic sodas now. um We see the non-alcoholic, alcohol industry you know has taken off. And so today we’re we’re seeing consumers um playing a whole different kind of ah you know, playing in a whole different way with their wallet and and and the wallet share we see going towards these healthy products that are truly enjoyable is, um it feels limitless.
Alejandro Cremades: So as we’re thinking about the feeling limitless, let me ask you something. Let’s say you were to go to sleep tonight and you wake up in a limitless world where the vision of aggravation is fully realized. What does that world look like?
Steve Magami: Yeah. I love to, I love to dream around this. i mean We have just not even scratch the surface of where we think we can take the the population of the world thats say you know that is transitioning to healthier consumption, healthier eating, um and transitioning those consumers to ah to to enjoyable, better tasting, truly enjoyable eating experience super fruit. And that means transforming the consumer experience, Alejandro, across the produce aisle. Imagine if a consumer could walk into a store.
Steve Magami: and be excited to go more excited to go into the produce section than any other section by far. I think that’s our that’s our that’s the potential. and I think the the limitless scenario for us is for us to play you know one of the one of the leading roles in that transformation.
Alejandro Cremades: So as we’re thinking about the past, I want to do it too with a lens of reflection because i mean now you guys have had the chance to push this for 12 years.
Steve Magami: equipment
Steve Magami: news
Alejandro Cremades: 12 years in the corporate world is like 100 years, right? I mean, 12 years is ah it a long time, right? They’re pushing a startup. So I guess as you are looking back now and and let’s say I was able to bring you back in time to that moment, maybe to 2012, that day year where you were thinking about a world where you could build something of your own. And let’s say you were able to show up right there with your younger self and being able to give that younger self one piece of advice before launching a business. What would that be and why, given what you know now?
Steve Magami: Yeah, I would, I would tell my my younger self, you have an incredible co-founder. Um, you have an incredible group of co-founders in, you know, Tom Snyder and your, your co-founder and in, in Mark Aaron and Caria Seal, your two, your two investment co-founders. You guys have incredible potential given your backgrounds, how complimentary you are and how committed you are to this vision.
Steve Magami: no pun intended with the name, but truly, with your commitment, as long as you stay the course of what is grounded in the, in that market opportunity, um and the value you’re bringing in the world, you will be successful. And, you know, continue to expand with like minded, like minded, you know, partners, investors, talent, I would say that be, be comfortable being bold, because we were bold,
Steve Magami: But it was it was it was not always comfortable. It was nerve wracking. It took a lot of courage. I would tell my younger self, when you see talent, don’t hesitate for two seconds. Talent is what it’s all about. And talent is not easy to attract. But do what it takes to attract the talent, and don’t let it go. And you know I think that my younger self would have been, um you know as a startup,
Steve Magami: foundry, you’re stretching every dollar. I would have said to my younger self, you know what, make exceptions sooner and faster when the right talent comes. Because waiting an extra year for that right talent, it’s going to cost you a lot more and the returns are going to be exponential.
Steve Magami: if you get that that talent earlier on. So those are, I think, some of the top of mind points I would make to my younger self. And then lastly, I would say enjoy the journey more. it’s you know Because you I was working 90 hours a week, Alejandro. And you know I would say that you you know try to bring more bring more balance to you know when I had time with my family.
Steve Magami: try to be present more because, you know what, there’s it’s hard. It’s really hard as a startup founder, but it can be done and it it will make you more disciplined. um I learned that later on, and and but but but I would have loved to have learned that sooner.
Alejandro Cremades: I love that. I love that. So Steve, for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Steve Magami: reach out to me on, send me a message on LinkedIn and um happy to, you know, happy to share more.
Alejandro Cremades: Amazing. Well, hey, Steve, thank you so much for being on The Dealmaker Show today. It has been an honor to have you with us.
Steve Magami: My pleasure, Alejandro. Thanks so much.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Steve Magami On Raising $500 Million To Build A Superfruit Platform To Provide Customers With Healthier Snacking Options appeared first on Alejandro Cremades.
For Bhavin Shah, a serial entrepreneur with a remarkable career, the paradox of Silicon Valley was his playground. In this exclusive interview, he talks about his experiences meeting Steve Wozniak in sixth grade and going through the motions of starting, financing, scaling, and exiting companies.
Bhavin’s latest company, Moveworks, has attracted funding from top-tier investors like Lightspeed, Bain Capital Ventures, Kleiner Perkins, and Iconic.
In this episode, you will learn:
- Building a long-lasting company requires carefully selecting investors who share your vision and philosophy.
- Execution, not just vision, is crucial for differentiating successful companies from the rest.
- Bhavin Shah emphasizes the importance of taking time to build trustworthy, long-term relationships with investors.
- Moveworks has evolved from a support-focused platform to an independent Gen AI super app that integrates with multiple enterprise systems.
- The “execution quotient” is a core principle at Moveworks, focusing on decisive action even with incomplete information.
- Bhavin values the structured problem-solving nature of the enterprise SaaS space, contrasting it with the unpredictability of consumer markets.
- Moveworks aims to be at the forefront of the next generation of AI-based enterprise app companies.
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Your email address is 100% safe from spam!**About Bhavin Shah:**As a three-time entrepreneur with over 20 years of experience, Bhavin Shah is passionate about building companies that leverage cutting-edge technology to solve real-world problems, assembling high-performing teams, creating quality brands, and shipping products.
Currently, he is the CEO and Founder of Moveworks, a generative AI platform that boosts employee productivity by surfacing information and automating tasks through natural language. His mission is to make Moveworks the enterprise copilot every employee needs and loves.
Most recently, he was CEO and co-founder of Refresh.io, a company that gives people insights about the other people they are meeting. LinkedIn Corp acquired Refresh.io in April 2015.
Through his work as COO and Co-founder at Gazillion Entertainment and in product and business development at LeapFrog, he’s taken companies from inception to scale and private to public in the internet, education, toy, and video game industries.
Bhavin has degrees from Stanford University and UC San Diego in Computer Science and Design.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty. Hello, everyone, and welcome to the Deal Maker Show. So do today we have a really amazing founder, a founder that is proven. you know He’s done it day before. Right now he’s on a rocket ship like you wouldn’t believe, and we’re going to be talking about it. But again, we’re going to talk about all the good stuff. We’re going to be talking from like what it was like to grow up in Silicon Valley, also what it was like to meet Steve Wozniak in sixth grade. Imagine about this, you know the co-founder of Apple.
Alejandro Cremades: And then you know going through motions, starting different companies, ah going through exits, and also financing cycles. So without further ado, let’s welcome our guest today, Babin Shah. Welcome up to the show.
Bhavin Shah: Hey, Alejandro, thank you for having me here. It’s great to great to join you on this afternoon.
Alejandro Cremades: So originally born in India, but then you lived in Jakarta, and then a three-year-old, you came to the US. s So give us a walk through memory lane. How was life growing up, you know especially in Silicon Valley?
Bhavin Shah: Yeah, no, you you got that right. you know um came Came to the US pretty young. So um unfortunately, no memories from from India or Jakarta. um But I really remember my my growing up in in the valley. you know It was unclear at that time you know how special Silicon Valley would become. And technology was around us. My dad was in technology.
Bhavin Shah: um But what felt pretty normal to us now in retrospect looks pretty unusual. For example, you know, there was this very sketchy neighbor down the street who my mom would always say, don’t go, don’t talk to him, just walk past his house, don’t stop. And he had a very messy garage and all this stuff. And once in a while, he would be outside kind of hanging out. And my brother and I and our friends would chat with him, not telling our mom. And turns out he was an engineer at Atari.
Bhavin Shah: And he would give us little EEPROMs with chips that were beta versions of the Atari games. And he would say, hey, go plug this into your your Atari at home and try this thing out and and let me know what you think. And that was like kind of normal for us. We were getting bootleg early copies of ah these games and um it was just a really neat time to be exposed to all of that. I remember you know spending my evenings on the weekends, school nights going to Fry’s Electronics, which was a popular a store where you had you know lots of computer software and hardware, and I’d piece computers together, um build computers, the the Pentium, 386, all the different versions, 486s we’d we put together. um and And that was sort of you know what we spent our time doing. I remember
Bhavin Shah: You know, almost vividly there was a day, I think I was in sixth grade or sell fifth grade, maybe, and we were debating at the dinner table, whether we should go with prodigy or compi serve because.
Bhavin Shah: To us, that was the future of the internet. You needed to decide, AOL, CompuServe or Prodigy? Otherwise, you were going to miss out. And in little did we know, obviously, how big the internet would become. um But you mentioned Steve Wozniak. I had the privilege when I was in sixth grade. um The school had to select some student to go to lunch or try to go to breakfast with this entrepreneur. I didn’t think too much about it. I didn’t know who I was going to go have breakfast with. And sure enough, it was it was Steve Wozniak.
Bhavin Shah: Of course, I knew Apple at that time, but Apple was still, ah you know, it was, I think, pre Macintosh or maybe the Mac had just come out. um ah But it was, you know, the Apple IIe, which we were using at school. So I didn’t didn’t quite recognize the significance of of that breakfast. But, um you know, you continue to bump into people. I remember, you know, Steve Jobs walked by my mom and I arguing one day in Palo Alto and He made some comment like, moms are always right. And then he kept walking and I was like, who’s that? And who’s butting in right now? And turn around and sure enough, it was it was Steve Jobs walking by. So, you know, you have these run ins, I think here, ah the serendipity has a lot to do with ah some of what makes us this this area so so special.
Alejandro Cremades: So I guess, hey, in in that sense too, I mean, what do you think, how do you think shaped you and and perhaps, you know, like your eagerness towards becoming an entrepreneur later on, you know, living in and being surrounded by all these incredible figures?
Bhavin Shah: Yeah. You know, it’s a good question because people ask me all the time, like, how do you take risks? How do you get comfortable with, you know, making these bets? And maybe I’m missing that gene that would normally help and people, uh, you know, from, or hold people back from making certain choices ah due to the repercussions. Uh, but to your point,
Bhavin Shah: You know, I grew up in an environment where lots of people I was meeting were entrepreneurs. And where that was coming from is, you know, I’m of South Asian descent. And there were a lot of my father’s friends who were coming to the Bay Area, coming to Silicon Valley. And they were starting these very now significant organizations ah that, you know, especially in the hardware space in the early, early eras or early innings.
Bhavin Shah: um And so every time I’d meet you know one of my dad’s friends or family friends, you know we call them all uncles. So all the Indian parents, friends, or aunties and uncles. And so you would sort of meet them and, oh, this uncle’s starting this this company. you know this this This auntie works at this ah young company that you know now is you know worldwide famous. So I think that um it wasn’t even really a question per se.
Bhavin Shah: um of in terms of is entrepreneurship a viable you know path one can take? However, I did have a little bit of stubbornness in my mindset, which was I did see a lot of people just wanting to be entrepreneurs because they grew up in Silicon Valley. It was sort of like, you got to do it. like you know If you’re in LA, you want to be an actor, actress. right If you’re in If you’re in Tennessee, you want to you know be doing country music in Nashville. you know There’s all these places that are tied to certain industries and domains. ah but But for me, I’ve always had this kind of belief that um you know if you want to be an entrepreneur, you have to really think about what is your unfair advantage. And if you don’t have an unfair advantage, then you know you probably shouldn’t be doing it. Now, living in Silicon Valley has its advantages, but I don’t think that’s significant enough to overcome some of the
Bhavin Shah: ah things that you have to solve for as an entrepreneur. But um but it definitely gave me the the appetite to want to go and see if there was an opportunity that fit my interests, that fit my skill set, you know, as as I got older.
Alejandro Cremades: So in your case, you know you ended up going to UC San Diego. And then from there, you went to Stanford um to to go to grad school there. But but eventually what you did is you joined a toy company out of all things. And you know it it’s interesting because it sounds like you had the entrepreneur entrepreneurial drive already in you. So what do you think took you so long you know to to really get going right away? and And instead of doing that, you decided to join somebody else.
Bhavin Shah: You know, I think the Steve Jobs quote that, you know, you can’t really make sense of things looking forward, but you can looking back to some extent and understand how they might’ve influenced you. ah Look, I think for for me, what really got me interested in that category was at at the time, so if you think about where I was, so at UC San Diego, I was there during the first beginnings of the dotcom boom. And I was a student. And so technology was very interesting. It was it was happening everywhere. But I got an opportunity to work ah with um Dr. Sally Ride, who was the first female astronaut in space. And she had put together a program where ah basically students could take pictures of the Earth from a camera mounted on board the space shuttle.
Bhavin Shah: And I just was like, wow, this is super innovative. You can control a camera that’s way up in the sky. And it was, it was sort of having a secondary benefit of educating middle school students about, you know, earth sciences. So.
Bhavin Shah: That was a project that you know I worked with her on for three and a half years ah and really started to just find a lot of interest and love for this idea of using technology in education. Because obviously internet was booming. People were using technology for everything. and It was disrupting retail. It was disrupting you know every category of business. And so this was another form of kind of thinking about disruption, access, and you know availability.
Bhavin Shah: in know in a way that was never achievable before. So that got me really excited about this intersection of education and tech. I then decided to go come back up to the Bay Area and go to grad school. And you know Stanford just happened to have a program that combined those two. It was a little bit of computer science, it was a little bit of education.
Bhavin Shah: And then I mixed in a little bit of the B school with with all of that. And it just kind of exposed me to a new category and I think it’s this intersection of different areas that you find a lot of entrepreneurial opportunity when you’re bringing domains together when you’re thinking about things.
Bhavin Shah: in an original way. right When folks talk to me and and my sons now in high school you know about what to major in, I will say and you should you should double major. and Double major in something so that you can see the world from different perspectives and maybe find a way to leverage those two perspectives into a unique advantage that you might have. So long story short,
Bhavin Shah: I spent time at Stanford learning about this intersection and then I met the founders of LeapFrog, which was a fledgling toy company at the time, I think about 70 employees, and joined them and started to work in various roles from product management to business development.
Bhavin Shah: and saw that company scale to about 1200 employees and took it, the company went public in 2002 on the NYSE. And I think to your question though, why not just start something right away?
Bhavin Shah: ah To my earlier point, I didn’t have necessarily some insight or some advantage that I could bring to the table that I thought was was durable, but I had some experience, I had some some knowledge
Alejandro Cremades: Thank you.
Bhavin Shah: um And I also wanted to to learn, you know, I think we end up learning as individuals throughout our lives. And it just felt like a really amazing opportunity that that met my my needs. Again, not I’m not one of those individuals that, you know, I’m going to start a company because that’s the thing I want to do. I want to start a company because I feel like I have a unique insight um into into the space or into the category.
Bhavin Shah: So um you know with with all that sort of you know being being the backdrop, yeah, went and joined joined the company and you you know saw what what it takes to go from private to public, what it takes to sort of you you know think about brand, what it takes to be um you know really insanely focused on product quality, because the founders there just had a really you know deep passion, but also skill at at building a really high quality organization.
Alejandro Cremades: So eventually, you know, a the time comes to go at it as an entrepreneur. And that is with a gaming company. I guess the experience here, you know, as they say, you know either succeed or you learn. And obviously it was not the outcome that you had the desire or hope for, but it was a good day moment for you to really discover yourself and learn about yourself too. So so talk to us about this say chapter.
Bhavin Shah: Yeah, I think it’s a you know, it’s a chapter that I I don’t shy away from but it is a chapter to your to your point in which I learned a lot about what it takes to build a successful company, what to do, what not to do now, looking back. It also taught me a lot about myself, ah what what I’m good at, what I’m not good at.
Bhavin Shah: You know, you learn things the first time you’re building a company, the first time you’re leading a larger team, ah the kinds of people you work well with. Who do you manage well? Who do you not manage well? um Who lifts and who raises the bar in the way that you you need it raised? How do you raise the bar for others? And then how do you think about culture? How do you think about hiring? How do you think about um capital raising? How do you think about investors? How do you think about all the different facets that go into building an organization. And, you know, luckily I was in my late twenties. I saw a lot of things early in in my career that I could then, you know, really take forward and learn from. Most entrepreneurs, as you know, from from this podcast and and other work you’ve done, you know, it takes a few tries to get to a place that people
Bhavin Shah: then you know respect and admire the work you’re doing. These things like everything else does take practice, does take um experience to do and it does take time. So I think that you know from from that perspective, learned learned a lot, learned also that you know sometimes all your best ideas don’t work out the way you intend them to be. And we started the company on the basis of being an educational gaming company ah focused on the large format MMORPG, specifically, um you know, for, for younger kids, and then found out that that wasn’t going to be very, very fruitful. um And we didn’t have the kind of, ah you know, early wins that, you know, some other products in that space ah did. And so as a result, we ended up converting the company into a more of a developer shop that did work on behalf of other brands and
Bhavin Shah: and licenses that we would build games for. So that turned into a very different kind of business, which you know was fine, but wasn’t the thing that gave me a unique um ability to to do something special with.
Alejandro Cremades: Well, alluded to what you were saying earlier, obviously, the more you swing the bat, the more chances you get to hit the ball, right? And and and i always, as an entrepreneur, always an entrepreneur, and you went at it again. And that was say definitely a moment where you were able to hit that ball you know and hit it well. So talk to us about how refresh you know comes knocking, and then how did that the idea end up becoming you know quite a successful outcome?
Bhavin Shah: Yeah. So it’s a, it’s a good point. And, you know, I think that when you wrap up one journey, you do do a lot of self-reflection and you think about, you know, what you want to do next. And, um, you make a good point, you know, once an entrepreneur, always an entrepreneur, it is hard to go and now work for someone else, uh, to go and you know, take direction if if you’ve had time where you could sort of call the shots. But not impossible. And I see people obviously do that successfully. I think in my case, refresh was an opportunity that I had sort of um experienced in real life. I had some previous journeys when I was at LeapFrog where I was
Bhavin Shah: working with some world leaders on some sort of initiatives ah to help um individuals in need, specifically in Afghanistan. It’s a long story, but what I discovered was that how to how do world leaders get prepared before meetings and they had a digital or they had a paper dossier and people would write stuff up and they would get briefed on who they were meeting when they last met, what they talked about, you know how to shake their hand, like everything down to the to the you know sort of every moment that they were going to spend, um you know what their last the person must ask them about in the last meeting, et cetera. So I was like, this is pretty interesting. and
Bhavin Shah: I wanted to create a digital version of that. And you know keep in mind in 2012, the world was all about these different social networks and databases. We were um you know connecting through to all these different services. And and that product made a lot of sense um to sort of bring break forth. And it was an interesting product. We had a lot of great users on the platform. um and you know But also what what sort of became clear is that that product success was predicated on the cooperation and the openness of of all of these data sources, because essentially you’re sort of reading from those. You’re you’re making queries into those. And the world was evolving. The world was changing. um People started to pull back on some of those systems and access. And you know people started to get concerned. And so it wasn’t an idea that I recognize as one that was going to be all that enduring and all that like you know durable, and if you will,
Bhavin Shah: So, i you know, the folks at LinkedIn had been paying attention to us and they came knocking and, um you know, we kind of worked out an arrangement that that made sense for for both parties.
Alejandro Cremades: And they obviously undisclosed the amount. So we’re going to have to leave everyone in the uncertainty as to what kind of outcome that was, but they always you know an exit is a great exit. So I guess in in in that regard, you know what have been some of those same you know takeaways when it comes to M and&A? What should be the general philosophy and what can you share with the founders listening?
Bhavin Shah: Yeah, look, I think ah you know people recognize that entrepreneurship can be very rewarding. We also know that on average, most people won’t succeed. But because of that dynamic, um people sometimes get very fixated on that outcome. And the problem with that is companies are not sold, they’re bought.
Bhavin Shah: Which means that if you’re out there and if if someone even catches a bit that you’re basically doing this for the purposes of some sort of an exit, it’s not something that motivates the buyer necessarily to really partner up. Now that’s not true in all cases and you have firms that specialize in helping companies get sold and there’s a lot of that work that goes on in M and&A and there’s you know ah different perspectives when it comes to PE firms and and how they go about choosing companies that they want to wholly own or or you know buy into and then run eventually. But I think when it comes to you know why you start a company and what you do with it every day and how you operate it and how you think about it,
Bhavin Shah: it really needs to be something that you believe you can give your very best to, irrespective of the outcome, irrespective of what um comes to bear. Now, that journey, as you know, is is long. And you know I was told, so we’re we’re about eight years in, I’m sure we’ll get into movers a little bit, but I was told, hey, you know to really do something significant in the professional world, you’re probably gonna spend at least seven years building it. Now it’s not universal. It’s not a, you know, that some cases things happen much faster, but it does take that much time for a lot of people to build something of of any significance. And then to really have an impact on how the world works, how the world operates, to have an enduring impact even beyond your own legacy, that takes at least 14 years, if not more. So I think that it’s the ah requirement to stick with something long enough
Bhavin Shah: That then could lead to certain outcomes, but you know if if you’re thinking about that too much I can tell you seven years will feel like an eternity And and you sort of aren’t gonna set yourself up for success
Alejandro Cremades: so then Let’s talk about moveworks because obviously you are now eight years plus in and following that philosophy. so um Why moveworks? you know You were now two companies in. You know you had a clear understanding on on how to go about building and scaling and and doing the whole thing. so Why did you think that moveworks was good enough of an idea you know to really take it seriously and take action on it?
Bhavin Shah: Yeah, you know, Alejandro, I think, as you probably know from all your interviews, I mean, the more you’ve done this… the more cynical you get. the more yeah Everything’s a bad idea. People pitch me ideas all the time. Ah, that’s that’s going to fail for these reasons. That’s not going to work for these reasons. And you know call it wisdom, but call it cynicism. Call it just simply you know ah seeing what the real world is, which is not a meritocracy. It’s much more than that, right? Much more complicated. And so um you know the move work story
Bhavin Shah: ah was one in which we were essentially doing a bunch of research um into the world of enterprise. And having been in toys, having been in video games, having been in mobile productivity, I said to myself, look, I have the energy to do another company. So that was sort of the basis, right? I talked to my wife, it was like, you know, so what do you want to do now?
Bhavin Shah: And it was like, I want to go do one more company, but I want to do something that I can really s sink my teeth into and do for the next 20 plus years. right Switching industries can be fun. It’s exciting at times, but it can also um not leave you as deeply as deep of an expert you know when you’re done or as you’re going through it. So I thought, hey, let’s sink my teeth into something that I could really learn a lot and hopefully have big impacts.
Bhavin Shah: And AI to us was was one of those areas that really felt like it had a very long horizon in which we could we could operate. ah So that was the starting point. And then of course, talking to CIOs, we were discovering more and more that there was very little use of AI, that a lot of the work that was being done inside the enterprise um was still very manual, that was using you know very people heavy. And this whole category that we got ourselves started in which is transforming the help desk, was really based on this idea that, hey, if you could apply machine learning models, which my co-founder from Google and Facebook and other you know and and other places came together with me to form this, we realized that if you could understand language, you could take an employee’s request or a question or issue
Bhavin Shah: And you could pretty successfully solve it end to end by triggering workflows and doing certain actions. So it was that kind of realization that language was actually the problem and that if you could get good at it, you could actually do the work of a lot of or do a lot of work for companies that today was very inefficient. It was taking three days on average to resolve.
Bhavin Shah: a typical IT issue, even with the best-in-class workflow tools and systems of record. So we were in the air of instant. There was DoorDash. There was Uber. We were like, why does this stuff take so long? So that was a sort of genesis. And we started this company on the early days of Slack, because we also recognized that the secular shift of of communication tools in the enterprise was also shifting. So we said, hey, AI was in a pretty interesting spot. We didn’t know about the next phase, which you know obviously we’re in now, but we said it was a pretty good spot. We had the secular shift of communications platforms like Slack and Teams emerging. And then you had the secular shift of mobile. you know I started to see my my parents use WhatsApp and I was like, oh, hold on. People like short form. People need to get work done and they’re doing it
Bhavin Shah: um you know more prolifically in these platforms than ever. So maybe we can surface ourselves in ah in a new way as a sort of you know bot slash co-pilot in his early days. So that’s that’s really what kind of engendered it. It’s you know perhaps not a made for Hollywood story where we’re on the streets of Paris haing trying to hail a cab and getting frustrated, but it is a story in which um I remember ah you know just going and meeting you know ah handful of CIOs, then meeting a dozen CIOs, then meeting 30-plus CIOs, and sort of making sure that what we were learning was a universal phenomenon. And once we had that conviction, um you know we started the company.
Alejandro Cremades: So why don’t they are becoming the business model of move works? How do you guys make money?
Bhavin Shah: Yeah, so we’re an enterprise SaaS AI company. We have this agentic reasoner. It’s a called a co-pilot. that spans across the organization and talks to all the different systems of record, business systems, automation tools, and it allows employees to search and take action. So think of it as a generative AI co-pilot that’s for all employees um for them to interoperate with all these different services and functions within their org.
Bhavin Shah: So we charge, as a SaaS company, in in two ways. One, we have a ah per-user um license model based on the size of the organization. right There’s different different pricing. And then we also have a consumption-based model in which customers can choose based on sort of active users. And um you you know what we find is that you know either one of those works for our customers. and it’s a it’s ah It’s an opportunity for us to keep driving more more impact and more usage to be able to bring more capabilities to users. And a lot of it centers around this ability to do actions, update systems,
Bhavin Shah: you know, get you access to this, you know, manipulate this other record, um update a purchase order, you know, find out who’s the owner of a particular account. All of that stuff can now be done through our product, which improves, it drives productivity, but it also reduces the burden that companies face on the service desk, which is then how people think about the value proposition for what we do.
Alejandro Cremades: and And here as well, I mean, you guys have raised quite a bit. I mean, you guys have raised over $300 million, $315 million to be precise. How has it been through the journey of going through the motions and through the different life cycles here you know to to get this money in?
Bhavin Shah: Yeah, well I you know as my as my co founder likes to say is when we started the company we were using stone age machine learning. And these were statistical technique techniques you know, ah ones that are named after trees and forests and things of that nature. And then in 2019, we.
Bhavin Shah: uh, we’re one of the early companies to deploy the BERT model in production. We started to use it for, you know, discriminative tasks. And, um, as the transformer models became ah more and more prolific, we started to use them in our architecture. We never had a toolkit that you would build and design workflows. It was all done through this reasoning engine. And you asked about the capital and and where, where, where that comes into picture is we had invested a lot in a lot of very deep, um,
Bhavin Shah: learning techniques. We have human annotation teams to help measure model performance, to fine tune models. And then, of course, as the world got even more interesting with GPT 3.5, and we were working with GPT 3 prior to chat GPT coming out, we were working with GPT 2 even before that, um we started to see the opportunity really expand.
Bhavin Shah: And no longer were we limited by a particular domain or a particular set of use cases ah with the older AI systems that we had built, but now we can actually go quite broad and wide. And so that’s where we’ve actually invested a lot of R and&D to build a truly agentic system, one in which ah people um you know can leverage our platform to have a real conversation to talk across a lot of different systems um and have it be just as fluid as chat GPT, but also with no hallucinations, with real deep um understanding of permissions and rules and and logic that is required to be able to act and securely perform the tasks on behalf of the individual.
Alejandro Cremades: and and Obviously, you know when it comes to um to raising money here, i mean you had done this before, and you came from doing it you know going around the block yeah a few times. so How did you guys go about selecting the right investors for this? and and Also, how how has it been to going through through one round to the next? i mean How has it been that experience as well?
Bhavin Shah: Yeah, so it is a good it is a good question. And I think that um capital raising is is always an art. it’s It’s a thing that um you know requires an understanding of incentives, an understanding of individuals. I think what is the case, though, is people tend to invest in people they can trust, people who ah they have alignment with.
Bhavin Shah: and To your point, I have had experience you know raising capital in the past, which built so certain relationships and certain know-how that has allowed you know me to bring resources to this company. um it is It is something in which I think I’ve learned a lot about who to pick, what kind of partners you want. Because I think one of the things that, at least the way I view company building, is it’s a very precious endeavor. It’s a very important endeavor. It is your life’s work.
Bhavin Shah: Now, again, some people view these as very fast moving, you know, experiences. They build a company a couple of years later, they sell it. um But if you think about it as more of something you want to be running in 20, 30 years from now, the cap table does become quite important. And you think about who’s on that cap table, who you who you’ve you know let in, who you’ve taken money from. um While there’s many sources of capital these days, I think having um and awareness of who those individuals are, what you think about them, do you have vision lock with them, do you have the same philosophy as them, is really, really important. And so I had the fortune of of working with a few a bunch of venture capitalists over the years, but specifically MoveWorks began that journey with but Lightspeed um and their deep understanding of enterprise.
Bhavin Shah: Software was what really helped us think about building this business and understanding all the things that we needed to get right to be successful. And then Bain Capital Ventures came in um and then we had Kleiner Perkins and Iconic join and so on and so forth. And we have other investors that you know continue to sort of provide value add. ah But these are all folks that I can call. These are all folks that I can you know get advice from who ah continue to be big supporters and um who really understand this journey of what it takes to build an enduring company. um You know, one of our investors used to be a CEO of a public company, Enrique Salem, and that perspective really, really helps. You have folks like Mamoun, a Kleiner, who’ve seen the best of the best and always has sage advice or are from light speed, really being a champion of this business from from day one, but also having deep enterprise experience with a lot of his other investments.
Bhavin Shah: So a lot of guidance there and a lot of introductions and things of that nature. So look, I think I tell people take it slow. Um, investors always tell me, uh, Hey, if you’re doing around, let us know.
Bhavin Shah: We can move really fast. And I’m like, I don’t want to move really fast with a relationship that I can’t get out of for the rest of my, um, endeavor. Right. I want a relationship that I can truly bet on and trust.
Alejandro Cremades: Thank you.
Bhavin Shah: And for that, it takes time. Got to get to know people. Uh, you got to do your homework on both sides.
Alejandro Cremades: Absolutely. Now, obviously, you know, like they’re banking on the vision, you know, and not only investors, but also employees, you know, customers. So when it comes to the vision, and Bobby, and let’s say you were to go to sleep tonight and you wake up in a world where the vision of move works is fully realized. What does that world look like?
Bhavin Shah: Yeah, so look, I think, ah you know, your point about vision is is right, but vision is easy to come by. In other words, like anyone could dream about going to Mars, but it takes actually execution that actually discerns the winners and the losers, the ones who who make it happen, the ones who don’t.
Bhavin Shah: And I think that’s something that we’ve been you know really indexed on. In fact, one of our operating principles is XP, execution quotient. How much can you just act ah versus trying and to bait or deliberate? Because you’re always going to work and in a sort of impartial, um or i’ sorry, in a you know world in which you don’t have all of the data, partial awareness of of what the right answer might be.
Bhavin Shah: So, you know, when you talk about our vision and where we are headed, uh, we came out with this platform, you know, as I said, starting in the support function, but it’s now become something that enterprises are now using across every department from HR to procurement, to finance, to facilities, to marketing, to a variety of use cases that we bring out of the box, but also they’re extending. And we’re seeing the usage continue to increase quarter after quarter.
Bhavin Shah: as more employees use this to navigate a particular ah you know thing that they’re looking for or um to run a particular process. right It’s things that are common, that are infrequent, that tend to get people stuck. And they’re like, wait, how do I do this? Or where can I find this? And they’ll spend 20 minutes you know when instead our tool becomes this essential discovery engine. And the underlying plugin architecture gives us the ability to talk to all these systems. And the agentic reasoner gives us the ability to interoperate and to answer questions and to pull data from different systems. It’s quite magical when you see it. and And we’re really excited about what it’s now doing for us and doing for our customers. So when you think about like going to sleep, and this never happens by the way in the enterprise world, you have to grind out every new customer and new deal. um But what you do find or what we do hope for, and we’re seeing this already, is that we become this employee experience hub, this co-pilot that is independent.
Bhavin Shah: that is not biased based on you know what system of record you have. These companies and organizations that have co-pilots for their systems of record don’t make it easy to work with the competition. They don’t work extra hard to make the competition’s product work better with yours. But for us, we see everyone as someone that the organization or customers want to be able to feed into this experience. And so being that independent um sort of facility capability that then companies can control really puts us at the center of the employee’s journey throughout their day. um And we become more of a Gen AI super app that people can go to and access lots of different systems. Now, it doesn’t preclude
Bhavin Shah: you know, ah companies from having other co-pilots, right? GitHub is actually a customer of MoveWorks and they use obviously GitHub co-pilot for engineering and code writing, but they also use MoveWorks for all the other hubbers um to be able to navigate the different services and and and and search, you know, ah tools that they have and and documents and things of that nature, as well as take action. So I think that we’re starting to see that emerge um around the world.
Bhavin Shah: Uh, and you know, with, uh, you know, 300 plus large enterprise on the platform and many millions of active users every day, every week, we are, we’re seeing kind of this vision.
Bhavin Shah: kind of take place and take hold. But I would say that you know the vision is is easy for me to dream about, but it’s the, as I said, years of work that it takes to refine this and to support your customers, to navigate with them um this whole new world and and make sure that you’re you know delivering a quality experience that they themselves can be excited about and and rely on.
Alejandro Cremades: So let’s say now instead of thinking about the future, we think about the past. okay Let’s say I put you into a time machine and I bring you back in time, maybe to that moment where you were about to give the um the the the notice at LeapFrog after that amazing journey. and And you felt that it was time and to venture into the unknown, into becoming an entrepreneur. Let’s say you’re able to stop that younger self and give that younger self one piece of advice before launching a business. What would that be and why, given what you know now?
Bhavin Shah: Yeah, well, that’s an easy question, right? Because we can all look back and have have this sort of perfect clarity. I think ah what I found is that I wish I had gotten into enterprise SaaS much earlier. I think this is a space that’s really exciting, one in which there is a lot of reasoning behind what success takes or what it takes to be successful. I think, you know, I was previously in the consumer world and what’s what’s tough with that is you sort of never know ah for sure if the work you did that day is going to amount for much. Whereas in the enterprise world, the puzzles in front of you just got to figure out how to put it together. So it is it is different and and one in which I think um i’ve I’ve enjoyed every minute of it. I think the act of of selling, the act of sort of figuring out this incredible puzzle that is the enterprise was something that I think, again, going back
Bhavin Shah: if I had sort of had the foresight, I would have gotten into. And some did, right? Salesforce started in 98 and ah Workday, I think seven years later and you know a bunch of other you know great companies, Okta and others really saw the early beginnings of that. But I think what it’s now positioned given the stage that we’re in now is there’s a new generation of of entirely AI based enterprise app companies and we get an opportunity to become one of those and build a company that I think the next wave of SaaS is gonna be really predicated on.
Alejandro Cremades: Amazing. So, Babin, for the people that are listening, I would love to reach out and say hi. What is the best way for them to do so?
Bhavin Shah: Obviously, go to our website, moveworks dot.com, but you can go to LinkedIn and and and send me a note. Happy happy to chat.
Alejandro Cremades: Amazing. Well, easy double, Babin. Thank you so much for being on The Deal Maker Show. It has been an absolute honor to have you with us today.
Bhavin Shah: Thank you, Alejandro.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Bhavin Shah On Raising $315 Million To Build An AI Platform To Automate And Streamline Enterprise Workplace Support appeared first on Alejandro Cremades.
Rob Bearden’s journey is one of innovation, leadership, and relentless pursuit of growth. From his early days at Oracle to his most recent venture, Sema4.ai, Rob has been at the forefront of technological transformation across multiple industries.
In this exclusive interview, Rob dives into his experiences, the lessons he learned when building and scaling his companies, and the vision that drives his latest endeavor.
Rob’s company, Sema4.ai, has attracted funding from top-tier investors like Benchmark (Business/Productivity Software), Mayfield Fund, Canvas Ventures, Harpoon VC, and Uncorrelated Ventures.
In this episode, you will learn:
- Rob emphasized the importance of resilience and adaptability in navigating the fast-paced tech industry.
- He highlighted the necessity of having a clear strategic vision to guide company growth and direction.
- Rob stressed the importance of building a strong, cohesive team that shares the company’s mission and values.
- He discussed the significance of timing when it comes to market entry and scaling operations.
- Rob pointed out that flawless execution is crucial for the success of any venture, no matter how innovative the idea.
- He advocated maintaining a customer-centric approach, ensuring that products and services meet market needs consistently.
- Rob shared insights on the value of learning from failures and using them as stepping stones to future success.
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Your email address is 100% safe from spam!**About Rob Bearden:**Rob Bearden is the co-founder and CEO of Sema4.ai. He was co-founder and CEO of Hortonworks, a publicly traded open-source company that merged with Cloudera in 2019. He was then CEO of Docker in 2019 and remains on the board.
Rob returned to Cloudera in late 2019 to serve as CEO, where he led the restructuring and sale to private equity firms KKR and CDR for $5.3B. Previously, he served as President and COO of SpringSource, a leading provider of open-source developer tools, until its acquisition by VMWare in 2009.
Prior to joining SpringSource, Rob served as Entrepreneur in Residence at Benchmark Capital. He also served as President and COO of JBoss, a leading open-source middleware company, until its acquisition by Red Hat in 2006.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty Hello, everyone, and welcome to the Deal Maker Show. so Today, we have a really exciting you know founder that that is joining us. you know We’re going to be talking about all the good stuff that you all like to hear, building, scaling, you know everything. and and Again, you know our guest today, you know he’s done it you know a bunch of times. and And I think that now you know he’s going to be telling us too about what he’s up to. He is now riding a rocket ship, but then we’re going to let him tell us about this. But again, brace yourself for a very inspiring conversation. So without further ado, let’s welcome our guest today, Rob Bearden. Welcome to the show.
Rob Bearden: Hey, I’m a huge fan of the show. Thanks for having me and I can’t wait to get to get into the discussion and thank you for ah for the opportunity to be with you today.
Alejandro Cremades: Amazing. so So why don’t we why do we get going here with they giving us a walk through memory lane? How was life growing up in Atlanta?
Rob Bearden: And it it it was great. it it was It was a very grounding experience and you know very transformational and just watching ah Everything from the Braves flourish to seeing tech come on the scene in the early days. ah you know and And then I ended up building a lot of my career here in Atlanta with Oracle in the very early days and seeing the whole ERP and application world explode right here in the Fortune 500s that were headquartered and in the southeast.
Rob Bearden: and then And then made my way to doing a lot of work and a couple of companies that were um headquartered on the west coast and doing a east coast west coast, west coast commute almost every week. And and now full circle back to founding and and and building and scaling a company back here in my hometown of Atlanta, Georgia. So it’s it’s been a lot of fun to see that evolution happen.
Alejandro Cremades: That’s amazing. Now, in your case, you know you are alluding to it. Right after school, you got into the whole data ah world and the hardware world. and And also, the real software job that you got you know was in Oracle. And that was even before they had reached $1 billion in revenue, which is a really a spectacular. I mean, you started there as an individual contributor and then regional manager and then all the way up to VP. So what what did you learn there from climbing the ladder, the corporate ladder?
Rob Bearden: yeah You know, it was it was a phenomenal experience being able to to be part of Oracle in the early days. That was my first software company job, second job out of school, but first real software company job. As you said, it was before they had even pierced the billion dollar and and revenue model.
Rob Bearden: And but it taught what it taught us was how do you construct process and and and and through every part of the business. And that’s what Ray Lane and Jeff Henley had done so well is how you operationalize every line of business.
Rob Bearden: how you wire between strategy and execution and how you deliver that through ah very surgical processes across every line of business and and how to go through and a ah construction of process through inspection and very focused on detail. And that’s what Oracle, I think, really did a great job of of teaching us.
Rob Bearden: And it was a pleasure to be and and and very fortunate to be able to be part of those early days of of Oracle and watching it double every year for six, seven, eight years while I was there. And just you know learned a lot and ah met a lot of great people and watched, I think, as as much as anything, the transformation of tech happen from being very you know, on-prem to moving to the ERP and next generation of applications and how businesses were transforming their model with technology generally and specifically ah with Oracle ERP and applications and how they were transforming their business models enabled by technology. And watching that happen taught me a lot.
Alejandro Cremades: And also, you know like it it took you some time you know to really going at it as um as a co-founder, but you did some really interesting transitions. you know And some of those were really ah being very heavy on the operational side, whether it was as a COO or as president. I mean, some of the things that you did was I2 technologies, where you were there ah basically they’re helping them um And and and on that on that journey of taking the company public or being the COO of JBoss, which had a $650 million dollars exit, or even Spring Source, where you were president too, and that was scaled and sold ah for $650 million to VMware. I guess say out of all these experiences, all these transitions, what was you know that the that common theme and and and that common thread you know from from one to another?
Rob Bearden: yeah they they They were all very different to some degree and haven’t had a lot of commonality at the it at core parts of overlap. I too was you know one of the very first very specific business applications and it was it was really the leader in automating supply chain.
Rob Bearden: and and you know built a great company, got to a billion dollars in revenue. At the height, it was a $52 billion dollars market cap, 20% operating margin, and just a model of ah scale and efficiency. and And I learned a lot from the board, from the leaders, from Sanjay, some Sanjeev, excuse me, and and and Greg. um but really under You had to learn in that model how to establish your correct and accurate positioning into the apps consumption model, and what your best practice use cases and value props were, and how how to go accurately position those value props um within those use cases that that that fit by industry.
Rob Bearden: um And it was a very surgical process. and And watching how the tech was built for very problem-specific outcomes, ah productized, and then put into, you know arguably one of the at the time, the best sales machines on planet Earth, um you know there there was a lot of great lessons learned, a lot of benefits that came out of that.
Rob Bearden: um And we applied some of those basics, but then we had to transform when we went into the JBoss world. And that that that that that tech was completely open source, completely free. And then contrast to I2 and Oracle, which were very were very much obviously license driven model, perpetual license driven models.
Rob Bearden: you know in the In the world of JBoss, it was all free, consume it all. And we had to figure out where the value proposition was and how to create value in an open source model that you could monetize and scale ah through the consumption model. And you know that that took a few cycles. The team really figured it out at at JBoss.
Rob Bearden: scale the revenue and and I think was very transformational in how you go make open source become enterprise viable and do it in a way where it can be consumed at scale for mission critical applications and the enterprise would pay at scale for it almost in parity with its proprietary competitors um and and to go build a scalable business model around that.
Rob Bearden: um And then and we applied those same principles at spring source and had you know similar results, similar outcomes, ah but but both using you know the transformation to open source and um and and the different and opera and moving to a subscription model as you monetize versus the um perpetual license model. So there was there was a lot of transformation that was happening both in how the tech was consumed and used and and the commercial models and how it was monetized.
Alejandro Cremades: Well, the exit of JBoss was pretty spectacular too. I mean, we’re talking about 650 million. So 2005 as well. That’s a remarkable. What do you think why were some of the key ingredients there for being able to accomplish such a nice outcome?
Rob Bearden: Well, yeah I think it was a testament to Mark Fleury’s vision around the tech um and and and what the capability of the tech was and the power of the open source model. And then I think Red Hat really saw the opportunity to take that And I would i would would suggest that that was the early days in the very beginning of what a product-led growth model actually was, because of course they had REL and you know had done a phenomenal job making the ah the Linux operating model work at scale for enterprise applications, made the whole ecosystem work around it, were monetizing at scale.
Rob Bearden: And then with its acquisition at JBoss, we’re able to go to the adjacent space, apply their principles of building, deploying open source, and monetizing it and and into the adjacent ah spaces and parts of the enterprise that they were already um had relationships and monetization.
Rob Bearden: and enterprise agreements in. And I would suggest that was the really the the first foundational steps to a PLG model. And you know they they they executed it extraordinarily well from everything from the acquisition, the integration, the applying it into their build, deploy model from an engineering standpoint and then rolling it into a commercial model that that drove um monetization at scale.
Rob Bearden: And you know they were able to replicate that and in a bunch of other places. And obviously, ultimately, you know had a $32 billion thirty two billion dollars outcome with IBM that that I think has gone extraordinarily well for both sides. So I think it was very foundational in operationalizing open source generally into enterprise and commercial models that set a standard that allowed enterprises to adopt open source for mission critical use cases and applications for the you know for the last 10, 15, 20 years.
Alejandro Cremades: So it sounds like just like you you did here on the transaction with JBoss, which was sold to Red Hat as we were talking for 650 million. Sounds like that 650 million also is a common theme because then you went to Spring Source where you were president in there, and that was scaled also and sold to VMware also for 650 million as well. Now, that was the immediate step that needed to be taken before you got going as an entrepreneur entrepreneur. So tell us about what were the immediate steps that needed to happen for you to end up founding what ended up becoming your first company, Hortonworks.
Rob Bearden: Well, you know after after the spring source acquisition, um yeah we we looked at the enterprise landscape and what were the biggest problems that that they were trying to solve. And this was obviously you know at the biggest advent of cloud and it’s in in its beginning of of of really um becoming mainstream and very validated for being able to run mission critical use cases and applications. And and in the IoT t of things were in full force. And we were seeing ah with Web 2.0 all of the data exhaust that was being generated.
Rob Bearden: And we I think but by definition, the enterprise understood the value of being able to capture all of the data about the transactions, the devices. um And the challenge was how to bring that, how to cat capture that, bring it under management and get value back from it. And how do you leverage new transformational business models with it?
Rob Bearden: And I think the the underlying thesis that a lot of enterprises had was if we can bring all of this disparate data under management at the right total cost of ownership, we can create very transformational high value business models to do things in our business models that we couldn’t do before. We can create more visibility to our customers. We can have more velocity with our supply chain. We can do better in product design and accelerate our our product build and delivery cycles.
Rob Bearden: whether it be tech or hard goods or or consumer goods. And it was very applicable in B2B and B2C models. But the challenge was there there wasn’t a platform that could really bring it under management with a TCO that could be leveraged to next generation platform and business models. And we saw what Yahoo was doing with Hadoop.
Rob Bearden: and how Yahoo had leveraged Hadoop to be the platform to manage across all their content across all their properties and to have leveraged that content into a clickstream revenue model that manifested itself in the form of advertising.
Rob Bearden: But but but the the common denominator was data data at scale. And in order to have data at scale with high velocity of refresh of capture and refresh, it required a new operating platform that they had to go build. They built it in an open source community. And and that that that was the manifestation of Hadoop.
Rob Bearden: in open source. and And we saw that there was a great opportunity to actually partner with Yahoo and to bring the core of Hadoop into a commercial company along with the brain trust. It was about 22 core individuals at Yahoo that were building an open source, the core of of Hadoop, and to bring them into that commercial entity with the goal of making it a commercial platform, but do it all in open source and make the big data market function around Hadoop, leveraging that platform. And that’s how Hortonworks launched. And it was launched as a partnership with Yahoo, spinning those core that core team of 22 engineers into Hortonworks,
Rob Bearden: with the goal of through the open source community, making Hadoop an enterprise viable data platform. And we did that in collaboration with Cloudera Legacy and in a collectively ah assembled ah four or 5,000 customers that were doing yeah mission critical applications and use cases at scale, largely in regulated industries.
Rob Bearden: um and And we ultimately saw a path to accelerate the market, drive a lot of efficiencies and synergies, both in terms of expense and revenue, ah by combining the companies in four or five years. And after taking both companies public, we put them together and improved that thesis ultimately right.
Rob Bearden: And you know at the at the end of of ah that integration, We had about a quarter, almost a third of the world’s data under management on the Hadoop platform between the two customer bases. um It generated a little over a billion dollars of revenue, about $960 million dollars of ARR and became a very profitable company. And and more importantly, was just incredibly transformation transformational
Rob Bearden: and how enterprises were able to transform their operating and business models to better serve their products, their customers, their supply chains. and you know And that opened up so many new opportunities across the board for how data and use case and value was constructed, leveraging data to do it.
Alejandro Cremades: Now, one thing that is a really remarkable there is, say as you were saying, you know how how the two companies come together and how you ended up packaging it and going through a transaction that you led there that ended up being $5.3 billion to a private equity firm. Obviously, in the past, you were doing transactions, as we said, you know all the way up to $650 million.
Alejandro Cremades: But I mean, this is like the three, the three comma club. And so really a spectacular, you know, like to be able to go through a transaction like that. I guess when you achieve a size of that nature, I mean, how is the transaction different from what you were used to perhaps before?
Rob Bearden: Well, yeah just a a couple of clarity points. So we we did bring the two companies together, Hortonworks and Cloudera Legacy. um And I remained on the board post that transaction. And you know the management team that that stayed to run the company did a great job integrating the companies, rationalizing the the roadmap.
Rob Bearden: rationalizing the the transition from each of the legacy platforms to the to the new platform tech, um you know opening the aperture for many, many new kinds of use case and value drivers. And then ultimately, I did come back as CEO of the combined company and um and you know had the had the privilege, quite frankly, of working with um that leadership team And we got very focused on really just taking the you know the opportunity
Rob Bearden: to capture those synergies at full scale that the thesis of the combined company we felt like we could achieve. And and so we got very focused in a balance between growth of ARR as well as um operating margin at scale and finding and finding the balance between those. um And at the same time, doing it in a way where we could create bigger and wider value for the customer bases in the kinds of ah use cases that they could enable, ah the value like value levers that they had the ability now to go capture in the new platform with the new company,
Rob Bearden: um and and and grow their volume of data, the use case they’re driving, and quite frankly, um spend more money with with the company and taking advantage of the new products that the company had built. you know And what that did was it it drove the synergies to the upside on the revenue past the billion dollar mark. But with that scale, we had to become very disciplined about also delivering at scale operating margin.
Rob Bearden: and and And we had to really go through operating margin expansion from you know low 20s into the 40s and 50s and become a rule of 50 company. um And and and you know and that that’s important as a company matures through its life cycle.
Rob Bearden: and and becomes a great steward of value to its customer base. And you know that’s what the cloud era team was very focused on. ah it It deeply operationalized that. It had a lot of support from the board to do that. And and as we did that,
Rob Bearden: and the private equity buyers saw that as is a great opportunity um for in a in a and a long tail horizon to continue to serve a very strategic customer base and an invaluable asset around data to continue to build and capture value for the customers that will continue to scale both in terms of revenue and an operating margin and free cash flow.
Rob Bearden: and ah you know And they’ve done a good job proving that model through um you know well past, certainly my exit, and you know continue to you know do great things with innovation for that that customer base they serve. And so that’s been cool watching them continue on with their operating model execution.
Alejandro Cremades: So then, as they say, once an entrepreneur, always an entrepreneur. So um you know right after this chapter, it was time to get going again. and so And this is your latest baby. So let’s talk about what you’re up to now, you know what this next company you know has been as a journey, and and how did the whole idea you know for semaphore.ai, how did that come knocking?
Rob Bearden: Yeah, i mean I wish I were smart enough to actually know how to go through pattern recognition. um But if ah if I look back you know and and and in each of the iterative loops that that my career has is been fortunate enough to go through,
Rob Bearden: I was part of the early days of VRP. And then you know very much the business app side of supply chain. And then the open source models for both JBoss and SpringSource. And then the advent of big data in cloud, Hortonworks and Cloudera. And you know and as we see the transformation that’s happening right now,
Rob Bearden: across the enterprise, it’s how do we leverage AI to be, again, transformational in our business models, right? Certainly there’s value drivers in particular use cases. Certainly there’s value drivers in particular line of business opportunities. But it’s really at the macro of how do we leverage AI in an enterprise viable way to accelerate our business model transformation using the enabling technology that AI creates um to drive more efficient more efficiency with my products, with my customers, through my supply chain, and how do I create more efficiencies, both in terms of
Rob Bearden: new revenue creation that comes through that, as well as more efficiency in my operating margin and model because of ah of of how I transform my business models through my product innovation, my supply chain efficiency, and how I better serve my customer through AI.
Rob Bearden: um you know and And we had some pretty good points of view of where those value drivers were and the problems that needed to be solved to enable the enterprise to do it with the advent of LLMs and generative AI, leveraging data to to to enable it. And um that’s what drove ah the inspiration for semaphore and we feel like
Rob Bearden: there is a time to market element that’s important. And there’s an opportunity to be definitional and in terms of how generative AI applications are built, deployed, and managed through intelligent agents. And we saw an offer an opportunity to accelerate how to execute on that vision and opportunity. And so we were fortunate enough to be able to bring um semaphore in its early form factor together with RoboCorp um ae and and to finance the combined entity in a way that allowed us to accelerate the great architectural decisions and work that RoboCorp had done in the automation layer.
Rob Bearden: with our vision for intelligent agents that we wanted to go ah construct to get sort of the next generation of AI business apps in motion. And we felt like the the combined entity saved us literally a couple of years of build and go to market.
Rob Bearden: And ah you know to many degrees, I think that thesis has proven accurate. And we’ve been very fortunate ah ah to have that Revacorp team. Aunty, as its CEO, has become a founder here with us. ah And we’ve been able to leverage the great work in both the tech platform and their customer base, and then able to to apply our intelligent agent infrastructure with the Robocore planning, scheduling, automations, and control plane um capabilities. And it’s accelerated um the use cases that the existing Robocore customers have been able to accomplish, as well as it’s opened our aperture up much faster
Rob Bearden: to a to you know ah very wide audience for a number of very targeted use cases that are you know quick to value realization. And so seeing that model that transformation model with the enabling technology of LLM, generative AI with our intelligent agents,
Rob Bearden: um is is is is showing you know it sort of it’s its ability to gain traction faster than really any of the other companies that we’ve done before. So that’s been a lot of fun to be part of.
Alejandro Cremades: So talk to us about raising money here, Rob, because obviously after ah all these incredible ah transactions that you’ve done and a hell of a resume that you have, you know I’m sure that the investors you know were really ah you know not even thinking about jumping in and and and giving you guys a check, I’m sure. So how did you guys go about raising money here? Why did you take the money from the people that you did? And also how much money have you raised you stay in total?
Rob Bearden: Yeah, well, you know, we’ve been very, very fortunate. um I specifically have been very fortunate to have had a relationship with Benchmark for over 20 years. You mentioned JBoss, SpringSource, Hortonworks, what became Cloudera. I’ve been fortunate enough that Peter Fenton and and Benchmark have stood behind me and and and financed all those companies. and um you know, given us awesome guidance and input and kept kept us on a very efficient path. um You know, and we looked at what we were doing next, um you know, began to just have great collaboration with Peter Fenton and the and the Eric and Chet and the rest of the team and Sarah. And, you know, they we we we we began to really transpose on
Rob Bearden: that AI in an enterprise level is going to manifest itself and in terms of intelligent agents. And that was very much in alignment with um ah with how Naveen at Mayfield saw the market moving and and um and how the enterprise would embrace and enable AI.
Rob Bearden: um and And so it became a very natural alignment, a very natural fit between their vision and how their thesis of AI was going to be applied pragmatically and at scale for enterprise use case enablement, i.e. through intelligent agents. And and so it just became a natural gravitational pull ultimately um between Naveen Peter, Benchmark, and Semaphore, and ultimately bringing Robocorp into into that as well at the same time, it just naturally pulled itself together. um And we were very fortunate to have the support of Peter and Naveen and the rest of their partners. um And so we’ve been in we we we we initially raised $30.5 million dollars
Rob Bearden: post-acquisition of Robocorp and we’ve been very efficient with the capital. We’re very focused on targeted use cases within the enterprise. We’ve been fortunate enough to get, you know, I think the right cohort of co-dev or design partners um at the right scale of enterprise who are very meticulously and surgically focused on solving very deliberate problems with agents. And it’s been a great partnership working with them. um And we’re very close to having you know ah ah a handful of them. We’re hopeful in production at scale, you know driving a lot of efficiency and accuracy in their AI.
Rob Bearden: application model by the end of this year. And then I think we’ll really be off to the races and be able to scale from there.
Alejandro Cremades: um Amazing. think So obviously, you know the caliber of investors that you got on board is say is really remarkable. And I’m sure that at the end of the day, employees, customers, also investors, they look at the vision. So with that in mind, you know let’s say if you were to go to sleep tonight, Rob, and you wake up in a world where the vision of Semaphore is fully realized, what does that world look like?
Rob Bearden: Yeah, well, I think i think what but the opportunity that we we we believe in deeply and get, you know, daily confirmation is the enterprise is has to transform how they do work. and And they have to be able to bring much more efficiency and accuracy in how their knowledge workers do work.
Rob Bearden: And between LLMs and generative AI and and and through intelligent agents and the proper infrastructure to enable it, they can realize that opportunity at scale.
Rob Bearden: And so I think we’re going to see a world much sooner rather than later where every knowledge worker has an intelligent agent that that’s really up-leveling the volume, capacity, efficiency, and accuracy of the work that they do.
Rob Bearden: and And it’s gonna bring, as a result of that, not only a lot more efficiency that’ll show up in things like operating margin, but I think what it’s gonna be able to do more importantly is transform the velocity and the kinds of applications and business and ultimately business models that they can go realize. And so if you think about from old world to new world, in the old world,
Rob Bearden: um that we’re just graduating from, customers wanted to bring data under management so they could make quote, data-driven decisions, right? And they would use that data to make decisions on how they would better innovate a product or better serve a customer, get more efficiency in logistics or supply chain.
Rob Bearden: And they now understand what the best-in-class outcomes or the best-in-class KPIs um or what the bar is that the auditors want, need, and require them to get over. They understand the standard of work that has to happen to get a particular job function or process done.
Rob Bearden: and they want to be able to transition from making data-driven decisions to actioning the work autonomously from end to end.
Rob Bearden: and and using intelligent agents to do that and ah in using humans um to help them go through that reasoning process and can be an exception manager versus a manual execution agent.
Rob Bearden: and and And so you’ll see that transition happen and that enablement happen with intelligent agents and you’ll see better, certainly operating efficiencies and operating margins, but more importantly, you’ll see better velocity of work, more accuracy of work, new kinds of of applications being able to be driven for how products are built how customers are served, ah how product is sold, and how supply chains are orchestrated and ultimately delivered. ah And it’ll allow the human to do
Rob Bearden: higher ah higher efficiency level kinds of work that they’re not able to get to today. And so it’ll it just creates higher value and better velocity in the enterprise operating models. And um you know and now we’re going to have to think about how to manage, how to enable the life cycle of these agents and how to manage these agents at scale. And that’s what the semaphore platform is designed to do.
Alejandro Cremades: so Let’s say ah now I bring you back in time. okay so We’re talking about the future, but I want to talk about the past to the lens of reflection. so I bring you back in time to that moment where you were maybe like thinking about starting your own thing you know right after Spring Source, right before you were going at it with Hortonworks. Let’s say you’re able to give yourself one piece of advice for launching a business. What would that be and why? Give me what you know now.
Rob Bearden: Yeah, you know, I underappreciated when we started Hortonworks, the importance of really knowing and understanding on one axis, the business model, granularity of the business model that you you want to create.
Rob Bearden: um On the other axis, I underappreciated um the importance of having use case specific outcomes that you’re trying to create for the customer.
Rob Bearden: and to be able and and and the lack of appreciation of not having surgical focus on what those use cases were that we were trying to enable very specifically for a customer by line of business, by persona, um with a very that that was underpinned by a very specific operating and business model um And we had to feel our way and sometimes not very eloquently quite frankly but it but because of um my my lack of experience at scale in those days. um But learning and appreciating when you dial those things in and get them right um combined with
Rob Bearden: still keeping the innovation spirit of building the next generation of tech to enable those things. And when you figure out how to balance that, then you come up with things that are very special and can go to scale. um and And so those were those were key lessons and and in retrospect learned post Hortonworks.
Alejandro Cremades: That’s amazing. So Rob, for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Rob Bearden: Yeah, anytime, happy to help ah if I can be in any way, shape, or form, Rob at semaphore.ai. ah Reach out to me anytime. I’ll try to get back to you within 24 hours and um always glad to glad to help in any way possible.
Alejandro Cremades: Amazing. Well, hey, Rob, thank you so much for being on the Deal Maker Show today with us. It has been an honor.
Rob Bearden: It’s been my pleasure and I’m a huge fan of you and the show and thanks for all you do to to to bring the visibility to all of us on ah on these great topics you bring forward every week. Thank you.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Rob Bearden On Building Billion-Dollar Companies And Raising $30 Million To Co-Create A Platform That Leverages AI Agents To Transform How People Work appeared first on Alejandro Cremades.
Arjun Pillai’s journey from a small village in Kerala, India, to becoming a successful serial entrepreneur in Silicon Valley is nothing short of remarkable.
With a deep passion for problem-solving and an unyielding entrepreneurial spirit, Arjun has built and sold multiple companies, navigating the challenges of bootstrapping, fundraising, and acquisitions along the way.
His latest company, Docketai, has attracted funding from top-tier investors like Mayfield Fund and Foundation Capital.
In this episode, you will learn:
- Arjun Pillai’s entrepreneurial journey began at 23, with multiple failed products leading to eventual success.
- Arjun’s first venture thrived on a lean budget, with a $200 monthly salary in India sustaining his early efforts.
- Arjun’s first successful product launch happened by chance, demonstrating the power of organic growth and unexpected opportunities.
- Arjun learned the hard way that securing investor commitments requires written agreements and strategic timing.
- Knowing how investors think can significantly improve your fundraising process.
- Arjun advises entrepreneurs to prioritize long-term business growth over planning for an exit.
- Both of Arjun’s successful company exits were driven by organic interest rather than a deliberate process.
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Your email address is 100% safe from spam!**About Arjun Pillai:**Arjun Pillai’s work experience includes being the Co-founder & CEO of Docket Inc. since August 2023.
Arjun is also an Investor & Advisor at Chi AI (Techstars ’23), Produx AI (Techstars Seattle ’23), Siemba, EventHQ, Greenikk, and Bluehour, with roles starting in various months of 2023 and 2022.
Additionally, Arjun has been an Investor at Factors.AI, Pupilfirst, and Inflection.io since 2022 and 2021, respectively.
Arjun Pillai received their Higher Secondary School Leaving Certificate from Good Shepherd Public School from 2004 to 2006.
Arjun then went on to pursue a B.Tech degree in Electronics and Communication Engineering from Cochin University of Science and Technology from 2006 to 2010.
Additionally, Arjun has obtained certifications, including being a Graduate of Startup Chile from Corfo in 2014, a Graduate of the Blackbox Connect Program from Blackbox Accelerator, LLC in 2013, and a Graduate of Microsoft Ventures Accelerator from Microsoft in 2013.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty. Hello, everyone, and welcome to The Deal Maker Show. So today we have a very exciting founder that they you know is joining us.
Arjun Pillai: Thanks a lot Alejandro for having me. Excited to get this going.
Alejandro Cremades: He’s a founder that has done it multiple times, you know a founder that really understands what he means to scale and to build something from nothing, and then also to get it all the way to an exit.
Arjun Pillai: Yeah, I’m originally from Kerala, India.
Alejandro Cremades: We’re going to be talking about all of that good stuff you know from the first round you know experience that he had to going through you know through the motions of going through several acquisitions
Arjun Pillai: it’s ah I grew up in kind of a village. It was a pretty agricultural place. I mean, it was my childhood was a lot of games. you know I played a lot of cricket, which is normal in India ah for people who are unaware of the game cricket.
Alejandro Cremades: ah for his previous companies, and right now he’s on a rocket ship. So without further ado, let’s welcome our guest today, Arjun Pji.
Arjun Pillai: um Yeah, a lot of cricket, a little bit of studies. I was decent at studies.
Alejandro Cremades: Welcome to the show.
Arjun Pillai: Nothing big happened, right? I come from a middle-class Indian family. I have an elder brother and me.
Alejandro Cremades: So originally born in Kerala, there in India.
Arjun Pillai: to to people in the family, to kids in the family, then grew up ah without, you know i when I look back, the only thing that I have learned in that process is you know how to be frugal, how to be another, how a middle-class family person would grow up in India, that’s exactly how I grew up.
Alejandro Cremades: So give us a walk through memory lane. How was life growing up?
Arjun Pillai: So the memory lane is a bunch of happy memories of being in the family.
Arjun Pillai: Yeah, in in India, we have this joke that goes around that everybody becomes an engineer and then they figure out what to do with their life. um in In India, everybody wants to become an engineer or a doctor.
Arjun Pillai: In my case, what happened is when I was studying in my eighth, ninth and tenth standard, I went to what you call as a technical school. It just meant that on top of all the usual subjects that we were learning,
Alejandro Cremades: So i guess I guess where does the um the whole idea i mean the the whole idea of becoming an engineer, where does that come from?
Arjun Pillai: We also had electronics and computer science as to additional and electrical engineering, I guess. So three different subjects that usually you don’t learn during your school time.
Alejandro Cremades: Where does the um the love from problem solving you know come from?
Arjun Pillai: um I grew very, very passionate about generally, I have always been excited about physics. And then when I saw electronics, I saw electrical, I grew very attached to electronics. So around that 8, 9, 10 time I started becoming here, I want to be an engineer because that’s what I love. So there was a little bit of that. And then on top of that, my brother was an engineer. So there was somebody in the family itself who just became an engineer. So I could look up to and say, oh, OK, you know what? and Being engineer is a good potential career choice.
Arjun Pillai: um And yeah, that’s how we decided to become an engineer. And then, you know, thankfully the ranks and steps came together. So I ended up joining a college not too far from my home. It was like, you know, in eight miles away from my home. So that also worked out.
Arjun Pillai: Yeah, so the first I started my first company when I was 23. At that age, right what I call is you are young and stupid, so you don’t necessarily know what you are getting into.
Alejandro Cremades: So then tell us about you know really becoming an entrepreneur because you were there for a couple of years, but then you know eventually you decided to brownshot into entrepreneurship, but you did it in a very interesting way, you know in a way in which you were just like testing stuff until you know one thing you know came together which ended up being profoundness, but it was not the first try.
Arjun Pillai: And you don’t have the kind of family and kids to take care of. And financial freedom is kind of there because you just came out, so you ah you don’t have mortgages. And thankfully, I didn’t have student loans and things like that.
Arjun Pillai: So it was fairly easy for me to make a plunge into doing something of my own. um i During my engineering time and post that, I always wanted to do something of my own.
Alejandro Cremades: So walk us through that.
Arjun Pillai: Didn’t really know what that meant back in the in the day. Then I was with Infosys. It is an IT services organization for about one and a half years. During that time, three of my batch mates back in college and I, we kind of planned, hey, let’s do a company.
Arjun Pillai: and That’s how the idea of a company came together. and In 2012, I resigned and started this company. To your point, the first company was a lot of ups and downs. um We built like four products in the first two years. All of them successfully failed. We would build one company or one product every six months. It was all under the same company, the legal entity. We were also bootstrapped because that’s all we knew back in the day. We didn’t know that there was something called as investors. We didn’t know that they could put money into the company.
Arjun Pillai: So the only way we knew was to bootstrap the company, which was how by like taking projects, outsource projects, and then doing it, taking that money, and then you know trying to build a product out of it. Since we were also super young, we didn’t need a lot of money to live. So my salary for about, I think, two and a half, three years in the first three years of the journey as an entrepreneur was $200 a month.
Arjun Pillai: Again, $200 in India goes a little bit further than $200 here in the US, but it still was a little lower for even even India. But we were happy. you know It was almost like ah an extension of men’s hostel for us. So it was fun. We didn’t think of it as a failing, right? We just thought, okay, next one, next one, next one. And the fifth product became a sales intelligence tool.
Arjun Pillai: ah for listeners who are aware of this company called Clearbit or Zoominfo. It was kind of like those two companies, but ours was before Clearbit. This was 2013. So that’s how we ended up in that product, and that product kind of became successful.
Arjun Pillai: Yeah, it ah it was interesting. are That product launched, it was accidentally launched. The story goes like um we were sitting inside our apartment. All of everybody lived in the same apartment because we didn’t have money, so everyone was sharing.
Arjun Pillai: 8.35 PM, we saw that the traffic on our website was going up. And the website was in such a really bad, atrocious state. Nobody would understand what we what we were doing by looking at the website.
Alejandro Cremades: So at what point do you guys realize, hey, I think that out of all the ones that we’ve tested, this one you know really makes sense to to go at it with.
Arjun Pillai: Then what we saw from Google Analytics is that people are coming from this website called as Product Hunt. So what happened behind us um There is an investor called Dave Ambrose in Silicon Valley. I have never met the person. He somehow stumbled onto our website. And on the website, there was a slider between $2 to $30. Basically, my team asked me, how should we price this? And I said, I have no idea how to price this. So let’s put a slider between $2 to $30, let people pull it wherever they want, and then click on Pay and just pay for the product.
Arjun Pillai: you know it’s probably a bad idea but they felt that it was an interesting pricing strategy and so he posted it on twitter saying that hey startup is trying out a new pricing strategy here or pricing you know analysis or experiment here Rand Hoover, who was the co-creator of Product Hunt, saw that tweet. He came to the website, and he saw that the product was interesting. So he went back to Dave on Twitter and said that, hey, Dave, the product is also interesting. Why don’t you post it on Product Hunt? We didn’t know any of this, and Dave posted it on Product Hunt, and we got launched.
Arjun Pillai: So that’s how we got accidentally launched. But in the next 30, 36 hours, we onboarded 2,000 people came to the website. We kind of manually using chat onboarded 800 of them. And out of those 800, there were like a few PR people, ah you know writers. They wrote about the product in CNET, GigaWomb, LifeHacker, LifeHacker Russia. And kind of in the next two, three weeks, we went up from 800 users to 4,000 users.
Arjun Pillai: So to answer specifically to your point, right when that organic pull happens from the market, which never happened with our previous products, this was the time we were like, okay, we are probably onto to something here.
Arjun Pillai: Yeah, so two and a half years we were bootstrapped and then we decided, okay, you know, it’s time. Let’s go out and try something. I made a bunch of mistakes. The first mistake that I did was I started racing in October timeframe, October, November timeframe, which is probably not the best time to start raising because of the vacation, December, et cetera come through.
Alejandro Cremades: So I know that, they obviously, to to to to support that growth, you know you guys looked at, the as well as raising money.
Arjun Pillai: I got two investors to, I was planning to raise $400,000.
Alejandro Cremades: And I know that the first time, you know the first rodeo was a not a walk full of roses.
Arjun Pillai: I got two investors to commit 150 and 150 each. And I was like, OK, I’m at 300 K.
Alejandro Cremades: So what happened during the the fundraising efforts here?
Arjun Pillai: Let me find a few more value added angels and I’ll close the round. But the mistake that I did was. um I didn’t make them sign a safe or a convertible note. And December went through, January came, and they were both like, oh, we didn’t commit. We were just seeing that we are interested. So my 300k soft commit went to zero. But even before that, I had to go through 65 people. 65 people said no to me. you know They would take a call. They’ll be like, yeah, this is interesting. Let’s do another call. So I went through like 65 meetings, and all 65 were no.
Arjun Pillai: The 66th person said yes. And then this commit went back to zero. And then I had to restart. And we ended up raising $380,000. And that was enough for us at that time. ah So the first rodeo was certainly not a cave walk, but learned quite a bit.
Arjun Pillai: Yeah, simple things like when somebody is committing, make them commit on a piece of paper, right? You should know the instrument that you are looking at. And then once you have somebody saying, yes, I am interested, I am hard committing some some number, use your instrument. Could be safe, could be a convertible note, whatever you are using.
Arjun Pillai: Just make sure that you get it on a piece of paper. The second thing is if you are doing your fundraise, do it in a statistical way where you have everybody coming at pretty much the same timeline.
Alejandro Cremades: What is the biggest lesson, your biggest takeaway you know from that besides you know timing and seasonality and all of that good stuff?
Arjun Pillai: You shouldn’t be serializing the conversations, right? You should be like, OK, let me talk to person one, then person two, then person three. It should be more like I’m bringing everybody to the table almost at the same timelines.
Arjun Pillai: The more people that there are on the table, the better deal I will get. You know, The third important thing, which probably is over a period of time I learned this, it’s very important for entrepreneurs to understand the math that investors are doing in their head, the pattern matching that investors are doing in their head, and where they are coming from. If you can get into their shoes, then your fundraising process is way easier.
Arjun Pillai: But most of the entrepreneurs don’t know that. And again, first time entrepreneur as an entrepreneur, I also made that mistake. If you get a chance to sit down with an experienced deal maker, then ask them, hey, what does that rationale look like? What does that thesis look like? Why do people care about ownership percentage? Things like that. So those are some of the learnings.
Arjun Pillai: Yeah, so we were in the process of building out the company. We started as four people grew to seven, 12, 32, 52, 72. So the company was kind of scaling pretty well. We became profitable. I think we were about 39 people when we became profitable. And then we were like, yeah, we have money. We will grow. So we will kind of started burning a little bit more.
Arjun Pillai: um I got a fully committed pre-series term sheet for the company. At that time, Full Contact who was an existing strategic partner who was buying data from us.
Alejandro Cremades: So at what point does a full contact they come knocking?
Arjun Pillai: They were like, hey, we want to buy out the company because the combined entity has a lot of value. And back in the day, Full Contact was doing extremely good. they had raised um At that time, I think they had raised about $30 million dollars or something so far, and they were just going to close their CDC for about $25 million. dollars Again, CDC in 2016, $25 million is pretty good. ah So they had a lot of traction behind, and they were doubling revenue almost on a yearly basis. So it totally made sense to sell the company. And this happened in 2016. So we ran that company for four and a half years.
Arjun Pillai: And while I sold the company, i later I realized that that was the first product exit in the history of my state. It had never happened before. So you can imagine the nacency of the ecosystem. But it became kind of like a milestone event um in the in the in the state. It was not a big outcome. It was single digit million. It’s a legally undisclosed thing. So I cannot tell the numbers, honestly. But ah yeah, the outcome kind of changed our lives, the founders, but also the larger ecosystem.
Arjun Pillai: yeah
Arjun Pillai: Between full contact and Incent, there is nine months where I was actually consulting. um I consulted for a bunch of sales tech companies, smart tech companies, data tech companies.
Alejandro Cremades: That’s amazing. So then obviously in this case, you guys say they did the transition, the vesting and resting in full contact for a little over a year.
Arjun Pillai: up wanted to kind of learn the trick of the trade of consulting, wanted to do better in sales.
Alejandro Cremades: And then eventually the idea of ah basically Incent the AI comes also to you.
Arjun Pillai: So did that. And during that journey is when I realized the real time conversations in B2B was becoming more and more apparent to me.
Alejandro Cremades: Once an entrepreneur, always an entrepreneur. So tell us about how you know did you think about this next day you know chapter you know and and why you thought it would make sense to go at it again with Incent.ai.
Arjun Pillai: And I was like, there is certainly a better way to do real time conversations. That’s where Incent, the name comes from intent and consent of the buyer. So the whole idea was a buyer wants to get information from a B2B company. It is very difficult today. They don’t want to submit a form and then wait for you know five days to get information. So we wanted to build a B2B account-based buyer-centric conversational experience for companies. That’s what we did. um and There was drift.com.
Arjun Pillai: um was kind of, they had a conversational platform which was more chatbot oriented back in the day. And we were there and there’s another company which is still around doing good, Qualified.com. ah So three of us were kind of in that realm of account based marketing advanced B2B chat application. ah That’s how Incent came together end of 2018.
Arjun Pillai: It was a B2B SaaS model. So it was based on, there was a platform pricing for the underlying conversational platform, which included the integrations, setting up of the process onboarding and all of that.
Arjun Pillai: And then there was a per seat pricing. I think ah there was 10 seats that were baked into the basic platform fee. And then if you wanted to have more seats, then you would obviously pay more money.
Arjun Pillai: that’s ah that was the It was true SaaS simple model.
Alejandro Cremades: So they tell us about the um the monetization strategy here.
Arjun Pillai: There was no pro services or things like that.
Alejandro Cremades: What was the business model? How did you guys end up making money here with Incent.ai?
Arjun Pillai: Yeah, so the second company, we actually didn’t raise 4 million, we in total raised 2.7 million, but you’re right that the fundraising process was way more easier.
Alejandro Cremades: Now this time around, you guys were ah quite successful in raising money.
Arjun Pillai: The first round, when I said that I’m starting the company, my previous investors who all made good outcome with my first company, they all wrote a check almost immediately.
Alejandro Cremades: You know, if you were to compare with the first rodeo, you raised the a little over 4 million bucks, you know, and that was an ultimate same thing. You know, you have um another player swimming for coming knocking here.
Arjun Pillai: I told them I don’t even know what I’m doing, but they were still happy about it. We put a cap on a safe and then they wrote like, I think it was a 4 million cap back in the day.
Alejandro Cremades: Obviously you at this point, you are very familiar with the acquisition process.
Arjun Pillai: They just wrote a check and like, here you go with $300,000.
Alejandro Cremades: So how did you go about things differently, you know, this time around?
Arjun Pillai: And then we also went through Techstars. They put in an additional 120K. So in total, we started the company with 420K. Then ah coming out of Techstars, there was $380,000 that organically came through mentors inside Techstars. We didn’t try to raise. We had that. And then we did a seed round ah led by Emergent Ventures. ah That was $1.9 million.
Arjun Pillai: So that was the total fundraising at the company. It was way easier to raise the second time around. The big acquisition, again, wasn’t planned. The first time also it wasn’t planned. Second time also I was never planning to sell. I was just continuously focused on the business and how to grow the business.
Arjun Pillai: I had a almost a commitment to my CDC. I had advanced discussions with ah series a a really good investor here in the Bay Area, and I was supposed to come to the Bay Area to meet the investor. um But at that time, Henry Schuck, the CEO of ZoomInfo, who I had known for some time,
Arjun Pillai: I have this habit, it’s probably interesting to the listeners how that conversation, how the acquisition inbound came. I sent an email, I have this habit of when an industry thing is happening, which I feel is relevant, let’s say Alejandro for you, something is very relevant for you. I’ll drop a quick two, three sentence to you saying, hey, did you see this news? It’s very interesting for you.
Arjun Pillai: right or I believe it is interesting for you. So I sent such an email to Henry when I saw some industry news, which I felt was relevant to Zoom in for as a company. He responded back saying, Hey Arjun, that is interesting, but what you’re doing is more interesting. Let’s catch up.
Arjun Pillai: So that is what got the first conversation actually going. And I had received other acquisition offers, but I didn’t entertain any of them. But Henry was different. Zoom info was different. So I took the call. He was very explicit that, hey, you know this is a space that I want to do an M and&A.
Arjun Pillai: um And then it went cold for a little bit. We so we talked October 2020, I believe. It went cold for a little bit of time, and I didn’t push because I wasn’t trying to sell. Then in February, when my CDSA was coming together, ah again, interestingly, I was sitting at my desk doing the work. I got a notification from my product saying someone from Zoom info is on your website. And I said, hey, great to have you from Zoom info. And well hey, Arjun, this is Henry Shaq from Zoom info.
Arjun Pillai: ah the product is very interesting, we should catch up. That restarted the conversation. At that time, it went super fast. In about two months, three months down, the the whole thing was done. That’s how the second acquisition kind of came about.
Arjun Pillai: Yeah, a few things. First of all, don’t build a company to exit. It is fine to have exit as one of your options, but build the company as if you want to build for long term.
Arjun Pillai: I always believe that the best deals come to you, whether it is from investors, whether it is from acquirers, they come to you when you build a solid business.
Alejandro Cremades: That’s in incredible.
Alejandro Cremades: That’s amazing.
Arjun Pillai: So I would put all the focus on building a strong business and funding coming through or acquisitions coming through.
Alejandro Cremades: So how what have you learned about acquisitions? What’s your biggest take? You know, like for the people that are listening that maybe are thinking about, you know, doing M on&A and and getting a bigger player to acquire them.
Arjun Pillai: In all of these cases, I have never ran a process.
Alejandro Cremades: I mean, what do you have to tell them?
Arjun Pillai: I’ve never run a process for fundraising. I have never run a process for acquisition. It always come organically to me. That has been my experience. Focus on the business, good things will happen. The second experience is if you are going through the acquisition process, make sure that you get the right kind of support.
Arjun Pillai: whether it is legal side, tax side, you need to make sure that you have the right support if you’re going through that process. First time I made a lot of mistakes because it was happening for the first time. I didn’t have the right legal support. I didn’t have the right tax support. I probably paid about, I don’t know, $300,000 in taxes to the government, which was which we could have easily saved if I had a good tax person assisting us.
Arjun Pillai: Second time around, I got the best legal support, best act support, and that that turned out to be a really good ah decision. The third and the biggest learning from me after acquisition is once you sell a company, it is not your company.
Arjun Pillai: founders have a difficult time getting this internalized. I also went through this mistake where once I sold my company to full contact, I had an emotional attachment to the company still. That is not the right way to do it. Once you sell the company, it is not your company. You should kind of emotionally and mentally move on from that and start looking at things objectively. So these are probably the three big ones that I can think of.
Arjun Pillai: Yeah, my time at Zoom info was very fruitful. um ah For me, I learned that ton.
Alejandro Cremades: So then obviously, you know, once this acquisition happened again, you know, you stay with Sumi for a little bit and and then, you know, pretty much the same thing, you know, docket.
Arjun Pillai: And in my perspective, even for the company, it was very fruitful, whatever I could do for the company, including launching a new product, doing things with the data side at Zoom info.
Alejandro Cremades: And so docket, obviously third time around, you know, I’m sure that you thought about, you know, things differently and and very much in depth, you know, before you actually pull the trigger, you know.
Arjun Pillai: um But at the same time, you know, and you mentioned this Alejandro, once an entrepreneur, he or she, they always have they always have this feeling of, hey, I want to go out and do this again.
Alejandro Cremades: So what what do you think, you know, like made it so, I don’t know, so appealing to you to to to go at it, you know, on this third chapter?
Arjun Pillai: And I still have the energy, right? I’m 35 now. I still have the energy to build a company. And this is probably the time I am the best networked. I have the most amount of energy.
Arjun Pillai: And with my second outcome, a second exit that happened financially, I’m taken care. I don’t have to work per se. But see but That all gives me a lot of cushion to kind of go out and swing for the fences. right So that’s what docket is all about. And AI was happening so thick and fast in the past couple of years. This is probably the biggest paradigm shift that we will experience in our lifetime. um I mean, we had a couple. right I was studying when SAS was happening, but I was around when mobile was happening.
Arjun Pillai: um I was kind of there when social was happening. But those were, I was still very young to kind of really get used to or make sense out of those trends. But AI is happening when I have the energy, I have the network and I believe it is the biggest paradigm shift that will happen in my lifetime. So it was too good of an option or ah too good of an opportunity to pass.
Arjun Pillai: And on top of all this, I found a problem statement that resonates with me that I understand deeply, and I wanted to solve that. And that’s where Docket comes in.
Arjun Pillai: Same thing. It’s a SaaS product. It’s a platform-based pricing. We have a platform price and a per seat price. Hopefully, over a period of time, the AI is going to enable us to evolve our pricing to something more like an outcome-based pricing or something like that. But today, it is true SaaS platform plus seat model.
Alejandro Cremades: And how are you guys making money a docket?
Arjun Pillai: Yeah.
Arjun Pillai: Yeah, absolutely. so Yes, it was easier this time than the last time. What my experience is, every time it gets easier up to a point, my second company, it was easy to raise my first couple of rounds, this time also the first couple of rounds.
Alejandro Cremades: So then in this regard, the you know you guys also went about it ah differently too on raising money because you’ve raised a quite a bit more than on the last day rodeos and and also from like super heavy, heavy weights.
Arjun Pillai: And I’m sure that as the company progresses, it will get slightly tougher. um When I started the company, the initial idea was, I don’t have to raise, I’m going to put 400, 500k and then run the company for a month and then we’ll see.
Alejandro Cremades: So I’m sure that now, you know having had two exits under your belt, it was it was easy stuff, raising money. you know So how did you go about doing it and why did you take the money from the people you did?
Arjun Pillai: But when I was catching up with my previous investors, all of them wanted to kind of chip back in. And four days after the incorporation, I was sitting on roughly $3 million, $3.5 million dollars in in soft commits.
Arjun Pillai: They were like, yes, we want to invest this money. And I was like, OK, there is good interest here. So let me actually go ahead and do a proper race here. um At that time, Foundation Capital, Ashu Garg and Jaya Gupta, they reached out ah to me out of the blue, actually. I took a call. Ashu and I hit it off very quickly on a call. So the first call was supposed to be 30 minutes. We spoke for 55. And then in 20 days, from nothing to the deal done in 20 days happened with Foundation. So Foundation led the round for five
Arjun Pillai: The total round was $5.3 million. dollars um Founder’s co-op in Seattle, ah Henry Shaq, a CEO, ah Jeff Lunsford, CEO of Telium, Anu Parathwaj, at last same president, Viral, CTO of Six Cents. A bunch of really amazing angels came together to do the 5.3.
Arjun Pillai: Then we found a few pilots, design partners, started to build out the product, delivered the product. We started generating early revenues. ah Mayfield and I have had a pretty long ah relationship. I’ve known Rajiv Batra from Mayfield for a long time, Navin for a long time. That conversation kind of very quickly, I was catching up with Navin and then that conversation very quickly evolved into a CDC conversation.
Arjun Pillai: And I think they moved fast. Patrick ah is my partner at Mayfield. Patrick was amazing. He moved so fast in about three to four weeks time, did all the due diligence and work on on their side. um And then, you know, CDC happened. We raised $15 million, dollars led by ah Mayfield and and Foundation joined in.
Arjun Pillai: The future or with docket fully established would mean that docket has become an AI sales engineer in the organizations where it is assisting the existing sales engineers and existing account executors to a point where the go-to-market efficiency in those companies is so good.
Alejandro Cremades: So obviously, vision is a really big deal here, and it’s something that day I’m sure those guys were banking on, those guys and gals.
Arjun Pillai: Docket is joining the calls, answering the questions, taking the demos, being a full teammate through the companies, and making sure that the B2B companies are operating at super high efficiency.
Alejandro Cremades: So I guess a question for you. If you were to go to sleep tonight and you wake up in a world where the vision of Docket is fully realized, what does that world look like?
Arjun Pillai: that’s ah That’s what the goal would look like in terms of a vertically fully integrated AI sales engineer.
Arjun Pillai: My first advice would be learn validation and validate everything that you want to do really, really deeply.
Alejandro Cremades: so then So then here we’re talking about the future. I want to talk about the past, ah but with a lens of reflection.
Arjun Pillai: The first four products that I failed, the commonality was I did not do proper customer market validation before I built the product.
Alejandro Cremades: So let’s say I was to take you back in time. you know Maybe I take you back in time to that moment where you were you know now thinking about going at it on your own, you know building your own business, you know let’s say maybe 2012.
Arjun Pillai: So today, even even before writing the first line of code, I will do a bunch of validation with the right people.
Alejandro Cremades: And let’s say you have the opportunity of having a chat with that younger Arjun.
Arjun Pillai: So like validation, do validate ah everything that you are looking to do.
Alejandro Cremades: And give you that younger Arjun one piece of advice for launching a business.
Arjun Pillai: So that would be the first advice that I would give.
Alejandro Cremades: What would that be and why, given what you know now?
Arjun Pillai: The second advice is probably. Everybody who you meet, they are smart, take feedback from them, but don’t think that everybody you meet no more than you, which might be true for a very small percentage of the people, but for most people, especially in your business, right, I’m not talking everything. I’m talking about your business. You are thinking about it 24 by 7 all the time. So about that, there is a significant chance that you have a view that is probably right than most of the people that you meet. So here everybody’s input, take that as your input as a founder to process through. Don’t make other others take decisions for you. So I thought
Arjun Pillai: Yeah, I could have done better um you know in in the second one, second point that I just… So these are probably the two.
Arjun Pillai: LinkedIn is probably the best. Just search for Arjun Pillai, and that you should be able to find me. I’m pretty active on LinkedIn. I’m also on Twitter. ah But LinkedIn is probably the best place. And um you can also learn more about Docket at docketai.com or just search for docketai on Google. ah So those would be the two places where you can reach me, learn more.
Alejandro Cremades: I love it. So Arjun, for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Arjun Pillai: Likewise, I had a blast. Thanks a lot for having me.
Alejandro Cremades: Amazing. Well, hey, Arjun, thank you so much for being on The Dealmaker Show. It has been an absolute honor to have you with us today.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Arjun Pillai On Selling A Company To Zoom.info And Raising $20 Million To Build An AI Sales Engineer To Maximize Go-To-Market Efficiency appeared first on Alejandro Cremades.
Lawrence Lin Murata’s journey from Brazil to Silicon Valley is nothing short of extraordinary. Born and raised in São Paulo, he ventured into the tech world without prior experience, eventually leading a successful startup.
This blog post delves into his inspiring story, covering his multicultural upbringing, the challenges of breaking into tech, his experiences at Stanford, and the founding of his company, Slope. Slope has attracted funding from top-tier investors like Tech Square Ventures, Alerion Ventures, Charlotte Angel Fund, and Techstars.
In this episode, you will learn:
- Multicultural roots shaped Lawrence’s unique approach to problem-solving and innovation.
- Stanford provided Lawrence with hands-on experience that bridged the gap between academia and industry.
- Social impact has been a driving force in Lawrence’s entrepreneurial journey.
- Lawrence’s first company taught him invaluable lessons despite its challenges.
- The idea for Slope was born from Lawrence’s experience digitizing his parents’ wholesale business.
- Strong relationships with influential figures helped secure significant funding for Slope.
- A culture of transparency and collaboration has been key to Slope’s early success.
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Your email address is 100% safe from spam!**About Lawrence Lin Murata:**Lawrence Lin Murata is the Co-Founder & CEO of Slope, a B2B payments workflow company.
Prior to Slope, he was Head of AI Platforms and Data Science at Nauto, founded a self-driving vehicle startup, Newton (acquired by Nauto), and worked on NLP projects for Siri at Apple. Stanford B.S. CS, AI track (focus: NLP and CV, advisor: prof. Andrew Ng).
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty, hello everyone and welcome to the Deal Maker Show. So today we have a really amazing founder. a founder you know We’re going to be able to appreciate you know the the whole thing of going from Brazil to the U.S. not being familiar with tech. All of a sudden, like after getting his degree and working for other companies, he’s going at it on his own. i mean what What he’s done is really remarkable. We’re going to be talking about finding product market fit, how to go about ah culture. We’re going to be talking about fundraising too, and all that good stuff that I would like to hear. So without further ado, let’s welcome our guest today, Lawrence Lynn Murata. Welcome to the show.
Lawrence Lin Murata: Awesome. Thanks for having me, Alejandro. I’m excited to be here.
Alejandro Cremades: So originally born and raised in São Paulo with kind of like a nice a mix there, and you know with the family you know coming from all parts of the world, which I’m sure you know shaped you up as well.
Lawrence Lin Murata: yeah
Alejandro Cremades: So give us a walk through memory lane. How was life growing up?
Lawrence Lin Murata: Yeah, for sure. So I was born and raised in Brazil in São Paulo. um I lived in São Paulo my my whole life until college. My family is half Taiwanese, half Japanese. My great grandparents from my father’s side, they immigrated from Japan to Brazil. My grandparents from my mother’s side immigrated from Taiwan to ah to Brazil. Yeah, I mean, but Brazil is an extremely multicultural ah place. I think it it was an awesome experience. um At the same time, being so far away from Silicon Valley, especially at that time, there were not that many startups back then. um So you really had to like search for information about, okay, how do I go study abroad, tech, and things like that.
Alejandro Cremades: So what what ended up bringing you to the U.S.?
Lawrence Lin Murata: Yeah, I would say since I was little, one of my life goals is always true. How can I maximize my impact? I feel like growing up, I was never thinking of this idea of like coming to the US. I think to me that was kind of like a separate reality. And I was thinking of becoming a business owner, just like my parents. um One day, when I was in high school, an English teacher met him, and then he told me about the process to apply to the U.S., and he was very apparent passionate about having people like ah attend U.S. colleges.
Lawrence Lin Murata: Yeah. And then he mentioned how promising he felt my background was and what are the steps required to do that. Um, so I literally became obsessed about that idea. I was like, wow, like I thought these colleges were like things that I just seen in movies. They’re so outside of my reality. Um, and now this teacher is telling me that he sees potential in me being able to apply to these colleges. So literally every day I was like at his door, like asking questions about, okay, what’s tough or what’s SAT, t how does this work?
Alejandro Cremades: so then So then how, obviously, you ended up landing in Stanford, and Stanford has had like an incredible ah impact and in you, in your career, in your choices, in your decisions. How would you say that da you know Stanford as a whole you know shaped you up?
Lawrence Lin Murata: Yeah, I feel like, um I mean, what’s interesting about the California culture in Stanford is just the how close academia and industry feels. So a lot of my teachers, they were also in industry before, or they are in industry at the same time while they’re in academia. um So if it feels extremely close. um I feel like I like the US ah college style where it’s very application focused. So I studied computer science with focus on AI. um And back then I was doing a lot of projects and everything is extremely hands-on and you’re close to this great company, it’s like Apple. And I got the opportunity to intern at this company. So I think being so close to the industry, um having hands-on courses, I think those was that that really opened my horizons.
Alejandro Cremades: as well as experiencing two the inequality and i’m getting like super excited about social impact while you were living in Brazil. What kind of ah turn of events did that give you?
Lawrence Lin Murata: to
Alejandro Cremades: you know that That passion?
Lawrence Lin Murata: Yeah, for sure. um yeah i mean Growing up in Brazil is just part of your day-to-day life. i mean Brazil has extremely inequality um in the same neighborhood. You can see extreme wealth and extreme poverty. um I think that was extremely impactful in my own life. My grandparents and great-grandparents also went to Brazil without having much. um so So that was a big inspiration on how can I leverage um like this ah this background in computer science, everything that I’m doing in AI, to have more social impact.
Lawrence Lin Murata: um So at Stanford, I started CS plus social good, which is computer science plus social good. So it was Stanford’s first um official organization to combine technology and social impact. um So we run official computer science classes. um They’re all project focused students work with nonprofits to help solve their problems. We host speakers. um who talk about different applications of tech for social impact. um So that was a big part of my experience at Stanford. And then even later at Stanford, um I think everything I do, whether it’s slope or my first company, I try to tie that into how can I maximize impact.
Lawrence Lin Murata: So, for example, my first company was in self-driving cars. A big driver there is just seeing how globally you look at the top 10 causes of death. Most of them are some type of disease, um but one of them, which is driving crashes, is human-made. So I was thinking, okay, how can we improve this system that’s human-made and make driving safer? um so So that was a big inspiration for my first company.
Alejandro Cremades: so Let’s talk about that first company. ah What ended up happening there, because i mean literally, you started that company you know right after Stanford, and that was like your segue into Nauta, which kind of like changed everything you know for you, being able to work with one of your professors there. What happened with that first business?
Lawrence Lin Murata: Yeah, for sure. um So we had an exit to Nado. um so So I started Newton right after graduation. and was It wasn’t easy, but it was a big learning experience. um I feel like it had no no experience, no track record. I was learning on the go. I was making mistakes. And I think a lot of that dictated um like the way I run Slope, like our culture, um the way I manage the company. um And I was also a solo founder, and being a solo founder in deep tech was extremely difficult. um And then after the exit to Nado, so I joined Nado, I was running AI platforms and data science. um I was fortunate ah that Stefan, the CEO, Russon, the CTO, they both gave me a lot of autonomy. um So I was able to really learn about, okay, what is it like to run these teams at a later stage company?
Alejandro Cremades: So then let’s talk about how the experience of Naoto kind of like polished your worldview of startups, because here you have the opportunity to work with like a rocket ship, right? With Naoto. And you were there for over two years. And by the way, for the people that are listening, Stefan Hack, watch also on the podcast. So you know if they want to check out that story now, go and take a look at that episode.
Lawrence Lin Murata: you
Alejandro Cremades: But how is it like to be able to experience that, to experience a company like that, and and to also have the opportunity to work with someone like Stefan, you know that iss a remarkable you know individual?
Lawrence Lin Murata: Yeah, I think what was great about the experience was just having kind of like two things. One, the autonomy um of being a startup founder. um I feel like within the team that I was running, I was giving a lot of autonomy to prioritize things and work on everything, like not only on the technical aspects, but everything from um like I worked on design, I worked on sales calls, um and Basically that everything ends to ends just because of all the autonomy um that they gave me. um But at the same time, you are at a larger company, which was very different from being at my first company where you start the company. And of course, because you’re the founder, people report to you um and people follow what I do.
Lawrence Lin Murata: When you’re at a larger company, there’s more work that you need to do in terms of like crossing collaboration, pursuing stakeholders, handling disagreements. So I think there was this whole like real world experience that I didn’t have um before that Naoro gave me while also giving the all the autonomy.
Alejandro Cremades: So let’s talk about in that moment where you decide, because as they say, once an entrepreneur, always an entrepreneur. So in your case, after a couple of years there at the Nalto, you started to um to think that then it was time to get back at it.
Lawrence Lin Murata: Yeah.
Alejandro Cremades: know so So how would that happen? and And also, what were the sequence of events for you to be able to bring slope to life?
Lawrence Lin Murata: Yeah, for sure. Yeah, so I think of my goal was always to to maximize impact. So i actually, the CTO told me that he was surprised I didn’t leave earlier. um So he was not surprised at all to hear the news. so um And then, um yeah, ah after living in Ottawa, I explored some ideas with my co-founder. My co-founder is a longtime friend, Alice, so she studied at Berkeley. Berkeley and Stanford, they have a rivalry for the people who are in the Bay Area. um They have the big game that’s American football game between the two. We co-hosted the big hack that was a hackathon version version of that. um Yeah, and we stayed in touch.
Lawrence Lin Murata: um And then we explored a bunch of ideas. We had a process. and And throughout the process, um I think one thing that stood out was going back to building something for us. um And growing up in Brazil, I experienced firsthand the pinpoints that my parents have because they have a wholesale business that they’ve been running for more than three decades. And during COVID, I saw how they hatch digitizer business. um So I saw firsthand how there were no good solutions.
Lawrence Lin Murata: um I think one thing that sometimes people forget is this business owners are also consumers. So they’re using Amazon and all their great products and they’re seeing amazing e-commerce, like consumer e-commerce and payments experiences. On the other hand, there’s like a stack of paperwork for them to do anything in terms of like B2B payments. So so that that was an issue of inspiration to bring a consumer grade payments experience should be to B2B.
Alejandro Cremades: so then So then talk to us about the business model of slope. What ended up being the business model of slope and how are you guys making money?
Lawrence Lin Murata: Yeah, for sure. um So slope is a B2B2B model. So the first B is a B2B merchant. So we work with enterprise wholesalers who sell to other businesses. Basically, the value i to them is to bring their payments offline online. So typically, they’re doing things manually and offline. and we’re able to help them digitize that process. And then the last B is the business buyer. So there’s a wide range of businesses there. So it can be a small SMB or a larger business um that’s paying using slope. Basically, their business model has been to charge a fee in the transaction volume.
Alejandro Cremades: so then So then, I know that you’ve also raised some money, and you’ve raised money from very tier one investors. And we’re talking about some of the most influential people in in the world of of startups and tech.
Lawrence Lin Murata: Mm
Alejandro Cremades: so how did you go about really creating such an unbelievable network you know from someone that is coming from Brazil you know to be able to engineer that and and and to get all these people on board? I mean, how how how did you do that? and And I guess before you answer that, you’ve raised quite a bit between equity and debt.
Lawrence Lin Murata: hmm.
Alejandro Cremades: So how much have you raised in total?
Lawrence Lin Murata: Yeah, for sure. So we raised a total of $77 million in in debt.
Alejandro Cremades: Okay, so now talk to us about that network. How did you go about building the network? And and how would you say that financing rounds have shifted over time for you guys?
Lawrence Lin Murata: Yeah, for sure. um I would say it’s been kind of like a I mean, from many different paths. um so So Sam i actually met him back in college. He taught a class called CS183B, which was how to start a startup. So he brought a lot of like later stage YC founders in every class to teach about like different aspects of like starting and running a startup. um So that was, I think just, I mean, not having a lot of exposure to startups and tech growing up, I think that class was like,
Lawrence Lin Murata: was like really opened up my eyes to the possibilities and like all these great founders who are like coming here and and talking about their companies. So so we we stayed in touch since then. um I would say other investors, so Alice was already in YC, so we got into YC again. And I feel like we’re almost all rejected because we, so our partner Brad, he actually called us and he was like, hey guys, I think, so we applied with a different deal that was called Air Desk. It was Airbnb for office space. So Brad called us and he was like, hey guys, as you can probably tell from the interview,
Lawrence Lin Murata: We don’t really like the idea, but we really like you guys. um So I think he really pushed to accept us. um so So they gave us a chance. um And then I think one thing that Sam says that’s really like key to the scope of philosophy is iteration pay. So basically we iterated into a product that got traction. And I think because we got traction, um leveraging YC, I think we’ve been able to get more investors. um We’re also really good at like sending updates every single month. And we highlight we’re extremely transparent. If there’s anything good and bad, I think that builds a lot of trust between investors. So it’s been kind of like that network of like, OK, investors will do a trust. They introduce us to other investors. um And we love having operators. um I mean, not not just Sam, but the founders of DoorDash, Dropbox,
Lawrence Lin Murata: um the ah founders of Unity, Opendoor, and other great companies. um We love having people have done this before at different scales and tap into their knowledge.
Alejandro Cremades: So the equity versus debt, why did you guys go about doing both? And how does it differ, you know, raising one or the other, especially for a business like Slope?
Lawrence Lin Murata: Yeah, for sure. Being a FinTech, we need both because as part of B2B payments, one thing that we realized is 80% of global trade has some type of financing, whether it’s a supplier saying, hey, you can pay me in net 30, net 60, or whether it’s invoice factoring or other traditional ways to to get financing for B2B purchases. um so We realized that was essential um for B2B. um I mean, if you see in B2C, there are so many financing options for S&Bs, it’s even more essential. Cashflow is the life and blood of businesses. um So basically, that’s why we have these that warehouses because they amplify our cap capacity. So we don’t need to deploy our own capital. So we have a warehouse with JP Morgan, which we just announced. ah We have another one with First Seasons Bank and with Trini Capital.
Alejandro Cremades: So obviously, you know we’re talking about people. So how do you guys go about hiring too much slope? How do you guys go about building culture?
Lawrence Lin Murata: Yeah. I mean, hiring has, we’re extremely selective. um So we, we have 25 people um in the team today. We are always punching above our weight. We have some public company customers. ah We close our first enterprise customer, just being Alice and I. ah We raise our series A, I think, at about four people. um so yeah so so So I think we we try to keep the the team super lean and super nimble. I think we give out very few offers. We have an extremely rigorous interview process.
Lawrence Lin Murata: um I would say in general, ah in terms of culture, we look for people who are hands-on. So to give you an example, our CFO, Ashish, he was an executive at SoFi, and Deutsche Bank, our GC, Una, was an executive at Wells Fargo in Robin Hood. They’re both extremely hands-on. So they would take customer calls. They would do customer support. They would tell the customer, hey, you need to refresh your browser. um And there’s nothing is too trivial. um We all like work on sales. We didn’t have a sales team until a couple months ago. So I think being hands-on is part of our culture. I would say the other thing that we look for is always high-slope people.
Lawrence Lin Murata: um We want people who are able to pick up new things and learn fast, um which we call like the the slope of the curve. It should be high, the starting points can be low. I mean, Alice and I, we didn’t have any finance experience um before starting Slope, but we we talked with energy investors, we learned pretty fast. um so High Slope is a big part of our culture. We’re also very like no BS. We’re extremely transparent. So everyone, the team knows our revenue, knows our cash, runway, every single financial metrics. They have access to it real time. So we have dashboards. um Our bank accounts are connected through plaid, into our databases. People can see every single corporate spend. So there’s nothing to hide. We’re extremely transparent. We’re very results-driven. We’re very anti-politics.
Lawrence Lin Murata: Yeah, I think we’re we also collaborate really closely. I mean, we’re very competitive. We like having fun together. We just ran a the SF half marathon actually a couple of weeks ago. And we like doing like white water rafting, like different sports together. We did a burpee challenge. um Our CFO is the unchallenged winner.
Alejandro Cremades: That’s amazing. so So, as we’re talking about people here, I want to talk about vision, because obviously, all these people, whether it’s employees, investors, even customers, they’re ultimately excited about the future that you’re living into. and So, let’s say you were to go to sleep tonight, and you wake up in a world where the vision of slope is fully realized. What does that world look like?
Lawrence Lin Murata: Yeah, I think we we want to see much more of the digital economy digital. um And not only that, I think the reason why we believe that’s important is because that enables access to different digital digital services. To us, it’s kind of like a The B2B economy being digital is more of like creating that B2B data layer. On top of that, you can access get easier access to like different bank accounts that you would otherwise not be approved by in traditional processes, get access to different types of like finance products, AR automation, um and different things that help you run your business.
Alejandro Cremades: So I want to ask you this, i because obviously, i mean the way that you guys are are are growing now is it’s unbelievable. But at what point do you really feel, looking back, that day it really truly felt like you guys had hit product market fit? What did that look like?
Lawrence Lin Murata: I would say early on there’s a Yeah, I think because both Alice and I were second time founders, so we’ve had a first company that had much less traction. I think we’ve seen firsthand what that looks like, just how like the customer calls feel, how much you need to push, how much you need to sell. um I think at Slope, literally every single month, we feel understaffed. Every single month, we feel like we have more demand than we can handle. um So I think it’s a very subjective feeling.
Lawrence Lin Murata: Uh, not like a specific metric. I mean, there are metrics that we measure, but I would say it’s mostly the feeling that every single month since we launched, we were understaffed. We have more demand than we can handle and we’re actually trying to be selective. And we declined, um, a bunch of merchants because we were like, okay, we need to focus and like serve fewer merchants, but serve them extremely well.
Alejandro Cremades: So as we’re talking about like going back in time, I want to ask you, if I was to put you into a time machine and I bring you back in time, let’s say to that moment where you were thinking about starting you know something here with Alice, and let’s say you had the opportunity of having a chat with your younger selves, and you were able to give that younger self one piece of advice before launching a business. What would that be and why, given what you know now?
Lawrence Lin Murata: I would say um iteration is extremely important and experimentation and listening to your customers. Um, I think just getting something live out there is really important. I would say that that’s being not in the difference between my first company and slope. Um, first company was very driven by, okay, I’m doing all this AI research. I think this is extremely interesting. There’s some big vision. Um, I think the big vision is important, uh, but equally important is also to listen to your customers. And I think it was more like of a, more of a tech, um, tech.
Lawrence Lin Murata: first approach for my first company. um I would say for slope would be a lot more customer centric. um So really focused on iteration. So we actually didn’t start with B2B payments. I mean, it we started with that Airbnb for office space idea. It wasn’t just that idea. We had a long list of 100 plus ideas. We iterated for a bunch of ideas. We launched a few products. We even got revenue with other products, talked to a bunch of customers. um my parents included um and that eventually led to slope.
Alejandro Cremades: So, as we’re thinking about like learning and and and really being able to capture the best and and and to be able to receive feedback too and guidance, i mean you’ve been able to build a remarkable network, now especially with all these investors that you’ve been able to surround yourself by. you know Some of the biggest names that we can think of in Silicon Valley I guess the question that comes to mind is, how do you go about getting the most out of the people that are surrounding you? know one one so one One thing is obviously to get the right people to to be around you, but then the other thing is to be able to keep them engaged and to get the best and the most out of them. How do you go about that?
Lawrence Lin Murata: Yeah, I think at Slope, what’s been key is just having a poor relationship. So we’re we’re never afraid of like asking for things. um so even anyone on the cap table who always ask for help um and we’re very like we’re not really not shy about it. And we’re not afraid of like getting no as an answer. if I think that’s one thing that I learned like when I was an auto, um I think being given so much autonomy, I think that was important. um And I just learned to to like ask for what I want. so um so So we do that all the time for investors and and we’re not like, oh
Lawrence Lin Murata: And very often, like people appreciate it. I think people want to know that they’re being helpful. we We always have a very long thank you section in every single investor update. Yeah, I think we’re always actively asking for things.
Alejandro Cremades: So for the people that are listening, Lawrence, I would love to reach out and say hi. What is the best way for them to do so?
Lawrence Lin Murata: ah Yeah, I mean, you can email me at Lawrence at slopebay.com.
Alejandro Cremades: Is it enough? Well, Lawrence, thank you so much for being on the Dealmaker show today with us. It has been an absolute honor to have you here.
Lawrence Lin Murata: Awesome, thank you so much for having me, Alejandro.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Lawrence Lin Murata On Raising $77 Million To Provide Businesses With Easy Access To Capital And Favorable Point-Of-Purchase Terms appeared first on Alejandro Cremades.
Leadership in the fast-paced world of cybersecurity requires more than just technical expertise. It demands resilience, a strong vision, and the ability to inspire a team towards a common goal. Amitai Ratzon, the CEO of Pentera, embodies these qualities.
His company, Pentera, has attracted funding from top-tier investors like Awz Ventures, a Canadian-Israeli VC group, Felicitas Global Partners, Delta-v Capital, and Blackstone.
In this episode, you will learn:
- Leadership is about more than making decisions; it’s about building a cohesive team and earning the respect of those you lead through leadership by example
- There are no shortcuts. Leadership requires significant sacrifices, but these challenges build resilience and empathy.
- A strong, positive culture is the backbone of a successful organization.
- Lessons from basketball, like teamwork and perseverance, are crucial for effective leadership.
- Military experience teaches discipline, strategic thinking, and calmness under pressure—vital traits for a CEO.
- A customer-centric approach, honed in sales, is essential for driving business success as a CEO.
- Resilience in the face of adversity is key to thriving in the fast-paced cybersecurity industry.
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Your email address is 100% safe from spam!**About Amitai Ratzon:**Amitai is an experienced CEO specializing in growing early-stage tech ventures from no revenue / early revenue to tens of millions in ARR across regions and verticals.
As Pentera’s CEO, Amitai led the company’s exponential growth out of stealth mode to becoming the first Unicorn in the Cyber Risk Validation space through three funding rounds, led by AWZ Ventures & The Blackstone Group (Round A), Insight Partners (Round B), and K1 Investment Management & Evolution Equity Partners (Round C).
Amitai takes great pride in his contribution to the growth and establishment of two Fintech successes in Israel: SuperDerivatives, which was acquired by NYSE for $350M in 2013.
Here, he was a Top Performing Sales Director, and Earnix, which became a Unicorn in 2021, where he was the first VP of Sales between 2012-2016, putting the foundations for scale and repetitive business.
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Connect with Amitai Ratzon:* LinkedIn * TheOrg * Crunchbase * RocketReach
Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty. Hello, everyone, and welcome to the Deal Maker Show. So today, we have a really exciting founder, you know definitely a founder that you know is building a rocket ship. ah We’re going to be talking all about the stuff that we like to hear. you know That could be the sacrifice that founders make when they go at it you know as entrepreneurs. That could also be the way that you deal with raising money and the way that you engage with your investors, you know perhaps venture capital firms. you know It doesn’t need to be the typical structure as you go from one lifecycle to the next, or that goes in parallel with a financing cycle. But
Alejandro Cremades: in the end, really looking at every opportunity, every company, you know being its own story, its own life. And I think that we’re going to be talk about we’re going to be talking about that know quite a bit. And then also being able to establish a culture, a culture that allows not only to survive, but to thrive, and being able to do that as a founder and CEO. So without further ado, let’s welcome our guest today, Amitai Ratzon. Welcome to the show.
Amitai Ratzon: Thank you for having me.
Alejandro Cremades: So originally born and raised in Israel. Give us a walk through memory lane. How was life growing up over there?
Amitai Ratzon: Yeah, it’s growing up and living here. well Israel is um is a unique place, as I’m sure our listeners are aware. um Yeah, I’ve had great childhood back in Jerusalem, and back in the days, um classic kind of 90s childhood. I was born in 1976, really like, ah was a great basketball fan and I hope great players as well. I still play basketball, you know, the old of four brothers living in one of the suburbs of Jerusalem.
Amitai Ratzon: um you know really kind of always aspiring for excellence when i was a kid school was really really important to me you know when i got like a ninety four score out of a hundred i missed like two more so it kind of you know so it’s closer to a hundred than two nine twenty ninety i would this perfectionist kind of kid i wanted to kind of really be good at many many things at the same time um From that Jerusalem childhood, I went on, you know, an army service like we all do here in Israel, very proud of my service, at the IDF. Then ah when traveling, and and as I was traveling in the world after the army, when you want to breathe and like feel young again, I encountered a very interesting opportunity to be a sales guy at the company that was selling Yellow Pages advertisements to the Jewish community in the tri-state area of New York.
Alejandro Cremades: And we’ll we’ll dive we’ll dive into that. you know We’ll double-click into it in just a little bit. But one thing that I wanted to ask you is, you know obviously, from childhood to now, i mean you still play basketball. right i mean You are a competitive guy. And for people that are not able to see the video now, you know there’s like I see trophies behind you. I guess the yeah the question that I want to ask you, yeah, there you go. So the question that I want to ask you is,
Amitai Ratzon: Yeah.
Alejandro Cremades: I mean, it it kind of like reminds me of the documentary of The Last Dance with Michael Jordan, where it’s not just about the sport, it’s about leadership. What would you say that you’ve taken from all this time playing basketball and from being you know part of such a competitive sport, too? what what What are the main things that you’ve taken with you that have formed the way that you think about leadership and entrepreneurship?
Amitai Ratzon: Yeah, so I think you mentioned Michael Jordan, which is, you know, people that can judge by my age could could probably realize that um you couldn’t not adore Michael Jordan when I grew up. So he is my childhood icon. And and the few things that I took from Michael, I would really refer to two things. and And I think those kind of stayed, you know, I think part of me um One is that that I think Michael Jordan, one of his famous statements is people asked him, so who do you compete against? Like who is like the player you want to be like? Or who is your idol? And Michael Jordan always said,
Amitai Ratzon: I compete against myself yesterday. So I think this kind of you know resembles me in a way, in a different way, of course. But I was brought up not to kind of just adore anyone and just worship people. um you know it It takes hard work to become something. So you instead of just like ah blindly admiring someone, a better approach probably would be to try to work hard and beat this someone. So since I grew up as a competitive kid, one thing I took from you know the Jordan days is to always try to beat a better version of myself. And my benchmark is myself yesterday. ah The second thing that you know that Michael said and and and I take from those those days, at one point, people asked Michael Jordan after he had like five championships. and And people asked him, a journalist, I mean, what drives you? You’ve achieved everything. You’re a millionaire. You have five championships.
Amitai Ratzon: People refer to you as the greatest you know athlete of all times. Why do you still have to kind of achieve? That’s it. I mean, why won’t you just rest? And the guy said something interesting. He said, I mean, the reason I’m going to kick ass tomorrow night at at the game in whatever, wherever is that there is this child there that is like nine year old and he bought a ticket to see me. and and And for that child, I’m going to give a performance of my life irrespective of what I’ve achieved up until now. And when I think about it, it touches me a lot because when I think about it, it’s it’s ah you know it’s it’s an inspiration. When I have new employees that joined Pantera now, employee 350, 360, 370, they haven’t been part of the legacy up until now.
Amitai Ratzon: But I have to be their CEO as well. I have to lead by example. I have to you know inspire these guys as well so they could continue to follow me and follow the Pantera narrative and and what we’re about. So I like that a lot and that that was you know an inspiration to me and how I i run the company.
Alejandro Cremades: So, let’s talk about now also blending in the army experience, because you were for four years, you know, and obviously in the in in Israel, it’s mandatory, but in your case, you were there for four years, and and how would you say that that shaped who you are today, especially when it comes to discipline as well?
Amitai Ratzon: Yes, absolutely. So I’ve been, you know, I’ve been lucky to be at an elite unit, the Power Troopers unit here at the IDF, and I’ve been an officer, so I’ve been through a lot. um And I think what I’ve taken from that that time is, you know, really goes down to hard work, perseverance, resilience. um When you go through something like that, when you’re so young, I mean, nothing can really break you. I mean, no investor dynamic, or it’s a bad quarter, or a bad hire, or you want to hire someone, this guy went to another place, or any stress in work, anything, you know, gets a different perspective when you go through, like, real army experiences. People that have gone through that know what I’m talking about. People that haven’t gone through that would never know. But I think that’s something that, you know, I don’t regret. I’m happy I did that.
Amitai Ratzon: Although when in real time, you know how it is that you yeah you make something much more amazing in retrospect than when it’s real time. But yes, I mean, it was hard. But I think the lessons learned are very important, especially when it comes to you to prove yourself all the time. And you don’t take anything for granted. and and um And it’s really about when I was an officer, it’s really about lessons around leadership. So I always had the ranks, but I never tried to lead people because I’m more senior. It was always because of the example I’m i’m serving to them. So when I had to
Amitai Ratzon: for someone to do something because I’m more so i’m superior to this person, then in my leadership style, I failed. Still today at Pantera, I manage the management team here. These are very senior people. Some of them have been through more than me in life, and they’ve seen more than me. And I can’t possibly get their you know their support or their trust just because I’m the CEO. Then it needs to be more than that. So I always kind of work, I try to work the hardest and really lead by example, never thinking that just because I’m the CEO, then you have to do what I’m telling you or you have to follow my way. I need to convince you, I need to get your buy-in and it’s stuff I’ve learned in the army.
Alejandro Cremades: So in in in your case after the army, you know you decided to travel it a little bit. you know You went to New York, and obviously that they shaped you quite a bit. you know New York shapes everyone. No, I mean, it shaped me too. So I’m sure that was quite life-changing for you. And then eventually after that, you know you go to Israel, you get into you know complete you know your studies there, and and then you start you know to work in different companies ah in in the sales department. So I believe, I’m a big believer that you know it doesn’t matter if you have the best, if people don’t know about it, it doesn’t matter, especially when it comes to being a founder, to building a company like you’ve done now that distribution is everything. So what would you say that you learned throughout the years, you know really on the sales side of things, and how was that transitioning to starting out Pantera?
Amitai Ratzon: Yeah, so it’s a great question because if I look at the the landscape of CEOs like me in the cybersecurity space, and Israel is ah a great supplier to ah to the world of cybersecurity companies, I would say that very few, maybe two, three percent of all CEOs in this space in Israel, maybe a bit more, maybe it is a bit less. have my background. Most of them come from the right army unit, the right technology unit, so they kind of come with the cybersecurity background to their CEO positions. And there are technologies that try and try to transform to become business people as they raise money and become CEOs of companies. um To be really, really honest, I struggle to understand how this is a natural move.
Amitai Ratzon: I can understand how you can be a founder, technologist that comes up with a great idea and builds a product. But this has a very weak correlation, in my point of view, to becoming a CEO of a company at at our magnitude. almost like Almost no correlation between what you need, the skill set you need to build the first product and to get to the first 10 customers, and then to be a leader of a big company. These things are completely, you know if you have both, then you’re a very gifted individual. In most cases, you don’t.
Amitai Ratzon: So then comes the question, what’s more important for you know a company to thrive? A strong technologist, the legacy guy leading it all the way, or someone that you know is more used to running businesses and running P&Ls. So to me, stepping into the CEO position, I think was quite natural after having done two VP of sales positions. because i’ve i’ve felt I felt the stress and I felt board members and and the responsibility to look after the company’s number. And I was always used to have a strong CTO, just that they didn’t report to me.
Amitai Ratzon: that we’re looking after, you know, the production facility, like developing the product, researching and and and product management. These domains were never under me, nor was GNA under me. So the main difference for me is that I had to basically take everything I’ve learned as a sales leader in my past, which transcended quite well to the CEO life, but then learn a lot about the R and&D domain, how these guys think, how they’re driven, motivated. What does it mean to be running marketing and not be part of marketing as a VP of sales? What does it mean to run the GNA function, finance, legal? So I was very curious and and learned a lot and and and asked a lot and came very humble to all those you know responsibilities that I didn’t know anything about.
Alejandro Cremades: So then talk to us about then being at the right time, meeting your co-founder that had kind of like the idea and more of the technical background because it was like a
Amitai Ratzon: yeah
Alejandro Cremades: matchmaking made in heaven. you know And I think that you kind of like pinpointed that really nicely because i mean I see so many companies from Israel that have developed such amazing stuff in cybersecurity, but the the ultimately, the founders are extremely technical. So I find that in this case, you know you guys were so fortunate to meet one another.
Amitai Ratzon: Yeah. Yeah.
Alejandro Cremades: So how did that happen? And what was that journey into bringing this to life?
Amitai Ratzon: Yeah, so I was introduced to Alec Liberzon back in 2017 by, you know, Arik’s co-founder at the time, Arik Feingold, and by the the very early investor at Pantera, Oz Ventures. Those guys invested, I mean, Oz Ventures invested at Pantera when we were basically nobody. So give give them all the credit for identifying what this could be. But it was just like, you know, a bunch of guys. And Arik was humble enough to say, I’m a CTO. I don’t want to be a CEO. i My passion is product development and and being the visionary. And I said, that’s amazing because I’m not a product guy. I do understand how this works and I can relate to product management concept, but I’m not, you know, a Mr. Noam. I’m not this guy. And I could only succeed as a CEO if I have a technical in the technology space.
Amitai Ratzon: In this space, I can only succeed as a founder, co-founder, CEO, um if I have a co-founder, CTO, who is very technical and and is very passionate about what he does, he or she, um and ah humble enough to say, and I want to welcome someone from the outside to be the CEO of the company of the idea I thought about. Not every founder is humble enough to admit that they can’t be the CEO. And Arik was you know a a responsible grown-up. I think he was indeed a match made in heaven. We didn’t know each other a second before we had dinner. We’ve spoken about you know about what this could become. We were both 40-year-olds with you know three kids when we met.
Amitai Ratzon: um So we kind of both came quite mature to this adventure. um And I think that although we’re very different in many to a logic that we’re also very similar, we’ve realized we’ve realized that after this matched marriage happened, and I couldn’t have i couldn’t have thought of a better partner to the journey than Eric.
Alejandro Cremades: so So, talk to us now about how has the business model of Pantera evolved and and how are you guys making money today?
Amitai Ratzon: Yeah. So as any venture, it starts with crazy people like me and Alec and others say, hey, this could become the biggest, you know, the next biggest thing out of Israel, out of, you know, the cyberspace. But, you know, everyone says that about their startup because everyone, you have to be this guy to get anywhere. um So it started with a big bold vision. We had to believe and we all had to bring our number twos and our trusted people from the past to kind of work with us. So Arik immediately kind of ah hired Lan Tamil, our chief product officer, and Alex Bivakovsky, a VP of research at Pantera. They served together in the army.
Amitai Ratzon: I quite fast hired Aviv Cohen to be my CMO.
Alejandro Cremades: you
Amitai Ratzon: He used to be, we were to be peers. I was VP sales, he was VP marketing at a different company. And I hired Savannah Rael from Earnix, another company I worked for, to be the first salesperson on the ground to run big parts of Europe. Now she’s VP of sales in EMEA. And we’ve hired like people who we trust. to go on this journey with us and they brought more people. So we kind of had this cluster of like 30, 40 people that are, all of them are still with us, maybe minus one or two. And that is the core of Pantera, the core of the atom, if you want. So us 30 have been the people, the pioneers that have led, you know, upset examples for others and have led the company till now.
Amitai Ratzon: Most of the people that joined then are now VPs and SVPs in the company. um And it’s really about this camaraderie and this determination and and conviction among all of us that we’re building something amazing. Pantera is very famous in the VC world as a company that didn’t miss a quarter for 26 quarters. which is quite crazy for a privately held company that’s young, that’s not you know traded on a stack. And that goes back to how we forecast you know some ah sales marketing fundamental that we think we’ve cracked and and stuff like that. We’ve taken the company through a few funding rounds. We’ve just crossed the 1000 customers milestone a week ago. We’re very, very proud of that. And the best is yet to come.
Alejandro Cremades: So talk to us about fundraising. How much capital have you guys raised today and how it has been that journey?
Amitai Ratzon: Yeah. So we’ve raised ah up until now into the company over $100 million dollars and and there were more deals between shareholders that happened in parallel. um The journey has been fascinating. And maybe one of my tips to entrepreneur entrepreneurs listening to me, people who are thinking to start a company or started a company and they’re they’re in this journey. When you raise money, um people would tell you everything you need to hear so that they get into your data room and so that they would get into your world. They would give you all kind of flattering you know compliments. And they would do everything to kind of get to know you. ah And some of them would also give you offers. And some of those offers early on might be very tempting to take very fast.
Amitai Ratzon: um I would say um one warning here is be careful of the investors you you and you kind of you bring in. I have to say that I’m very proud of all the investors that I’ve i’ve teamed up with. I know stories of other founders that kind of regretted that you know they took the money too fast from some people because then you live with these guys. You live with them. It it becomes a family so that the CEO at the beginning is really attached to the co-founders and like the internal management of the company and maybe to one investor as the company progresses and goes on and and goes higher than the CEO and the board members. It’s usually a few investors become like a cluster of itself. So you have your
Amitai Ratzon: I would say nuclear family at home, wife, kids or husband and kids. And then you have the family of the VPSC level guys. and But then you have the investor kind of unique family where people have different you know motives and agendas. So since that is inevitable, because people join in different stages of the company and you can’t really ah control what people how people would behave if the company goes well or things don’t go well, people can change. What usually doesn’t change is the DNA of the you human beings on your board. Because you need to quite fast understand whether you talk to a very junior guy on the investor side that sits on your board. Maybe that junior guy when things get a bit messy you wouldn’t be the person to count on or to rely on. Whether the investors basically place partners
Amitai Ratzon: and and GPS on your board, which I think sends a strong signal about how much conviction they have in your company. So those things are things to pay attention to as you ah raise money. The identity of the personas sitting on your board. It’s very important.
Alejandro Cremades: What about challenging the VC template-ish way of thinking, you know of caging every company they deal with?
Amitai Ratzon: Yeah. Yeah, it’s very, very important. A great point and a very important item. I think that I was lucky to start the CEO journey after being VP of Sales for many years. But people who haven’t been in the business space at all, maybe just after the army and then they start the company, they might hear all kinds of VC recommendations and take them as if it came from God himself, herself, whatever you want to believe. And they’re not doubting it because allegedly the VC sees a hundred like you or thousands like you and you’re you’re a one-off. So what do you know, right, that can challenge them? However, if you’ve gone through some stuff, then you can challenge them, especially if you have some words of wisdom or some some stuff that has some substance behind it that can challenge the paradigm. For example, most VCs would invest in Israel, in the cyberspace, in
Amitai Ratzon: specific teams from specific army units at specific age, and that has been the template. you know Many of those don’t make it. They just fail, but you don’t hear about it. You hear about the guy that did make it. So the fact that you know we were born in a way as a unique company with a unique sea level structure, I think is very interesting. That’s one challenge. The second one, another tip you get from VCs early on is US is the world and the rest is the rest. And I challenge that. I still challenge it. I think it’s not the it’s not the case. The US is the biggest market that we have, and it probably represents the biggest kind of you know gift to any founder that want to go to the world. However, please don’t be blind to amazing territories like the UK and Germany and Spain and France and Italy and others. Probably don’t go against them you know at the same time at the beginning.
Amitai Ratzon: But as you place your bets in the U.S., it’s always important to have a better tool in Europe as you grow from round A to round B, so that you’re not highly, completely dependent just on the U.S. buying dynamics and U.S. economy. um Today, Pantera has presence in 18 countries. And we have 1,000 customers from 64 countries. So we’re very much an international business, although, yes, the US is the most important region. for I would say any cyber or FinTech or B2B founder, um in any founder in the B2B space, the US should still be the and the main area of focus.
Alejandro Cremades: So now that we’re talking about the fundraising and investors and people that you know you’re ultimately enrolling with the future that you’re living in into, and that not only is investors, it’s also employees, customers. I guess the question that comes to mind is, if you were to go to sleep tonight and you wake up in a world where the vision of Pantera is fully realized, what does that world look like?
Amitai Ratzon: um Yeah, that’s a great question. um I would say that the ultimate vision that probably would materialize, I would assume four to six years from now, because it takes time for companies like this to become mainstream, um looks like the following. Just like if you remember, when you buy a laptop now, any great laptop has this sticker that says, Pentium inside or Intel inside. And that makes you as the buyer, even if you’re just like a regular person, not like a big developer, that just like opens the internet and just maybe some Word documents, maybe some spreadsheets for the family economics and maybe you download some stuff and maybe you have Netflix. Even if your usage of the laptop is very, very minimal, just the fact that you see the sticker says Pentium inside by Intel says, okay, wow.
Amitai Ratzon: this computer I’m buying, I’m paying $100,000 for, has this sticker of you know credibility, Intel Pentium. It’s great. It’s a great brand. So I kind of envision a world where we are approaching 3,000, 4,000 customers, where each big household, big bank, healthcare, government institution, you know industrialized company has Pantera inside, and like a virtual sticker. saying, telling the hackers, hey, why won’t you go try elsewhere? Because this company is powered by Pantera. This business is protected by Pantera. Pantera is trying us inside out, outside in, native cloud.
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Amitai Ratzon:
on-prem, you know, they test the perimeter. Pantera attacks our business like the attackers, which is what we do using technology. So ah we feel quite quite good about how resilient we are against tomorrow’s attack. So my dream, my vision is that I wake up in the morning and, you know, most of Fortune 500 companies would would be in that position that they will be protected by Pantera. It will become as famous as the inter pensions.
Alejandro Cremades: So, you’ve been at it now for close to seven years with Pantera, and you know I guess the what comes to mind here is you know we’re talking about the future, but I want to talk about the past, but doing so with a lens of reflection. So, let’s say I was to put you into a time machine. and I’m able to bring you back to 2018 when you guys were like starting to discuss you know a world where you could bring you know the solution that you guys are doing now you know to what you were encountering as a problem back then, and you’re able to like step right there in the picture and being able to tap on the shoulder of that younger self. and Let’s say that that younger self will listen, and you’re able to give that younger self one piece of advice before launching a business. What would that be and why, given what you know now?
Amitai Ratzon: Yeah, so um obviously, you know, we’ve done lots of mistakes on the way. Thankfully not big mistakes that kind of have taken Pantera off track. um But I think one thing that I would say Amitai seven years ago is what i I think I did tell myself back then, but I just didn’t come from the future. And I think it’s a great thing to say, maybe even if it’s not what people really want to hear. If you are looking for too much balance in your work life balance, I mean, probably this is not your business. I know we’re in 2024 and many people from Gen Z and even, you know, older say, hey, you know, work is not everything in this life in this world. There are so many more things to kind of be, you know, exploring and, and and and and you know, and doing. And I can’t be that fanatic about my, this is just a job. So if you think like that, it’s great.
Amitai Ratzon: please don’t open a company or don’t go in with high expectations because you need to put mega sacrifices. You need to put everything you know next to the venture for the venture to get to the peaks. You know, Pantera got to a billion dollar valuation in 2021. For that to happen, so many people had to make Pantera their number and one number one priority in life. I would say, yes, I mean, I want to say that my wife and kids are you know amazing. They come first. There were many situations where you know they came second and you need to have a very supportive home to do that. I can be as talented as i is whoever but if your wife or your significant other or your girlfriend or whoever you have at home um doesn’t give you the backing you need if you have kids.
Amitai Ratzon: then it’s very, very hard because you need someone to be there for you when you go back home, when you go from a, you know, um frustrating business trip or when you go through a frustrating investor dynamic, when something doesn’t go well with your co-founder and you think the world is coming to an end, there needs to be someone there are to, you know, so two things I’m saying. One is be all in. without being frustrated that you’re sacrificing so much because that is the life of entrepreneur entrepreneurs. And the second thing is I have someone there that believes in you, irrespective of how quarter A or quarter B worked, or how this higher went or that higher would happen. It’s just about, you know, someone that believes in you and says, hey, I look at you from the sidelines. I’m seeing that the journey, someone that gives you a mirror because CEO is usually,
Amitai Ratzon: Don’t get compliments. I don’t wake up in the morning, people coming to me and say, Amita, you’re an amazing CEO. We’re so happy you are a leader. you know can we make a cup of Can we make you a cup of coffee? Says nobody. Usually, CEOs don’t get that mirror from anyone. People that come to meet with me, they want something. If these are my direct reports, okay, we work together, but people that just want to talk to me usually need something from me. And I’m needed usually to solve the most complex things. It’s never to just tell me how amazing I am. So it’s usually helpful and recommended to have someone that believes in you, ah that kind of sticks with you for good and bad.
Alejandro Cremades: This is profound, very profound and and also very authentic. Amita, I really appreciate you sharing that. I’m sure that there’s a lot of people that are listening right now and super inspired ah with the conversation and are probably wondering what is the best way for them to reach out and say hi. What would you tell them?
Amitai Ratzon: Yeah, so I would say first of all, to um if anyone you know builds a company and they want to have a chat, I’m a friendly guy at least, I think. I just don’t have too much time, as you might imagine. So anyone that wants you know anything, a piece of me, um can definitely reach out via LinkedIn. I think my my profile is there. People can reach out and just drop me like a a message, say what they want to talk about, and and I’ll try to fit people into my calendar as time allows. I try try to look at myself as a friendly guy in many conferences where where I give talks or you know when I get off stage of some places, Black Hat or RSA or whatever, people kind of catch me when I’m going down to say, hey, can I talk to you? Can I call you? And I try to be friendly because I know it’s hard. It’s not easy.
Amitai Ratzon: And founders usually don’t have friends that are founders as well. And so if you’re a founder and you start climbing this career, this ladder, usually you’re quite alone. very It’s very rare that a founder has really good friends that are also founders of companies and you can kind of talk to your best buddy from high school and you’re both founders of cybersecurity companies. Usually it doesn’t happen. So yeah, I mean, happy to help and
Alejandro Cremades: Amazing. Well, Amitai, thank you so much for being on The Dealmaker Show today. It has been an absolute honor to have you with us.
Amitai Ratzon: Thank you for having me and and good luck to everyone listening to us. The world is big for many people to succeed.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Amitai Ratzon On Leading A $1 Billion Cybersecurity Company Redefining The Way Entreprises Defend Against Cyber Criminals appeared first on Alejandro Cremades.
In the fast-paced world of startups, few founders successfully navigate the tumultuous transition from building a company to becoming a venture capitalist. Robert Grazioli is one such individual.
Robert moved from founding and scaling Density—a company valued at $1.1B—to now investing in the next generation of entrepreneurs through his venture firm, Bread. His story is one of trial, error, and resilience, and provides valuable insights to founders and investors alike.
Bread has attracted funding from top-tier investors including Trevor Thomas-Uribe who is also one of the founding partners.
In this episode, you will learn:
- Trial and error is vital in the entrepreneurial journey, leading to unexpected successes.
- Blending software and hardware in a startup requires a deep understanding of both models and careful planning.
- Building the right team involves hiring adaptable talent that can thrive in a startup environment.
- Raising capital brings both opportunities and significant pressures, especially with high valuations.
- Founders must balance ambition with patience to navigate the long, challenging road of building a successful business.
- A successful investor adds value by being hands-on, helping to shape and execute a startup’s vision.
- Focusing on solving foundational, often overlooked problems (“boring magic”) can lead to impactful, sustainable businesses.
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Your email address is 100% safe from spam!**About Robert Grazioli:**Robert Grazioli, based in New York, United States, is currently a Managing Partner at Bread. He brings experience from previous roles at Density, Density Inc., and Rounded.
Robert holds a BS in Information Management from Syracuse University. With a robust skill set that includes Design, Graphic Design, User Interface Design, HTML, Web Design, and more.
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Read the Full Transcription of the Interview:Alejandro Cremades: alrighty Hello, everyone, and welcome to the Dealmaker show. so Today, we have a very exciting founder, you know a founder now turned investor you know with his last company. you know They did quite a lot of good stuff. you know They raised over $200 million. We’re going to be talking about that blend of software and hardware, you know and some of the other stuff that they’re doing now, like how they go about evaluating companies, um what to look at you know when investing into products, how to think about team structure, you know whether that is the engineering team or the product development team, and then also thinking about go-to-market, especially when you’re at an early stage. So, again, brace yourself for a very inspiring conversation, and without further ado, let’s welcome our guest today, Robert Gracioli. Welcome to the show.
Robert Grazioli: What’s up? Stoked to be here.
Alejandro Cremades: So, born in Brooklyn, but you travel quite a bit, so give us a walk through memory lane. How was your life growing up?
Robert Grazioli: Yeah, life life was ah life was fun, life was different. um Born in Brooklyn when I was five, my parents ah took us off to Italy. um My dad got a job there as a CTO for a bank. ah So spent some time there. Obviously, my dad being a CTO was around technology a lot, which just like super integral in my life. moved back to the States, to Virginia, went to high school there, and then eventually off to Syracuse, which is really where my think entrepreneurial journey began, um so to speak. So it was part of a networking major there, basically how to configure routers and switches, but more importantly, left ah met my my now co-founders there. There are five of us, um and started our first company my my junior year of college.
Robert Grazioli: so
Alejandro Cremades: But that was kind of like a trial and error. You know you guys were kind of like a testing stuff and and and figuring things out. So how do you land on the idea of density and what kind of like got you guys to think, hey, you know maybe maybe this one, you know this idea has some legs.
Robert Grazioli: Yeah, so I think trial and error is an important theme and in my life and in my co-founder’s journeys. Like we tend to say yes more more than no. And i know I know the advice is always to the contrary, but saying yes to things is sort of how we wound up. where we are. um So we we started a services business out of college. ah We were just in a small small city and we were technical, people needed stuff built. um We did pretty well in our first in our first year and that led us to try to chase a model where any profits from our business we would kind of spend in like an R and&D fashion and try to launch products into market. We built
Robert Grazioli: ah to do application, which didn’t work very well. We built like a hotel maintenance product that we really tried to bring the market we thought had legs and didn’t. And then we were, we were a bit jaded after like eighth try of bringing a a product to market thinking maybe we should just focus on building an agency. um But one of my co-founders had the idea of counting people in a city ah with ah with a wifi router essentially. So we would count MAC addresses and we entered a competition called the launch conference. It’s with jk Jason Calacanis and we won our category and all of a sudden had access to to venture capital um and made the tough decision to actually shut down our our agency business and go go all in on what became density.
Robert Grazioli: um So trial and error for sure that’s that’s a great. I think underlying theme in my life in general
Alejandro Cremades: And what what ended up being the business model of density? You know, how are you guys making money there?
Robert Grazioli: Yeah, so the business models changed quite a bit. um we We were really infatuated with this idea of like hardware as a service. So you pay a subscription, you get leased. We were building sensors ah that counted people in rooms. So you would lease these sensors and really pay for the software. um So we were super excited about that. But you know when you go into market, especially in the enterprise world, you learn very quickly that you tend to need to operate on on these businesses’ terms. And the people we were selling to ah were really stuck on CapEx models and OpEx models. And when they were purchasing hardware, like they wanted that to be part of their CapEx budget. um So in the end, we decided to really be selling the hardware um and then having having software almost sold separately.
Robert Grazioli: uh, accompanying that hardware. And that, that was, that was tough. Like that created a lot of friction for us. Um, we were software people, software minded. So learning how to actually run, run a hardware business and how to focus on optimizing margins, um, across really two different products was, was a definite challenge. But I think like the biggest challenge was just making that hardware real. Um, as, as a group of software people, that was kind of an insane journey and in and of itself.
Alejandro Cremades: So why are why are startups that are blending in software and hardware so complicated? What’s what’s so complicated about it?
Robert Grazioli: Yeah, I think one is is the business model. like I think a lot of people getting into um building a company these days are thinking about it like a software product and don’t think about the operations involved in building hardware, which is basically like you have all these fixed costs ah that you end up accruing. And so it’s very capital intensive upfront. And if you, if you’re not used to like planning, which the software world is kind of not, it’s very much throw it against the wall. See if it sticks, then you could end up really wasting a lot of time and money and ultimately killing your business. So I think like that idea is one very hard, but also.
Robert Grazioli: um Hardware is challenging to build and test, and you really have to make sure the product works before you’re in market. And that’s also kind of the antithesis too to to a lot of software development. um And that’s something that I think ah a lot of people struggle with when you had this big IoT wave, when we launched this company, it was kind of 2013-ish. um You had a big emergence in IoT-based products, and I think that’s where a lot of companies faltered. They they had these great ideas, but They just didn’t really know how to execute or have the patience to execute well.
Robert Grazioli: And we were kind of one of those companies, honestly.
Alejandro Cremades: and how ah I was thinking too, you know while you were speaking here, you know when when you build a company like this, the way that you think about the team, especially at ah at an early stage, how you develop that infrastructure in which you’re starting to hire engineers or or product people, you know how how did you go about that and what were some of the biggest lessons that you got?
Robert Grazioli: like
Robert Grazioli: Yeah.
Robert Grazioli: Yeah. um I mean, we we messed up a lot. I think we we invested in a lot of like amazing talent, but they’re maybe used to operating at a scale that we were not operating at. So there may be X Apple. And so they’re used to millions of units and and planning a business based on that, whereas we were really trying to go to market in like a small niche enterprise space. And um we don’t get the same kind of cost ah reductions because we’re not shipping the same level of volumes, but also on the engineering side, it’s the same thing. They don’t have the typical time and testing ability that they otherwise would, because we simply don’t have the capital to afford that kind of time. So you need people
Robert Grazioli: who are more holistic, more systems engineers, more product-minded people who are really going to help you focus on building the simplest possible thing so you’re not over-engineering a hardware product, and even considering more off-the-shelf options versus constantly going going custom with um your your hardware selection. um we We were delayed ah months, like six month delay on our production product. um In order to get to market, what I wound up doing was taking our prototype and basically ah extending the the number of prototypes we built to to the hundreds and using these early tests test products to install in customer ah locations and actually get the kind of product feedback we needed.
Robert Grazioli: to make the right decisions both on the software and hardware side. um And there were so many learnings from that, like getting on an enterprise network as an IoT product was ah became a product in itself. And that’s just not something we really would have learned had we actually built this production product. like we We would have really messed up had we gone to market at scale if we didn’t have those learnings. So finding ways to to be lateral, but always be moving forward, I think is where a lot of other hardware companies falter. They stay so narrow-minded on that hardware track and don’t think about creative ways to at least get their product in the market in small volumes, take those learnings into a bigger run later on. I don’t know if that makes a ton of sense.
Alejandro Cremades: and and And I was thinking, too, you know on the software meets hardware, one of the things there that I see is that it’s extremely challenging, raising money from investors. So you guys raised quite a bit.
Robert Grazioli: Yeah.
Alejandro Cremades: So how was what was the total amount raised? And then also, what were the cycles? How was how was it like going through those cycles, too?
Robert Grazioli: Yeah, um we had some ups and downs. I think early early on, and there again, there was definitely an excitement around IoT-based products. So I think we initially, we were kind of part of that category of people. And we were building something that just made sense. like Our pitch was, how many people are in a space before you get there? This was before Google had Google wait times. essentially. So that pitch was really intuitive for people. The story was really intuitive and my co-founder is also an amazing storyteller and ah he’s now the CEO of Density and he was fantastic at just creating a compelling narrative around how obvious this problem was. um But as time went on and it
Robert Grazioli: it became more of an enterprise product. We were in this this real estate world now. It definitely start started to get a little more challenging. We were mostly buoyed by our ability to get into big name businesses and land early deals and be effective and build solid relationships with those businesses as we were trying to bring product to market. So that kind of carried us. But we are also really lucky to have great investors that I think took um took big risks, ah helped us with with a bridge round early on that kind of got us really into the pandemic era, which completely changed how people thought about their spaces. People stopped showing up to the office. So as you can imagine, all of a sudden this became like a tier, let’s call it like a tier three problem to like a tier one problem. We need to figure out what to do with our office space. And we became pivotable pivotal in helping people
Robert Grazioli: ah make those decisions. And that’s where we kind of, we’ve raised off of that momentum for our latest round where, uh, we hit that $1.1 billion dollars valuation. Um, and that’s kind of carried us to today.
Alejandro Cremades: And hey, 1.1 billion people will think, hey, that’s unbelievable. They probably read like all the articles that were covering that. And they think that it’s like, the oh my god, 1.1 billion, like the holy grail.
Robert Grazioli: Yeah.
Alejandro Cremades: There’s probably like other stuff that comes with it, too, that people don’t talk about it much. you know what What could those things be?
Robert Grazioli: Yeah. ah Well, of course. Well, one, you have now the pressure to of living up to that valuation, um which at the time, like valuations were high. So you were able to get those kinds of numbers we’re raising at the top of a bubble, ah which we learned. So now you have to kind of go after and prove to the world that you’re you’re actually worth that amount. That’s an incredible amount of pressure um and creates like way more emphasis on your go to market execution um in ways that I think, yeah, As a naive founder, like you you don’t always expect and you’re not always prepared for. um So you need people in the room who’ve been there before. And you we had we hired some great, um I think senior people have kind of seen that. And again, our investors are also really helpful.
Robert Grazioli: um The other is like your strategy changes too. When you sort of end up with that much cash in the bank, you start to think about your market position differently, um especially when you have a downturn in the market. So I think at times like you, you Something that’s always really beneficial as a founder is having a survival mindset. So you kind of shift from, okay, how like do we have a corner of the market? And how do we make sure like we use this cash really wisely and extend our life for as long as possible until we can get our next pop and our next ah find our next frontier in the market? um So those are some things that were that were unexpected. And I think too, it’s just like,
Robert Grazioli: just reminding yourself that that’s not the end all be all to building a business. Ultimately, the how much you raise doesn’t matter. At some point, you want to stop raising capital and you want to be a highly profitable business. and um I think we’ve always had our our heads on our head screwed on right in that sense. Um, but, uh, you know, I, see I definitely see other founders kind of get caught up in, in that magic and all of a sudden expenses go through the roof. They’re buying, you know, way too much swag essentially. And, um, it’s, it it turns into a party and not what it really is, which is like, you really need to execute now because there’s a lot of money on the line.
Alejandro Cremades: Well, you were for eight years here executing and you know really pushing through from from nothing to, I mean, being able to see this this incredible you know amount of value that you guys had they created. But then eventually, you know it comes the idea of potentially going to the other side of the table. So how was that transition like?
Robert Grazioli: Yeah.
Alejandro Cremades: And at what point you were like, you know what, maybe becoming an investor, becoming you know more of a VC is my next chapter.
Robert Grazioli: Yeah. So I think for me, it was deeply personal. I mean, eight years was a long time. And also I was working with my very close friends and founders. So stepping away was a very difficult decision for me, but I was, I was just kind of waking up every day and Um, starting to feel a little unsure of myself, um, in terms of what I wanted to focus on. And it just felt like there was something missing. I mean, at that point I was, I was functioning as a head of product in a sense we were, it was still pretty scrappy. So I was still very much tactical in a sense, but.
Robert Grazioli: ah The next step was to be less tactical, was to be more of a an executive in the room. um and i don’t I didn’t think I was ready for that. um I don’t know what it was, but like I wanted to make things again, or at least be part of that early journey where it was it was so much more about making a thing than kind of optimizing a business model. or optimizing an operation. And yeah, so I stepped away. I started doing some consulting, um really focused purely on early founders. And so I’m a designer and and and a front end developer by trade. And so really, like design can be pivotal and pivotal in the early stages of the business. It can really set set you apart from other other companies, but also just help you think through things in a way that a lot of people aren’t. um
Robert Grazioli: And so being part of those early journeys again just excited me in a way and lit that spark that I think was missing. But obviously just doing services, you kind of lack that upside, you lack that buy-in the outcomes of these founders. And a lot of the people that we work with would go on to raise really awesome rounds after working with us. And why not be a part of that success? Uh, and I think I was super resistant to be perfectly honest. I wasn’t stoked about the venture journey in general. I think like watching the bubble happen, some of the valuations that were being thrown around. I don’t want that to happen again.
Robert Grazioli: um i I want businesses to be better earlier and I want ah like capital to be spent on on people that are focused on on the right things. um And so I started just getting excited about being part of maybe be a better way of investing. And um yeah, I haven’t really been this excited in a while now.
Robert Grazioli: Oh, Alejandro, I can’t hear you.
Alejandro Cremades: So what’s the investment thesis for Brett? How do you guys think about the deploying capital?
Robert Grazioli: Yeah, so we’re obviously influenced by, I think, our ah previous experience. And ah we have this general thesis we call boring magic. Essentially, one analogy I’d like to use, I don’t know how how how well this connects with people, but I think about bridges a lot. Like I live in New York, I’m walking along the the promenade in Brooklyn Heights, and you see all these bridges just streaming across the the the East River. And like what a lot of people don’t think about in a bridge, you’re looking at this beautiful thing, but there’s this little piece of equipment that sits between the road and the supports of a bridge called a bridge bearing.
Robert Grazioli: And like, I love bridge bearings. These are the most exciting aspects of a bridge, but the average person doesn’t think about them. And, uh, we at bread call those types of products, those types of things, boring magic, the everyday things that no one thinks about that really are the foundation of our world and our society. And those are the kinds of things we like to invest in. So think thinking about really fundamental problems. And like you think about real estate, like density was basically a corporate real estate business. And like it’s it’s really ah an important fabric of our society, like where people spend their time. um So these kinds of problems really, really excite us. um And think about all the burning boring things like InsureTech, what we call DeathTech. Essentially, we met this amazing founder who’s trying to improve the experience after you have someone close to you pass away. um Like right now, it’s super scattered. You’re stressed out.
Robert Grazioli: it’s It’s a very challenging thing to manage. Let’s improve that aspect of our lives. So these types of problems, these types of people who kind of care about the boring things um are are really what would excite us quite a bit.
Alejandro Cremades: So between the partners, you guys have invested in about 10 to 12 companies. How do you guys go about evaluating businesses?
Robert Grazioli: Yeah, I think um this is where, one, it’s awesome to have multiple partners who are really well-versed in different areas of of business, where I’m um more focused on the product and their their general go-to-market strategy, how they’re thinking about the future of their product. um We have deeply technical partners who are really interested in their foundational engineering practices and how they’re thinking about engineering. We have a partner who is a lawyer by education, ah but has been a chief of staff and and helped run ah HR teams.
Robert Grazioli: ah One, we’re super holistic with our evaluation and we’re brutally honest on where people need help. so Every founder that walks through the door, we give them a report card almost immediately on where where we think they’re not excelling, um but also where they are excelling. and so so Being able to be really holistic, but also evaluate their product in a way that I think a lot of ah investors can’t and really really focusing on the tactical nature of how they work. So the fact that we’re still also kind of um in the trenches with them, we get a sense for how they’re working as a team, not just how well they can pitch a story. So getting in the room with them, ah brainstorming ideas, actually getting a sense for how they’re thinking about the problem, what their team dynamic is, really to us is is pivot pivotal in that sometimes our initial evaluations are wrong.
Robert Grazioli: like Great pitch, really compelling founder, but you get in a room with them and their team, you try to solve a problem and you just see the dysfunction all of a sudden. But the inverse is true. Maybe the founder is not so compelling. Their story is not great, but you get in the room and you realize, oh wait, there’s kind of a gem here. They have a core, they have a good core user base. This problem is interesting. And this team loves this problem. This team loves these founders. It can really flip the switch on your investment. Whereas I think a lot of investments often got based, um, because founders or investors aren’t really in the trenches or kind of getting the, getting to the nitty gritty with, with founders.
Alejandro Cremades: Now, one thing that you just remind me there is that most VCs, they say that they are that they add value. right In fact, 90% of them don’t.
Robert Grazioli: Yeah.
Alejandro Cremades: So you’ve been able to experience what it looks like you know when you’re an investor that adds value versus not because you’ve been a founder before because you guys have raised a bunch of money for the last company. so What does it mean to have an investor that adds value? And what can the people that are listening now that are thinking about either raising money from the right people that could add that value or from putting their current investors to work, how does that look like when an investor is providing value?
Robert Grazioli: Yeah, I mean, for us, it’s it’s very literal. So you come to us and… ah maybe like your brand’s a little lackluster, um I will literally sit in a room with you ah for for two weeks and help reshape ah your visual identity, ah help reshape your go-to-market language, um like spin up a refined marketing site, um and essentially help you relaunch your product if that’s what you need. um And we can only do that because we have five founders, uh, five former founders essentially. And we make our model work. Like it’s just, it’s just not, kind of it’s not the time a lot of other VCs can spend at a seed stage or pre-seed stage. Um, and it’s time we can, but it’s literally doing work for people. We are in code with, with our, our founders. We are ah like helping them hire. We are deploying our hiring playbook that we used, uh, for our previous companies to help them interview and bring on top tier talent. Um,
Robert Grazioli: Yeah, it’s it’s it’s actual work output. It’s time real time spent helping build their product if that’s what’s needed. It’s not always what’s needed. So sometimes it’s it’s more it’s more traditional where we’re really just just doing advisory, helping make introductions to other investors for the next round, or introducing them to former customers or hours of hours or or people um who might help help them land some business. but um Yeah. i mean And we have direct examples of of of this too. One of our companies is building, um one of the companies we’ve worked with is building authentication and in on the blockchain. And we were able to work with them. And this is we didn’t invest in them, but this is a company we definitely would have invested in. um ah we’re We’re kind of in the middle of our of closing our our our fund.
Robert Grazioli: um And we really helped them gain market share just by building a better demo of their product. So like a small, discrete project that we saw ah could lead to market opportunity. We designed and built, um took to market and really helped them kind of complete their demo journey and and close ah close some big deals. So um yeah, does that answer your question?
Alejandro Cremades: Absolutely. So imagine you were to go to sleep tonight, and you wake up in a world where the vision of bread is fully realized. What does that world look like?
Robert Grazioli: Yeah. And I think I mentioned this before, but it’s it’s really a world with a a little less hype. So like we call ourselves bread because again, it’s like an unassuming thing in our world, but it’s also foundational. I mean, very few people in the world, in unless you have like a gluten intolerance, don’t eat bread. And it literally keeps societies going when times are tough. Um, so while like people don’t go around praising bread every day, maybe if you’re super into making bread, you do. Um, like we think that’s a a better world where people are less excited about the next big future thing and more interested in how to make the the current things we have better. Um, and I, I’d love, I’d love a startup world to be more focused on those kinds of things, those kinds of problems. And I’d love a, uh, a venture environment that.
Robert Grazioli: um that incentivizes those kinds of products in our world. um So I think that’s maybe a little ambiguous, but that’s definitely the kind of world I want to live in um and contribute to, if if at all, if I can.
Alejandro Cremades: So imagine you were to go into a time machine, and you were able to go back in time to that moment where you guys were like you know just testing things out and figuring things out you know with density.
Robert Grazioli: Mm-hmm.
Alejandro Cremades: you know Let’s say back in 2013 or 2014, and you had the opportunity of having a chat with your younger self and with your co-founders, and you were able to give them one piece of advice for like going at it with the business.
Robert Grazioli: Mm-hmm.
Alejandro Cremades: What would that be and why do you know what you know now?
Robert Grazioli: um Honestly, it’d probably be don’t don’t build a product with lasers in it. um ah That’s probably my number one and that would be my number one piece of advice for us at the time. Avoid lasers at all costs. um No, but I think in all seriousness, the main thing is it’s gonna take longer than you think. ah Every single thing I’ve done has taken way longer than I’ve wanted it to, of course. but learning how to maintain your ambition while having the patience to to do something the right way, um I think is what I would tell myself back when we were starting. like that My journey being eight years long and and still going, I mean, density is still not um not at its end. I would not have expected that. And I think just,
Robert Grazioli: Yeah, like be more patient, um but still be excited ah is is kind of what I would tell myself.
Alejandro Cremades: I love it. So, Rob, for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Robert Grazioli: Yeah, I mean, you can go to our site. It’s spread.works um and just reach out. Our email address is on there. um You could also find me on LinkedIn, Robert Grazioli. My dad is also Robert Grazioli, so you may see him as well. But um that’s a good way to get in touch with me as well and really just love meeting founders or other investors and hearing what they’re up to. um It’s kind of the best parts of my days when I get to meet new people, um or designers. I’m a designer. It still consumes a lot of my time. So if you’re a designer out there, hit me up.
Alejandro Cremades: Amazing. Well, hey, Rob. Well, thank you so much for being on The Dealmaker Show. It has been an absolute honor to have you with us.
Robert Grazioli: Alejandro has been super fun. Thank you.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Robert Grazioli On Taking A Company to $1.1 Billion Valuation And Managing A VC Firm Providing Holistic Support To Aspiring Entrepreneurs appeared first on Alejandro Cremades.
In the ever-evolving landscape of tech startups, few stories are as compelling as Rick Nucci’s journey from founding Boomi to launching Guru. A serial entrepreneur with a track record of success, Rick’s career is a masterclass in leveraging market opportunities and navigating the complexities of scaling a business.
Rick’s company, Guru, has attracted funding from top-tier investors like FirstMark Capital, Emergence Capital, MSD Capital, Slack, and Thrive Capital
In this episode, you will learn:
- Emotional durability and EQ are crucial for navigating the highs and lows of entrepreneurship.
- Identifying and acting on significant market shifts, like the move from on-premise to cloud software, can be a game-changer.
- Personal pain points and experiences can fuel innovative solutions and drive new ventures.
- Strong relationships with investors and partners can greatly influence the success and stability of a startup.
- Shifting from traditional business models to modern ones, such as SaaS, can provide a competitive edge.
- Building a steady and resilient team with high emotional intelligence is essential for overcoming challenges.
- Focus on solving real, pressing problems and ensure your solutions offer significant value to stand out in crowded markets.
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Your email address is 100% safe from spam!**About Rick Nucci:**Rick Nucci is co-founder and CEO at Guru. He brings twenty years of experience in creating category-leading software solutions and companies.
Prior to Guru, Rick was the founder and chief technology officer of Boomi, which defined and led a new segment as the first-ever cloud integration platform-as-a-service.
Boomi was acquired by Dell in 2010, and Rick went on to run the Boomi business for Dell as its general manager, helping grow the organization into the industry leader it is today.
Rick frequently speaks at industry events about startups, SaaS and cloud computing. He holds a Bachelor of Science in Logistics, Materials, and Supply Chain Management from Penn State University.
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Read the Full Transcription of the Interview:Alejandro Cremades: All right. Hello, everyone, and welcome to the Deal Maker Show. So today, we have a really amazing conversation in front of us. you know We are going to be speaking with a founder that has done it you know a couple of times ah with his first company, actually. you know He sold it to Dell. Then Dell sold it for $4 billion. dollars I mean, it’s kind of like unbelievable the value that they were able to create there. ah and they And now, you know, he’s embarked in a rocket ship, and we’re going to be talking about it as well. So again, brace yourself for a really incredible conversation. So without further ado, let’s welcome our guest today, Rick Nucci. Welcome to the show.
Rick Nucci: Hello, hello. Thank you so much for having me. Excited to chat with you.
Alejandro Cremades: So born in Pennsylvania. So give us a walk through memory lane. How was life growing up over there?
Rick Nucci: Oh, boy. Yeah, well, you know, there’s ah there’s ah there’s an amish Amish country in Pennsylvania, and that’s that’s sort of where i from where I’m from. I’m not um um Italian based on my last name. That might be obvious. But um yeah, sort of grew up outside of Lancaster, Pennsylvania. and um really was there um my whole life until I went to college um and um moved to Philadelphia ah in 1999 and have been here ever since and actually have had the plenty of moments to maybe move or do a startup in a more maybe predictable tech hub or something like that but actually have become an enormous fan enthusiast of Philadelphia. I think it’s a wonderful city so I actually love love living here and and do it by choice.
Alejandro Cremades: how How was it like for you to have both parents, entrepreneurs, and and how was it like to to be able to experience the going through the cycles for them?
01:42.52
Rick Nucci:
Yeah. um And, you know, look, for for those that have been on the journey, I mean, there’s plenty of ups and downs. It’s never the way it’s reported about then the and the breakout stories we read. It’s always that squiggly line with lots and ups and downs. And that’s what it was like. But um I would say it normalized the experience for me. It felt Um, it felt like this is something that people often do. And, um, both of my parents, my, uh, my father bought a small business and ran it, um, and grew it for, I dunno, most of my life that I remember can think about that’s what he was doing. And then.
Rick Nucci: ah My mom also opened a retail store in ah in a mall in the in the area where where we grew up that was sort of tied to the to the other business. And like that was like what they did. And so it was great. And it had like everything. It had its ups and its downs. But I would say for me, it it made me feel as moments came up and I was like, look, I think I think i want to start something. you know it It didn’t feel maybe as foreign to me as it otherwise might.
Alejandro Cremades: So then in your case, you know like you went to college, and then you know it sounds like you went to work for another company versus like starting your own. I mean, what what happened there? what were What were you waiting for?
Rick Nucci: Well, i think um I think I was figuring out what the heck I wanted to do. I mean, I went to Penn State University, and my ah major was business logistics. And about halfway through, I was like, oh, no, I’m actually interested in technology much more. It it was the first moment of like an area of you know career work where I felt a draw or a pull. um And so long story short, rather than like changing majors or going through all that, I went to work for a logistics software company. It was really an ideal combination. I don’t know that I thought about it that way at the time, but it was an ideal combination of being able to get myself into technology while still leveraging my major. So that was what I did. And so it wasn’t like in college, I was sitting here going, when am I going to start you know my first company as much as like,
Rick Nucci: Wow, technology is fascinating. You know, I’m a big music guy. So like, I just bought all my music on CD now.com. And I just made some, you know, I clicked around and these things showed up at my house, like, i I’m all in this is like, this is amazing and revolutionary. And then it kind of went from there. But but but I did, I only was at that company for two years. saw the pain of integration firsthand, which is what Boomi does, um saw that firsthand, and with two other coworkers at that company, we left and started Boomi. So that was in 2000. So i really I really was only working at another company for two years. I was 24 years old when we started Boomi. We’d go visit customers. I couldn’t even rent a car yet. you know but like
Rick Nucci: um yeah yeah zero regrets. I mean, quite the opposite. Really, really fortunate that I that I ended up doing that and kind of jumping into the the pool, so to speak, at such a young age, because I think I just my rate of learning, I feel like just skyrocketed.
Alejandro Cremades: so Let’s talk about Boomi. Because Boomi was quite a success. i mean You guys ended up going through an acquisition with Dell, but you were talking about like leaving as an employee you know the company that you were working at with your co-founders and starting this other company. How was that transition? you know That sequence of events that needed to happen for you to be like, it’s it’s time to to get this thing done. It’s time to take ownership of my own future.
Rick Nucci: Totally. Yeah. I mean, it was it was this build up series of conversations with my two coworkers, this growing energy of like, yeah, we should do this, this this kind of mutual encouragement, like, hey, we should take the plunge and do this. And the this was that we were observing the problem of integration firsthand. I mean, look, forever and and in the enterprise, companies of all sizes, you you have to connect data between these different systems. You have to do it in an automated way. The the systems literally don’t work. They don’t run unless they are properly integrated together.
Rick Nucci: That’s a very well-known thing. But the way it was being done back then, broadly speaking, was people were just writing code. It was very relative to today, primitive technology. um But it it was it was very cumbersome. It was always the the problem. whenever the logistics software that I was working at was being deployed to customers, integration was always what the problem was. It was always the issue. It was always the like reason the customer Go Live was getting delayed or whatever. And we’re like, man, this is a product opportunity. This is what we should do. And so so it was the combination of like observing the pain firsthand, thinking the, hey, there’s got to be a better way feeling. And then um the the the sort of like mutual encouragement with this core group of folks where we were like,
Rick Nucci: Like, hey, let’s let’s like actually do something about this. And and so that that combination, I think, jumped us you know jumped jumped us into the to the world of starting our own business.
Alejandro Cremades: So then walk us through the journey of Boomi, because also with Boomi, what was the business model there? How were you guys making money? I think that’s for the people are that are listening to get it.
Rick Nucci: Totally. I mean, Boomi started its life as an on-premise software sold with a perpetual license with maintenance. The way software used to be sold back then, again, we started in 2000. We had our first paying customer in 2001, um and and that was the business. and the the the the We call that Boomi 1.0. The real challenge and the learning that’s just been seared into my brain forever, and I think we’re seeing it play out now in the AI world in in in a different but analogous way, is as we got into this space, there was never a question that it’s a must-have product ever. There’s a must-solve problem. Businesses must integrate their software together. That’s that’s known and obvious.
Rick Nucci: What we realized when we got into it was, wow, there’s a hundred companies doing some version of this very, very crowded market. It was, I think without having any foresight into the market heating up in a big way in this time period. And that’s great, but also was really, really hard to stand out. And like, I remember. Microsoft launching a product called BizTalk in 2000 or 2001 that was very, very competitive. And we’re like, yeah, this is probably not great. And Boomi struggled, I think, as a result of that for several years um in this, how do we stand out where a smaller startup, we were competing against companies that had raised 30, 40, $50 million dollars in venture capital.
Rick Nucci: you know At the time, I think we had raised about a million dollars in angel investment. and um we Long story short, but like we we need to change. and and and At the same time, what we started to see happen was the beginnings of cloud and and SaaS. um I think SAS really was probably the name we that that everyone was starting to use back in 2005, 2006.
Alejandro Cremades: you
Rick Nucci: We were early adopters internally at Bumi of Salesforce dot.com. We were early adopters of NetSuite and we were sort of bought into this idea of like, Boy, the way on-premise software is sold and delivered is just drastically ineffective and absurdly expensive. And SaaS is going to change all that, et cetera. We said, OK, imagine that happens. And this is really, I think, a blueprint that plays out so many times in tech historically. Imagine that big sea change event happens.
Rick Nucci: That is, you see enterprise software shift from on-premise to cloud. And if that were to happen, how would integration need to work? Because it would be quite different than it would need to work in an on-premise world. When you have everything in one data center, the way you integrate it together is quite different than when you have some things running on-premise, some things running in the cloud, connecting different clouds together, et cetera. So we said, OK, we’re going to create a brand new product that assumes that future is true. And we called that um product ah IPAS, or IPAS Product Integration Platform as a Service. And we launched that product in 2007. And that was um way early. I mean, we’d talk to customers, and they’d be like, what well, i’m like I got Salesforce, but you know I don’t really have a whole lot of like SaaS stuff to be like connecting up. right So we were we were definitely early to market, which was a strength and ah and a weakness. I think the weakness was,
Rick Nucci: um We really needed to learn how to find those early adopters. The way that we did that was we partnered with other SaaS companies. um And by partnering with those SaaS companies as they were selling, you know, success factors to Leo, um salesforce dot.com, NetSuite, as they were deploying their products to customers, they had to integrate them. And so and so it was sort of created this natural pull for us, great. But the strength of being that early was it gave Boomi the ability to be sort of the you know category re-creator, re-inventor, what used to be called enterprise application integration, the on-premise days, got reinvented as integration platform as a service,
Rick Nucci: Gartner finally ah published a magic quadrant. Boomi was very top right. And that really, really took off, you know, Boomi. And then in 2010, we were acquired by Dell. And Dell was really looking to get into the software world and and go beyond hardware. And that drove them to acquire Boomi as an asset. um So I’ll pause there, but that was a, you know, I think that shift and transformation um and bet has guided a ton of my thinking, you know, throughout the, you know, next sort of decade and a half of my of my work.
Alejandro Cremades: So walk us through the acquisition. How was that like? Walk us through the process.
Rick Nucci: Yeah, um I mean, in hindsight, it was a very um it was a very ah good acquisition. and And I say that meaning like, I’ve heard many horror stories. um You know, it was it was a very fascinating experience for me because it was a competitive acquisition. There were two companies competing. um and bidding on Boomi. And they both sort of manifested organically because we had partnerships with both of them. Dell obviously ended up being the the winning one, but it was sort of a fascinating you know negotiation. It was certainly stressful. you know This is your baby kind of thing. So there was a lot of that happening.
Rick Nucci: But Dell had brought in um this guy named Dave Johnson who ran k corp dev at IBM before joining Dell and had done 100 M and&A transactions. And you could really feel that through the process because they just had this, you know, they had it down. from due diligence to acquisition, to promising what they were going to do post acquisition, to following through on those promises, to setting up Boomi for success. Of course, there’s the, oh, we’re part of a huge company annoyances that happen. By the way, Dell told us that. I’ll never forget they set us down, the the HR team, and they’re like, so everything that you guys are used to doing, expect it to take about 30% longer than it used to take.
Rick Nucci: We’re like, okay, good. At the time, I didn’t really understand what they meant because I never worked for a company as big as Dell in my life. But afterwards, I’m like, okay, I understand what they mean because there is just stuff. like You have to do HR differently. You have to do finance differently. You have to do IT t differently. You just have to. and so like Sure, if that’s like the stuff that’s annoying you, talk about a first world problem, right? So good acquirer, good process. They let Boomi run untouched. um I remember clearly my my bosses at Dell, you know they were great. And really it was a very autonomous structure. It was like, look, we’re gonna fund the business. We wanna fuel its growth. We want you guys to run it. We wanna protect the culture.
Rick Nucci: And they really did that. And I really was in no rush to leave. And I always named them as a great acquirer. And they really were. And when I did leave, um I did it over a six month period because I wanted it to be a non-event that the founder was leaving. I didn’t want it to be this sort of dramatic thing or have any potential negative impact to Boomi. And so I remember in 2013, January, sitting down and saying, like, hey, listen, like, I’ve got to do this thing. I’ve got to start. I’ve got to start, Guru. I’m just like feeling it. um But I’m not in a rush. And so let’s sort of assume that by the summertime, I’m kind of phased out. I want to make this easy. I’ve got my successor already lined up, Chris McNabb, who did a fantastic job running Boomi the next 10 or so years after I left. um and so And so that was kind of the story. But yeah, looking back on it, it’s like um great experience, great acquirer, the things that were quote unquote, annoying, you know first first world problems. They did they did write by the Boomi team.
Alejandro Cremades: and they ended up selling for a lot of money.
Rick Nucci: and then And then fast forward to 2021, they sold it for $4 billion dollars to private equity. And um I think that was a phenomenal outcome for Dell and and for Michael Dell.
Alejandro Cremades: That’s incredible.
Rick Nucci: And I think it um set up Boomi for the growth and the trajectory they are on now, which is really phenomenal. And ah they are continuing to innovate in the space. They are fully leaning into AI in their world, just like we leaned into cloud in the early chapter of Boomi. And i think it’s I think it’s amazing. And so they now yeah they now are running um as their own independent entity and I think have have huge opportunity ahead of them.
Alejandro Cremades: So then let’s talk about Guru because, you know, obviously after such a successful, you know, journey, you know, I mean, when Guru, the idea comes knocking, I’m sure that you thought about it, you know, a few times before taking action.
Rick Nucci: Yeah.
Rick Nucci: Absolutely. Well, you know, it’s the whole like, uh, if you could go back to high school again, you know, what, what would you do do a different thing? But I mean, like Boomi Guru, um, was born out of a personal pain. And what we saw happen at Boomi was, um, knowledge sharing and being able to, you know, allow employees to self-serve quickly, find the answers they need to do their job, um, is actually immensely difficult. it’s it’s it’s broken um and and you know it’s it’s it’s ah arguably even harder or or or even more broken today because of the proliferation of SaaS and the amount of places where knowledge and information is siloed across the company. and The way we saw it manifest was
Rick Nucci: um internally, it’s everything from like, how do I position against a competitor to how does this new product feature work to internal process and procedure around HR or IT, t right? i think I think we all can sort of, we we all sort of live the pain in our work of needing to find this information and find it quickly and be able to understand if what we’re finding is actually accurate. And we just tried using a bunch of products. There were, there were wikis out there and intranets out there and, you know, Our belief is that those those categories of software have have just failed. They’ve just failed failed customers. um There are some good you know nuggets taken out of them, as happens with all old categories of software. But you know we tried using all those. We’re like, there has to be a better way, essentially. And that and that really led us um to start Guru and built the… you know I remember sitting at a at a Gartner conference. This is like the moment. right I remember sitting at a Gartner conference and
Rick Nucci: There was a session and it was about an intranet vendor, a big one, a very big one. And the event start the session started and I was sitting in the back because I just wanted to learn at this point because I was like, I think I want to do this right. And the room was full of customers of this vendor. and up on stage was five Gartner analysts. The vendor wasn’t in the room. it was the It was the Gartner analysts and the customers. And the session went off the rails in the first 10 minutes. Whatever agenda they had got completely derailed. And what it became was this very passionate,
Rick Nucci: frustrated energy in the room about the internet and why it wasn’t doing what it was supposed to be doing and when was it going to work in the cloud and when was this going to happen and when was that and I and i was blown away. I’m like first of all the vendor’s not even here. like These poor Gartner analysts are sitting up on stage like trying to answer these questions like they’re product subject matter experts. It was it was fascinating. and I walked out of that session and I’m like, that amount of energy and passion around something like an intranet, I have to like i have to start this company. and like That was literally like the moment.
Rick Nucci: um And and and started guru with with Mitch Stewart who’s my co-founder and cto he and I work together at boomy so we work together since two thousand and two. um He ran all the engineering we left and started it and you know he was feeling the pain personally as well at boomy um yeah that was sort of the inception moment of like. This this this has to exist in the world we have to do this you know.
Alejandro Cremades: So how do you guys make money at Guru? What is the business model there?
Rick Nucci: So it is a seat-based subscription. So it’s very simple pricing um and ah effectively you know it tends to be something that is um purchased and used by the entire company. So the very predictable math is you know how many employees the company has. um Sometimes they also deploy Guru to partners or BPOs or or or folks like that where knowledge sharing is really, really critical. um That’s effectively going to be the the price for Guru. So we really wanted to keep it simple and and and predictable.
Alejandro Cremades: And you’ve also raised a about $70 million. Obviously, after such a successful exit you know to a company like Dell, I’m sure that raising money wasn’t that difficult. So how did you go about it? Why did you go about it with the people that you did? And how has it been going through the cycle stool and the financing with Guru?
Rick Nucci: totally Totally, yes. i feel I feel very fortunate with the investors we have at Guru. We have um um Firstmark Capital, Emergence Capital, Thrive, um Excel. Really, really strong VC firms with really great partners that um are on our board and guide us and really great networks. Um, you know, Amis Johnny from First Mark led Guru’s Seed. He also led Boomi’s Series A. And, um, I sort of just, uh, didn’t really shop the, the, the Seed round, um, and just sort of went right back to him.
Rick Nucci: because I just had a good experience with them. I mean, we we were, you know if you think about the years of Boomi, that was during the global financial crisis. There was plenty of tumultuous times. IT spend really got hammered in 2008. Everybody got kind of freaked out and did a lot of you know pauses in spending software, a lot like we saw play out in tech in 2022, 2023. That definitely happened. And so when you can see a VC in, uh not great moments and see how they behave and show up you know for me i’m like yeah i want to i want to work with this guy again so yeah i’ve i’ve been working with him since 2008 2007 i think is probably the first time i met him um and has really been been a phenomenal partner because um you know he’s that prototypical investor that is smooth through the storms you know he’s he’s not he’s not he’s not the you know
Rick Nucci: He’s sort of the calm the calm voice through the through through the crazy things going on and I just sort of value and appreciate that um in him. um The experience of fundraising, as you suggested, at Guru was quite different because we had a great outcome at at Boomi, fundraising was just very, very different. um The other big difference was geography was a really big thing, um and now it is not really a big thing, in my opinion. and What I mean by that is, you know being in Philadelphia building a tech company um was really a weird thing to do in the early 2000s. When we got acquired by Dell, one of the articles, wire Wired covered it, and the headline of the article was something like,
Rick Nucci: Dell finds its mojo in Philadelphia? question mark like that’s the Of the whole story they can tell about the acquisition, that’s what they focus on that we’re in Philadelphia. It’s like, yeah, look, like we actually have internet. We’re not all Amish. like There is some like actual cool stuff going on in Philadelphia. Anyway, but when we were fundraising for Boomi, That was an immediate objection we had to overcome every single time. Philadelphia, you’re not in, you know, even New York wasn’t considered a viable tech hub yet in 2007, 2008. It was starting to be, right? But it was like, oh, if you’re not in the Bay Area, you’re not, you know, you’re you’re not a viable, you know, option. And we were like, that seems very flawed. So that was hard. That was a lot, you know, a lot of conversations didn’t go anywhere simply because we were in Philadelphia. Whereas with Guru,
Rick Nucci: um Geography really i would say is is ah irrelevant in our fundraising journey and like when excel let our series see. They spent a lot of time sitting us down telling us like look by the way like we funded spotify we funded atlassian we funded message bird like all these businesses that that blew up in quote unquote non tech hubs. We actually love it. you know So they had sort of this opposite bias with their growth fund. And so they actually loved that we were in Philadelphia. I think they had recently funded another Philly company, Go Puff. And so anyway, so the the GEO thing kind of went away, I think, that being a second timer went away. But yeah, over the years,
Rick Nucci: really for us the decision to raise venture capital, you know, we’ve never been a company that’s had what I’d call a, you know, alarming or or outrageous burn rate as a business, but we have always believed in the in the opportunity and ability to leverage venture capital to, you know, subsidize growth to be able to, when we saw something working, when we saw our first sign of product market fit, I think we crossed over a million in ARR in 2017. And we were like, okay, it’s time for our Series A because we sort of knew we could spend money, put money to good use and really double down on those personas we were closing and bringing in. And we sort of played played that out through the next you know several chapters of our growth.
Rick Nucci: um but But yeah, I would say I would say i feel fortunate in working with a solid group of investors. Again, you hear a lot of horror stories and I think for us, it’s just been a really positive experience.
Alejandro Cremades: So obviously, when you bring in more investors, you know they’re backing on a vision. And we’re thinking about the vision here. you know If you were to go to sleep tonight, Rick Nucci: , and you wake up in a world where the vision of Guru was fully realized, what does that world look like?
Rick Nucci: Yeah, that world looks like you have a um a ah AI-centric you know assistant that is your you know search and research partner in order to do your work, that there is nothing going on at the company that you cannot instantly access and find. And the work to do the work part of your job goes from chore and pain and daily grind down to This is energizing because I’m focusing on the work I was actually hired to do. And and we believe that um AI, ah generative AI in particular, and and where LLMs are going will allow us to drastically transform how that problem gets solved. And so that that is the that is the world. like
Rick Nucci: everyone I’ve ever met that’s worked professionally has used an internet, has used a wiki. I’m not sure I’ve ever met one that said that was a great experience. And and our goal is that it it it is a joy, it is a pleasure to be able to use Guru because it’s just going to give you that answer you need, that insight you need and get you into the the the work that you’re actually trying to get done.
Alejandro Cremades: And what about, the we talk about the past with a lens of reflection. If I bring you back in time to that moment you know that you were still you know working as an employee for another company and and right that moment where you were about to make the jump with your co-founders, I would say before, right but right when you were making that jump and giving the notice, let’s say you were able to show up right there with your younger self and be able to give that younger self one piece of advice for launching a business. What would that be and why, given what you don’t know now?
Rick Nucci: um Investing in self awareness, personal coaching, um maybe maybe that could be ah CBT, cognitive behavioral therapy, whatever you want to call it. Any playbook, any founder advice, anything about product market fit, anything about you know ah MVP thinking, all that stuff comes way lower in the list to me than the emotional durability that can be learned and gained. um Maybe it’s meditation for some, whatever whatever the thing is.
Rick Nucci: It is the hardest thing I’ve ever pursued in my life to start a business. It is um immensely gratifying. It is immensely stressful and at times immensely frustrating. And so um it is all about EQ and not only for myself, but I would also tell myself it matters for me and anybody I’m hiring, certainly the leadership team I want to build out. EQ’s got to be top of the list because how they show up is going to go straight down into the teams that they’re building and I can’t tell you the amount of times when we have had the emotional resilience and the awareness as a team to be able to endure really hard moments
Rick Nucci: is mind blowing to me. And when I see the way this team shows up and handles hard things or bad news or good things or stressful things, they are an even keel steady team that really doesn’t get freaked out, really doesn’t get spooked by things. And that to me is the ultimate skill of all skills because you can, you know, once you’ve got that down, And you and you are operating in that mindset, you will learn a new thing twice as fast, you will by default be open and curious, instead of being closed and critical and being open and curious sets you up to have a growth mindset to rethink about old problems in new ways I mean, you will just process everything so I would 10 out of 10.
Rick Nucci: forever, any founder in any business at any stage, I would say it is the EQ, the self-awareness, the mental resilience, the well the wellness and mental wellness and wellbeing that will be the biggest ah ROI that you could ever look for. it
Alejandro Cremades: That’s amazing, Rick Nucci. So for the people that are listening, Rick, we’d love to reach out and say hi. What is the best way for them to do so?
Rick Nucci: ah LinkedIn is where I spend most of my time from from a social perspective, so you can easily find me on on LinkedIn. Just look at Rick Nucci and I will be there and would love to say hi.
Alejandro Cremades: Amazing. Well, hey, Rick. Well, thank you so much for being on the Dealmaker show today. It has been an honor to have you with us.
Rick Nucci: ah Thank you, Alejandro. I appreciate you.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Rick Nucci On Selling A Company To Dell And Raising $70 Million To Make Relevant Internal Information Available To Enterprise Teams appeared first on Alejandro Cremades.
In the ever-evolving landscape of entrepreneurship, few have experienced the full spectrum of highs and lows like Zvi Schreiber. His journey from software engineer to successful serial founder offers invaluable insights into the trials and triumphs of building and scaling companies.
In this exclusive interview, Zvi talks about his experiences selling a company to IBM, taking another company public, and fundraising. He has had a series of successful acquisitions and fire sales.
Zvi’s latest company, Freightos, has attracted funding from top-tier investors like FedEx, SGX, OurCrowd, Aleph, and Annox Capital.
In this episode, you will learn:
- Overhyped valuations can lead to dramatic crashes, so approach deals with a critical eye.
- Being too early to market can be as detrimental as being too late, as infrastructure and consumer readiness are crucial.
- Opt for investors who share your business’s long-term vision and are supportive of the timeline for success.
- Digitizing traditional industries, like freight forwarding, can transform outdated practices and create new efficiencies.
- Successes and failures alike offer valuable lessons that contribute to future ventures.
- Building and maintaining a loyal, skilled team is essential for long-term success.
- While immediate results are important, the aim is to have a lasting impact and improve the global landscape, such as by enhancing world trade.
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Your email address is 100% safe from spam!**About Zvi Schreiber:**Zvi Schreiber (“tsvee shryber”), is a British-Israeli software and Internet entrepreneur. He founded Tradeum Inc., one of the pioneers of B2B E-Commerce, which achieved revenues of over US$100m and an exit of $500m.
Zvi founded Unicorn Inc., which sold to IBM, and G.ho.st, sold to Infinity Fund. He was CEO of clean-tech electronics company Lightech, which he sold in 2011 to General Electric (GE) Lighting.
Zvi is the Founder and CEO of Freightos, the Internet marketplace for the trillion-dollar international freight market. He has a PhD in computer science, has written and spoken widely, and continues to code part-time.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty. Hello, everyone, and welcome to The Deal Maker Show. So today, we have a very exciting founder that is joining us. you know We are ah definitely about to experience an incredible conversation with a founder that has done it multiple times. He sold his companies to the likes of IBM, you know done the whole thing of going public, raised all the money that you can think of, ah and going through the cycles. so um you know Now, ah he’s on a rocket ship. We’re going to be talking about it too, how he’s disrupting this outdated industry that is massive and what they’re doing about it. And again, you know super incredible you know founder and conversation that we have. So brace yourself for a super unbelievable episode. So without further ado, let’s welcome our guest today, Svi Shriver. Welcome to the show.
Zvi Schreiber: Great to be here.
Alejandro Cremades: So give us a walk through memory lane because you were born in London, spent a bunch of time in Jerusalem, you know, there in Israel and now in Barcelona. So yeah I guess you’re a citizen of the world.
Zvi Schreiber: Yeah, I’m still in Jerusalem, but also splitting time in Barcelona, where we have our biggest office. um So yeah, briefly, I started started my career as a software engineer. And while I was doing that, I did a PhD in computer science. So technical background, I still still getting you know get involved in the technical side when I can. But for many years, I’ve been an entrepreneur. I’ve had ah acquisition successful acquisitions, fire sales, a mixture of everything. But now, already for 12 years, I’m founder and CEO of Freitas. And you can think of us like Booking dot.com or Expedia for international freight. So we’re trying to digitize a very big, very important old industry and bring it into the 21st century.
Alejandro Cremades: And we’re getting we’re going to get into that in detail. But you know before that, we’re going to get to know you. and it’s weird So how how how do you get into math? So obviously you went to study at Cambridge, and you got all types of shiny degrees you know around mathematics. But out of all things, mathematics. Why mathematics?
Zvi Schreiber: I just seem to have a natural skill at it and I love it.
Alejandro Cremades: but that’s good because that got you into, I guess, say becoming a software engineer. So how was that journey from being a software engineer to all of a sudden taking ownership of your own future and becoming an entrepreneur? entrepreneur at
Zvi Schreiber: Yeah. um You know, I think in many cases, certainly for me, that it was just sort of a natural progression. um I worked for a very good software company in London, and and I saw sort of saw how they did things. And at some point, I thought, I want to try to do this myself. And so, you know, someone wants to find an entrepreneur, someone who’s unemployable, you know, like they sort of couldn’t hold down a job for long. I was itching to try it for myself.
Alejandro Cremades: That’s amazing. things So tell us about what happened there, you know, because it was during the 2000s, you know, with all the yeah craziness kicking into it with the bubble, you know, and so forth. So how was that like?
Zvi Schreiber: Well, those was yeah, that certainly was crazy for your for your younger listeners who weren’t around through that. I mean, in 1999 and the beginning of 2000, there was a bubble, like we haven’t seen since in ah tech. it was The internet was very new and um stocks went completely berserk. I mean, there there were startups you know valued at tens of billions of dollars with that without any profit. and and barely any revenue. ah So it was a very extreme bubble. Actually for that year, so and I had a company called Tradium at the time, also doing sort of B2B platforms. um And I moved, I raised money in Israel and then moved to the Bay Area at that time. So I was actually in the the San Francisco Bay Area at the peak of the craziness and it really was a ah wild time.
Zvi Schreiber: And I was able to sell my startup um to a startup really called Vertical Net, which was public with a $10 billion dollars valuation at the time. um And I sold it in March of 2000. Within days of that sale, the market crashed hard. And the shares that we received on on paper, it was a really good exit, but the shares crashed by, well, 10% and 20%. And before long, they were down 99 point something per percent. And so it was quite a roller coaster.
Alejandro Cremades: So what did you learn there when it comes to cycles?
Zvi Schreiber: Well, um I learned the things that don’t look real aren’t real. and and And I have to say, I went into this deal with my eyes open and and advised people. I told my team, look. you know, on paper we’re selling for half a billion dollars, but but this paper is very hyped. And so so I went in, fortunately with my eyes somewhat open that this this may not be a sustainable thing. um And and i’t none of us knew how quickly and how dramatically it would crash, but but we were certainly well aware that things were likely to crash because it didn’t make any sense. um But you know, it just ah it just, the lesson is the obvious one. If if something, if evaluation doesn’t make sense of a startup,
Zvi Schreiber: which isn’t doing particularly well, it’s valued at $10 billion, then that’s probably not going to last. And I’ve seen that with many other types of shares of technologies that, you know, I think to some extent blockchain went through a similar thing. When things get over hyped, then there’s a correction, as you’d expect.
Alejandro Cremades: So then in your case, you know you ended up a you know moving on to the next chapter. And once an entrepreneur, entrepreneur always always an entrepreneur entrepreneur. And the next one also had quite the outcome. So how was that they journey with the next company?
Zvi Schreiber: Yeah, I mean, so it was tough it was tough in a way because what happened after 2000, in the bubble, everyone was spending money on IT like there’s no tomorrow. So so companies were were really investing. And then when the bubble burst, and then, you know, and I started a company called Unicorn. nothing but This was before Unicorn had the connotation that it has today. And we were sending data management to big banks and big insurance companies. And and it was a tough time because everyone was slashing their IT budgets. Everyone was nervous to buy from startups because startups so many startups weren’t bust in 2000. So big enterprises became much more conservative again about their IT spending and and also who they bought from. So we we had some success. We did sell to MetLife Insurance, Bank of America, and some top tier enterprises. But it was hard going.
Zvi Schreiber: And it was kind of frustrating in a way, as soon as we sold to IBM, many deals that we were trying to close and failing, as soon as IBM bought us those deals closed immediately, because buying from IBM was the conservative thing to do in those days, certainly, and you know still today. So that was ah a lesson. you know We had ah a modest success, but it could have been a lot more if we weren’t dealing with such ah such a conservative market at that time.
Alejandro Cremades: How was it like to do ah an M&A transaction, you know selling your business to such a big player like IBM? How was that for you?
Zvi Schreiber: Well, it was that was my first time going through well sorry it was my second time um first time going through through an ah acquisition by a big enterprise, let’s say. It was quite an experience. we We turned up there in Albany um for two days of due diligence. And they had given us a questionnaire in advance with one over 1,000 questions. For example, though there were 35 questions on on and environment, whether we’re polluting any rivers, you know that kind of thing. now We’re a software company, but they don’t get it. They ask all the questions. So very, very heavy process. And we had this funny thing when we met them. And and they so you know we said, um oh, we’re a team of but about 30.
Zvi Schreiber: And they said, we’re also a team of about 30. Of course, they they meant just the team doing due diligence was 30. IBM at that time was 300,000 people. But they’d sent 30 people just to sit with us and do due diligence. So it was a very heavy ah process, but but ultimately successful. And the product did very well inside IBM. yeah
Alejandro Cremades: So then let’s talk about you know what happened after. you know Obviously, one thing that is saying incredible is that you go from two successful outcomes to all of a sudden a fire sell. And it’s like they say you either succeed or you learn. So with this next experience, what happened there that they really forced you guys to having to go to ah to really sell the business you know and and perhaps not at the desirable outcome that you had to hope for.
Zvi Schreiber: Yeah, I mean, look, you win some, you lose some. I always knew that it’s ah that that it’s risky. And um I was always very honest with my investors. Even though they know that, I always said explicitly to my investors, you you could lose all your money. um And and that that was helpful. So when they did lose almost all their money, I was able to you know look at them straight in the the eye. And some of them invested with me again afterwards. So so I kept a good relationship. um The company then, it was called Ghost, which was kind of a clever acronym of global hosted operating system. um And it was my only time I did B2C, which is always even much more risky than B2B. So it was consumer web. And it turns out that we were too early to market was really the issue there because we ended up getting, ah we we really did something which is very similar to Dropbox and and Box dot.net and
Zvi Schreiber: you know, keep all your files in the cloud. And if we if we were two years later, maybe we could we could have been, you know, Box or or ah Dropbox. That was a very, we had the right idea, you know, I had the right idea and and um we built a good product. come It’s rated, of course, we had issues, but we built a good product. And if we were two years later, it might have been a huge success. It might have been worth billions of dollars. ah We were too early. It’s kind of hard to remember, but in 2008, ah The internet wasn’t very fast. you know In those days, when you bought a broadband internet connection for your home, it was 256 kilobits per second, you know a quarter of one megabit. Now everyone’s got 100 megabits and 500 megabits. So um the internet the internet infrastructure just wasn’t ready for keep all your files in the cloud. ah So we had the right idea, and we were actually a couple of years too early to market, I would say.
Alejandro Cremades: So in this case, then, you know market timing. you know What did you take away there from market timing that maybe some of the founders listening you know can really get inspired by from some of those lessons on um being able to time things?
Zvi Schreiber: Well, you know, get it right. um You know, being being too late is everyone knows that if you’re too late, then it’s tough. um But being too early can kill you for sure, just as much maybe more maybe being early kills you more because there are amazing cases of people who were late to market and succeeded. Maybe the most obvious one is Google. I remember very well when when the first time someone showed me Google, And I’m like, what what are they thinking? It’s too late. We’ve got Yahoo search. We’ve got Ink ink to Me search, and Altavista, you know alta vista and and you know there’s several great search engines. Who would even fund a new search engine? It just seemed like ridiculous to me. They they were too late to market. And boy, was I wrong. you know that they They just created a search engine which was a bit quicker and a bit better, and everyone moved. um So you can recover. You can be late to market. And if your product is better, you can you can win.
Zvi Schreiber: if you’re too ah If you’re too early to market and and you don’t have enough money to to wait it out, then then you’re dead.
Alejandro Cremades: so I mean, here you are, you know building, scaling, exiting successfully and unsuccessfully also companies, ah learning a lot, having a lot of fun. So why going from being the founder to being more an um an employee?
Zvi Schreiber: um No, I’m still still the founder. um
Alejandro Cremades: ah with with ah with a like With the next one, no? With the hardware company that you take that you did like that
Zvi Schreiber: ah Ah, yes, sorry, I got you. Yes, for a couple of years, years i was I was the CEO. um But although I had wasn’t the founder, I’d been involved in that company for a long time. My dad was an investor there. I’d been on the board of directors. I’ve been involved in the original investment there. So i’d been although I was not the founder, um I’d been quite involved as ah as an active director for many years and certainly felt some of the same ownership that you feel when you’re the founder. um And at that time, we had to fire the CEO who was there, and and there was a gap. So one, I wanted to help out. I cared about the company. um but But also, you know it was an interesting experience. That’s why I learned all about supply chain and managing inventory. And you know managing a hardware company is really something very different. So so I had a good couple of years at Lightech and had a good opportunity to sell it to GE Lighting in 2011.
Alejandro Cremades: And hey, you know that’s where the idea of your next baby came about. So it’s just the one that you’ve been pushing out for quite a bit of time.
Zvi Schreiber: Exactly right, yeah.
Alejandro Cremades: So walk us through what was that ideation process because at this point you had built a couple of companies and you really understood you know what it took from point A to point C.
Zvi Schreiber: Yes.
Alejandro Cremades: So walk us from ah how you come up with the idea to really testing it, valid validating it, and then being like, this is it, let’s go.
Zvi Schreiber: Yeah, well, I thought I understood. I’ve learned learned some new things as well, but ah for sure. um So I mean, it it was really a classic case where I saw the need. So when I was at Litec, we were doing international shipping, we were manufacturing, it was electronic power supplies for for LED lights is what we were doing, which was good because LED lights was growing market by now it’s taken over the world. But then it was quite new and growing fast. And um we were manufacturing in the south of China like most electronics and and shipping by ocean and by air from Shenzhen area to the US and to Europe where our customers were.
Zvi Schreiber: um and so Yeah, so so we did that. And um you know I was just kind of shocked. you know I expected that um if you want to travel from Shenzhen to New York or or Paris already for 25 years, or at that time already for 15 years, you know there was a website where you could see all the options and book online. So I certainly thought that when I was the first time I was shipping a container or air cargo from Shenzhen to to LA actually or to London, i expect I said, okay, where’s the website where I can see all the prices and and book? you know and And I was kind of shocked to find out that it didn’t exist. Not only that there wasn’t a website, but you call up, the the the companies who arrange this are called freight forwarders. It’s a big, big industry.
Zvi Schreiber: As you know, Alejandro, when you go into a shop in America, in Europe, 90% of the products you buy are imported. So this is a huge part of the world economy, international shipping. A huge part of our lifestyle, a huge part of how the world economy works is international shipping. But not only was it not online, but when you call up a freight forwarder, and that there’s 100,000 freight forwarders in the world. It’s a very, very big industry. ah When you call them up, that they They don’t pick it up when they say they’re going to pick it up. They don’t deliver it when they say they’re going to deliver. You wait. And this is still the case. We’ve started to change it. But it’s still common. You can wait two or three days for a price quote. When you get an invoice afterwards, it doesn’t match the price quote. you know There’s hidden fees. It’s a complete mess. And you know I felt like I was the first guy to ship something from China to the US you know the way they treated me. And as you know, that’s something which is which is done hundreds of thousands of times a day. And yet it was completely unautomated, completely opaque.
Zvi Schreiber: um so um So yeah, you know it was just a classic situation where I started Freitas because I saw a big gap in the market and a big need.
Alejandro Cremades: So how do you guys make money with Freighters? What’s the best model there?
Zvi Schreiber: Yeah, two main two main business models. One is, you know, I do see us primarily as a platform, as ah as a marketplace or a platform, which match matches buyers and sellers. So part of our part of our revenue is transactional. We call that platform revenue. And we’re now a public company, so we report platform and solutions separately. So we’ve got platform revenue, which is transactional. ah But still a majority of our revenue is actually subscriptions. So it’s um mostly SaaS, software as a service subscriptions, but also ah data subscriptions. We sell ah data. we We have the best data.
Zvi Schreiber: in the world for what is the current price of ah shipping a container? What is the current price of shipping kilograms by air? And so we published that data and other related data on the Freitas terminals. So our solutions businesses. So it’s basically platform, which is transactional, and then solutions, which which splits into SAS and data subscriptions.
Alejandro Cremades: so then So then in this case, too, I mean, you guys have raised quite a bit of money, you know, with going in public and then also with the investors prior to that. So how much in total have you guys raised to date?
Zvi Schreiber: $200 million dollars in total.
Alejandro Cremades: And then what has been the journey of raising that money? Because obviously, too, you know, you are a successfully accepted founder, so you are according to investors a tier zero founder that is very hard to come by. So I know that there was more than the people and the money. So how did you go about the people? you know How did the cycle shift? How was going public? So walk us through that.
Zvi Schreiber: Yeah, I mean, there are some advantages when you’re doing this for like, you know, the fourth time that that you do have a relationship with the venture capitalists. and That helped a lot because when we started Freitas, the VCs didn’t really think about supply chain or logistics as an interesting area. ah That changed then over the years that we were, by the time we did a Series C, um you know, Logitech or was already sort of a thing. So so VCs have discovered that there’s a big industry which needs to be modernized. But I think the Series, the seed and the Series A, I only did because I had relationships in a track record. That helped me a lot.
Zvi Schreiber: because investors were not otherwise looking at Logitech at that time. and Then I did a Series C, which was mainly actually strategic investors, so FedEx investors and SGX invested, the Singapore Stock Exchange invested. um And then we did our final rounds by going public. We IPO’d via a SPAC in January of last year.
Alejandro Cremades: How crazy was that?
Zvi Schreiber: Well, um you know again, I have to say I went through it um with our with my eyes open. Our stock has not traded well since then, which is disappointing. but But I told all the team and I told all the investors, we’re not doing this to exit. We’re doing this to raise money. ah you know and I haven’t sold any shares and almost all my investors haven’t sold any shares. you know We did it as a good way to raise money. At that particular time, um there was a lot of money in SPACs. We were right at the end of the whole wave of SPACs. We were one of the last SPACs to really get out. But at that time, there was a lot of money in SPACs. It was good money. it was you know that There was good investors behind our SPAC and M and&G, which is a
Zvi Schreiber: top British funds invested and they’re long-term investors so actually I think for us it was better than an an IPO because in an IPO you get a lot of people who are just investing short term for the IPO pop. ah We raised 80 million dollars from long-term investors. at that time. So it was it was a great way to raise money from quality long-term investors. um And I said to all my team, and I said to my investors, we’re not doing this to exit. I hope the trade the share trades well, but that’s not what i’m what it’s about. I’m not not even going to look at the share price. This is a good way to raise quality money. And in that respect, it was very successful for us. Of course, I’d be happy if the share
Zvi Schreiber: traded well and reflected our true value, that would be even better. um but But even though it’s not, and and the volume is very, very small in ah in our share, so it’s not not a very liquid share yet, um even so we achieved our main goal, which is to raise good money from good investors.
Alejandro Cremades: So let’s talk about that, because i sure I’m sure that you know like people are going to be able to to really learn a lot you know when it comes to like the key ingredients to choosing the right investors. If you could share what are the top three that founders should keep in mind, what should those be?
Zvi Schreiber: Look, um you want investors who who are going to understand your business and be supportive. You want investors who are suitable to your business. So I knew when I started Freitas that this would take a long time. I’ll be perfectly honest, I didn’t know how long it would take. I knew it would take a good number of years. This is a big conservative industry. I knew it wouldn’t change quickly. um And so I took investors who were in it for the long term. And honestly, yes, it took even longer than we thought, but but but it’s succeeding. and And my investors have been very patient um and never pressured me to exit early, never always understood it would take a long time. So you need you need the right kind of investors for the…
Zvi Schreiber: for the for the type of um business that you’re building. We were building a business which is modernizing, digitalizing a very large, very conservative industry. It was always clear that’s going to take time, taking even longer than we thought, but succeeding. And so it’s fantastic that we have investors who, some of whom are in already for more than a decade, and still not pressuring me to to you know to to help them exit. ah still supporting me making the right long-term decisions. so So that’s super important. ah You know, value-add is the third but the least important. If investors can add value, that’s great. If they could they have connections, if they have insights, if they are able to help with a business that’s a value-add, that’s always good, but it’s not critical. What’s critical is to have investors who are going to be supportive and who are aligned with you on on what kind of business you’re building and what kind of timescales you’re building on.
Alejandro Cremades: So let’s say you were to go to sleep tonight and you wake up in a world street where you are able to see fully realized the vision for Freitas. What does that world look like?
Zvi Schreiber: Well, yeah the vision, it’s quite simple, really. The vision for Phratos is that shipping goods around the world will be transparent and automated, just like passenger travel has become. um And we’re already making progress towards that. and And we’re making more progress in air cargo than ocean. In air cargo, we did ah you know about ah a billion about a billion dollars of spend on air cargo.
Alejandro Cremades: you
Zvi Schreiber: which represents many billions of dollars of goods were booked fully digitally last year. And that’s where we’re at an even higher run right now. So we’re starting to see that. Still, it’s a small proportion of the world market, but we have some scale now. So we’re able to see what it looks like. And it’s just what you’d expect. It’s bringing the same experience for shipping of goods. as we already have for passenger travel, where things are very transparent, very online. And through that, ah improving world trade. I think world trade is important. It’s improving and important for employment. It’s important for our lifestyle. It’s important for world peace in a way. you know There is a claim, and it’s it’s quite well-backed, that when countries trade with each other, they’re less likely to fight with each other.
Zvi Schreiber: It’s not a guarantee, but but clearly there was a correlation between you know trade opening up and and peace. And I know i know this and know there’s some parts of the world which are far from at peace, but still most of the world is at peace in Europe ah besides other than Ukraine, but Western Europe has been at peace for for, you know, 80 years now for the first time in in history. um so So even though there are some horrible exceptions, it’s still true that as countries open their borders and trade with each other, it contributes to world peace.
Alejandro Cremades: So now let’s talk about the future, but doing, sorry, the past, but doing so with a lens of reflection. Let’s say, you know, you were able to go back in time and I’m able to put you in the spot where you are now a software engineer that is thinking about, you know, switching gears here and becoming an entrepreneur. Let’s say you had the opportunity of being able to be right there with that younger self and you’re able to give that software engineer one piece of advice before launching a business. What would that be and why, given what you know now?
Zvi Schreiber: goodness Goodness. I don’t know. I think if if I was a young entrepreneur and some guy, some dude sort of turned up from the future, started giving me advice, I wouldn’t appreciate it very much. So so I think I wouldn’t.
Alejandro Cremades: ah Let’s say that younger self actually listened.
Zvi Schreiber: um
Zvi Schreiber: look i don’t have anything clever to say that you haven’t heard before um but And you you’ve probably heard this many times before, but it is it is a lot about the team. so you know So surround yourself by great people, surround yourself by smart, engaged, loyal people. That’s ah obviously, and I’m sure many other entrepreneurs have you’ve heard given the same advice, but that’s that’s the reason why many people say that is is because it’s true. Likewise, treat your investors as part of the extended team. Find good investors who are going to support you, who who are aligned with your with your vision and your time scales.
Zvi Schreiber: um and And and also, you know, there’s a lot of luck, you know, I don’t think that I when I had successes, I don’t think it’s because I was clever when I when I had failures, I don’t think it was because I’m stupid. and there’s And you’ve probably heard this from other entrepreneurs as well. but But we have to be honest, there’s a lot of luck along the way. And so you have to enjoy the ride and and celebrate the wins and don’t be yourself up about, you know, about the losses.
Alejandro Cremades: Absolutely. Absolutely. So, Svi, for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Zvi Schreiber: Well, LinkedIn or my emails, v at freytos.com.
Alejandro Cremades: Well, that’s easy enough. Well, Svi, thank you so much for being in the Dealmaker show today. It has been an absolute honor to have you with us.
Zvi Schreiber: Oh, my honor. Thanks for having me on.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Zvi Schreiber On Selling A Company to IBM And Now Raising $200 Million To Build A Freight Shipping Marketplace And Platform appeared first on Alejandro Cremades.
In the evolving world of entrepreneurship, few stories are as compelling as that of Stephen Bailey, a former lawyer who transitioned from the courtroom to the startup ecosystem. His journey is a testament to the power of leadership, reinvention, and adaptability.
Stephen’s company, ExecOnline, has attracted funding from top-tier investors like Kaplan, ABS Capital Partners, NewSpring, and Osage Venture Partners.
In this episode, you will learn:
- Shifting from law to entrepreneurship can leverage skills like structured thinking and rigorous problem-solving.
- Early-stage investors bet on the founder’s potential and adaptability, not just the idea.
- Headline valuations matter, but investor rights and preferences can significantly affect your true value.
- Keeping investment rounds simple and transparent facilitates smoother future funding.
- Implementing founder-friendly provisions, like super-voting rights early on, helps retain control in later funding rounds.
- The pace of change demands continuous learning and adaptation in leadership capabilities, accelerated by recent global events.
- Successful entrepreneurship combines a clear vision with the agility to navigate unexpected challenges.
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Your email address is 100% safe from spam!**About Stephen Bailey:**Stephen Bailey is a regarded entrepreneur, leadership and workforce expert, and futurist who works with corporate leaders within the Fortune 500 and Global 2000 to create life-changing learning experiences.
He co-founded ExecOnline, a premier provider of certified, online leadership development experiences, to diversify the leadership pipelines of the world’s largest organizations by democratizing access to high-quality leadership training.
As CEO, Stephen oversees the organization’s partnerships with top universities and its broader efforts to produce impactful and life-changing experiences for leaders worldwide.
ExecOnline partners with the world’s top business schools to deliver online leadership development programs.
Prior to ExecOnline, Stephen was the CEO and chief product officer of Frontier Strategy Group (FSG). Before joining FSG, he was an associate in WilmerHale’s venture capital and private equity group.
Stephen earned his bachelor’s degree from Emory University and received his JD from Yale Law School. He is the board chair of the Truman Center for National Policy and a member of the board of Prospect Schools, a charter school network in New York City.
Stephen was also recently named to the Board of Directors of Match Group, Inc. He was named 2022 “EY Entrepreneur of the Year New York Award Finalist.”
Under Stephen’s leadership, ExecOnline was named Forbes 2022 “America’s Best Startup Employer” and has become a member of the World Economic Forum New Champions Community.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty. Hello, everyone, and welcome to the DealMakers show. So today, we have a very exciting founder joining us, you know a founder that day was a lawyer, you know now turned entrepreneur, which I can definitely relate to that. And we’re going to be learning quite a bit on how he made that switch you know from being a lawyer to now being a founder, you know to joining the startup world, to um Ultimately, you know like ah what he has seen too when it comes to leadership, because that’s something that they’re one of the leaders had, funny enough, and some of the changes that they’ve seen you know with COVID and so forth, and especially with some of the pivots when it comes to their business model as well, which I think is going to be all in all very inspiring for for all of us. So without further ado, let’s welcome our guest today, Stephen Bailey. Welcome to the show.
Stephen Bailey: so So good to be here. Super excited for the conversation.
Alejandro Cremades: So, originally born and raised in Louisiana, two parents there that were doctors. So, it gives us a walk through memory lane. How was life growing up?
Stephen Bailey: Life is great. New Orleans, best city on earth. um It is a fun place to be from. I try to make it back as often as possible. um But yeah, born and raised in New Orleans. um My family still lives there. My mom and dad are ah ah doctors. My mom’s a psychiatrist. My dad’s a desk. Much to their chagrin, I decided to ah pursue law, which you know doctors usually hate. um and um i In high school, I spent a lot of time debating. um As my activity, I also did that in college, and that really helped shape my trajectory into law school. so
Stephen Bailey: went to Emory for undergrad, went to Yale for law school, and after spending all of that time preparing to be a lawyer and working at a firm that it turns out we we share in common, Wilmer Hale, um I figured out after all that that I wanted to do something totally different and and move into the world of entrepreneurship. So I now define myself as a recovered lawyer um and you know I know still probably just enough to commit malpractice at this point.
Alejandro Cremades: That’s amazing. That’s amazing. So so in your case, you know when I guess being a lawyer, you know what do you think you know that opened up for you? you know When it came now, you know obviously, even though you left that behind you, I’m sure that there’s a lot that in that you use from that background, from that day learning, now that you got in and that training too. no So what do you think you took away from with you you know from those years as a lawyer and studying law?
Stephen Bailey: Yeah, it’s a great question. I think really three things come to mind. So one, Yale was just a really inspiring place with a great network of people that were doing really exciting and interesting things, both inside and outside of the law. So to give you an example, the ah first company that I left to join, that startup, was founded by one law school classmate and funded by another law school classmate, just to give you a sense of the value of those connections. I’d say the second thing um was really understanding how to think in a really structured and rigorous way about complex problems. And that was a combination of both what I learned at Yale as well as my time debating in high school and college. And I would say in addition to being able to think in a really structured way, being able to see both sides of an issue and understand how to make difficult decisions between um competing options.
Stephen Bailey: And then the third ah piece was just the very specific experience that I got at Wilmer Hale in the Venture Capital and Private Equity Group, and that’s been tremendously helpful as we’ve gone through um various financing rounds. We’ve raised over $100 million dollars of capital i’m at Tech Online, and I always appreciate um having a working knowledge of the legal side um of deal-making, which has come in handy at it Tech Online um on a number of occasions.
Alejandro Cremades: Now, one thing that is crazy here is, and and obviously, as I’m also a recovery lawyer, I can’t relate to it. you know All the years that you put into studying law, you know doing the bar, then joining an amazing law firm, one of the best actually. ah How was that how much that a journey you know of getting to the decision of, hey, I got to leave this career behind and I got to switch gears?
Stephen Bailey: Yeah, it was a really tough decision. And just like you said, you spent all of this time preparing for a career. And when I went to law school, I had no conception of a potential career in entrepreneurship. So this was not something that was on the back of my mind. If you’d asked me on day one of law school, I was going to go to Yale. I was going to go to a big firm like Wilmer Hale. I was actually going to be a litigator, likely ah an appellate litigator. I’m actually one moot court at Yale. So that was very much the path that I was on. um but But I find that in life, um being open to new possibilities ah can really be, not just career defining, but life defining. And as I started to, you know, I spent a summer at a law firm after my first year of law school as a summer associate, which is something that’s pretty common amongst law students. And that was sort of my first inkling that, you know, this is interesting, but it might not be where I want to plant my flag long-term. And then separately from that, I started to have conversations with some classmates, one in particular, um Thomas Lehrman, who’s one of the,
Stephen Bailey: co-founders of Gerson Lehrman Group, um who had started Gerson before law school. And so talked about entrepreneurship, met some other folks who were interested, and that sort of planted the initial seed that maybe there was something else out there. um Then I went back to a law firm after my second year of law school, and it was really between that second and third year that I got serious about considering, is this really what I want to do? So um I had the good fortune of being at a firm like Woomer that had a diverse practice, and so So what I said to myself when I graduated is instead of going into litigation, I’m going to actually go into private equity and venture capital because that felt like an easier way to transition. And it just so happened that one of the law school classmates that I was talking to um was thinking about starting a business. And I ended up introducing him to Thomas, who was the initial investor in that business. front ti drive group So that’s sort of how it happened.
Stephen Bailey: My decision to actually leave and say, I’m walking out of the law firm and I’m going to be working for a startup for my kitchen table, ah you know leave on a Friday, work at the kitchen table on a Monday, was driven fundamentally by a conversation that I had with a good mentor at the law firm, a guy by the name of David Sylvester. And I was going back and forth, and he said, look, I’ve done a lot of deals for a lot of entrepreneurs. I assumed at some point that I would leave and I would join one of those companies. And I kind of never did. And I always have a piece of me that wishes that I had. And what that what he sort of said is, like look, you’re young. you The firm is always going to be here. But what I ultimately took from that, and as I went through a lot of soul searching, was that I feared um regret more than I feared failure.
Stephen Bailey: And so what I said to myself is worst case scenario, I turn over some cards and I learn what it’s like to be an entrepreneur. And that’s going to fulfill me a lot more than staying at the law firm on the safer path and then wondering what could have been on your cell phone.
Alejandro Cremades: so So I guess say you then now become, I would say, part of the venture world with these folks. ah But one thing that is very interesting as part of that journey is you go from being a lawyer to now a heading product out of all things, and then slowly you know you end up becoming the CEO. I mean, that’s quite a shift of um of gears there when it comes to titles and responsibilities.
Stephen Bailey: Yeah, you know, it was um so so my first startup was a company Frontier Strategy Group. Information Services Company sold a subscription um that helped organizations benchmark their performance, improve their performance in international and emerging markets. And so it was a business that I had ah very little experience in. On day one, it was three of us, ah the two founders and myself as the first hire. so it Saying I was the head of product sounds a bit lofty. I was really you know just sort of one of three people doing the work that came in as it came in. um and Then over time as the business grew, um I grew my career with the business. The ability to go from really what on day one was doing bespoke work for a couple of individual clients to then thinking about how do we build a scalable subscription offering.
Stephen Bailey: to then, as you said, taking over as CEO of the business was a really important journey. And I think I had the benefit of growing with the business as opposed to stepping into a business that was already large and established. And so one of the things that I sort of say to younger folks who are thinking about their career is constantly put yourself in uncomfortable positions. I mean, there was, through my throughout my entire run at Frontier Strategy Group, there was rarely a day where I felt like, I’ve done this before and I know exactly what I should be doing.
Stephen Bailey: I was learning as I went, I was making mistakes, I was hopefully getting more things right than I was getting wrong. But ultimately, it’s kind of like going to the gym and pushing yourself with a really hard set of workouts versus just kind of going through the motions. If you do that every day, you’re going to get up the curve so much faster than your peers that are maybe taking a safer path. What I think about if I’d sit at the law firm, the conversations I was having, the clients I was meeting with, I would have never seen those folks. And I certainly would have never been in a room sort of leading conversations with them if I’d stayed on the on the safer path.
Alejandro Cremades: So then, I guess, at what point does it become evident that it was time to um start your own company? That’s that’s a mega step.
Stephen Bailey: Yeah, it was ah it was a it both was and it wasn’t. it you know When I think about um the biggest ah moments in my career, the first decision to leave the law firm and join a startup probably felt bigger at the time because it was a whole change in professional identity. um Whereas when I went from a frontier to starting my own company, I already saw myself as an entrepreneur. Now, what was interesting is I never started a company before. And so I did have some questions around, OK, if I was going to start something, what would I start? And does it make sense for me to start something? Or does it make sense to join a startup and take over as CEO and help them scale their businesses I had done um at Frontier? And so I learned a couple of valuable lessons um before I talk about specifically why I started Tech Online.
Stephen Bailey: And the first is that we often have a tendency to um define ourselves by our past experiences. So because I had joined as the first hire and because I’ve become CEO and helped build someone else’s idea, the first thing you think is maybe I should do that again. And you know when I started to step back and reframe, I said to myself, well, why wouldn’t I want to stop my own thing? Why wouldn’t I want to bring a great idea into the world and scale it as opposed to taking someone else’s idea? And when I reframed it, it opened up a whole set of possibilities that maybe wouldn’t have been evident if I had sort of thought about my future based on what I had accomplished in the past. And so that sort of led me to um exec online.
Stephen Bailey: um I always had the idea in the back of my mind that um I’d be interested in a business that solved the challenge that I heard repeatedly from executives at frontiers strategy. So we would host roundtables for leaders all over the world. We’d have agenda different topics on the agenda and talent was always a topic. and leadership capability was a top topic and so when I left I started to think about what could I build that would fundamentally help organizations develop leaders in a different and kind way and help leaders accelerate their career and the more I learned about leadership development the more I was surprised to find
Stephen Bailey: how few leadership development resources were available to um the the typical and a leader in an organization. There were a few people who got heavy levels of investment, but the vast majority of folks were not really being invested in from a leadership development perspective by their companies because all leadership development was happening in person. And so the idea behind the tech online was what if you could take leadership development, which traditionally everyone thought had to be done in person because you couldn’t engage leaders online. What if you brought that online and what if you did it in a way that was higher quality than what you could do in person. And the way we did that initially was by partnering with some of the best business schools in the world.
Stephen Bailey: um having a very intentional methodology around how you develop world-class um leadership programs, bringing those online, and then democratizing that access without sacrificing quality.
Alejandro Cremades: So how do you guys make money at Except Online? what is the business What ended up being the ultimate you know business model here?
Stephen Bailey: Yeah, so we partner with um many of the world’s leading business schools, so schools like Berkeley and Columbia and Wharton and MIT, um taking programs um that traditionally, before I took online, would have been delivered purely on campus in their executive education group. So we’re all non-degree certificate programs that you would call executive education. um We partner with them to build exec online specific offerings that we host and deliver on our platform for the corporate enterprise. So we partner with schools. We sell to companies who then buy the programs we offer on behalf of leaders within their organization. And we now work with hundreds of companies. We develop tens of thousands of leaders um every year. And we’ve expanded our offerings to include not only school partners, programs but our own proprietary programs and our own coaching capabilities so effectively we become a one-stop shop for all leadership development needs from frontline managers up through the most senior leaders in the organization.
Alejandro Cremades: So I guess see you guys have raised quite a bit of money, too. So you were alluding to it earlier. You guys have raised about $110 million. So how has it been through the experience of raising money, and how have those financing cycles, how have they gone in parallel with the life cycles of the business, and how those expectations, too, have shifted from one cycle to the next?
Stephen Bailey: Yeah, so one of the things that um I think is really important when you’re thinking about raising capital is, you to your point, where are you in the stage of your company and understanding what investors expect at different stages? um So when you’re raising a seed round, which you know is, in my view, um both the most exciting time for the business and also the hardest capital to raise, You’re raising around an idea. um you know Every great startup has to solve ah chicken a number of chicken and egg problems. And the first problem you have to solve is it’d be really great if I had some money to build something really cool. um But in order to get that money, um I’ve got to sell someone on a vision before it’s built.
Stephen Bailey: um And so for for that stage, people, by and large, are just investing in you. When I talk to um seed stage investors, the thing I hear pretty consistently is, yeah, the business idea needs to be a good one. um And it needs to make sense. But fundamentally, I’m evaluating the person. Because I assume they’re going to pivot. The but the world’s going to change. The business is going to change. And i have I’m betting on whether I think they’re going to figure it out. And so that is fundamentally a very personal sale. By the time you get to the Series A, I think what investors tend to be looking for is product market fear. So you’ve gone out, you’ve proven there’s something here, you’ve sold some customers, there’s traction, the business has some early things to grow. Then when you get to your kind of Series B, Series C, I think this is a mistake that a lot of young entrepreneurs make, is they go with the same pitch for their Series B and C that they did for their Series A.
Stephen Bailey: And it is a very different set of expectations. And the sort of way I think about it is by the time you get to Series B and C, you have investors that are really starting to think about, okay, how are the economics of this model coming into focus? What your what are your retention rates? What is the lifetime value of your customer? What is your LTV to CAC? You know, all these things that then start to create the long-term view of how the economics of the business is likely to trend. And is this going to be an exciting growth, our growing profitable business over time? And then at the latest stages, you’re starting to really have investors that are thinking about exit. So what are the likely paths? Is this an IPO? Is this an acquisition? If it is an acquisition, what does the acquisition market look like? What type of return am I going to get on that acquisition? And so I think understanding
Stephen Bailey: each one of those stages is really important. And through the life cycle at Tech Online, we’ve gone through our Series E round. um but We’ve been able to tailor our message at critical moments, given those expectations of particular investors.
Alejandro Cremades: So then, in that in in that case too, you know being a former lawyer know and and having that training too, you know now that you’re looking at it from the founder point of view, there’s probably a lot of founders that are listening to us right now, and they’re probably about to go through financing rounds, through dealmaking. What would you say are the three biggest things that a founder should keep in mind when it comes to legal, when going through those deals?
Stephen Bailey: Yeah, it’s a good question. Well, you know, I will preface it by saying, and my my general counsel would probably appreciate me saying this, I know just enough law at this point to commit malpractice. So take everything I’m saying with the grain of salt. But in all seriousness, I think um founders tend to over index on headline valuation. And the first question that everyone’s got, what was the valuation? And that’s really important. I mean, that’s a critical economic term. But there’s so many other pieces that go into when you think about rights and preferences of investors that really determine what I would call the true valuation. So, for example, if you get a
Stephen Bailey: $200 million pre-money valuation, but your investors have a heavy lip-pref on top of it, then that’s not really a $200 million dollars valuation. And I would argue that you should pay a fair amount in a valuation, a headline valuation to get that lip-pref out of the deal because ultimately that’s going to make a big difference in terms of your own personal economics. But secondly, it’s going to make a a big deal in terms of your ability to do future rounds. So I think the second thing that um a lot of founders underestimate is the extent to which complexity in one round, in addition to creating potential potential drag on your economics, also makes it harder for you to do future deals because new investors like to come into a cleaner capital stack.
Stephen Bailey: And if they’re coming into a messy capital stack, then they want certain rights and preferences, which just makes it more complex and attempts to snowball round to round. So as you’re thinking about building your business, particularly in the earlier stages, one who survives is I try to make your rounds as clean as possible. ah the The third thing I would say is, um Think early on about ways that you as a founder can maintain control of your business as you bring on capital. So super voting rights um are kind of one ah way to to do that. That’s something that we did at Exec Online. And what I would say is people often think about it too late. So in the earliest days of a business, when you’re raising your seat round, if you put into your incorporation documents that you have 10X voting,
Stephen Bailey: for your common shares, then most seed investors just don’t care. Because they’re investing in you anyway, it’s like it’s you know whatever. um It’s already in the document. So when you incorporate initially, put that in there. And then once it’s there, if your business is doing well and things are are continuing to progress, most investors aren’t going to make you take it out to do a deal. And so it kind of is in there. If you wait and try to do it later, No investor is going to go for it. So I think my third thing is think early and proactively about how you maintain control of your business as you take on more capital, even if you don’t own a majority.
Alejandro Cremades: So, let’s say you were to go to sleep tonight, Steven, and you wake up in a world where the vision of exec online is fully realized. What does that world look like?
Stephen Bailey: That world looks like a world where um there is much greater leadership mobility in organizations. People who enter organizations feel like they have a real path to leadership, no matter their background, um but whether they went to an elite school, whether they’re in the right networks, whether they’re you know male, female, what their race is, all the different axes of diversity. um People have the opportunity to advance in organizations because high quality leadership development is available to them at scale as a benefit that every leader comes to expect and have access to.
Stephen Bailey: And that has been the opposite of what leadership development has been traditionally, traditionally going to tap on to show the resource for a handful of folks that have been selected because they’re seen as high potential. And then 95% of people who aren’t categorized that way have to kind of fend for themselves. And that creates self-fulfilling prophecies that aren’t good for companies because they tend to have thinner leadership benches than they need in a world of significant change. And it obviously um has a huge impact on the careers of really talented folks that with a little support could advance and accelerate to higher and higher levels of leadership, but are often trapped and and kind of hit ceilings because they don’t have access to the development that we all need to push our careers forward.
Alejandro Cremades: and We’ve seen a lot of shifts in the world that we’re living in, that we’re living in now especially you know after we experienced COVID. So I guess a with that in mind, what kind of leadership changes have we seen ah in the last couple of years?
Stephen Bailey: Yeah, so I’ll talk about leadership capabilities, and then I’ll also talk about leadership development and how companies are thinking about it. From a leadership capability perspective, I think with COVID, you saw an acceleration of a trend ah that is already that was already taking place, but it’s just that the half-life on leadership skills is always shrinking. And at the end of the day, there feels like there’s a once in a hundred year event every year at this point. whether it’s COVID, whether it’s been you know the last bout of economic uncertainty, ah whether it’s global wars, there’s constantly shifting landscape under our feet that leaders have to ah react to in terms of both things that are happening inside their companies and outside of their companies. And so leaders, the pace of change and the pace of learning has to accelerate as a result. And so what I believe is that we’re in a learning economy,
Stephen Bailey: And I think COVID really highlighted this, where success is increasingly determined by your ability to learn fast in the pace of change. um The second big thing that we’ve seen is the need for leaders to be able to communicate and align through different hybrid environments than they’re used to in the past. Leaders were able to do everything largely in person. They basically had their teams around them. There were leaders that maybe ran international businesses that had to do a lot more virtual, but most leaders had the luxury of being co-located with the teams that they landed.
Stephen Bailey: We’re now in a world where you’re sometimes in person, you’re sometimes virtual, you often they have teams that are hybrid, some in person, some virtual, and that requires different communication approaches just in the same way that you know as a leader when to pick up the phone or hop on a Zoom versus sending an email. You also have to figure out how to lead a team that’s all co-located versus a team that’s brought all over the world. And I think that communication has become um a key piece. And I would say thirdly, especially with the rise of AI, um alongside COVID, a long term alongside economic downturn, the ability to make complex strategic decisions effectively is really important because as there have been so many shifts in the world, COVID being a key one of them,
Stephen Bailey: um decision making has gotten pushed down in organizations because you just don’t have the time for everything to flow up and back down. So leaders have to make more agile decisions with less than perfect information in a complex environment so there’s a lot of pressure on decision making. So that has meant that leadership as a capability and a priority is on the agenda of um every organization I think in ways that it hasn’t been ah in the past. And then in addition to that, the obvious piece with COVID in our business is It took us from a world where every day we were working to convince companies that you could deliver high quality leadership development online as opposed to in person to a world where overnight it all moved online. And so there was probably a decade of progress in that one to two year period with COVID of you know really taking the market from an in-person leadership development market to what is now primarily an online and hybrid leadership development market.
Alejandro Cremades: So you’ve been pushing this now, Steven, for over 13 years. And that in the corporate world, it could be like 150 years, right? so Which is unbelievable. So let’s say I was to bring you back in time. I put you into a time machine, and I bring you back to, let’s say, 2011, which was the time where you were thinking about starting something of your own. And let’s say I gave you the opportunity of um showing up right there and seeing your younger self. And being able to give that younger self one piece of advice before starting a business. What would that be and why, given what you know now?
Stephen Bailey: It’s a great question. um To me, the the key to starting a business is to be but have the right combination of a vision, with the ability to pivot and be agile on the path to that vision. So I think you have some entrepreneurs that suffer from, they don’t have a vision, they just they’re doing stuff but they’re not really sure where they’re going. And then you have some entrepreneurs who have a really clear vision but the vision is almost too clear and they think there’s only one straight line path. And so in some ways I analogize being a successful entrepreneur to whitewater rafting.
Stephen Bailey: You know where you want to get at the end and it’s about getting through the eddies, it’s about knowing when to fight the current versus when to go at the current and ultimately finding your way um to the right destination. I feel like if I had to summarize what it takes you know, in my 2011 self, looking forward to, and I’ve never started a company before. I joined as the first hire of a company. If I think about the person setting the vision, that was the big new thing for me. It was staying clear of what we wanted to accomplish. And anyways, that vision today is the same as it was back in 2011, but the ability to make your way through those eddies and not to fight the currents that you shouldn’t fight, to figure out your way around them and to navigate to good places. I think the the the art that goes with the science.
Alejandro Cremades: That’s amazing. So I guess for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Stephen Bailey: Hit me up on LinkedIn. Stephen Bailey at Zuck Online. You’ll find me pretty easily.
Alejandro Cremades: That’s easy enough. Well, Steven, I got to say thank you so much for being on the Dealmaker show today. It has been an absolute honor to have you with us.
Stephen Bailey: Thank you. Thanks for inviting me. It’s been a pleasure. I’ve really enjoyed the conversation.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Stephen Bailey On Raising Over $110 Million To Create An Online Platform To Train A Diverse Pool Of Future-Ready Leaders appeared first on Alejandro Cremades.
In the dynamic world of tech entrepreneurship and venture capital, few stories capture the essence of resilience, innovation, and determination quite like that of Zal Bilimoria. From his humble beginnings in Indiana to his pivotal roles at tech giants and eventually carving his path as a solo venture capitalist, Zal’s journey is as inspiring as it is instructive.
Zal’s VC firm, Refactor Capital, has funded projects like Astranis, Granza Bio, Bedrock Materials, and Rubedo Life Sciences.
In this episode, you will learn:
- Zal’s upbringing in Indiana, immersed in his father’s multiple ventures, laid the foundation for his entrepreneurial journey from a young age.
- His tenure at tech giants like Microsoft, Google, and Netflix provided deep insights into product management, influencing his approach as an investor.
- Leading the redesign of Netflix’s iPad app underscored the impact of user-centric design and metrics-driven decision-making in product development.
- Transitioning from Netflix to becoming a partner at Andreessen Horowitz highlighted his pivot into venture capital, where his product background became invaluable.
- Zal’s approach at a16z emphasized treating founders with respect and professionalism, which is evident in their Net Promoter Score system for interactions.
- Embracing the solo capitalist model allowed Zal to focus on early-stage investments, leveraging his expertise in identifying visionary founders and nurturing startups.
- Reflecting on recent market shifts, Zal highlighted challenges in fundraising post-COVID, emphasizing the importance of adaptability in venture capital.
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Your email address is 100% safe from spam!**About Zal Bilimoria:**Zal is the solo partner at Refactor, a seed-stage firm focused on bio, climate, and hard tech investments.
Previously, he helped launch the Bio Fund at a16z, and, prior to that, he spent 10 years in the product at Google, Netflix, and LinkedIn. He is an alumnus of the University of Pennsylvania.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty. Hello, everyone, and welcome to the Deal Maker Show. so Today, we have a really amazing you know founder turned investor. Well, I would say a employee corporate America, then turned founder, then turned investor, and now what he’s doing is pretty remarkable. so um So again, we’re going to be learning quite a bit. We’re going to be learning from his time at Netflix, some of the successful initiatives that he pushed. I mean, he’s worked at some of the best companies that you can think of. I mean, Microsoft, Google, ah LinkedIn, Netflix. I mean, talk about resume there. And then we’re going to be talking about his time
Alejandro Cremades: while he became a partner at Andreessen Horowitz, how he went about investments, ah treating founders, and then also what really pushed him you know into now having his own gig, you know which is basically is a solo you know ah capitalist. right i mean He’s just himself, and he already has like $225 million on their management, which is unbelievable. Again, brace yourself for a very inspiring conversation. And without further ado, let’s welcome our guest today, Sal Billimoria. Welcome to the show.
Zal Bilimoria: All right, thanks Alejandro. Thanks for having me.
Alejandro Cremades: So originally born and raised in Indiana, ah but they obviously, you know, like parents, say immigrants parents, which I’m sure it was incredibly inspiring for you, you know, immigrant parents from India. So give us a walk through memory lane. How was life growing up?
Zal Bilimoria: Yeah, I mean, life was amazing. I was so lucky to have my parents you know migrate here 50 plus years ago from India. We settled in Northwest Indiana a one hour from Chicago. The reason was my dad was a metallurgical engineer. So he actually worked at a steel company for 25 years. But we also had a computer business growing up where we built and sold computers in our basement, initially at people’s homes, doctor’s offices, libraries.
Alejandro Cremades: you
Zal Bilimoria: We did the entire school system in our in our area. And I was basically conscripted child labor from age six onwards, believe it or not. And so that’s how I got into hardware software and coding at a young age. But it was great to be near a big city like Chicago, but also have that small suburb feel growing up in Indiana.
Alejandro Cremades: And also your dad was an entrepreneur, so I’m sure that that was quite impactful you know for you and played quite a role on the choices that you ended up making.
Zal Bilimoria: Yeah, I think that was also his third company that he had started. He had started two small storefronts before. And this was his kind of first move into technology. And even after that, he did two other startups after that, during quote unquote, retirement. And so he’s been a founder of five companies.
Alejandro Cremades: By the way, Sal, we’re going to have to restart this because for some reason I’m hearing like there’s like um the sound is not coming nice from your end. There’s like some boom, boom, boom, boom, boom, like all types of stuff.
Zal Bilimoria: Okay.
Alejandro Cremades: So I’m wondering if, let me just say, a stop the
Zal Bilimoria: Mm.
Zal Bilimoria: Yeah, life was was really interesting. you know we It was nice being next to a major city like Chicago. My parents you know moved here over 50 years ago from India. And the reason we picked Indiana or they picked Indiana is because my dad was a metallurgical engineer. So he worked at a steel company while we were growing up. But we also had a computer business as well on the side where we would build and sell computers initially to people’s homes. But then we did doctor’s offices, libraries. We did the entire local school system as well. And I was conscripted child labor from age six onwards helping my dad. And so I got into hardware software encoding at a very young age.
Zal Bilimoria: And it was just an amazing experience. so um Yeah,
Alejandro Cremades: I know that they also your dad was an entrepreneur. how So how do you think that shaped you, who you are, and then also the choices that you ended up making?
Zal Bilimoria: yeah absolutely. I mean, actually, that was my dad’s third business as a founder. He had started two other companies beforehand and then did two other startups after in quote unquote retirement. but So he’s ah he’s a repeat founder himself. but you know that’s why I chose Penn in terms of the Wharton undergrad program because I thought I wanted to be an entrepreneur just like my dad and I wanted to follow in his footsteps. And so had an opportunity to go there, realized that a lot of my classmates at Wharton would go into banking and consulting. And so I did internships in both and I actually hated both of those industries. So I was very lucky that Microsoft came to campus and recruited me to be a product manager, which started my 10 year career as a PM.
Alejandro Cremades: Now, in your case, i mean you’ve been in some of the biggest companies that one can think of. right i mean You’ve been at Microsoft, then you were at Google, Netflix, and then obviously you know like the more they venture side of things. so i guess What would you say you know were some of the biggest things that you learned from being at a Microsoft, or at a Google, or at a Netflix? What do they have in common?
Zal Bilimoria: Yeah, I mean, a lot of these companies, you know they all have PM functions. They all have product manager functions. And for our audience audience who don’t know what PMs do, right? The PMs are responsible for working with the engineers, the designers ah internally, as well as external parties, like the sales team, for example, or or user research groups, et cetera, marketing teams, to be able to build and launch new products and then iterate upon them to to make them more efficient, make them better in terms of the core metrics.
Alejandro Cremades: you
Zal Bilimoria: And so the PM can be considered kind of a like mini CEO inside of a product organization, helping kind of steer the ship, setting the strategy, prioritization, and execution for a particular product. Now, each of those companies that I worked at thought about PMs in very different ways. So at Netflix, it was a very PM-centric organization, which means I had a lot of control and a lot of authority to decide where we spent our time, how the product would look, and and you know how to marshal resources toward that goal.
Zal Bilimoria: um I’ve never worked at Facebook before, but my understanding is Facebook is on the opposite end of that spectrum, where the engineers are really the ones that are kind of the guiding force, and PMs are mostly in support of what the engineers want to do.
Alejandro Cremades: you
Zal Bilimoria: Google was somewhere in the middle, whether it was YouTube, Google, et cetera, where PMs still had a significant amount of authority, but it was relatively balanced with the engineers. And so to answer your question, I think Having spent those 10 years building products, I got to see how different organizations thought about product development and execution. And I think they all had their own stripes of of awesomeness when it came to launching successful products.
Alejandro Cremades: So then I guess say in this case, too, I mean, with Netflix, you were part of the um one of the most successful initiatives that they pushed, you know which was I believe it was their their app. So so walk through what walk us through why it was so successful and and and and how did you guys go about planning it you know to to be the way that it turned out to be?
Zal Bilimoria: Yeah, no, it was an amazing experience. So I ended up joining in 2011. Steve Jobs had just launched the iPad and Netflix’s first iteration of the iPad app was just taking the desktop experience with the white background and like, you know, all the elements that looked like a point and click using a mouse and keyboard. They shoved that onto an iPad screen where there was no mouse or keyboard. And so it wasn’t really mobile responsive. It didn’t look like an iPad app. But admittedly, nobody really knew what an iPad app was going to be at that point in 2011. And so we used a lot of iPhone and mobile-related principles when redesigning the phone. And we actually did a couple of focus groups um while you know designing this product. And one actually, we came down to Mexico City
Zal Bilimoria: because we were just launching for the first time outside of the United States and back in 2011. Because before then, people don’t remember this, but before then, Netflix was just a US-centric company that was only available in the US. And so Mexico was one of our first launch countries. And so we did a focus group down there where we showed them three very different iterations mockups of what we think the the iPad app could look like. And of course, the one that won was going to be the most mobile responsive You could flick through the various rows and the titles, and you really got to get an immersive experience. um The way that PMs are geared at Netflix is on two dimension on two metrics. One is retention and one is streaming hours. So my goal as a PM, I’m trying to keep people continuing to get them to pay the $10 a month for the subscription, right? It’s really hard to move the needle on retention.
Zal Bilimoria: in ah in an AV test at Netflix, just because the the numbers are so massive and it’s really hard to move month to month. But but the most highly correlated variable to retention was streaming hours, meaning the more minutes and hours that you stream on Netflix, the more likely you were to retain as a member month to month. So I could potentially design a system that got you into a video, a TV show or a movie, as soon as you open the app. That was my goal as a PM to make those really great titles pop up at you. So then you have all these recommendations. You have this really great um system to kind of see all the stuff that you were watching. And so it’s very it was a lot easier to kind of move streaming hours as a metric. When we launched the iPad app and usually these AP tests, by the way, they run for about three to six months.
Zal Bilimoria: before you turn them on for the whole population. So you only have, you have two cells. You have a control cell, maybe a hundred thousand people, and then you have an experimental cell for another hundred thousand people. And you turn it on for maybe three to six months and you see what the data says, and then maybe you can turn it on to the entire, at that time, 30 million population. The iPad app was so successful in moving the needle on both streaming hours, but also retention after the first month. Reed Hastings, the CEO at the time, allowed us to turn it on to everybody almost immediately. And so that was just like such a rare instance of moving both of those metrics and in such a short period of time.
Alejandro Cremades: And by the way, I can see that, you know, the color her red, and yeah you know, you got a little bit from from Netflix for those that damn that are not able to to see this, you know, like right now, it has a background that is that is red, you know, beautiful background. But but in any case, one thing that tim that I’d like to ask you to is. for those that i are wondering, like, what about Sal, you know, with his say entrepreneurial, you know, path and, you know, especially having, you know, been exposed, you know, at such an early age with his dad, you know, what about him? What did he think about that? So you also, you know, went at it, you know, before before actually Netflix. So you went at it. But unfortunately, it was not the desired outcome. And as they say, you either succeed or you learn. So what happened there? And what was the lesson to be taken with you?
Zal Bilimoria: Yeah, you know, I was I was at Google ah at an amazing time, 2007 to 2010, and a bunch of my friends and fellow PMs ended up starting companies. um So Kevin Systrom from Instagram sat in the cube next to me. Dan Soroker and Pete Kuman from Optimizely were in the other cube over on the other side.
Alejandro Cremades: you
Zal Bilimoria: um I mean, you and then Ben Silverman from Pinterest, he was just on the other other side of the floor from us. So there was something in the in the in the water, Alejandro, at Google, right around 2009, 2010. And everyone thought, oh, I can leave Google and start a company and raise a few million dollars. And so I kind of wanted to really be a part of that movement as well. So I grabbed my my best friend from Microsoft and my lead engineer from YouTube, and the three of us co-founded a company called Sniply, which was rebuilding Google Reader after it had shut down.
Zal Bilimoria: You know that RSS Reader that was really popular?
Alejandro Cremades: Yep.
Zal Bilimoria: They had shut that down. and That was right when Twitter was starting to get going. And we thought we could use Twitter as an amazing distribution engine to get the news out there in snippets. We call this Snipply because we’re like, let’s get the snippets of the news out there so people can understand because most people don’t actually read articles. They just read the headline and maybe the first two sentences of an article. And so we wanted people to be able to say, let’s snip certain quotes and content within a piece of an article or a piece of content. so that people can actually see what’s going on in those write-ups.
Zal Bilimoria: But it was extremely challenging to get distribution because Twitter was just literally taking that and like they had that built into their platform from the beginning where you can write 140 words and create your own snippets and get that out there.
Alejandro Cremades: you
Zal Bilimoria: And so um we were able to build a product in a mobile-friendly way, but getting distribution was super challenging. We actually had an offer to um raise $2 million dollars in our seed round back in 2010 And um I had it all, I was fundraising. We’d gone through an incubator. I had all the paperwork in front of me and I had a sit down with my founders who we realized were like, it’s gonna be really tough to build this product and build this business. And we actually declined the money. And we said, you know what, we were gonna shut down the business. And so all of us kind of actually i ended up going back to corporate jobs, which I think really kind of underscored maybe some of us aren’t meant to be founders of startups and some of us are meant to like really be amazing people
Zal Bilimoria: working at at other companies.
Alejandro Cremades: So obviously, in your case, you ended up and landing on Netflix, as we were talking about, then LinkedIn, and then something really interesting that is not the typical, you know, um event that happens, if if if I may. I mean, all of a sudden you land into becoming a partner at a venture capital firm, and none other than the nutrition Horowitz, A16C, I mean, one one of the best VCs out there. So how did this happen? Because, I mean, that’s quite a sexy move there.
Zal Bilimoria: Yeah, I was surprised myself. um you know i I actually got a cold email from Andreessen Horowitz and they were looking for people that had my phenotype, former product managers and former founders who could come be a part of the investment team and help the general partners source and evaluate companies and then work on those investments after writing the check. And if you actually look back at the history, so Chris Dixon, Ben Horowitz, even Mark Andreessen himself, They were all PMs in their own careers. They were building products and they were launching them at a regular cadence and they really liked the PM phenotype there because the PM were ones that like I had mentioned before are the ones that technically understand how to build products but commercially understand how to sell them as well. And so when you obviously look at startups and you evaluate them
Zal Bilimoria: You have to understand both the building and the selling, obviously. And so it was actually a really great background that they were recruiting from. And a lot of my colleagues on that the the investment team at A16Z had product background. So let’s just say I was lucky at the right time that they were growing. At the time, they only had like 50 people. I think today they have over 500 individuals at the firm, which is just insane. But I got in at a perfect time to be able to start my venture career. And it’s been a blast ever since.
Alejandro Cremades: So how was that you know um like when you guys were like now investing in companies and and how did you go about treating founders too? I mean, that that was quite a steep learning curve for you as well.
Zal Bilimoria: Very steep learning curve. The first day on the job, I still remember. So Mondays is when we have our partner meetings, right? And first day, 9 a.m., we walk in, and three sets of founders, 9 a.m., 10 a.m., 11 a.m., are pitching their final pitch to the firm, and then we make a decision on whether we want to invest or not. And so everybody’s around the table. You’ve got, at the time, I believe there were seven general partners, and there were seven of us on the investment team. So about 15 people or so in the room. And then there was the founder and his team presenting to us at that time. And they got to basically share the summation of their life’s work in that one hour. And then we would break for lunch and then we would spend the next three to four hours discussing those companies and all the other companies that were kind of high priority. And it was a marathon of a day because you’re just going through teams and technologies and ideas and markets.
Zal Bilimoria: And it was just intellectually so stimulating that at the end of that day, I realized I wanted to be an investor for the rest of my career. Just imagine figuring out how to do that was was my goal. And so, yeah, how we treat founders was so amazing as well. um I think I’ve talked about this on on on on on other ah podcasts, but there’s something called the NPS score, right? The Net Promoter Score. Each one of us at A16Z, the general partners, as well as all the investment partners, had an NPS score. And what that was was after you meet with a founder for the first time and you’re obviously passing on like 98% of companies, um, they get sent an email and it only has one question in it.
Zal Bilimoria: How likely are you to recommend a 16 Z based on your interaction with Zoll one to 10, right?
Alejandro Cremades: My God.
Zal Bilimoria: And we were all scored and all of our numbers were published and we had to actually make sure that founders really liked our process, even though we were passing and saying no to them. It was crazy.
Alejandro Cremades: Wow. So um i guess I guess in terms of, um you know, Andrews & Horowitz is one of those firms and and for those that have had the opportunity of reading the book, the hard things about the hard things is like how well they did about building the infrastructure and the value for founders. now And I’m sure that that’s something that you have taken with you, you know, as a, you know, as a lesson learned, you know, as you’re now on the investment side of the table. But How do you think, you know, andusian was and A16C was able to accomplish getting at the top of the top on VC, like at the same level as the tier ones like Sequoia, Kleiner that were for decades before they were even in the picture, how they were able to do it so fast?
Zal Bilimoria: Yeah, I mean, when I when I joined, we were on fund three, it was one monolithic, $1.5 billion dollar fund, everything from seed to growth, crypto to health care, SaaS consumer always shoved into one fund. And our entire team managed all of those those those different sectors and stages from seed to to growth round series D, etc. And, you know, I think at the time, the their most venture firms did not to your point have operating teams. So we had, I think, five operating teams at the time. We had an executive talent team, technical talent, marketing team, corporate development team, and a regulatory affairs team, I believe. And so the executive technical talent team are are are fairly clear, but the executive talent is director, VP, and C-suite, and they help you kind of fill those those positions inside of your company after we make an investment.
Zal Bilimoria: And obviously, the marketing team is helping you tell your story, how to engage the press, how to deal with crises. And Margit Wenmacher is a legend. She had her own agency called Outcast. And then Margit met the minister to come and build that internally at A16Z. And she has been one of the quiet, awesome, amazing stars at that firm and helping really create that brand and getting A16Z on the map. And then, of course, the the corporate development team as well. on which is all about future fund raisings and financings. The 15 was not the regulatory fairs team, it was the market development team. And what that was is they have something called the EBC, the egg Executive Briefing Center, where the Fortune 500 companies of the world would come into our offices and want to meet five or 10 different startups during a day’s time. And so it was literally a matchmaking service
Zal Bilimoria: for enterprise and startups to come together so that the startups had an opportunity to sell their products to these Fortune 500 companies. And that still has been one of the biggest assets for the firm. And so not just the investment team, which is what Sequoia, Benchmark, all the ones that you mentioned before had, we had this entire operating apparatus that was able to kind of help our companies succeed.
Alejandro Cremades: That’s amazing. Now, it sounds like you were at the top of the game when it came to a segment that you were enjoying. So tell us about branching on your own. At what point did it become evident that you wanted to go at it on your own?
Zal Bilimoria: Yeah, you know, I think um ah the average tenure at the firm for an investment partner is a few years. And they want you to go and help if they want to be an investor, they’re going to go and help you kind of get get started. And I was really grateful to have their support. And I connected with an old friend of mine, David Lee from SV Angel. ah He and I were at Google a long time ago. And the two of us were both consumer guys that were getting into bio and health among other areas at our firm. And at our respective firms. And he had just left SV Angel and was looking to start something new. And the two of us started brainstorming together and decided to start this as the first, as the fund won in back in 2016, which was a $50 million dollars fund to go after the intersection of biology and healthcare and and and technology. And so um that was great. You know, I started with David and David, by the way, has an amazing track record if you don’t know. so
Zal Bilimoria: He helped run SV Angel with Ron Conway. He invested in Twitter, Snapchat, Stripe, GitHub, Slack. um I mean, the list goes on. It’s just amazing what companies he’s been involved with. And he wanted to leverage that track record into building a new fund, a new firm. And so he was in l LA. I was up here in the Bay Area. We were the GPs on the first fund and then He ended up retiring, and then I ended up kind of becoming a solo GP about seven years ago, when frankly, it really wasn’t in vogue at that time. A lot of LPs were like, you how are you going to do this solo? That’s crazy. um And I was just like, you know what? I know the types of founders I want to invest in. I want to spend a lot of time with them. I want to create a concentrated portfolio of 20 to 25 companies every fund, and really put all my effort into making those companies successful. and
Zal Bilimoria: um that That fundraise fund 2 for factor 2 was extremely extremely challenging but fast forward a couple of years later when I raised fund 3 that was done in five weeks and I just completed fund 4 which is done in and in a similar amount of time and so It’s kind of just been great to have that my own track record now Really demonstrate that I can actually do this solo and do it successfully
Alejandro Cremades: how How many companies have you invested in so far and what are the assets on their management?
Zal Bilimoria: Yeah, so including all of the funds and all that I’ve done a few SPVs as well as special purpose vehicles where I raise those to go after certain investments. um It’s about $225 million under under management. And the current fund size is $50 million dollars fund across eight and a half years and four funds I’ve invested in just over 100 companies now.
Alejandro Cremades: Wow. Now, in your case, you’re doing it alone. How is that? And how is that possible you know like with all those funds under management and all these investments? i mean how how how i mean I know that this is kind of like a new trend of the solo capitalists, where you don’t need like the big firm with the big infrastructure, the big upfront cost. Why did you you know go in this direction? you know why Why? And how do you are you able to to to do it?
Zal Bilimoria: Yeah, so I think, to be very very frank and honest, you know I had a chance to manage people in my operating career. And i I just did not enjoy it, to be honest. I did not have a desire ever factor to build a large team of principals and associates that would be working and trying to help me create something um you know um in terms of like sourcing and and but sourcing and evaluating companies. um i I’m investing in health care, biology, deep tech, climate tech. There’s just so many categories to cover. I’m almost a little bit of a generalist when it comes to planetary and societal health. And so if I really wanted to hire somebody, I’d probably need to hire a whole cater of folks to be able to help me evaluate these opportunities. But at this at the same time, I realized um that would also make me having to raise a larger fund because then I would need the management fees to actually go
Zal Bilimoria: and so and and pay for those really smart people because they’re not going to be cheap. And so a larger fund size at seed stage is going to be really challenging because the larger the fund gets, as you know, the harder it is to create fund returners and get get a multiple from that. The very best performing funds are sub $100 million dollar funds in in the last 10 years, right? um Maybe maybe there’s a few there’s there’s a few exceptions to that. But um the the smaller the fund, the faster you can get into carry, right? the The profit of the fund. And so I realized I really wanted to spend time at seed stage. I didn’t want to creep up and start doing Series A and Series B investments because I really liked that initial stage of a couple of founders and a couple of employees getting a product off the ground and getting their first sales. I think I’m very good at kind of rinsing and repeating that on these hundred plus companies that I’ve invested in.
Zal Bilimoria: And of course I obviously invest at the A and the B in those businesses, but that’s for my reserve checks. I spend my time at that that really early stage. And so if I came back and I said, okay, I can actually do this myself because so much of the evaluation is on founders themselves at the seed stage. Are they technically and commercially gifted? Are they going to be magnets for three types of people, customers, talent, and investors? And if they can be, and That’s something that I can actually help with my gut. Having met thousands of founders over the last 10 years, I can actually make that decision and make that leap on my own. Instead of getting overburdened with all the technical diligence and the market diligence, of course I have to do that to make sure that the product has a chance to be real and to be scalable. Make sure a founder’s not pulling like the wool over me in terms of you know a particular metric or something like that or an opportunity. But it’s all about founders and picking the very best ones.
Alejandro Cremades: So when it comes to, for example, trends, you know, especially what you’re seeing now on fundraising, you know, crazy amounts being raised in COVID now, you know, there’s like some type of a reset, you know, kick that has kicked in. What are you seeing now, you know, out there?
Zal Bilimoria: Yeah, I mean, the last two years have been actually fairly challenging for startups to raise capital, because when the bubble burst in early 22, the public market started retrenching and lower going down in price. That created a whole cascade of events where LPs, limited partners, are the ones that are investing in these funds, like mine, started seeing that the value of their investments were going down, both on the public side, but also eventually on the private side. And so there was a lot of downward pressure And so they weren’t feeling as flush and as liquid as in 2021 when Jerome Powell was flooding the market with QE, quantitative easing capital, which created obviously not only inflation, but also just a lot of jobs and a lot of opportunity post-COVID. And so when that happened, um venture investors didn’t know when they’d be able to go raise their next fund because the LPs were feeling a little bit more skittish because they weren’t feeling flush in late 22 and obviously most of last year in 23.
Zal Bilimoria: and so people had to extend their funds. They had to spend a little bit more time ah investing out of that fund. And um and then the next fund raise took a lot longer as well. So you just started seeing the number of deals being done year on year to climb. And it just became on across stages, by the way, seed to growth, but especially the growth rounds, because nobody wanted to look silly in front of their investment committees and price a company incorrectly, especially when there were no IPOs happening in their And the IPOs that were happening, the companies were cratering with within three to six months on the market. Right. And they were getting so much downward pressure as people were looking for liquidity from any source they could. And that was from a public investment, a public stock. And so private companies suffered. VC-funded companies suffered. Now it’s starting to come back, which is good. The last six months,
Zal Bilimoria: Starting from January, I’ve just felt like there’s just been this new energy, whether it’s in biotech, climate tech, or deep tech, which are the areas that I spend the most time in today at Refactor. But obviously, AI is white hot. It’s getting a lot of interest. And there’s a lot of inflate evaluations probably on that front as well. But I have seen it come back a lot in the last six months, which has been really positive.
Alejandro Cremades: So then, I guess, say you know let me put you here into a time machine, and I bring you back in time to that moment that you’re thinking about starting your own business, coming out of Google. And let’s say right as you’re coming out of the you know Google office after giving you a notice, you’re able to stop your younger self right there on the spot. And you’re able to give that younger self one piece of advice before launching a company. What would that be and why? You know what you know now, you know after dealing with all these founders and seeing all these investments, making mistakes yourself, you know what what would you say?
Zal Bilimoria: I would say even before I gave my notice, I would have said, OK, let’s make sure that we understand what the commercialization and distribution model is going to be for our company. And maybe even think about building a different product that we knew how to build and we knew how to sell it. And so I think relying on on advertising revenue, which I had known from YouTube and Google, and was kind of the old style business. Now people are willing to pay for high quality content and people are willing to um pay out of pocket for a lot of different products and services. so I would say let’s have that commercialization talk first before we have the product talk.
Alejandro Cremades: I love it. So Sal, for the people that are listening, you know for those founders that are like, oh my God, I would love to have a chat with Sal you know and and reach out. you know what What is the best way for them to get in touch with you?
Zal Bilimoria: Yeah, so ah you know i go to my website, refactor dot.com. It has my thesis on there of the areas that I’m very excited about. Like I mentioned, biotechnology, health care, climate tech, anything deep tech, IP centric. as maybe coming out of you of a university or spinning out of another company, or just a couple of smart founders that have found a really new and novel way of being able to leverage an old technology in a new and different application. Those are the founders that I want to meet. And so there is a forum on our website. Feel free to fill it out and send me your deck. I’d love to, I respond to every one of those that come through. The only person that sees that is me. And so I get a chance to review that and decide which companies that are really, which companies and teams are really exciting. and
Zal Bilimoria: um ones that I think could be a good fit for my thesis.
Alejandro Cremades: Amazing. Well, hey, Sal, thank you so much for being on the Deal Maker Show today with us. It has been an absolute honor.
Zal Bilimoria: Thank you so much, Alejandro. I really appreciate it.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Zal Bilimoria On Creating A $225 Million AUM Venture Firm To Support Startups Developing Technologies That Enhance Planetary And Human Health appeared first on Alejandro Cremades.
Arturo Elizondo, a founder with a remarkable story, has built a transformative company that addresses a critical global issue. Growing up on the Texas-Mexico border, he witnessed stark income disparities and developed a deep awareness of the broader world.
His venture, The EVERY Company, has attracted funding from top-tier investors like Temasek, Wheatsheaf Group, SOSV and TO Ventures.
In this episode, you will learn:
- Arturo Elizondo grew up on both sides of the Texas-Mexico border, instilling in him an awareness of global disparities and a passion for making a positive impact.
- Witnessing factory farming cruelty at 16 sparked Arturo’s interest in transforming the food system to reduce reliance on animal proteins.
- Despite initial ambitions in government, Arturo shifted focus to food tech after realizing its potential for large-scale impact on global food security.
- Arturo’s journey to San Francisco was driven by a desire to tackle food production issues despite his initial lack of experience in startups and biotechnology.
- Arturo co-founded The EVERY Company, leveraging biotechnology to produce animal proteins without animals, securing over $240 million in funding.
- The company’s mission is to create sustainable, animal-free proteins for the food industry, reducing environmental impact and improving food security.
- Arturo’s perseverance and growth as a leader are fueled by his belief in technology and its potential to revolutionize the food system.
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Your email address is 100% safe from spam!**About Arturo Elizondo:**Arturo Elizondo is the CEO of The EVERY Company, a company for EVERY human, EVERY animal, EVERY being on the planet. Arturo has held this position for 8 years.
Prior to this, they were a board member for Forbes, representing the San Francisco Bay Area and supporting the 30 Under 30 community.
Arturo was also a founding member of the Newsweek Expert Forum and a Person of the Year for the National Hispanic Institute.
Arturo has been recognized by GreenBiz Group as a 30 Under 30 Sustainability Leader and as a Fellow by Leaders In Tech and Unreasonable.
Arturo has also served as Chambers of the Honorable Justice Sonia Sotomayor for The Supreme Court of the United States and as Investment Banking/Prime Brokerage for Credit Suisse.
Arturo began their career in public service as the Office of the Administrator for Food Safety and Inspection Service (FSIS) at the USDA and as Constituent Services for Congressman Henry Cuellar (TX-28) at the U.S. House of Representatives.
Arturo Elizondo received their undergraduate degree from Harvard University in government and comparative politics. Arturo then went on to earn their SLELP Scaling Excellence Fellowship from Stanford University.
Finally, they completed their education at the School for International Training in Geneva, Switzerland, where they studied international studies and multilateral diplomacy.
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Connect with Arturo Elizondo:* LinkedIn * RocketReach * Crunchbase * TheOrg
Read the Full Transcription of the Interview:Alejandro Cremades: All righty. Hello, everyone, and welcome to the Deal Maker Show. So today we have an amazing founder, you know a founder that has a remarkable story, you know very inspiring. you know You’re going to find how he found a problem, and he found every single angle that he could educate himself about it you know before he actually took the plunge. But remarkable journey, a rocket ship that he’s built, and obviously a first name and a last name that the origins are from Spain. so You know, from a long time ago, but hey, you know, I’m a little bit biased. I like, you know, like those people that eventually, you know, they’re coming from the same country. Why not? Even though we’re all here in America. But anyhow, without further ado, brace yourself for impact. Brace yourself for the for this super interesting conversation ahead of us. So without further ado, let’s welcome our guest today, Arturo Elitondo. Welcome to the show.
Arturo Elizondo: yes yeah Thank you for having me, Alejandro. Great to be here.
Alejandro Cremades: It’s such a pleasure. so So give us a walk through memory lane. So obviously you you grew up in the border. So um tell us, how was life growing up for you?
Arturo Elizondo: yeah I’m one of six kids. I grew up on both sides of the me Texas-Mexico border. and um
Arturo Elizondo: And I think it really from a very early age, just given that the texas the US s-Mexico border is the the border with the highest income disparity of any two countries in the world, um and being on both sides of it made me very aware of the like just how life might how different my life would have been and having a perspective around around like that there’s a much bigger world around me than just my, you know, my neighborhood or my city. And, um but also growing up in I was I’m one of six kids, we grew up in a very Mexican American household and you know, like any good Texans, we had our barbecues every Sunday, like any good Mexicans had our two extra breakfast every morning. And I never thought about where ah for my food came from. um It wasn’t until many years later, but
Arturo Elizondo: um that that animal protein was a huge, huge part of my life. And it still is now, but just from from from a different source.
Alejandro Cremades: So obviously, you know in your case, really spectacular. You land in in Harvard, you know out of all schools you know all the best schools, one of the best schools in the world. And I guess that was your segue to start starting to get involved with like government and and and how you eventually you know found yourself exposed to agriculture.
Arturo Elizondo: Yeah, I think ultimately i I think growing up on the border and seeing like I remember going going across the border with my with my dad on the weekends and I remember seeing little kids my age who had no shoes and were selling gum on the street. And I thought you know I didn’t do anything to deserve what I did. like I just happened to be born you know a few miles north of the border and and and to parents that had resources.
Alejandro Cremades: you
Arturo Elizondo: But I didn’t really do anything to deserve this. And and that that really marked me when I was very little. and And it kind of put in me this idea that if I you know that if i could help ah improved a lot of others who weren’t as lucky and didn’t win the lottery of life, then my life would have been worthwhile. And I thought, well, how can I make the biggest possible impact? Even growing up, I was like, oh, I’m not really sure what that it looks like. But then I thought government was going to be, you know, maybe government is how I can how i can make a difference.
Arturo Elizondo: And I thought, well, if I can change one law, even in one small way, I could impact the lives of millions of people. And that idea of scale always fascinated me, even from a little when I was younger. And that’s why I decided to go to Harvard and study government, thinking, OK, I’m go to go into you know going to go work at the UN or become a senator or a congressman. and and change laws to help you know help as many people and as many beings as possible. And then you know the more I learned about government and then the more I learned about our food system, that quickly that quickly changed.
Alejandro Cremades: So what was about the food system that really sparked your interest?
Arturo Elizondo: So I don’t know if you’ve seen any of the factory farming videos, um but
Alejandro Cremades: I remember food ink. It was say pretty disgusting, to say the least.
Arturo Elizondo: Yeah, it’s one of the things we’re like, I wish everyone in the world could see this because I think if if we all knew what we were eating, we would have a very different food system. um And I remember being 16 and someone posted a video online of a factory farm. And you know I i had never thought about where my food came from. And then I see it was a video factor of like of ah of workers inside a factory farm and this guy who grabbed two chickens by the neck and smashed them against the wall. and And then these chickens were in these cages on top of each other. And i my immediate reaction was,
Alejandro Cremades: you
Arturo Elizondo: There’s no way this is what I’m eating. like There’s no way that this is or this is like this is the norm. This must be an exception. This should be that this is illegal. like that we need to you know these These people need to be in jail. um and And then the more that I looked into it, the more I realized that this is not the exception, it is it is the norm. um We slaughter over a million animals every single hour, just in the US, to feed less than five percent of the world population. And that what I saw in that video is not the exception, it is how we produce animal protein at scale today, because that is the most efficient way of feeding people.
Alejandro Cremades: so Obviously, you know after this, you started to see the problem from many angles, not only government, but then also you did a bunch of internships, for example, in banking. so What would you say was what you needed you know for you to be like, okay, you know it’s time for me to take action. I’m packing my bags and I’m going to San Francisco.
Arturo Elizondo: Yeah, I mean, the number one piece was understanding the scale. Like, you know, I thought, okay, I want to do scale and I want to do impact that scale and I want to do good for the world. How can I spend my time in this earth doing the most good that I can? And i and when i and i used you know that video I watched when I was 16, but the more I kept doing my research and and then I interned at the U.S. Department of Agriculture and then I went to the United Nations and I start i did my research on global food security.
Arturo Elizondo: um and ah more and it just The more I learned about our food system, the more it blew my mind. And i just like it was one crazy statistic after another where like i i I was like, how is no one talking about this? you know i I had no idea that animal agriculture and animal protein production is the number one cause of deforestation on Earth. It is the number one cause of extinction on the planet.
Arturo Elizondo: Three out of every four emerging infectious diseases, like COVID, like SARS, are are zoonotic. They’re traced back to animals in a relationship to the natural world. um it is a number one Animal protein production is the number one cause of ah freshwater pollution um because of the of the waste runoff from these factory farms. and And our diet, very rich in animal protein and fat and animal fat is animal you know processed meat is a level one carcinogen out there with with with asbestos and cigarettes by by the World Health Organization.
Alejandro Cremades: Okay.
Arturo Elizondo: And so it just you know antibiotic resistance, 70% of the antibiotics in the world today are fed to animals, not to humans. And so I just, like the more I learned, the more shocked I became and really the more angry I became. I was like, how is no one talking about this? We need more people to be focusing on this issue. And and then I came across, when I was studying global food security, I came across these different technologies out there and I thought, well, are there ways that we can actually solve the problem? Because I fundamentally didn’t believe that we were gonna market our way into a better food system, that people will magically wake up and say, hey, you know what, I’m going to,
Arturo Elizondo: You know, I I’m going to go vegan or vegetarian because I love animals or because of the planet I just didn’t think that that was realistic and my parents, you know, they still eat meat almost every day in Texas so I knew that that was a long time coming but I knew that I given how big the problem was in terms of its scale and and how neglected this problem was, that I realized that there was no more you know no better way for me to spend my time on this Earth than to tackle this problem.
Alejandro Cremades: So 2014, that’s the year where everything changes for you.
Arturo Elizondo: Yeah.
Alejandro Cremades: So what what happened in 2014?
Arturo Elizondo: Yeah. So I graduated from from college and I went to DC. I was interning for Justice Sotomayor at the Supreme Court and thinking, okay, maybe I should still stay in government, fine. I was already on down that path and I didn’t want to let it go. But you know food kept calling me, but I was like, look, I have no experience in this in food. I don’t have any expertise in biotechnology or in food technology. I just have read a lot about it and I’m very passionate about it, but I don’t have any real skills. um And then I get a job in the a job offer to join the Obama administration as a political appointee and I called one of my my boss from Credit Suisse actually my boss is Boston Credit Suisse and And he was he had been a mentor of mine and I was so excited. I was like look I I got this job i I’m gonna you know, it’s a great, you know a great launching pad for my career um And he
Arturo Elizondo: his reaction so it was, what are you doing? you should be why’rant You should be in San Francisco working on food tech. the way that like Working on food, the way you’ve been telling me for the last 18 months you’ve been wanting to do, as you’ve been doing all this research, like why why why aren’t you doing this? ah And it was completely shocked me because I thought he was going to be like, oh my God, that’s amazing. Congratulations. You should take it. And I wanted someone to validate ah my my choice. um And so for him to say to say that made me realize, um you know what, I made me like take a step back and say, man, like, what am I doing?
Arturo Elizondo: And I i realized, as the more I thought about it, that I was scared. I was scared to go down a path that I didn’t know what it would look like. It was this big question mark. like i’ve never you know i’ve I don’t know anything about startups. I don’t know anything about venture capital. I don’t know anything about these things. um And and and and i was I was scared to make a ah leap. But I think being aware of that fear helped me identify and say, hmm, maybe I can find a way to still make it work. And I said, let me get myself six months and see I can make it bigger something out. And so the next day after that call, I booked a one week ticket to San Francisco. I had no job. I had no place to stay. But I thought, you know what? I don’t want to be on my deathbed saying like, what if, what if I had tried?
Alejandro Cremades: So what happened next?
Arturo Elizondo: So I posted on Facebook asking if anyone knew of any dog sitters or cat sitters of any couches that I could stay on while I was in San Francisco until I found something and ah a couple of friends are um offered and I stayed with one of my friends and started networking my ass off, emailing every person I could. And I was like, look, I’m gonna I have six months to see if I can make this work. And I was still interviewing at other places just to yeah be on the safe side and like to to to to to to keep some options open. But I emailed everybody I could and i I grabbed coffee with all these impact investors. I thought maybe if I joined venture capital, I can do something that I can learn about the space, build some skills and then jump into something
Arturo Elizondo: that where I can like jump into a startup. And and one of I met this guy who started another food tech company and I was like, hey, I really want to be a part of this. You know, what what can I do? And he’s like, come to this conference with me. You know, it’s one of the first ever food tech conferences. Because 10 years ago, food tech wasn’t really a thing. There were probably two companies in the world really doing something in it, ah Beyond Meat and Hampton Creek at the time. And it was before Impossible Foods or others had had had even even like had commercialized or existed in any in any real way. And I show up to this conference.
Arturo Elizondo: And ah that day he doesn’t end up going to the conference so I find this empty chair and the only table with young people in it. I sit down and little did I know I’m sitting next to this molecular biologist who had this crazy idea of making eggs without chickens and proteins without animals. and And a couple of other folks and New Harvest, this nonprofit, Isha from there, brought him to that conference ah to help kind of see the space and and learn more about it. And she brought us together and we we went to coffee shop and started cranking out a business plan.
Alejandro Cremades: So that’s how you know all the good stuff happened. So the everyday company he is born at this point. So I guess what what ended up being the business model of the everyday company? How do you guys make money?
Arturo Elizondo: Yeah, so the the core idea was you can use biotechnology is an industry that has been primarily, is a technology that has been primarily employed in pharma. So almost every protein based drug therapeutic vaccine is made using a fermentation and technology through but using fermentation. The philosophy was we’ve made all these animal proteins through fermentation for pharma, which is a very, you know,
Arturo Elizondo: You can use a very sexy technology to make these products at very, very high prices. But the question was, can we democratize access to this technology and optimize it so that we can make other kinds of animal proteins at scale, at cost levels, where we can start selling into the world’s biggest food companies that are using billions of dollars worth of animal proteins as ingredients? And that’s where the that’s that was the net that that was a basic idea is can we use this fermentation technology to make all kinds of animal proteins, not just for medicine, but for food. And we raised 50K in cash and they gave us three months of lab space through IndieBio, which is a biotech accelerator program. And the business model was we’re gonna make these proteins really efficiently using yeast instead of
Arturo Elizondo: chickens or pigs or cows instead of using animals and then ferment them and then sell them off to big food companies and help them have a much more efficient and de-risk supply chain with the same but the same kind of functionality and quality of products that they already use in their hundreds of applications. You look at you go to any grocery store and you look at the back of the label of almost any food product out there and on the back it says you know they have egg protein. Right or dairy proteins or other or different kinds of animal proteins like you know Guinness Wasn’t was the beer company was still using fish splatters to filter their beers up until 20 until seven years ago and And so you see this huge use of animal proteins um throughout the food system and that no one even knows about. And so we could replace them using much more efficient um protein factories and animals like microorganisms, then we could really make a difference in decarbonizing our food system and also working with the world’s biggest food companies to make them more sustainable.
Alejandro Cremades: So obviously, you know, a business like this is a capital intensive. um So how much capital have you guys raised to date and what has been the experience of going through the different rounds?
Arturo Elizondo: Yeah.
Arturo Elizondo: Yeah. We’ve raised over $240 million dollars of capital. um And we have used that over the course of of eight plus years. so um The first six years we’re developing the core technology. And at that time, and you know in the beginning, because we don’t have you know we don’t have the same metrics that software companies have, and we’re much more capital intensive before you see any revenues, but we’re not really a pharma company. It’s you know it’s confusing to a lot of investors. like How should we look at you? um Because you’re not a software company and you’re not a pharma company. You’re kind of in between. You’re very capital intensive. um and And so the a big part of it for the first several years was selling the the the vision. Like, hey, like it’s this is
Arturo Elizondo: This is how it’s going to work. This is the problem at hand. This is how big the opportunity can be. And and then really working, like especially like finding ways to de-risk the technology. like Can you actually get a yeast to make animal protein? more efficiently than an animal can make it. And so we had to make a lot of technology progress there. And then on on this at the same time, we had to sell these you know work with these big food companies and share with them you know what we were doing. and then And fortunately, a lot of big food companies are trying to get rid of those ingredients because
Arturo Elizondo: They do this. They’re inconsistent. theyre theyre The pain points are very, very high. And so we we were able to tell that story um you know for the first several years until we really were able to prove ourselves. And now you know we have all the regulatory approvals. you know We got our products. you know, have been in the hands of, you know, at 11 Madison Park, that’s where we launched our egg.
Alejandro Cremades: you
Arturo Elizondo: it’s the It was voted the best restaurant in the world. We got it in the hands of probably arguably the world’s toughest food critic, Florence Fabricant of the New York Times, um with the very positive reviews. And we have now some of the world’s biggest food companies saying, you know, when can we get our hands on it? And so now we’re starting to to start scaling the business. So we’re at that inflection point today.
Alejandro Cremades: My God, so how do you do it being 10 years in it you know until you finally you know come out of the desert? What do you think kept you guys going for so long?
Arturo Elizondo: I think what kept us going, um I mean, as probably a lot of people relate is, is I mean, for for me, like this is very personal. I started the company when I was 22. And I’ve grown a lot as a leader. i’m you know I wouldn’t have hired myself you know eight years ago when I, um just by virtue of how much like how much growing up I needed to do, but I realized actually, um for me at least, what has kept me through has been,
Arturo Elizondo: like this needs to exist, and it and it will. The technology works. like and And I think what has kept us going is every week or every you know every month and every quarter, there’s like something big like that’s happening where we’ve has fundamentally changed and given us more conviction.
Alejandro Cremades: you
Arturo Elizondo: So even though it’s ah it’s ah it’s a long haul, um It’s been really powerful to see, oh, like we got the FDA approval. Oh, like the world’s, you know, like the world’s largest, you know, whatever, like winemaker, like loves a product though. You know, the, um, we’ve got, you know, that this restaurant loves it. And, and now you know we, we, we, we, we exceeded this yields, we scaled the technology to this level. So every little milestone, I think for me. goes allows me to underwrite the business in a much deeper way in a way that in the beginning I was selling a vision like I you know I was like I was kind of scared to pitch because on the on the one on the one hand I love what we’re doing but on the other hand
Arturo Elizondo: like We don’t have the proof. like We don’t know if it’s actually going to work. And to pitch that is is is really hard. um And now it’s like, OK, we know it’s going to work. Now it’s a matter of just having enough time and capital to ensure that we can that we can that that we have the ah the resources to take this company to where you know to to domination. But like it works. The products work. The technology works. It scales. like And that, that I think has helped, you know, has made me, and I think a lot of our team members um continue believing in what we’re doing because now we have proof.
Alejandro Cremades: So talking about vision there, let’s double click on that. Let’s say you were to go to sleep tonight, Arturo, and you wake up in a world where the vision for the everyday company is fully realized. What does that world look like?
Arturo Elizondo: Yeah. It means that The foods actually look very similar. um a lot you know a lot you know A lot of products are like looking much healthier, but ultimately is that when people where people don’t have to turn their brains off when they’re eating, but they have to say, I don’t want to think about where this food is coming from. I just want to enjoy the food. is that we can eat these foods um and and celebrate where they’re coming from. um Our vision is a world where we’re not using factory farms to make food, ah to make animal protein, where we don’t have to stack animals on top of each other and have them suffer in ways that are just
Arturo Elizondo: unimaginable and yet we’re doing it at the, you know, in the quantities of billions and our planet is dying because of it. um The vision is that that is no longer needed. We have better, we can make protein from breweries instead of factory farms.
Alejandro Cremades: It’s incredible how um you know obviously you guys have been at it now for about 10 years. you know As you were saying, you know like everything that you’ve learned along the way, you were talking about like even not hiring you know your younger self. so Let’s talk about that for a second. let’s let’s Let’s go a little bit deeper here. Let’s say I was to put you into a time machine and and we arrive at 2014, that moment where you’re maybe at a Starbucks you know like crafting that business plan together you know with with with with your co-founders.
Arturo Elizondo: Yeah. Yeah.
Alejandro Cremades: Let’s say you had the opportunity of um showing up right there and sitting down with your younger self and and perhaps you know with with your other colleagues. and You had the opportunity of um giving that younger self one piece of advice before launching a business. What would that be and why, given what you know now 10 years in?
Arturo Elizondo: Yeah, man, I that’s a that’s a That’s a very deep question. um And I’m very conflicted because there’s a part of me that’s like, I don’t think of anything like, I don’t know if I would have believed anything that I would have told myself then because I ah i was, um just because I needed to like see it, to believe it. and And like all, I got so much advice, but it like, you know, I had to like, I wasn’t like embodying it. um I think the piece of advice would be to do psychedelics earlier.
Arturo Elizondo: they like And because ultimately, for me, the the big piece that I’ve been working through is ultimately owning my power and like believing in it. um And I think for like several years, like i just I felt like, man, I’m selling this vision and I And I couldn’t underwrite it with the proof. It was selling this dream. And i and like it it was like very mentally taxing because i’m I’m taking investor money. And I don’t know if um if I’m going to be able to to to return it and like you know and and and and make it work. um So I think the advice that I would have given myself as number one is,
Arturo Elizondo: go to therapy as soon as possible, get an executive coach and work with psychedelics as early as possible and like do the work on yourself so that you can be the best leader you can to lead this company um and and lead it with conviction.
Alejandro Cremades: So that’s amazing, very profound. So for the people that are listening, that would love to reach out and say hi, what is the best way for them to do so?
Arturo Elizondo: Yeah, I’m on LinkedIn. um My email is also arturoarevery.com. um Yeah, and also but the the one thing that I would, um that I think, you know, that that I would have loved my younger, younger self to know is i you don’t have to compromise, like to say, hey, you can you can do good in the world. and get the professional development and have the job of your dreams both professionally and also doing good. You don’t have to work at a nonprofit. You don’t have to work in government exclusively. There are incredible ways that business can be a force for good. And I think early on, I just demonized business. I demonized the private sector. I was like, oh, I don’t want to be a sellout. And I think I realize that for me in my life now,
Arturo Elizondo: this working, working using technology. um is the, for me, the the best and most impactful way that I can make a difference in the world. And I would urge everyone to like, that we live in a world where we don’t where you don’t have to sell, where you don’t have to um um compromise and sell out that you can um that you can do really well for yourself. Doing good for the world and the biggest problems in the world are are going to be also the most lucrative.
Alejandro Cremades: I love it. Well, Arturo, I have to thank you really, you know, for being with us. ah Such an honor to have you today on the Dealmakers podcast. And dan yeah, thank you so much for for being here.
Arturo Elizondo: Thank you, Alejandro. Appreciate it.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Arturo Elizondo On Raising $240 Million To Develop Biotechnology To Produce Animal Protein Sustainably appeared first on Alejandro Cremades.
Qin En Looi is an inspiring founder turned investor with a remarkable journey, full of unexpected turns and packed with insights on transitioning from founding a successful startup to becoming a venture capitalist.
Qin En co-leads the $150M AUM fund, Saison Capital, which has funded prestigious projects like Fego.ai, Redacted Coin, Jia, and Origins Analytics.
In this episode, you will learn:
- Qin En Looi, born and raised in Singapore, began his journey under strict academic expectations.
- At 18, he co-founded Glints during his military service, transforming it into a leading recruitment platform in Southeast Asia.
- Glints’ initial success was driven by its ability to connect startups with young, eager interns during Singapore’s nascent startup scene.
- A pivotal moment for Glints was shifting from self-serve SaaS to a service-based recruitment model, significantly boosting revenue.
- Despite early struggles with fundraising, mentorship from strategic investors helped shape Glints’ growth and narrative.
- Qin En Looi transitioned to Boston Consulting Group to build ventures for large corporations before moving into venture capital.
- As an investor with Saison Capital, he leverages his entrepreneurial experiences to support and guide early-stage startups, particularly in emerging markets.
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Your email address is 100% safe from spam!**About Qin En Looi:**Qin En Looi is a Principal at Saison Capital, where he actively leads pre-seed and seed investments in web3 startups globally, with a focus on Southeast Asia and India.
To date, he has invested in more than 30+ Web3 companies and actively supports them in community building, branding, and recruiting.
Qin En was previously the co-founder and COO of Glints, the leading talent ecosystem in Southeast Asia. During his tenure, he was recognized by Forbes 30 Under 30 and Entrepreneurs 27 Under 27 for being one of the youngest founders to have raised venture capital in Southeast Asia.
In his personal time, Qin En is also the creator and host of Parents in Tech, a podcast for parents in Southeast Asia that has topped charts in Singapore, Indonesia, and the Philippines.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty, hello everyone and welcome to the Deal Maker Show. So today we have a very exciting founder turned investor. you know We’re going to be talking about his journey, which is quite remarkable. And again, some of the things you know that they come you know along as part of the journey, you know whether that is his transition into venture, you know what happened with his last company too, and then also the realities of venture capital, venture funds, and some of that misalignment that we see with with LPs now. So again, a really inspiring and exciting conversation that we have in front of us. So without further ado, let’s welcome our guest today, Chin and Loi. Welcome to the show.
Qin En Looi: Thank you so much Alejandro, really excited to be on.
Alejandro Cremades: So originally born and raised in Singapore. Give us a walk through memory lane. How was life growing up?
Qin En Looi: Yeah, absolutely. I think I always consider myself very fortunate to be born and raised in Singapore. I grew up under, I would say, what people called a tiger parenting construct. um So both my parents went academia. My dad was and still is a university professor. ah My mom taught Mandarin in middle school pretty much for her entire life. So as you can imagine, since young academics doing well in school, getting the A’s, super important, right? And kind of like that was pretty much the be all and and all of the first, I would say, 15, 16 years of my life. um As with all Singaporean students at 16, no, 18 years old, um the Singapore government has came up with this pretty wonderful scheme of providing full rights scholarships
Qin En Looi: for Singapore students, ah regardless of your background, to go over overseas to pursue your education. like So it was an entirely meritocratic process. And for me, this was exciting at a point because it was a way to get out of Singapore and also escape from my parents, to be fair. Just got tired of studying, got tired chasing after exam, after exam. And so really sort of but put my heart into it. Got admitted into Stanford. um Got full government scholarship. But as all Singaporeans have to do, we have to serve military service. So I did that for two years and during military service was when I got together with two friends to start what was then just a fun side project and today it’s a series D company that has raised more than 80 million dollars.
Alejandro Cremades: That’s amazing. So how do you guys say get going with the company? How did that thing all happen? How did that come together?
Qin En Looi: Yeah. You know, sometimes when people ask that, I wish that, you know, I had to say that, you know, i bore I was born knowing that I would do it. But but that couldn’t be further from the truth, right? It was accidental by many counts. So first and foremost, you know, me and the two other friends, we we’ve felt frustrated during military service, right? Sure, we were serving our nation, but we felt like we weren’t mentally challenged. And so what we figured out we had to do is to figure out ways to mentally challenge ourselves. Now, who would hire people like 18, 19-year-old folks, zero work experience, and they can’t even work office hours, right? They can maybe only work weekday evenings or weekends. As we very quickly turned out and learned, it was startups, right? At that point, the startup scene in Singapore was just taking off, like the what we call Generation 1 of startups. so And look, these startups at that point weren’t able to raise large amounts of funding,
Qin En Looi: Um, and they were happy to take us on, right? They were happy to kind of help get any help that they could. So really the three of us embarked on startup internships, um, during military service. And we very quickly realized, Hey, there’s actually quite a lot of startups out there. So we started to connect our friends who were also serving military, uh, with those startups. And that’s really how Glenn started literally serving the two arguably smallest market sizes. one is startups and other it’s I would say young, fresh, hungry interns looking to do that.
Qin En Looi: And so that’s really sort of Glintz, right?
Alejandro Cremades: you
Qin En Looi: um In fact, the name itself um has an interesting story. Of course, the word Glintz has the connotation of like a a star, a shining star, right? And that’s sort of what we, um why why we chose it. But the reality of it was Glintz was actually also a mashup of global internships. So GL from the global and then INT from the internship spot, right? So really sort of even the name today pays heritage to how how we came about. And really this was just meant to be a project. ah We weren’t really thinking about building this as a company because like I said, myself and my two other friends, we actually were full-ride scholarships ready to go to the US to some of the top universities to study, right?
Qin En Looi: So it was really sort of almost as a fun thing. And then That was when, once again, something coincidental totally unplanned happened, right? A friend of a friend met us for the first time and said, hey, would you like some money to turn this into a business? And as you can imagine, when you are 18 years old, if someone offers you money, you don’t say no, right? And so we we took it back. We figured, okay, we need 50K. And then the following week, the angel said, sure, let’s get started. And I vividly remember the first question I asked was, how do you incorporate our company? Because that was absolutely like, we just had no idea right on how to do all of these things. But that was really sort of how Glintz came about.
Alejandro Cremades: so What ended up being the business model of Glintz? How are you guys making money there?
Qin En Looi: Yeah, so so look, we went through kind of a lot of pivots and all the ups and downs. But I think today sort of where Glintz is at, it’s one of the largest, if not the largest, recruitment platform in Southeast Asia. ah The primary revenue source is really true that the the traditional I would say, recruit employment models. A lot of it is a contingency basis. So you give me an available job vacancy. If you fill it, you get paid. Another business that has taken off very well is what we call employer on record. um So being able to set up offices all across Southeast Asia so that companies don’t have to. but Let’s say today you want to hire someone from Indonesia. You can do so right away and we’ll take care of everything right from payroll to tax to Social Security. So really, sort of these are the two key drivers of of the business.
Alejandro Cremades: and how was At what point do you guys realize that they you guys were turning around a corner?
Qin En Looi: Yeah, I think it was really you know that did that it’s really interesting. right And also that kind of shaped a lot on how I view at least emerging market venture ecosystems. I think the biggest lesson we learned is distribution of a product. In the first few years, we were very obsessed with the idea of product-like growth. ah We were obsessed with building SaaS, the obsessed with the idea of selfs self-serve, right? The idea that someone would pick up a credit card, key in their information, and bam, we will build them a couple hundred bucks a month. I think we were trying different ways, different value propositions, but fundamentally, just that behavior didn’t work. And I would hazard, I’ll go as so far as to say that 10 years down the road,
Qin En Looi: that hasn’t actually changed much, right? In a sense that um the models that we see that work well in a bit more mature markets, Western markets like the US and Europe, where SaaS is a lot more common for folks who who once again take a credit card and make payments, doesn’t really happen, right? So it’s it’s a lot more of a sell-in approach where you need to actively build up your distribution. You need to build up your sales, your marketing channels that actively sort of canvas um potential customers. And really at the end of the day, people also want to be served. people don’t want to self-serve. I think that’s sort of one key behavior difference that we have noticed broadly in terms of markets, right? so so So case in point for us at Glens, when we were charging a couple of hundred bucks for people to access our platform, search for candidates, ah post their jobs, it was so difficult, right? Like it was really like rolling a rock up a hill. But then the moment we tell them, hey, give me the job,
Qin En Looi: I’ll use those tools myself to find you the talent. But if I’m successful, you pay me 20-25% of annual salary. Like boom! They were like, sure, take it. And then that was when it was like the aha moment, right? Here I am struggling to get 2-300 bucks from you. And here, there you are willing to give me a pretty substantial sum of money if I’m able to use those same tools. But the difference is I do it for you. So really sort of that that whole thinking was the big turning point for us in terms of the business.
Alejandro Cremades: And what about fundraising? Because obviously the company has raised quite a bit already, but how has it been that the journey for the company, especially while while you were there you know for close to five years?
Qin En Looi: Yeah.
Alejandro Cremades: How how was that like?
Qin En Looi: Yeah, I mean, I would say it’s ah very much an up and down journey, right? And and I think that has also shaped a lot on how I view my current job now as an investor. Look, fundraising was very difficult, right? There was just so many co-starts. We were co-emailing, we went to pitch events, we went to conferences to set up booths, just trying to get the right sort of investors to believe in us. And and when when when we raised sort of our first few rounds, it was very much narrative driven, right? And the narrative was even less about the business. It was really about the founders. What we had going for at that point was we were early in the ecosystem. So we were one of the first in Southeast Asia to to to raise venture at such a young age. And so that got us sort of a lot of I would say it helped us right to gain the attention of other investors. ah But even then, the business model was tough, exactly for the reasons that I shared. Many people felt like, oh, this is not like a like Amazon, like a social media, like a SaaS platform that could scale 100X. Many people felt like, oh, this is a recruitment business at the end of the day.
Qin En Looi: so So finding believers who believed in us, the team, the idea ah was challenging, but really at the end of the day, it’s it’s it’s almost like the the law of large numbers, right? When you put in enough effort, you canvas enough ah people and the sincerity comes through, eventually we manage to find our supporters.
Alejandro Cremades: What was the turning point there with the supporters?
Qin En Looi: I think the turning point was really finding people who first believe in us and then they in turn help us coach us on how to shape the story so that other investors would come on board. right And I think to the extent some of our CVC investors were instrumental in the process, because they were just more, they were so much more investors. They were coaches, right? They saw us as these young, hungry, but foolish um founders. And they really took the effort to spend time with us, walk us through um you know the pitch deck, walk us through how how do you build even a data room? How do you build a financial forecast, right? These are things that we really work together with investors, ah some of our investors um due to to build out. So I think really sort of finding those one or two early champions ah who then really supported us was was critical.
Alejandro Cremades: So then in terms of the um the actual um you know ah growth of the business, you know like how how were you guys going from like one cycle to the next? How was that how was that journey like, too?
Qin En Looi: Yeah, I think the nice thing about at least our industry was yes, right. Like exactly. It’s not, it’s not a hundred X thing, right? It doesn’t, doesn’t go hundred X overnight. Uh, but I think one thing it’s quite clear, um, recruitment is one of those things that you just need on an ongoing basis. Of course, in bull markets, so people expand their hiring needs, so there’s a lot more sort of volume in that. But even in sort of challenging markets, there’s still attrition, right? and And people need to find opportunities. So I think generally the the business itself is is quite resilient against macroeconomic conditions.
Qin En Looi: um sort of the biggest unlock for us was geographical expansion. right We started in Singapore simply because that was where we’re all from and we are all based, but also very quickly realized that Singapore is such a saturated market, such a small market. The inflection point that came was expanding to Indonesia, but which is the largest economy in Southeast Asia, 230 million people. So I think really sort of unlocking the market, understanding how it works and myself, my co-founders would spend more than half of our time in the market to just understand and speak with customers. I think that really was kind of um the big the big unlock for us. And that subsequently, right, even though I had left in 2017, riding the the tech boom from 2017 all the way to 2021 definitely helped to catalyze the business.
Alejandro Cremades: So well what happened there? you know Because eventually you know the chapter comes to an end, and and you decide to transition out of the business. So so what what what what led what led that decision?
Qin En Looi: Yeah, I mean, honestly, that was that was a tough right tough moment and and still probably is the lowest moment of my life. I think it came to a point where in terms of the direction which we want to take the business, there was too much creative friction, there was too much disagreement ah with my co-founders in terms of how we wanted to to to grow, how we wanted to run the business. um to the point that I think we all mutually agreed that it would be better for for for me to step down, right? And as you can imagine, something that I gave up a lot on, gave up school, gave up scholarship, and know and I think more importantly also to deal with sort of the precious back from family ah around that was was quite a lot, right? But you know I think that was really sort of a huge learning lesson I had. I think looking back, there’s many things I would do differently, I think to really,
Qin En Looi: be less, I would say, individualistic, to to to be a lot more collaborative and open. But look, it was a lesson, a painful one, definitely, but one that I have taken. and yeah i think that’ So so it wasn it wasn’t easy at all, right to to basically co-founder disagreement, co-founder separation. But I think you know having gone through that, ah definitely sort of what doesn’t kill you makes you stronger.
Alejandro Cremades: So I guess for the people that are listening and also for the some of the companies that you are advising and investing in, what advice do you typically have for them when it comes to co-founder arrangements, co-founder structures, you know, that kind of relationship?
Qin En Looi: Yeah. Well, I think it’s important to be intentional. I think that’s really the number one thing, right? um Often in the excitement of starting a business, especially if there’s a funding offer on the table, it’s just tempting to sort of grab whoever who is available, whoever who is most convenient or whoever you know best, right? To kind of work on this. But I think what what is very clear, it’s just the ability to to get to know your founders better, to make sure you’re with the right people, Because it’s truly like a marriage, right? I think there’s no better sort of way way of putting it, the amount of time you spend together and all of that. And even now as an investor, I’ve seen so many, I mean, I’ve seen situations where the chemistry is awesome between two or three founders and and when the chemistry just doesn’t work, right? So I think taking time to sort of
Qin En Looi: Find out whether there is that chemistry between the founders, especially before you take funding. I think that’s going to be like the biggest advice, right? Because once you take funding, it becomes a lot more complex, a lot more tricky. There’s a lot more voices in the room, sometimes not necessarily best suited for individuals. um So really sort of figuring out and and taking time to understand who you’re working with. I think that’s ah that that’s the biggest takeaway.
Alejandro Cremades: So then after Glitz, basically you joined BCG, ah their digital ventures arm, and you were there for about two years and a half before you decided that it was time to make the move to the other side of the table.
Qin En Looi: Yeah. Yes.
Qin En Looi: Yeah.
Alejandro Cremades: So so walk us through through, because it sounds like it was people a pivotal moment for you, so walk us through that transition from BCG to then all of a sudden becoming an investor.
Qin En Looi: Yeah.
Qin En Looi: Yeah, absolutely. So so I joined BCG because I think at Glens, a lot of our customers back then were small and medium companies, right? And I felt like I had a pretty good grasp on, you know, if you put me in front of a small, medium ah company owner, I could sell, I could i could understand them, ah but I had no experience sort of working with the the Fortune 500s and large corporations. So BCG was a great place to do that plus combine sort of my my founder experience um and apply it in a corporate setting.
Alejandro Cremades: you
Qin En Looi: um I think that was also right when the bull market was this full swing, 2019 to 2021, where there were plenty of corporates that were hungry to build ventures. um and And look, I think it was pretty interesting right to kind of go through the zero to one process. ah So this opportunity to move to the investor side of the table actually came up unintentionally. ah Once again, a friend of a friend reached out because he was leaving to do his Harvard MBA, um asked whether I was interested to join. I was like, why not, right? Let’s chat.
Qin En Looi: And honestly, I was very skeptical at the start because it’s not just a venture capital fund, it’s a Japanese
Alejandro Cremades: you
Qin En Looi: corporate venture capital fund. right And sort of having been a founder before, like certain stereotypes come about. right Firstly, CVCs are generally known to be slow, bureaucratic, and they force partnerships. And then if you add the Japanese layer to it, it feels almost like the worst. I remember the first question I asked in my chat with them was, are you going to take six months to write a 100k check? Because having been a founder, if that happens, absolutely, you just lose competitiveness. um Thankfully, the the answer is not.
Qin En Looi: It’s one of those, I think, better set up CBCs, which I’m happy to go into more detail, which is why I’m still around. ah But I think really sort of figuring out that this would be a great platform for me to come back into the ecosystem, um support and and partner with founders, especially at the pre-seed and seed.
Alejandro Cremades: you
Qin En Looi: I think that’s sort of where my heart is at, because sort of having been through the journey, being through the heart pains of, you know, almost the company almost failing, almost running our runway. I feel like the experience comes in potentially useful, less from a purely how to run your company perspective. Because I think also, once again, many VCs think that they know how to run companies, which even I don’t dare to claim that. But I think really just from a support perspective, I want to be the investor I never had.
Alejandro Cremades: I hear you. So then so then that transition to becoming an investor now.
Qin En Looi: yeah
Alejandro Cremades: Now, obviously, that’s what you’re up to. You know, that’s saying what you have been doing now for about close to three years with Saison Capital. So how did the opportunity of Saison Capital you know come about knocking?
Qin En Looi: Yeah.
Alejandro Cremades: and And what are you guys doing there?
Qin En Looi: Yeah. So look, I think it’s really sort of pretty interesting, right? um so So a bit of background was ah it’s the parent company is Credit Cason, which is the second largest credit card company in Japan. One might wonder what is a Japanese credit card company doing outside, right? ah Long story short, 10 years ago, the company expanded out in emerging markets, India, Southeast Asia, and most recently, Latin, on the debt and equity front. On the equity front, this fund was set up in 2019 to do sort of early stage, right, precedes seed investments. um And it’s set up to be financially focused, which I think is a very important difference, right? that We were set up to make money instead of purely sort of like the strategic alignment is optional.
Qin En Looi: um so So when I heard all of that, I was like, yeah, that they makes sense. um I think being a financial focus CVC also allows you to move a lot quicker, allows you to take bets that might not necessarily make sense. um And that leads to the next question, the answer right to the next question, what are we doing? um When I joined, that was when I had the first hand opportunity of setting up our web tree, our digital asset, the early stage fund. And that was a lot of fun for me, right? Because once again, Previously, I had only bought Bitcoin as purely as an investment thing. um Never thought that there’s this whole world of web tree applications, use cases and all. um So since then, over the past few years, I’ve been ah deep diving down the rabbit hole, of course, alongside the non-web tree side of things. But really, sort of a lot of my time resources has been just to understand right the whole the whole world of DeFi, of NFTs, of gaming.
Qin En Looi: So yeah, it’s been ah it’s been exciting, right? I don’t think we’re anywhere close to done, but that’s something that we’re up to.
Alejandro Cremades: So then now, in terms of the types of companies that you look at, you know what what do they look like? How would you break down the investment thesis that you guys have?
Qin En Looi: Yeah, so what’s unique once again is we do both direct investments, free seed to I would say pre-aid, but we also do final funds. And I think that’s one of the the the good things that actually I saw, right? Because look, I mean, direct investments is, it is what it is, right? I think yeah there’s so many VCs out there that have spoken about it, but I think for us, the interesting piece is actually doing final fund investments because it gives me a firsthand understanding of what good great and maybe not so good look like. right ah So to date, we have reviewed like more than 300 over funds, Web2, Web3, all across the globe. And really sort of helps me to understand, OK, this is how some of the leading venture capitalists think. great So I think having the access, having that knowledge, having that exposure, it’s something that I appreciate a lot. To date, Saison Capital has invested in 15 funds globally, a couple more in the pipeline. So yeah, I think that’s that’s one of the things that
Qin En Looi: I also have some interesting insights on.
Alejandro Cremades: So talk to us about the misalignments there with LPs, you know founders, you know all of the all of that stuff. How how how does how does that come together?
Qin En Looi: Yeah. Look, I think the biggest thing when I came into this space is remembering once again my founder days, you know, every founder has their own internal ranking and tier, right? Of, you know, which, where VC stack up, right? ah Just like how watchers have brands, handbags have different ah brands that rank differently. I think all startups founders have have their own list, right? And often that list of who is tier one, top tier, is somewhat related to fun size, right? More often than not, we would at least for me in my experience right as a founder, I would greatly admire the largest funds. right You’re talking about your billion dollar global funds or perhaps in Southeast Asia your multi-million like triple digit million funds. right
Qin En Looi: And so kind of when we when I was at Saison, there was with some funds we invested in, some funds we invested after I joined. And we invested in a whole broad range of funds. right We invested in, like I said, billion dollar funds. We also invested in micro funds that are like 10, 20 mil. And what I quickly realized is that brand does not necessarily correlate to performance. Right. It was, and then that was shocking to me, right? Because one would think that, okay, with a brand, you would be able to attract, you unfairly attract the best founders. And therefore you should have the best performance.
Alejandro Cremades: you
Qin En Looi: But what it really quickly kind of, I realized it’s that that’s not always the case. In fact, it often leads to the opposite outcomes. So what I mean by that, right? It’s really about For these GPs out there, what exactly are you banking on to grow your wealth? To put it bluntly, right? Are you relying on a 2% management fee or are you relying on a 20% carry? And more often than not, what we see is quite a few fund managers that raise outsized funds
Qin En Looi: especially in Southeast Asia, where like we know for sure there’s no way that you know such an outcome can be generated. right so So let’s just say, for example, ah any fund that raises above, let’s say, $500 million in Southeast Asia will probably need at least eight or 10 unicorns to kind of return that fund. And the idea of 8 to 10 unicorns in Southeast Asia, it’s it’s quite quite challenging. right and We haven’t talked about dilution, the challenge on capital markets and all of that. so And then the question is, if you are raising 500 mil, ah you are making 2% fees every year. Maybe that’s split about a couple of partners. And that’s done over 10 years, mind you. It’s like, by the time people realize that perhaps your returns aren’t great,
Qin En Looi: you’ll be fine, you’ll be set as a GP, right? And so that was something that was such a huge realization and such a huge, I guess to some extent yeah awakening for for me, right? As compared to the smaller fund managers who are hungry, who are valuation sensitive, right? And because they can’t, I mean, they’re barely surviving on their 2% fee, right? Let’s say you raise a 10 mil, a 20 mil fund that barely covers your OPEX, So you really kind of optimize for the exits, you optimize for the carry, which in turn works well for LPs. So, I mean, of course, I know this is generalization. There are of course large funds that also have that, but I think broadly this pattern of sort of what are your incentives, miss a light incentive really comes out, right?
Qin En Looi: So really, and and what happens if you raise two large funds? It’s firstly, you don’t deliver returns for your LPs. And secondly, you go to founders. And because you have a large fund, if you run a 500 mil fund, look, you can’t be writing a 100k check, right? You’ve got to write something larger. You write larger checks, you offer higher prices. And then those companies are forced to grow into those prices. And then in bad markets like this, they struggle. So yeah, like I know I’ve spoken a lot on this, but I think that’s sort of really one of the things that being an LP as well as sort of a, I would say I’m not a GP, right? Because we are CVC, ah but doing both direct and doing both LP as sort of one of the biggest realizations that we have.
Alejandro Cremades: So just real quick here, how many investments have you guys done and how big is the the amount i mean the assets under management that you guys have right now?
Qin En Looi: Yeah, it’s evergreen fund, but we’re slightly more than 150 mil AUM, USD, and we have done slightly more than 100 direct investments um anywhere from 100k check all the way to single digit million, and then 15 funnel funds also.
Alejandro Cremades: So if I could bring you back in time and bring you back to that moment where you were now finishing the military service and you know you were thinking about like doing something of your own, you know i’m becoming an entrepreneur, if you could have a chat with that younger self and give that younger self one piece of advice before launching a business, what would that be and why, given what you know now?
Qin En Looi: Yeah. learn to sell and don’t be afraid of selling. I think that’s the biggest advice I have learned and I unashamedly share with all the founders I work with. um At the point when I started the company, there was a lot of ego, right? And it didn’t help that getting all that press, getting all that funding helped inflate that ego. And I think that ego came around to look,
Qin En Looi: I don’t need to sell. right My ah product should sell for itself. ah People should come in and and use it because I built such an awesome product. And and I think that was, and I refused to sell. And that was when an investor came in um to sit the three of us down and say, look, pick up the phone. and call the customers. Because if you can’t even convince your customers, how are you going to train your team to but sell? And I will remember picking up the phone very vividly, dialing those, and just praying that the other person on the line wouldn’t pick it up. Because I don’t want to talk. I don’t want to sell. I don’t want to do the cocoa. I don’t want to face rejection. right
Qin En Looi: And so sort of really going through the hurdle, I still remember it very vividly, right? um And that that that state investor would actually sit us down at the end of the day and say, how many calls did you do? And then but I would say like five. And I said, like you had eight hours in the day. Why do you only do five calls? So like yes, I know it sounds a bit micro, but it really sort of woke us up in terms of building the discipline, building that confidence and the courage to do Sips. So today, kind of like even when I work with founders, um and even in the different things that I do, right like building an events platform, building a digital asset fund, but I’m not afraid to call cold call, cold DM, cold message. right like To me, that’s that’s just a discipline that has been built. I’m not afraid for people to say, no, it’s fine. It’s just a numbers game. So sort of really, that’s the biggest
Qin En Looi: thing that I would say changed our company’s trajectory, because personal growth also for me, right, to sort of put put aside an ego. um Because at that point, I was like, you know, I dropped out of Stanford. I didn’t drop out of Stanford to make cocons. Yeah, I mean, of course, I didn’t say that out. But that was really sort of what I was thinking, right. But being able to put that aside was truly sort of like the removing that barrier.
Alejandro Cremades: So for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Qin En Looi: On LinkedIn, yeah LinkedIn is the best and I respond to most messages there.
Alejandro Cremades: Amazing. Well, hey, well, Chin, it has been an absolute honor to have you with us. So thank you so much for taking the time to be on the dealmaker show with us and to really, really appreciate every minute.
Qin En Looi: Thank you so much, Alejandro. Really appreciate the time and the work that you’re doing. And for founders out there who are keen to connect, especially if you are in India, Southeast Asia, Latin, please do hit me up on LinkedIn.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Qin En Looi On Co-Founding One Of Southeast Asia’s Largest Recruitment Platforms And Now Co-Leading A $150 Million AUM Fund To Support Startups appeared first on Alejandro Cremades.
Caroline Winnett’s story is nothing short of extraordinary—a journey that weaves through disciplines as diverse as music and neuroscience, culminating in a successful career as a serial entrepreneur and now, a prominent figure in the venture capital community.
Caroline’s company SkyDeck Berkeley is the investment arm of UC Berkeley’s flagship startup accelerator.
In this episode, you will learn:
- The rigorous discipline learned as a professional violinist translated directly into the daily grind required to build and scale a startup.
- Coming from a family of entrepreneurs instilled a natural inclination towards founding and scaling companies.
- Transitioning from a successful career in music to entrepreneurship required courage and a willingness to take risks.
- NeuroFocus revolutionized marketing research by applying neuroscience to understand consumer behavior.
- Co-founding with her husband at NeuroFocus showcased the importance of trust and complementary skills in startup success.
- At Berkeley SkyDeck, Winnett combines her passion for startups with a mission to support Berkeley’s public education initiatives.
- Today’s fundraising environment demands a balance of caution and strategic investment, focusing on solving specific pain points with well-understood solutions.
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Your email address is 100% safe from spam!**About Caroline Winnett:**Caroline is the Executive Director of Berkeley SkyDeck, UC Berkeley’s flagship startup accelerator.
At SkyDeck she leads a program that hosts over 200 companies per year. She recently launched the Berkeley SkyDeck Fund, a $25 million VC fund investing in SkyDeck startups that shares half of fund profits with UC Berkeley.
Prior to BerkeleySkyDeck, Caroline was a serial entrepreneur. She co-founded the pioneer company in the neuromarketing industry, NeuroFocus, which was acquired by Nielsen in 2011.
Before her career in startups, Caroline was a professional concert violinist. She is a recognized speaker on startups, accelerators, and consumer neuroscience. She is an angel investor, startup Advisor, and Board member.
Caroline received her MBA from the Haas School of Business at UC Berkeley. Her undergraduate studies were at Brown University and she earned her Violin Performance degree at the Indiana University School of Music.
In her spare time, she likes to read books on startups, play the violin, do the occasional Ironman triathlon, ski as fast as possible without crashing, and scuba dive.
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Read the Full Transcription of the Interview:Alejandro Cremades: alrighty Hello, everyone, and welcome to The Deal Maker Show. so Today we have another exciting founder joining us, you know incredible incredible story, you know incredible um you know path and and and career. you know She’s done it multiple times and very successfully so. you know The full thing, you know building, scaling, financing, exiting, We’re going to hear about it and also about the way that she’s now giving back to the venture community, which is a really remarkable. So again, brace yourself for a very interesting conversation, a conversation where we’re going to be talking about
Alejandro Cremades: What were some of the lessons learned from becoming a professional violinist and then you know how that was applied to become a successful founder? Also, some of the things that she’s learned from coaching, tons of founders and some of those trades, you know fundraising trends too, because i mean there’s obviously Lots of cycles that we’ve seen with COVID after COVID, now what’s going on with the elections coming up. So there’s a lot there you know to be learned and a lot to be discussed. So without further ado, let’s welcome our guest today, Caroline Winnet. Welcome to the show.
Caroline Winnett: Hey, Alejandra, great to be here.
Alejandro Cremades: So originally from Berkeley, you know born and raised there in Berkeley. So give us a walk through memory lane. How was life growing up over there?
Caroline Winnett: It was really fantastic. I i was born in the 60s and I was very young. So i i I wasn’t able to fully participate in the 60s, but I was able to to catch the vibe of Berkeley. And that is, as everyone knows, question the status quo. Do we have to do things the same way? Can we think differently? And that vibe is still here in Berkeley after all those years, and it certainly is is a big part of what startups do. So it’s a great environment for startups, and I love it here.
Alejandro Cremades: So you ended up going to Brown. And eventually, you didn’t have the kind of like the the the outcome of what you were hoping for, because all of a sudden, you know you decide that you got the calling for music. So so how did this happen?
Caroline Winnett: Well, I started playing the violin when I was a wee little girl of six years old. And I also thought it would be a hobby, um which it ended up being, but I did take a detour in college to really study it seriously. so i So I left Brown thinking I would just do a year at a conservatory, but it was such a fantastic place. I ended up graduating from there and and did a lot of practice, which which has served me well in my life, I must say. The discipline I learned, becoming a professional violinist, there’s really nothing harder.
Alejandro Cremades: you
Caroline Winnett: There’s nothing that requires more discipline. There’s a lot of things that require discipline, but playing the violin is is is up there. um So I became a violinist, always thinking, you know, I really, I love business. I’ve always loved the idea of creating ventures And so i after I played professionally for a few years, I applied to Berkeley. It’s in the MBA program and they remarkably let me in because I had no business experience. But they took a chance on me for which I am now able to help pay back that that wonderful chance they gave me by being at Berkeley and giving a chance to many entrepreneurs. so So it’s a wonderful full circle of my life.
Alejandro Cremades: And obviously, you know like came you went to Berkeley, you got your MBA, and then that was kind of like the um the segue into entrepreneurship.
Caroline Winnett: Okay.
Alejandro Cremades: I guess before ah going into that, I’d like to ask you, what do you think? Because you you just talk you you just we we just touched on it, which was playing the violin and and how you were doing that since you were six years old. How do you think that you know also becoming a professional at it, you know performing for an orchestra as well, How do you think that has given you perspective, or how do you think that has helped you to to become, you know over the years, a successful entrepreneur, too?
Caroline Winnett: the discipline without question. It’s the discipline that it taught me. You can’t not, I’m not going to practice this week. I’m just going to practice more next week. No, you’ve lost that time. You have not progressed. You cannot get it back. It is the same thing with the startup. You can’t say, well, I’ll just slack off for a few days or go a little bit slower. You’ve lost that time and your startup slows down and you have to have that daily attention to your young growing company the same way you must train your muscles and your brain to play an instrument daily. And if you don’t do that, you won’t succeed. So that was the most important thing I learned from being a violinist.
Alejandro Cremades: So then let’s talk about a finishing up the MBA program and and becoming an entrepreneur. entrepreneur you know How did the whole idea of um of entrepreneurship come knocking you know on your door?
Caroline Winnett: Well, it was always there. So I come from a family of entrepreneurs. My father was an entrepreneur. My grandfather was an entrepreneur. There’s some others scattered throughout the family. So it was always in my DNA, I think. And I always knew I i would do something in starting companies or or certainly working with young ventures. Big companies wasn’t my thing. at that year when I went and got my MBA. The hot thing was going into consulting or investment banking. It still kind of goes, but that never attracted me.
Caroline Winnett: so When I graduated from the MBA program, I worked for a very small company doing recycling plans, which was which fascinating and interesting. Then I had children, so I wanted to do something that didn’t require my entire full life dedication. So I took over my family’s publishing business after my father retired. And that was a great experience, running that small company, and then I got it acquired. So I took care of my parents’ retirement
Caroline Winnett: And after that, my kids were a little settled and it was time to do something interesting that really was going to be one of those zero to one companies. And at the time I was married to ah another Berkeley alum, an engineer. He came home one night and said, hey, I have this idea. Why don’t we put EEG headsets on people, measure their brainwaves and turn that into insights for marketing and branding. And I went, that sounds nuts. That’s a crazy idea. Where did you get that idea? But we started talking about it. And the more we talked about it, the more it sounded like actually a fabulous idea. So that was the creation of Neurofocus, which then was my big ride, zero to acquisition in five years, um zero to 25 million in revenue in five years, an acquisition by the Nielsen Company,
Caroline Winnett: And that that whole journey and along the way, of course, doing what many entrepreneurs end up doing, which is putting their entire life savings, all of their time, their energy, all of their hopes and dreams, pushing on a big pile of chips and putting it in the middle of the table and saying, I’m all in on this bet. And that’s what we did. And we we worked hard and we had a little luck and it paid off.
Alejandro Cremades: So for the people that are listening to get it, what what ended up being there, the business model of neural focus?
Caroline Winnett: So it what we were replacing, even though we were a brand new thing that didn’t exist, which was EEG headsets, measuring brainwaves for marketers, who had ever heard of that? ah But what we were doing was replacing traditional copy testing where people, brands would test ads. So we started out doing that, testing ads and messages and and actually actual products ah one by one. We actually had a great project where we tested how the brain reacted to Cheetos for Frito-Lay, which was fascinating for which Frito-Lay won an award. But what we ended up doing that really was the success of the company was that we ended up doing something called a neural lab.
Caroline Winnett: for our large clients like Unilever and Cola and Frito-Lay where we would run an entire lab at the site of their choosing and they could pick from a menu which ads do you want to test, which products do you want to test with messaging. And so it was a turnkey neuroscience consumer research operation. as opposed to just doing one-off tests one by one. That’s what led to our growth, our financial success, and our eventual acquisition by Nielsen.
Alejandro Cremades: Yeah, I mean, 0 to 25 million, as you said, in five years is is remarkable. At what point you know were you like thinking, wow, I think that they we’re into something really interesting here? What was that they turning a corner moment you know where you know there was something really incredible here?
Caroline Winnett: So there were there was a couple, but the first one it was was really very interesting. So neither myself nor my husband and co-founder were neuroscientists. So of course we needed a neuroscientist. So being in Berkeley, we went to UC Berkeley and we asked one of the neuroscience professors there to join us. His name was Dr. Bob Knight. He ended up becoming our chief science advisor and co-founder. And Bob was a scientist, very good scientist, very solid scientist. And Bob said, look, I don’t know if this works. I don’t know if this testing will lead to any kind of really significant and accurate conclusions about how brains react. But I’ll keep an open mind. So let’s do the following. We asked one of our customers for three ads and we said, don’t tell us, but based on your research, which one is bad,
Caroline Winnett: Which one is meh not so great and which one is really, really good? Don’t tell us. We’re going to test it using our equipment. And if we get it right, pay us. If we don’t get it right, no charge. So we did that and we got it right. And that’s when we went and the customer went. I think you’re on to something. So that was one of the first tests, you know, real real tests of is this going to work? And it did.
Caroline Winnett: And from there, we just ran with it.
Alejandro Cremades: And what about too? I mean, I’m sure that there’s like like a couple of people here that are like wondering, hey, you know, like, what what is it like where when you’re like doing a startup with your significant other, you know, how are those dynamics like?
Caroline Winnett: Mm hmm. Yeah. So, you know, based on my many years of experience, both being a startup founder with with my husband at the time and watching other startup founders, I will say that startup founders who are married or related have just as much chance of success as any other startup founders. There’s no, oh, they’re much more likely to succeed or they’re much less likely to succeed. It’s all about, the relationship between the two people? Is it a successful relationship to be co-founders? So for us, it was a very successful relationship. where We get along really well as co-founders. We had different skills, different things we focused on. And it was very nice that there was 100% trust between us as co-founders. I mean, that that’s a great thing. And that’s a requirement for a great founding team.
Caroline Winnett: whether they’re married or not.
Alejandro Cremades: So then I guess, you know, it sounds like you guys were into something really amazing here, you know, already at 25 million in revenue. At what point does Nielsen come knocking? You know, what was that process like?
Caroline Winnett: yeah So as I mentioned, we funded it ourselves. we we The seed funding was all from our savings. And in fact, it got yeah very intense because we spent all of our savings. We were out of money. We had small children. We had a house and a mortgage. So at that point, I went to my parents and I was very fortunate that they were able to loan us money for about a year so that we could pay our mortgage. So I was very lucky and fortunate to be able to tap into that resource.
Caroline Winnett: um And then it was a very quick ride to get to a very stable business model. And along that way, we were at a conference and I noticed the CEO of Nielsen walking around. So I made a beeline right up to him and I said, Hey, Dave, come check out our booth. We’ve got a demo here and you can see how we measure brainwaves. So I brought him over, we showed him the technology and he went,
Caroline Winnett: This is interesting. So we had a few meetings, one thing led to another, and Nielsen was our first and only investor in Neurofocus, and they invested our one and only investment round for an A round. And that’s how they got involved. And then the CEO joined our board. And it was actually his idea to create those neural labs that I mentioned earlier. So he was a very valuable board. He was a very value add investor.
Alejandro Cremades: So at what point does the conversation transition into an acquisition?
Caroline Winnett: So we put something in the investment agreement that, of course, we advise startups to never, ever do. Don’t do this. Nielsen asked for it and received a right of first refusal. And somebody else came and said a few years later, hey, Neurofocus, we want to buy you. And Nielsen said, aha, we’re exercising our right. And we were happy with that. So it turned out well. But like I said, We don’t advise startups to do that. In our case, it turned out well.
Alejandro Cremades: ah do you think it kept the competitive bidding process?
Caroline Winnett: Well, we had um two other companies sniffing around, so so it worked out well for us.
Alejandro Cremades: Got it. now Now, obviously after this, you ended up in you know shift shifting gears, and you became more an angel investor. But you know before even talking about this, I mean, Neurofocus was not your only you know baby that you co-founded. You also co-founded another company called BoardVantage that was acquired by NASDAQ. you know Anything that you can tell us there.
Caroline Winnett: Yeah, i i don’t you you won’t see that on my LinkedIn. I won’t talk about it much, because I did co-found it, helped come up with a concept. I named the company. You can see similarity, neuro, focus, board, vantage.
Caroline Winnett: And that was, at at the time, I think the lesson from that is, at that time, I could not devote myself in the way you need to devote yourself to a company.
Caroline Winnett: you’re either all in or you’re not. So I couldn’t be all in. So I stepped away. I was taking care of very small children at that time and and raising my children and my family. So I took a little bit of time off from being an entrepreneur and that was very much the right decision. That was also co-founded with my husband at the time. So he went off and ran it and found a ah founding team and it turned out to be a successful operation, although the acquisition wasn’t until about 15 years after founding, so which is not unusual, you know as we know.
Caroline Winnett: um There’s many startups that look like an overnight success, but they’ve actually been around for 10 years.
Alejandro Cremades: i hear you
Alejandro Cremades: It does take time. So in your case, after Neurofocus, you became an angel investor and and advising other companies. and And you were thinking about maybe starting an accelerator program or something to really, you know, kind of give back to the to the venture community. But, you know, one thing that came knocking was the, you know, possibility of SkyDeck. So why, um you know, joining forces with Berkeley, you know, on their startup program?
Caroline Winnett: So how it happened was interesting. As you mentioned, I was thinking about starting my own incubator because I love the idea of working with lots of startups, lots of them. That sounded absolutely fascinating. I had gotten a little taste of that being an advisor, an investor. So I started making a plan. I found some partners. We started talking about it. And of course, I had heard at that time about Berkeley Sky Deck, which was very young at that point. and I thought, hmm, maybe rather than starting my own operation here in Berkeley, maybe Berkeley Sky Deck wants to have another location, different part of the city, different focus, et cetera, et cetera. So I ended up running into one of the board members of Sky Deck, one of the founders of Sky Deck, Rich Lyons, who at that time was the dean of the Berkeley MBA program and is now our chancellor at Berkeley. But I ran into him at an event
Caroline Winnett: And I pitched them the idea about a second Berkeley Skydag location. Little did I know that at the time they were looking for a new executive director of Berkeley Skydag. So i they started chatting, we started chatting, and they offered me the position. And I went, absolutely fantastic. This is an amazing opportunity. And it’s been, I have to say, the most fun thing I’ve ever done professionally.
Alejandro Cremades: So what are you guys doing exactly at Skybic?
Caroline Winnett: So I can put it in two ways. First of all, we’re just having an an amazing time helping young companies grow, which as you know, in the venture community, there’s nothing quite like it. There’s nothing quite like being surrounded by people who really want to do something that doesn’t exist. They want to change the world. Most of them have a deep desire to solve a really difficult problem. And those problems can be curing cancer, solving climate, et cetera. It’s really exciting to be around people with that mindset. I’ll put it in terms of you know what what are what’s our mission at Skydek? And we have a dual mission, and both are equally important. One is to be the world’s top global accelerator, top the best. No comparison, just the best.
Caroline Winnett: That’s what we do at Berkeley. That’s a Berkeley mindset. And number two, to support Berkeley’s public education mission. And as far as I know, we’re the only startup accelerator for whom that is a mission to support the public education mission.
Alejandro Cremades: Thank you.
Caroline Winnett: And we do that through a very unique way. So when I came to Skydex almost 10 years ago and started the accelerator program, I said, well, we need a fund. You can’t help startups grow unless you give them some money. Turns out we can’t do that at Berkeley. We’re a public institution. It’s not in our charter. We can’t start venture funds. Okay, fine, no problem. I found someone to run a dedicated venture fund. That fund now has about 85 million AUM assets under management. And that fund invests in the companies in our startup accelerator track and in a nice
Caroline Winnett: legal agreement document signed by all of us and lawyers as well, the fund manager will donate half of the carry back to Berkeley. So it’s a really unique public private partnership. And what does that mean? It means that as we find these great companies and they exit, which will happen in a few years, it’s still a fairly young in the cycle.
Alejandro Cremades: you
Caroline Winnett: lots of funding could come to support Berkeley and support education. So that ignites the nearly 600,000 living Berkeley alums, who when we go to them and say, hey, we have a startup, will you talk to them? Oh, and by the way, if they succeed Berkeley benefits financially, we usually get a yes. So we ignited that network to not only have a good time helping startups, which is a fun thing to do, just in and of itself, but also to know that they can support education doing that. And that unique partnership has really yielded an incredible community.
Alejandro Cremades: As you’re talking here about investments too, what are you seeing now in terms of fundraising trends?
Caroline Winnett: It’s a really weird market right now. You would think with everybody falling all over themselves to find what’s the next big hot startup using generative AI, that people would be writing checks right and left. They’re not. there They’re both scrambling to find those hot startups, writing a few checks here and there, but they’re also very, very cautious with their capital. And it’s a combination of geopolitical factors, the high interest rates, the fact that a lot of
Caroline Winnett: new funds are having more trouble fundraising. And I think it’s to some degree, confusion about what is the right thing to invest in, and right? I think the days of dot com era, throw money at everything are over.
Alejandro Cremades: you
Caroline Winnett: and And investors, you know, one thing about investors that they they pay attention to the lessons of history. And they realized, I can’t just throw a bunch of checks around. I really have to do this thoughtfully. So what they’re doing and what we’re focusing on at SkyDeck is which companies are really addressing a specific pain point by people who understand that pain point and can build something that really is useful as opposed to let’s throw some generative AI at some problem somewhere and see what happens. So we’re really looking for founders who not only can build very sophisticated products,
Caroline Winnett: but really understand what problem they’re solving or what opportunity they are creating.
Alejandro Cremades: And I guess in in that sense, you know as you’ve been coaching all these founders, what have you seen in terms of um you know some of those traits and and pattern recognition when it comes to the successful founder mindset?
Caroline Winnett: So i’ll go back to that word I used earlier, discipline. it There’s no way to dress it up. A startup is brutal hard work for years and years and years. It is like, we like to call it a marathon of sprints where you constantly feel like you’re sprinting and then you have to do it the next day and the next day and the next day. And if you haven’t been trained somehow through something you’ve done in life, or you havet you you have a mindset geared toward discipline, you’re not gonna make it. You’re just not. So that’s number one. wet We wanna inspire our founders and give them not just all the tools they need, a great community, but also you know a positive experience. At the same time, we know they’re working really hard. So we use that discipline and practice over and over again.
Caroline Winnett: I would also say there’s a unique combination of pig-headed determinists and coachability that is the mark of a successful founder. So one way to put it that I think clarifies is you’re determined to start your company and make it succeed, but you’re agnostic as to how you get there. So you don’t give up, you’re absolutely determined your you’ You’re focused like a dog with a bone, but you’re always open to people giving you advice on the best way to do that.
Caroline Winnett: That’s a somewhat unique mindset combination. It’s a combination of humility and and massive confidence at the same time.
Alejandro Cremades: I love it. So now imagine that you were to go to sleep tonight, a Caroline, and you wake up in a world where the vision of Skydink is fully realized. What does that world look like?
Caroline Winnett: Ah, oh, I love that question. So we’re doing what we’re what we are have always been doing, which is creating an amazing experience for founders and helping them move very, very fast. And there’s a bunch of exits in our belt. Some some big returns have come to the fund. The general partner has donated half of that to campus. And UC Berkeley is well resourced for education, for research, for innovation, and all those things that that we want to do as a campus. And we’re not one of those universities with a massive endowment with many billions of dollars floating around to keep us through. We got to fight for our dollars at Berkeley. We got to work hard as a public university.
Caroline Winnett: We don’t get a lot of money from the state. In fact, you’ll be surprised to hear of the 100% of the budget that we spend at Berkeley, the amount that’s covered by the state now. It used to be 100% right back in the day. It’s currently about 12%. All of the rest of that money we have to raise. And as you know, our tuition is capped. Which is a good thing because then we can bring in students who can’t necessarily afford a gigantic tuition. So that’s a good thing. But it means Berkeley’s always having to support itself. And if we could realize our vision of finding the next Tesla, Apple, Google to help support education, that would be meeting our goals.
Alejandro Cremades: So let me ask you a question here. Let’s say I’m taking you back in time. It’s the year of 1990, where you’re now coming out you know of the MBA program from Berkeley, and you’re venturing into the world of business, into the world of really building and scaling stuff. And let’s say you’re able to have a conversation with that younger self, that younger self that is about to get into it. And you’re able to give that younger self one piece of advice before launching a business. What would that be and why? Give me what you know now.
Caroline Winnett: That’s a great question.
Caroline Winnett: but This isn’t so much what advice I would give, but but kind of partially. So back then, you know the the mean I don’t think I’ve even used the word start up. Compared to today, there was just nothing out there to help you start a company. Now you can just go to Google, press a button, and mil you have so many resources to help you understand how to start a business. So I think what I would have said is spend a little more time looking for people who have started a company and whatever I was starting. Because I started a bunch that failed, quite a few.
Caroline Winnett: and you know I like to make a joke if people ask me, what did you do before Skydeck? I like to say, I was a serial killer. I mean serial entrepreneur, because most of them died. Most of them were learning opportunities.
Caroline Winnett: so So I think I would say, and this is advice I would give today, make sure that you have looked into every resource you can. you know This open mindset I talked about earlier, you know this humble mindset of, of make sure that you’ve tapped into every resource you possibly can.
Alejandro Cremades: you
Caroline Winnett: So you make as few mistakes as possible because you’re going to make mistakes. But the benefit of talking to people who’ve done this before you is often it’s not so much we as coaches are telling you what to do, it’s that we’re we know what won’t work. And and we’re we’re kind of like guard rails, like, don’t go there, you’re gonna fall off the cliff. Don’t go there, are you’re gonna fall off the cliff. And then the entrepreneur figures out where to go. We just keep them on that path. So i would i that’s what I would say to my younger self. And as I think about it, that’s what I tell entrepreneurs today.
Alejandro Cremades: I love it. So Caroline, for the people that are listening that would love to reach out and say hi, what is the best way for them to do so?
Caroline Winnett: so our So our website is skydeck.berkeley dot.edu. You can find me on LinkedIn. If you’re an entrepreneur and and you want to find out more about SkyDeck, just email me winnet at berkeley dot.edu. And applications open July 16. I know this in a few days, so this this podcast, not sure when it’s airing, but our applications are open in July and August and we welcome applications from anywhere in the world.
Alejandro Cremades: Amazing. Well, hey, Caroline, thank you so much for being on the Dealmaker Show. It has been an absolute honor to have you with us today.
Caroline Winnett: It’s been a pleasure.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Caroline Winnett On Selling A Company To Nielsen And Now Helping Raise $84 Million To Support Upcoming Entrepreneurs appeared first on Alejandro Cremades.
In the world of financial crime compliance, few names resonate as profoundly as Tom Scampion’s. Born in Warwickshire, UK, Tom’s career journey has been anything but ordinary. From his early days in the corporate world to leading his own venture, Tom’s story is a testament to the power of data, the importance of collaboration, and the relentless pursuit of innovation.
Tom’s company, Global Screening Services has attracted funding from top-tier investors like AlixPartners, The Cynosure Group, Commonwealth Bank of Australia, and MUFG.
In this episode, you will learn:
- Tom Scampion’s academic foundation in PPE from Oxford University shaped his analytical and ethical approach to decision-making.
- His corporate career at Deloitte emphasized the transformative power of data and analytics in solving complex global problems.
- GSS, Tom’s entrepreneurial venture, offers a SaaS-based transaction screening service for financial crime compliance.
- The collaborative model of GSS reduces costs for banks while enhancing compliance efficiency.
- Early engagement with regulators ensured that GSS’s solutions met industry standards and gained trust.
- Strategic investors, particularly banks, provided crucial capital and industry expertise for GSS’s growth.
- Tom envisions GSS becoming the industry standard for compliance solutions, with potential expansions into fraud prevention and ESG reporting.
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Your email address is 100% safe from spam!**About Tom Scampion:**Tom Scampion has over 25 years of experience in the design, delivery, and evaluation of financial crime systems and controls.
He has led many of the largest global regulatory look-backs and remediation programs in financial crime, as well as the design and delivery of financial crime operating models for major institutions.
Tom has worked closely with regulators, law enforcement, and counsel in the US, Europe, and Asia and has spent time seconded to institutions to help deliver material change.
Before joining AlixPartners Tom was the Financial Crime head of EMEA for a leading big four firm.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty. Hello, everyone, and welcome to the Deal Maker Show. So today we have a really exciting founder, a founder that is joining us, you know a founder that and has done a lot of things you know in corporate, but now he’s really riding this rocket ship, you know and I think that you’re all going to enjoy you know essentially what he’s going to be you know sharing with us from lessons learned you know like with the first customer that they were able to onboard. to why our people are really collaborating, especially when it comes to competitors you know around what they are up to. And then also how to engage you know regulators, which is quite a really important thing, as well as you know building partnerships with FMIs and getting them excited about the journey that they embarked in. So again, brace yourself for a very inspiring conversation. And without further ado, let’s welcome our guest today, Tom Scampione. Welcome to the show.
Tom Scampion: Thank you. It’s a pleasure to be with you today, Alejandro.
Alejandro Cremades: so Tom, originally born in the UK, in the middle of the country. Give us a walk through memory lane. How was life growing up over there?
Tom Scampion: Well, you know, it’s all chocolate boxes and and cookies and cream. I mean, it’s ah it’s Warwickshire. It’s right in the middle of the UK. Your local is fine. I’m a child of the 80s, so I enjoyed that time. and I’ve enjoyed my career since, but I love being based in the UK because I’m equidistant from the wonders of America’s and of course what’s happening in Asia. It’s a great place to be.
Alejandro Cremades: So, how you how do you end up then you know in Oxford you know studying and also combining you know some really three interesting things? you know One is politics, the other one is philosophy, and the other one is economics. i mean quite Quite a complex you know path there on there on the studies that you decided to embark on.
Tom Scampion: Well, I was like a lot of people, I i was a political nerd, like I was obsessed. I thought politics and how we get governed is just fascinating. And I’ve kind of taken that into my career, given what’s happened since, but politics, philosophy and economics is a really standard course at Oxford. Lots of people have done it, prime ministers and presidents and all sorts. It’s a it’s a really good grounding in three related topics and I enjoyed it. Long time ago, but I enjoyed it.
Alejandro Cremades: That’s amazing. so then so Let’s talk about really getting into the corporate a world. you know You ended up getting into the whole world of data you know and analytics. What what really captures the attention and the love for data and analytics for you?
Tom Scampion: When it’s down to decision-making, right, Alejandro? So look, when I was growing up, um being able to make good decisions based on limited information was a challenge for everyone. It still is, right? So how do I understand the data in front of me in order to actually decide what decisions I ought to make and when in a timely way? And the amount of information we’ve been generating has been, of course, growing exponentially. And then the question is, well, how can you make sense of it all? you know I can have lots of data but very little information and that stops everything. It stops commerce, it stops politics, it stops all sorts of things. If I can’t actually make sense of all this data, then I really am stuffed. so i When I was first working in the 90s and then into the beginnings of the 2000s, that was such a hot area. A hot area of saying, how can I look at structured data, unstructured data?
Tom Scampion: How can I make it useful for me? And how can I put this date with people’s fingertips? That was really positive. So I enjoyed that journey. I enjoyed catching that wave. And it’s kind of the basis of everything I’ve done since.
Alejandro Cremades: Now, in your case, you ended up a you know becoming a a big person at Deloitte. you know They are becoming their global head of analytics. so you know when you When you are at such a large organization and you know dealing with so many corporations around the world, I’m sure that you were able to really see data and analytics at scale. In addition to that, you know also running a good-sized team. So, what were some of the learnings there while you were at Deloitte?
Tom Scampion: Yeah.
Alejandro Cremades: Because you were there you know for close to 14 years, which is a long time.
Tom Scampion: yeah Yeah. I mean, the beauty of working for firm like Deloitte, and of course there are many firms similar to Deloitte, but what I particularly liked about Deloitte is the biggest problems were there to be solved. So clients would come to you with their biggest problems, whether they were at scale or whether they were just niche challenges that they’d struggle to get their arms around. the ability to actually take on the biggest challenges at the biggest and most significant organizations is really, really motivating. And also, so It employs a lot of really bright people and they had great technology in the hands of really great technicians and so you really had this wonderful selection of colors you could paint from. So you could really sort of choose anything you needed wherever you were in the world and combine that to really make a difference. So for me it was the size of the opportunity, the excitement of actually solving the biggest problems
Tom Scampion: um That’s a really motivating thing when you’re a firm like Deloitte and of course other firms are available but I knew Deloitte really well and I was there as you say for almost 15 years and it was it was a really great time really proud of the things that we did during that time.
Alejandro Cremades: So, I mean, when you started there also, um data and analytics was perhaps not as hyped as it is today. No, I mean, it hey everyone is talking about data and analytics. So, how have you seen consciousness, you know, and and and and in that incredible wave that they you’ve been able to ride, you know, for all these years?
Tom Scampion: really interesting question is that when you look at how you’ve gone from the back office to the front office with data and then it wasn’t even called on analytics when we first began it was sort of database marketing or it was you know different forms of Management information and remember you used to write the queries send them to the back office the back office would turn the queries around and you’d get You’d get answered and then you said well, I wasn’t quite the question I wanted to have answered and you go around this cycle almost never-ending cycle so for us to see analytics become actually a business tool and The sort of thing that you could not imagine um doing without
Tom Scampion: That journey was was really was really exciting. I mean, ah when you have CVs coming across your desk, everyone knows Python. and Everyone’s got different forms of you know SQL or different query languages that they’re familiar with. That wasn’t the case. Back in the day, it was you know this little team off to the side somewhere that you’d throw questions to and they’d give you answers. And mr therefore, to see analytics, as it’s called now, go on to the main stage Well, that’s great. I mean, that’s catching a wave as well. It’s kind of as business matures, you wouldn’t imagine running a business without really good analytics, really good data. But back then, when I first started, that that that awakening was just happening. So therefore, that journey was something that I was fortunate enough to be in the right place at the right time. um And of course, now,
Tom Scampion: when we talk about the thing that’s close to my heart, which is financial crime compliance and finding bad guys and stopping bad behavior. um Back in the day, it was much more of a kind of a policy driven world. And now financial crime compliance is all about analytics. It’s all about understanding complex data. So again, that’s another market that’s kind of come towards me. Fortunately, as my career has developed, so I found the analytics maturing has been has been something that’s coincided with the work that I’ve done.
Alejandro Cremades: So all your life in corporate, you know, all of a sudden, you know, the opportunity of becoming an entrepreneur and and really, you know, building your own future and and your own destiny, you know, comes knocking, you know, really in the technology side of things. So tell us about how that journey was in in and what was that day like when you’re like, screw it, let’s do it.
Tom Scampion: You know, that the um I think lots of us are frustrated entrepreneurs. We’ve always wanted to do something, we always wanted to drive our own business, but we’ve never had the opportunity, never found the thing that feels right. And so I was incredibly fortunate to have this business opportunity come to me from my from my clients. I mean, the banks came to me and said, It’s ridiculous that we’re all doing this duplicate activity. Can you not build a platform and we can all benefit from it? But but it it took it took the kind of the confluence of analytics
Tom Scampion: financial crime compliance, coming together as an opportunity to create this platform capability, this utility offering, um that idea needed to crystallize before I said, right, that’s it. I’m going to do it. And, you know, I’d been very happy and very comfortable in these different corporate roles. But it’s one thing to be an advisor. It’s an entirely different thing to actually be responsible entirely for the outcomes. and for it to be your business, your decisions, your team, your colleagues who are all making that difference. And so um when it came, or ah when the opportunity came along, because it was in this space, which I feel so passionate about, I didn’t really have a second a second thought. This was always going to be something I wanted to do because of what it was and because of how important I think this is to solve at a business level.
Alejandro Cremades: How did that opportunity come along?
Tom Scampion: I had some banks who expressed real frustration with the way in which the current market solutions are operating, which is very fragmented, very duplicative. um And the genesis of that idea was really with them. I mean, there’s been different authors, I guess, over the over the years, but the idea that common solutions can be built to solve common problems is is one that really crystallized in my space. And therefore, when you’ve got big global banks, big global transaction banks coming to you and saying, why don’t you build this? If you build it, we’d love it. If you build it, we’d use it. That was what I needed, Alejandro. It was someone to effectively say, well, you could do this, Tom. We’ve worked with you for years. We know you know this space. You’re passionate about trying to make this space really
Tom Scampion: um solution in this space are really ripe for for for being for being deployed. um That enthusiasm from those banks made me think, right, this is the time. So so they gave me that impetus. And boy, oh boy, has it been a journey since then.
Alejandro Cremades: So for the people that are listening to Get It Tom, what ended up being the business model of GSS? How do you guys make money?
Tom Scampion: We make money by creating a SaaS-based cloud native transaction fee driven screening service. So fundamentally everyone who is regulated by any institution around the world or any regulator around the world has an obligation to pay attention to the laws that prohibit doing business with sanctioned entities. So that could be individuals, it could be businesses, it could be countries. And you have to screen all of your traffic, all of your transactions and make sure you’re doing so in a level that is acceptable, but also in a way that does not create unnecessary friction, unnecessary kind of cost to the business.
Tom Scampion: So what we do is we say look for every transaction we’ll charge you a fee and the more transactions you give us the lower that unit cost becomes. But we can do it at less money than it costs a bank today and we can do it at higher quality than a bank can do it today. Plus if we’re all following the same standards we avoid the issue of friction and therefore we’ve got three simple messages we’ll do it for less
Alejandro Cremades: Thank you.
Tom Scampion: We’ll do it to higher standards and we’ll take away that friction that blights customers whose name sounds a little bit like someone on a sanctions list, but they aren’t that bad actor on a sanctions list. So it’s a really compelling model. We like it. We love the fact we’ve got all these banks that have worked with us to build it. And we’re really, yeah we’re really pleased to be where we are on Alejandro.
Alejandro Cremades: So as we’re thinking here about the business model, about making money, let’s talk about validating this. What was that the moment like when you onboarded the very first customer and what were the biggest lessons that you got from that?
Tom Scampion: So the the first customer is always gonna be your favorite customer. um Certainly for me, the fact that they press the button, they sign the contract, they sentence the checks, you know that was great to have our first customer. um But the difference between being able to prove all of this in a proof of concept environment, in a and an offline world to actually being operationally live, That step was a big step and it it was probably a bigger step than we realized when we yeah when we got going.
Tom Scampion: um But all of those lessons are invaluable. All of the things you learn about the reality of of you know being in the wild and actually doing this for real.
Alejandro Cremades: you
Tom Scampion: It’s such a wonderful moment. It’s one thing to have the confidence and the contracts and celebrate write all of that good stuff but it’s another thing entirely to say not only have I got the bank’s trust but I’m actually doing something which is now demonstrably better and it’s demonstrably cheaper than what they’re able to do themselves but there were loads of things that we we hadn’t foreseen you know as a new business you know there’s there’s there’s the smell of wet paint everywhere right so there were lots of things that we had to learn and um going through that journey
Tom Scampion: was invaluable. So the the difference between testing and going live, um it was so important for us. And we’ve got the the experience now which is baked into the product. And the beauty of our product is that every cycle gets a stronger and stronger and all those benefits are then there for all the other platform users to appreciate. So it took longer, but wow, was it a great learning experience.
Alejandro Cremades: So I guess you know when you were thinking about users, when we’re thinking about to you know some of the people out there, especially, how do you see the or how have you seen competitors really coming together as one to collaborate?
Tom Scampion: So the nicest thing about our world is that every customer wants everyone else in their industry to a adopt. You don’t want to keep a utility to yourself. You love the fact that everyone else is using it. So the more people that adopt it, the stronger it becomes. So I’ve got this great sales asset, it’s my customers. And my customers are then going to tell all of their customers, or their competitors, but all the banks in their region, or their correspondent banks, their correspondent networks, that this is a profoundly better way of doing doing something, and therefore for us,
Alejandro Cremades: you
Tom Scampion: The ability to have competitors collaborate because it’s in their interests has been really something. In fact, we regard ourselves as a standards-based organization that can benefit everyone because everyone contributes. And if everyone contributes, everyone benefits. And therefore, you’ve got this virtual so virtual circle. because we’ve had, I don’t know, 3,000 one-to-one meetings over our three years.
Alejandro Cremades: you
Tom Scampion: And each of those meetings, experts are giving us their know-how because they know that it’s in everyone’s interests for us to create less friction, higher quality, less cost when it comes to delivering this really important part of compliance. So that journey and understanding how you unlock the power of the network, that’s been really exciting for us.
Alejandro Cremades: What about unlocking the power also of regulators?
Tom Scampion: Yeah, you know, what’s interesting is that, you know, the old adage, you know, do you ask for permission or do you seek forgiveness? And and for us, we went early with the regulators, you know, particularly in North America, in the US Treasury, there’s a couple of big departments, there’s the Office of Foreign Asset Control, OFAC, there’s TFFC, who look after financial crime compliance. And um we told them early on, we said, look, we’re gonna build this, We want you to let us know if you’ve got any issues with us building this. And that was the best decision we ever made. So we’ve seen more regulators than we’ve seen banks globally now. And the regulator engagement is is important because they’re a stakeholder. They also want financial crime compliance to work. They want sanctions when they say that this is a bad actor or these people, these businesses
Tom Scampion: You know, we we want you to limit the business you’re allowed to do with them for foreign policy reasons. They want it to work. And so therefore there is a collaboration actually between the public sector and the private sector, what people call the public private partnership and having the regulators as a stakeholder here. was an important strategic call for us to make because we work in a regulated space. So we want the governments and the financial services regulators and the privacy regulators to know exactly what we’re doing and to feel great about it.
Tom Scampion: Now, they’re not going to endorse us because their public sector and they’re not going to say to the industry, you must buy these services from this private company.
Alejandro Cremades: you
Tom Scampion: But they’re engaged. And when they’re engaged, and they see the banks engaged, it just makes life so much easier. So we are superbly connected, I think, with the regulators and it’s an important part of who we are.
Alejandro Cremades: So let’s talk about fundraising here, because obviously, when you are in a heavily regulated space, too you know it requires capital you know to really build the organization. So you guys have raised about $90 million, dollars you know and that includes a significant Series A. So talk to us about what has been the journey of raising the money for you all.
Tom Scampion: So the most important thing for us um was to choose the right partners. Everybody likes the concept of a utility in the compliance space, using a SAS model. um It ticks a lot of boxes for different regulators, a different investors, but we wanted to choose the right, the right sort of investors. And so for us, a significant community of investors are the banks themselves. ah And that’s important for us because they become customers and it’s endorsement, but choosing um strategic investors has been an important part of this. The other side of it is getting to find financial investors who understand this world.
Tom Scampion: who understand the challenges and the opportunities and the potential. So the but one of our principal regulator investors is the Sinushek Group, who are run by a guy called Randy Quiles, who’s formerly of the US government.
Alejandro Cremades: you
Tom Scampion: He was of the Federal Reserve, the first head of supervision. And more recently, he was the global head of the Financial Stability Board. And he got this in a moment, in an instant, and therefore that connection was really important. He understood our world, he understood the business problem and was really engaged in helping solve it. So yes they’re a financial investor and of course they will have their journey to go on but they’re passionate about this topic. So we were able to find people who believed in us and believed in what this could be um because it’s just so badly served at the moment.
Alejandro Cremades: you
Tom Scampion: And we’re doing this transformation to say, look, the way in which this problem has been solved in the past needs a radical rethink. And so we’re creating a utility approach to something that at the moment is is’s done individually by banks. And you need to be familiar with the topic. and therefore to have experts in the investment businesses who understand it and relate to it. Wow, that that was great. And and we’ve had other other investors too, but that’s when the light bulb turns on, when they really get what we’re doing and why we’re doing it. And so for us, you know, we’re a purpose-driven business. We are really passionate about changing the world and there’s 5,000 banks out there and every bank needs this service. So for us, we want to become the standard.
Alejandro Cremades: So obviously, you know like when you get those investors betting on you, they’re betting on um and a future that you’re living into. now You’re enrolling them into into what that future is going to be. And and and and again, you know like that’s also part of the way that you enroll to customers, employees. So as we’re thinking about the vision, imagine if you were to go to sleep tonight, Tom, and you wake up in a world where the vision of GSS is fully realized. What does that world look like?
Tom Scampion: Well, remember that GSS starts with the first use case. The first use case is around sanctions compliance. And it’s basically saying, why does every single bank duplicate what every other bank is doing when we live in this connected world? And actually, we should do this at an industry level. And we should create the best capability that everyone can benefit from. In a GSS world, we are the standard. We are the standard and we take out cost. we We really improve the quality and we we tackle this friction that affects the end the end customer. But we don’t stop at sanctions. We stop we stop um ah you know in where we run out of use cases um for where competitors should collaborate. So take fraud. The whole area of fraud is it something that we collectively suffer.
Tom Scampion: And actually information sharing can solve fraud in a way that you can’t solve at an individual level. So we have got so many use cases about saying, where are there opportunities for us to do this at a community level? We can still compete in all sorts of areas, but there are many places where it just makes sense. to do this at a community or an industry level. Now sanctions is obvious, um so too is fraud, but but ESG reporting, in fact, there’s there’s about a dozen areas
Tom Scampion: where actually you don’t benefit by being better than the next bank in the chain, you benefit if all boats go up on a rising tide. And so that connectivity, um where there’s connective tissue, There’s common interest in us solving it as a community. For me, I love that because that’s transformational.
Alejandro Cremades: you
Tom Scampion: You know, we’re not just about making bucks. We’re going to make a lot of money. And of course, that’s all great. We’re transforming the world for the better. And I i don’t want to sound too pompous when I say that, but I believe it. I mean, I’ve worked in this space as we touched on the beginning of our conversation for years, decades. And you know, I go to banks when I was a consultant and and oftentimes the first question from a bank is, What is everybody else doing? Right? So now we can share what everyone else is doing. We can make it available, whether you’re the biggest or the smallest bank in the world. And we can say, we can solve this as an industry. And I feel really good about that.
Alejandro Cremades: so Obviously, we’re talking about the future here, but I want to talk about the past with a lens of reflection, Tom. If I was to put you into a time machine and brought you back in time to that moment where you were you know now getting that little push from you know those folks that you were engaging you know as a consultant and they And basically, that thing they were telling you, hey, you know there’s the problem that we’re dealing with. Let’s say if you were to show up right there you know with that day Tom that is thinking about venturing into becoming an entrepreneur, entrepreneur and you were able to give that younger Tom one piece of advice before launching what ended there up being GSS. What would that be and why, given what you know now?
Tom Scampion: And I can’t take my code base from now back to then, right?
Alejandro Cremades: That’s right.
Tom Scampion: Okay. So assuming I don’t have what I have today, I think um it’s that simple word focus. ah You know, we live in a target rich environment where there’s loads of things we could do and um everyone gets excited. Oh my goodness, you’re doing this. What about this? And we can do that. And you know, we don’t want for ideas. We’ve got so many things that we can do, but you need to walk or you run. You need to make sure that actually your focus on what’s in front of you. And um I think we did a solid job on a handrail, but actually I think even more ruthless focus on
Tom Scampion: Get the basics in place. Make sure your foundations are rock solid before you start worrying about where else you might go. Because there’s there’s it’s very easy to be distracted. We create wonderful momentum because it’s such a fundamentally good idea and everyone wants us to win. But you’ve got to focus on converting the near term and making sure everything is 100% complete before you do the next thing because it’s very easy to get this back. So for me, I would just remind my younger self that focus is our friend and you stay focused because the future, we’re going to have lots of opportunities, but you don’t get to have those opportunities unless you’re proven. So let’s make sure each step of the way you’re proven.
Tom Scampion: and you don’t have to build a massive edifice in the first 12 months. I don’t need infrastructure for this than the other. You know what you need? We need to prove the service. Convert the customers, have the the wonderful experience of running the operations, and then you can build and you can build. And I think that’s the lesson, I guess, moving from the corporate world. If you move from the corporate world, you’re you’re used to these big businesses with teams doing this and teams doing that. You know, when I speak to my fellow entrepreneurs, they’ll say to me, the biggest mistakes.
Tom Scampion: I built big too early. I had big marketing teams or I had, you know, big governance risk and compliance teams. I didn’t need that. I didn’t need that. I should have just reminded myself what I’m here to do. And so we’ve had a few course corrections as we’ve had to remind ourselves, this is the core. This is why we’re here. um And reminding ourselves of that focus every day is the best lesson I could offer.
Alejandro Cremades: I love it. so Tom, for the people that are listening, I would love to reach out and say hi. What is the best way for them to do so?
Tom Scampion: I am on LinkedIn. I am incredibly accessible through any channel you like, but I guess the default we’re all using is LinkedIn, but you can also put a message message on our webpage and well all my contact details are there for anyone who’s interested.
Alejandro Cremades: Amazing. Well, hey, Tom, thank you so much for being on The Dealmaker Show today. It has been an absolute honor to have you with us.
Tom Scampion: Alejandro, thank you. My pleasure entirely.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Tom Scampion On Raising $90 Million To Bring Global Banking Institutions Together To Prevent Finance Fraud And Crime appeared first on Alejandro Cremades.
Daniel Nathrath has had an exciting entrepreneurship journey building and exiting companies. He went on to build Ada Health, a revolutionary clinically-driven AI application that provides patients with in-depth health information.
Ada Health has attracted funding from top-tier investors like Red River West, Bertelsman Investments, Farallon Capital, and Schroders Capital.
In this episode, you will learn:
- Rob’s family history, escaping Cuba and rebuilding in the US, exemplifies resilience and the pursuit of the American Dream.
- Moving from engineering at IBM to product management at Endeca marked Rob’s shift towards impactful, customer-focused roles.
- Inspired by market shifts in e-commerce, Salsify aimed to revolutionize product experience management for global brands.
- Initial struggles in Salsify’s first years underscored the difficulty of selling e-commerce solutions pre-market recognition.
- Salsify’s breakthrough came with retailer mandates in 2014, compelling suppliers to enhance their e-commerce capabilities.
- Successful capital raises were built on early relationships with investors and understanding market trends over time.
- Looking forward, Rob envisions Salsify as a global standard for product information management and distribution across major retailers.
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Your email address is 100% safe from spam!**About Daniel Nathrath:**Daniel Nathrath is the Co-Founder and CEO of Ada. Prior to that, he was the Managing Director of Germany and New Geographies at viagogo from January 2007 to December 2009.
Daniel was also responsible for expanding viagogo’s market leadership across Europe through business development deals adding to the existing partnerships with, e.g., Bayern Muenchen, Manchester United, Chelsea FC, Inter Milan, 1. FC Kaiserslautern, MTV, Madonna, Bild, Kicker.
From 2006 to 2007, Daniel was the CEO of an internet startup that they built up from idea to profitability. Prior to that, he was a Consultant at The Boston Consulting Group from 2004 to 2006.
Daniel has also served as a Board Member at Jubii A/S from 2000 to 2003 and as the Director of Product Management at Lycos Europe from 1999 to 2003.
Daniel Nathrath has an MBA from the University of Chicago Booth School of Business and a LL.M. in International Law from the University of Houston Law Center.
He also has a 1./2. State Examination (JD equivalent) from The University of Bonn and a Diploma in Comparative International Law from the Faculté Internationale de Droit Comparé.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty, hello everyone and welcome to the Deal Maker Show. So do today we have a really amazing founder joining us. you know it’s saying It’s really incredible, you know the the journey that our guests, that our founder you know has experienced with the rocket ship that he’s riding. Obviously the first years, they were not easy as it never is really a straight line, but go ahead Daniel.
Daniel Nathrath: kind sorry i got keep out
Alejandro Cremades: I still see you, I still see this thing being recording.
Daniel Nathrath: yeah I’m back now. I’m back now. I just had to refresh the the the screen. Sorry.
Alejandro Cremades: um Okay. Well, don’t worry. I’m still recording, so we’re we’re good. Okay?
Daniel Nathrath: Okay. Okay.
Alejandro Cremades: And t will we’ll we’ll edit this piece, so don’t worry. All right. Hello, everyone, and welcome to the Deal Maker Show. So today we have a very exciting founder joining us. ah Definitely a rocket ship that he’s riding. Obviously, it’s never a straight line, and we’re going to be talking about you know, the type of journey that they embarked on. But nonetheless, you know, incredible conversation, very inspiring story. And I don’t want to make you all wait any longer. So without further ado, let’s welcome our guest today, Daniel Nathrath. Welcome to the show.
Daniel Nathrath: Hi, Hanro, thank you for having me.
Alejandro Cremades: So originally born in Germany, in a small town there, you know, to a family of doctors. So give us a walk through memory lane. How was life growing up?
Daniel Nathrath: Yeah, life life growing up was great. i mean i you know As you said, I grew up in a small town. My father was an ophthalmologist, so I was exposed to healthcare care quite early on. um but ah you know i Great childhood, but I didn’t really want to be involved with healthcare care because I saw with my father how hard he was working. and ah He was basically sitting in a dark room all day, and I was like, ah that’s not really what I want to do. but At the same time, I didn’t really know exactly what to do with my life. So I ended up studying law first, first in in Germany, and then I had what’s called a Fulbright scholarship. And I really wanted to experience studying abroad. So i was I was sent to Houston, Texas, where I did a master’s in law. And then I took the bar exam in New York as well.
Daniel Nathrath: But um while I was there, this was in the mid 90s, I discovered the internet, which was or a real revelation for me because it allowed me to ah stay and stay on top of what was going on in in German football or soccer, as the Americans would say.
Alejandro Cremades: you
Daniel Nathrath: And somehow I felt, OK, this is going to change everything and it really ah you know fascinated me, so I didn’t really want to be a lawyer anymore. um And I went back to Germany. I had a few offers from international law firms, but I decided to join ah one of the leading internet companies at the time, which was called Lycos. It was one of the earliest search engines and portals. I was always competing with Yahoo. I joined a company called Lycos Europe.
Daniel Nathrath: which was a joint venture of Lycos US and Bertelsmann.
Alejandro Cremades: you
Daniel Nathrath: And it was an exciting time. we This was like 1999. We went public a few months after I joined. I did a lot of work on that IPO. ah Then we acquired about 50 companies all across Europe, um and we went from 40 people to 1,500 people in a very short timeframe, ah which, as you can imagine, led to quite a bit of growing pains and chaos. I was then…
Alejandro Cremades: And right there, right there, Daniel, I guess the first thing that comes to mind is most acquisitions fail because of integration.
Daniel Nathrath: um Yeah.
Alejandro Cremades: I mean, we’re talking about at least 90%. So what, what did you learn about integration? Because I mean, it sounds like you guys were growing rapidly. You did a bunch of deals there. So what were some of the patterns on successful integration?
Daniel Nathrath: So back then it was all about speed really and the the original founder of Lycos in the US had led Lycos to the fastest IPO ever on the NASDAQ and he wrote a book called Speed is Life and that seemed to somewhat be our motto and so so it wasn’t really, let’s say due diligence was maybe not as diligent as you sometimes would wish. And I was ah i was a lawyer, ah but I transitioned ah very quickly within Lycos to more of a business-focused role and I became the Chief of Staff of the CO. And then I was put in charge of working on the post-merger integration. and
Daniel Nathrath: There were a lot of challenges with that, of course, because um almost all the companies we acquired were just as, um you know, I guess chaotic as we were. ah All very young people, young founders, first time founders. And we had, for instance, several companies that we acquired in France where, of course, you acquired three or four companies in France and every See all of the companies you acquire acquired basically wants to be the the king of france and you know this was just one of many challenges there and then we had challenges of course with tech integration one company was on a. Back then windows platform the other one was in unix and you know all these kinds of things.
Daniel Nathrath: That I had never heard of before and I have to say it was, ah you know, ultimately like us didn’t really make it because Google just sort of came out of nowhere and was just a much more focused company at the time with a better product.
Alejandro Cremades: you
Daniel Nathrath: um But i for me it was a fantastic learning experience because I basically experienced the whole life cycle of a company in in fast forward so from basically being 40 people to 1500 people and one year later because we had to. already restructured, I think we were back down to 600 or 700 people, um ah lots of acquisitions, ah really fast growth, but at the same time, also many mistakes that we made along the way.
Alejandro Cremades: you
Daniel Nathrath: and And I got a lot of responsibility very early on. And I don’t think I could have learned a lot more somewhere else. And many of the former Lycos team members went on to become extremely successful founders, actually, for instance, the founders of king dot.com, ah probably, you know, Candy Crush, you know, very successful company, fantastic ah entrepreneurs, ah the founders of B2 like dating platforms, um ah the the former head of Europe of DoubleClick. So really, a lot of very, very talented people who learned a lot, made a lot of mistakes, but then basically took these experiences and applied them to become even better founders.
Alejandro Cremades: So then it sounds like in your case, you know you had learned that tremendous amount of time. So why shifting gears on doing an MBA and joining corporate?
Daniel Nathrath: Yeah, so i’m ah you know like I came from a doctor’s family really talking about ah business or talking about money wasn’t wasn’t only not happening, it was almost like adapting. You wouldn’t talk about these things. So I had very little ah financial literacy or understanding of what entrepreneurship really means. So I really wanted to learn more about um business basically i mean also as a lawyer at least uh back then i don’t know if it has improved but ah you wouldn’t really learn that much about law even the really really sharp lawyers often wouldn’t really have an understanding of the business context and certainly back then in law school that wasn’t taught so i felt you know i was fascinated with entrepreneurship but i felt like i didn’t know enough so i wanted to learn more i didn’t mba at the
Daniel Nathrath: University of Chicago it was a global executive MBA program Barcelona Chicago Singapore big part of my motivation was actually to spend time in Barcelona city I love being in Spain just you know obviously was great especially at that age and then and then I joined BCG ah consulting firm because I felt like I wanted to see a few other industries and and learn more through doing some projects, but I told them even when I joined, and this was the second time they had made me an offer. They had already made me an offer when um before I joined Lycos. I said, look, I’m going to do this for two years just to learn, and and then I want to move on and and do my own thing. And then they said, yeah, that’s fine. you know It’s kind of our business model to have young consultants who we basically cycle through the process. and
Daniel Nathrath: ah That was a very good learning experience. I did see some other industries, banking, ah insurance, but ultimately um you know I wanted to get go back to tech businesses and internet.
Alejandro Cremades: so then So then what happened next? Because obviously, you know you decided to just go into it you know yourself becoming a founder, but they that didn’t really follow the course that they that you had hoped for you know in terms of excitement. So how did that unfold?
Daniel Nathrath: Yeah, so ah so the the becoming a founder was um almost a bit accidental. I mean, we were ah yeah having beers in Barcelona and I was talking to a few friends of mine in the MBA program and said, we we’re studying a master of business administration, but almost all of us are basically going back to corporate jobs like consulting, investment banking, whatever it is. And ah you know how what we started startup and then I had an idea it was in the skill gaming not gambling space and basically was bootstrapped a few friends of mine from the NBA put a little bit of money in
Alejandro Cremades: you
Daniel Nathrath: uh, certainly wasn’t anything that would sort of, uh, make the world a much better place, but, uh, it was another good learning experience because I, I started a bootstrap startup. It became profitable quite quickly. We, but I felt like, uh, it wasn’t really, there wasn’t really a purpose behind it that I wanted to continue pursuing for a long time. So we ended up selling it fairly quickly. So at least, you know, it was, it wasn’t a, it wasn’t a failure. Um, everyone you know made a little bit of money. ah But it wasn’t my real passion. so So then I, you know, one of my passions has been and is ah football, soccer, ah recurring themes. So I was living in Munich at the time and there was a company called ViaGoGo, which is a secondary ticketing platform. And they just had started a partnership with Bayern Munich, my favorite team, and they were looking for
Daniel Nathrath: a german country manager ah so i chatted to the founder and met him and got offered the job and and that was another very interesting ah experience ah seeing a very very focused and driven entrepreneur like the founder of via gogo who previously founded stubhub in the u.s
Alejandro Cremades: you
Daniel Nathrath: seeing him operate. And by the way, he’s a fundraising fundraising um you know master, I have to say. ah I learned a lot from that. I also learned a lot about really being commercially focused. But again, I did this for like three, three and a half years, something like that. And then I felt i um you know I needed to do something else maybe with more purpose. But to find that purpose, I went on a trip around the world. ah again second time I did this before after my previous job as well and then um yeah when I came back I got approached by some former colleagues from my Lycos days and they said um ah you know what are you up to and I said well blah I don’t know and they said we we you know we met these amazing scientists um especially one one scientist who’s a grandson of a Nobel Prize winning scientist called Heisenberg
Alejandro Cremades: Thank
Daniel Nathrath: and why don’t you have a chat with him he wants to eradicate misdiagnosis and i said well this is extremely ambitious and coming from a family of doctors trying to create software for doctors i’m not sure the doctors are ready for it so but i i met my co-founders the the scientist ah very fascinating he’s now a professor for medical ai in germany we’re still very good friends he’s no longer involved in the
Alejandro Cremades: you.
Daniel Nathrath: day-to-day Martin Hirsch, a fantastic guy. And ah the other co-founder actually is Claire who became our chief medical officer and ah who to to recruit her to the business and to retain her eventually I had to pull all the stops I married her and now we have two wonderful children and to Ada is kind of our third baby ah with
Alejandro Cremades: and Obviously, it’s saying it’s amazing. I mean, you guys have been together too for 10 years married, and as you said, you know two kids. I guess, how how how do you think you know people that they you know have also a significant other that they’re working on on a startup or or a business, how how do how are those dynamics? How how do you think you know like how how do you think you’ve you’ve made it work for you guys?
Daniel Nathrath: So in our case, we almost didn’t know it any other way because we kind of met ah through this and kind of becoming co-founders and dating kind of. inadvertently started happening at the same time and ah at the time we were still a very very small team ah and everyone was kind of friends pretty much so I don’t know if you if you were to ask my my my colleagues at the time if they found it awkward maybe but ah
Daniel Nathrath: Probably not so much because we always had ah quite a separation of responsibilities. So my wife Claire, she’s a trained doctor from the UK, a pediatrician and geneticist. She worked in the National Health Service in England for 10 years, something. uh and uh she obviously is the real brain here the medical brain i’m just i’m just a business guy who who had to try and do the fundraising and and you know get some revenue and these are usually quite different tasks of course one challenge is um that you know when you’re at home you at some point you have to
Alejandro Cremades: you
Daniel Nathrath: ah snap out of the business mode because otherwise it it gets ah that’s probably when it gets stressful when it’s like midnight and you you’re arguing about something in the business at some point you have to kind of put a stop to that if you want to keep both things healthy and somehow we managed we’re you know we’re we’re we’re still enjoying the the journey and it’s working really well And ah there there are ah you know quite a few examples where founder couples actually have been successful, if you look at Eventbrite, I think, and also Biontech. And then also you, Alejandro. I mean, I saw, I read your story. ah you know you you You did it too. And you know I think there’s some advantages where you know there’s someone you can really trust um and
Daniel Nathrath: you know there there will never be a lack of commitment to each other and and to the the joint cause. so
Alejandro Cremades: 100%. I think that they now now looking at it, you know if I was to look at it from the investor side, ultimately, you’re betting on people that you’re that they’re going to sleep with it and they’re waking up with it. so i mean It’s just like 24-7, thinking through it. But I guess, Daniel, in your guys’ case, what ended up becoming other health? How do you guys make money? What’s the business model there?
Daniel Nathrath: Yeah, so it took us a few years to figure it out. Initially, we were building a decision support system for doctors, and over 10 years ago, trying to um you know sell ah technology to doctors who, quite frankly, most of them at the time were still doing everything on pen and paper was a hard proposition. I mean, it was just really almost impossible, especially in in Germany, you know, where there are lots of concerns about using technology, etc. So it took us a few years. Eventually, I got my wish that we
Daniel Nathrath: shifted our focus more to the patient side. We knew that there were 7% of our Google searches, health-related, one out of five of those directly a symptom. ah There was a company that that is still around called WebMD. Their main feature at the time was a symptom checker that quite frankly wasn’t wasn’t very accurate and and we knew what we had built was multiple times more accurate but ah we had to figure out a way to make it easily accessible and to make it easily usable for patients. So basically we created a chatbot before the current ah wave of chatbots became all the rage. So this was in 2016, 2017 I think when we
Daniel Nathrath: We’re working on this. We really launched one of the first chatbots, I would say, certainly in the medical space. And we didn’t initially, we were thinking about different types of business models, maybe a freemium model, et cetera, but the app is still completely free. It’s been downloaded by over 14 million people. We have over 35 million cases in the system. Right now, every three seconds, someone somewhere in the world is entering the new case in Ada in 12 different languages. um And we didn’t really have a clear idea of what the business model was going to be.
Daniel Nathrath: or We had maybe many ideas, but we hadn’t zoomed in on some.
Alejandro Cremades: You
Daniel Nathrath: We got a lot of interest once we launched the free app from health systems, from health insurers, from government, from pharmaceutical companies, from telehealth companies. And it was ah you know it was a little bit of trying around and and finding out. And eventually we settled on two main business models. One is working with health systems, governments and and and payers to provide kind of a digital front door, a triage tool at the beginning of the patient journey where really we integrate our software into our partner’s environment.
Alejandro Cremades: you
Daniel Nathrath: For instance, we work with a large health system in in in the US called Jefferson Health and they integrated our technology where People actually start their journey with Ada before they see a doctor. And then ah they find out if they need to see a doctor, and if so, which doctor would be the best doctor to see. So we’re kind of the bouncer at the door that helps direct the patient in the right direction. It’s it’s integrated with the electronic health record system.
Alejandro Cremades: you
Daniel Nathrath: So you can go straight into the appointment booking. And it basically redirects a significant percentage of people towards self-care, whether that’s appropriate, so people with a cold shouldn’t really go to to the emergency room, obviously. ah But then it also helps to prepare the doctor visit. So because we’ve kind of automated part of the doctor’s job by taking the patient history, um And that saves the doctor ah you know several minutes per appointment because ah part of the documentation effort is already ah is already done. and ah So the the business model here is basically a software as a service model where the partner organization ah you know pays us and an annual license fee and these types of contracts are typically multi-year contracts because obviously there’s some
Daniel Nathrath: effort on both sides involved in in in setting up the integration and this is working really well, ah very high satisfaction for our partners. We work for instance with the largest health system in Portugal, one of the largest health insurers in Switzerland, you know largest and most innovative health system in the US a government in a province in Canada etc so so this is working well but then we also have a second business model where we work with life sciences companies we we call this ada match because basically we use this is where we use the free app to some extent.
Alejandro Cremades: you
Daniel Nathrath: where we help patients um find out what they most likely have. so We’re matching the patient to the most appropriate um underlying condition. I’m not calling it a diagnosis for legal reasons. but you know and We kind of help pre-assess the patient and then we can also help the patient direct ah connect to a healthcare professional who can then prescribe. and In many cases, um creating the awareness for the patient can actually be lifesaving and then getting on to the right treatment. That’s, of course, the doctor’s decision, but that’s also obviously in the interest in the commercial interest of the pharma companies. The other use case there is also trying to help find patients for clinical trials. So that’s another thing ah that we’re very good at, because basically what we’ve built is the most accurate
Daniel Nathrath: kind of doctor in your pocket that exists ah in the world. And therefore, ah and patients use us usually before they go see a doctor because they’re like, do I actually need to go to the doctor?
Alejandro Cremades: So.
Daniel Nathrath: So we’re very good at finding the undiagnosed population. And of course, this is of interest not only to the individual patient, but also to the life sciences companies who are looking to ah serve these patients. So that’s that’s the other business model.
Alejandro Cremades: So talk to us, Daniel, about the fundraising journey too, because I know that they it was not the typical you know ah way. It was a little bumpy, you know especially you know some of those times where the money took a little bit longer, where you had to even cover payroll yourself personally. So nerve-racking, for sure. so So how much capital have you guys raised to date, and how has been the journey on on raising that?
Daniel Nathrath: So we’ve raised roughly $200 million. dollars um And fortunately now we’re we’re profitable. We turned profitable last year. So we’re we’re actually no longer on the fundraising trail, ah which as you can imagine after 13 years is is a bit of a relief. ah But ah it it did indeed, it was unusual because the first, I would say five years of the company’s existence, we were completely privately funded by well-meaning and impact-oriented and very patient high net worth individuals, mostly from from Germany.
Alejandro Cremades: Thank you.
Daniel Nathrath: We also ah have the inventor of the AI behind Amazon Alexa um among our investors and then you know Google’s chief business officer worldwide. is one of our early backers so in in a private capacity so we we have um fortunately we we found people who really believed in what we were trying to do and i think if we had started raising from vcs at the very beginning we would probably have been shut down after a year or two um because at least at the time most vcs wouldn’t have any understanding of
Alejandro Cremades: you
Daniel Nathrath: how hard it is to build in healthcare. And I was naive about that too. If I had known it would take this long, ah you know i’m i’m ah I’m a big fan of the lean startup approach, building an MVP, you know starting to generate some revenue and then iterating from there. But if you’re building something where whether your answer is right or wrong could have a massive positive or negative impact on your user’s health and possibly you know life, then you can’t just say, OK, well, I’m building an MVP.
Daniel Nathrath: And and you know if it goes wrong, you know who cares? That was never our approach. So we we took an extremely doctor-led and science-led and responsible approach.
Alejandro Cremades: you
Daniel Nathrath: And that’s why it took so long. So um so I think we in the first few years, it was hard for me because I’m a commercial commercially-oriented entrepreneur. And I really wanted to basically do business and I couldn’t because the product wasn’t there yet. We had a big ambition, a big vision and to cover a large part of medicine and do it accurately with AI was almost harder than I thought. So so we were we were lucky that we found really amazing individuals who are still our backers and who’ve become friends over the years who
Daniel Nathrath: really funded us for a long time. And then I think in 2017, we had our first ah sort institutional funding round and um ah you know funny anecdote.
Alejandro Cremades: you
Daniel Nathrath: ah you know yeah I think when you first published your book, The Art of Startup Fundraising, I was just about to embark on my sort of going after my first institutional money. So I bought your book, of course. ah And ah you know because I think it was early days for you you, you actually built a little bit of a small community around it. And I’m sure you don’t remember it, but I remember very well that you had a small private Facebook group, as a Slack group, I think even in 2016.
Daniel Nathrath: And you know you and I and and I think a couple others we had even had like a private sort of video call where you were imparting some of your wisdom on fundraising and you know thank you because ah you know I found it really ah really helpful. I had as I said before I mean in my first startup I had only done. sort of a little bit of fundraising from friends and family but this is obviously different and and having a resource like the book you wrote and and your sort of thought leadership articles was actually super helpful in my journey.
Alejandro Cremades: you Well, I was not going to mention that, Daniel, but I really appreciate the kind words, and and it really means a lot. So so thank you. And obviously, he super proud of of everything that you guys have accomplished. I mean, what you’ve done is absolutely remarkable. So Daniel, with regards to you know basically these capital ah raising efforts that you guys have done and and all these incredible investors, obviously, they’re betting on a vision. no so
Alejandro Cremades: if I could you know give you the opportunity of going to sleep tonight and waking up in a world where the vision of Aida Health is fully realized. what what What does that world look like if that was to be the case?
Daniel Nathrath: Yeah, I would like to see a world where every person in the world has free access to highly accurate personal um health information and and personalized health assessment ah at their fingertips for free. So, you know, that right now we’re reaching through our partnerships and with our free consumer app, we’re reaching about 50 million people, five zero.
Alejandro Cremades: you
Daniel Nathrath: ah But, you know, as you probably know, there are um billions of people in the world who can’t afford a doctor and and you know who who might not ever be able to to see a doctor and you know with the sort of proliferation of ah internet access and and ah cheaper devices um I hope that people like that will be able to use a solution like Ada that is almost as accurate, or in some cases, more accurate compared to a human doctor. I mean, we’ve we’ve never been about replacing doctors where they are. We’ve been about supporting the patient and also supporting the doctors. But for people who woundy who don’t even have a doctor, we’re 100 miles each each direction. you You don’t really have a doctor. ah you know I think a solution like ours can really help immensely for people to understand and then
Daniel Nathrath: to understand their own health issues and and then take action from there. so I would like to see a world where um access to healthcare becomes more equitable and you know and and ah everyone can afford it. and ah you know the sort of The other part of my vision is that ah is One is access in general, but the other part is that I want for ADA to not only look at symptoms, ah but to eventually integrate data from all relevant ah sources. so For instance, um integrating sensors and wearables data, things like that are also going down in price. so That will allow you to, on a continuous basis, um
Alejandro Cremades: you
Daniel Nathrath: basically gather data and and ah try to be able to address a problem when it’s still a $100 problem and not yet a $100,000 problem and basically help get earlier diagnosis done and thereby literally save lives, which is very close actually to my co-founder’s original vision. We’re just, instead of starting in the doctor’s office, we’re starting much earlier, we’re starting um At the patient or we’re basically starting at the individual when the individual hopefully isn’t even yet a patient and doesn’t necessarily need to become a patient so this vision would be. To eventually even include if that’s something that the individual wants for instance a full genome sequencing which is also going down in price massively so you could have.
Daniel Nathrath: basically ADA or something like ADA is you as the medical brain that’s basically sitting always there with you on your smartphone or other devices and ah basically monitoring in the background but but on top of a baseline where I’ve done this, I’m often the guinea pig for this, so I’ve done this, so ADA knows I have a three times higher risk of celiac disease ah three times higher risk of gout, but at lower risk of melanoma. So if you, Alejandro and I, let’s say we’re both entering symptoms of abdominal pain, tummy ache, and exactly the same symptoms, Ada would look at this and would say, okay, we already know Daniel has a three times higher risk of celiac disease, so
Alejandro Cremades: you
Daniel Nathrath: you know We can apply this probability modifier and look out for that even more in Daniel’s case. And then if you can combine that with direct-to-consumer lab tests that you can do at home without even having to go to the doctor’s office, all these things. you know I think ah it’s exciting how technology will be able to help people you know understand and manage their own health ah in a more and more efficient way.
Alejandro Cremades: So, I mean, we’re talking about the future here. I want to talk about the past because it’s been, you know, like you were saying, 13 years, 13 years of pushing, you know, and and and writing, you know, they say this ship, this this journey, this path ah that you guys embarked on. I guess if you were to go back in time, if I was to put you into this time machine, and maybe I bring you back to that moment that you were thinking about jumping on this and becoming the business co-founder, you know, and you were able to give that younger self one piece of advice. What would that be and why, given what you know now, Daniel?
Daniel Nathrath: who I mean, there are obviously see many things. I mean, hindsight is 20-20, so when you look back, ah you know about many mistakes you you’ve made and that you wouldn’t want to repeat. I think one thing certainly that I would want to avoid if I were to do this all again is overhiring, sort of being too optimistic and and kind of before you’ve achieved real product market fit, ah building, you know, see teams that are are too big because that ultimately unfortunately leads to
Daniel Nathrath: Usually leads to a situation where you then have to let people go which i had to basically go through two rounds of that in this in the 13 year history of of of ada and you know i that’s probably you know most entrepreneurs i think with the conscience will say this is.
Alejandro Cremades: you
Daniel Nathrath: It’s ah not only the most unpleasant thing to do, but the reason why I i felt like it was a personal failure is because I felt like Not only did I fail the investors because i you know like I didn’t really get to the revenue growth I had anticipated fast enough to justify building up the the the cost but also most importantly I failed the individuals who i who um whom I had to let go because they trusted me and the the management team at the time. ah you know Some of them moved to a different country for the job and
Daniel Nathrath: And then ultimately, you have to make some tough calls because you have to, you know, the the survival of the company, I guess, is more important than than individual um ah cases, but still that was very painful. So i would I would actually, you know, there’s all this, I read the book Blitzscaling and I see the logic. I think it’s it’s fascinating, but um if you Blitzscale before you have a definite product market fit, it usually doesn’t end that well. So if I if i could go back, I would have been a lot more cautious in in hiring.
Alejandro Cremades: Understood. That’s incredible. I’m very profound Daniel. for For the people that are listening that would love to reach out and say, hi, what is the best way for them to do so?
Daniel Nathrath: I mean i’m I’m on LinkedIn and I respond to most messages that ah that are genuine and I mean the the only ones I have to basically ignore is all the recruiter and and offshoring spam. ah You probably get a lot of those messages as well like every day there’s a lot of them but I think it’s a useful tool um to basically connect with ah other founders, other entrepreneurs, other people who might be interested in in doing business.
Alejandro Cremades: yeah
Daniel Nathrath: ah So you know I can be found there.
Alejandro Cremades: you
Daniel Nathrath: That’s mostly where I do actually check it you know regularly. So happy to connect with other entrepreneurs. um i you know I think I’ve had some learnings over the years. so i did a bit of angel investing, usually it’s when i um when I already know the person, usually when we’re already kind of friends. um and And I guess learning from my own failures and learning from my own dealings with investors as well, I think sometimes I can help with either an introduction here and there or with some feedback. Not always, but you know I try to be helpful because I remember ah how often I felt that ah
Daniel Nathrath: it would have been very useful to talk to someone who’s been through the exact same journey.
Alejandro Cremades: I love it. Well, Daniel, thank you so much for being on The Deal Maker Show today. It has been an absolute honor to have you with us.
Daniel Nathrath: Thank you Alejandro and thank you so much for for your help because you know you you certainly had an impact on my own journey and ah it’s I think what you’re doing is amazing and you’re helping a lot of especially first time founders, first time entrepreneurs with what you’re doing and and thank you for all of it.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Daniel Nathrath On Raising $200 Million To Support Better Health Outcomes With Intelligent Technology appeared first on Alejandro Cremades.
In the bustling world of tech startups, stories of perseverance, innovation, and global impact abound. Today, we dive into the inspiring journey of Rob Gonzalez, co-founder of Salsify, a trailblazing enterprise software company revolutionizing product experience management.
The company, Salsify, has attracted funding from top-tier investors like Permira, Neuberger Berman, Venrock, and Cap Table Coalition.
In this episode, you will learn:
- Rob’s family history, escaping Cuba and rebuilding in the US, exemplifies resilience and the pursuit of the American Dream.
- Moving from engineering at IBM to product management at Endeca marked Rob’s shift towards impactful, customer-focused roles.
- Inspired by market shifts in e-commerce, Salsify aimed to revolutionize product experience management for global brands.
- Initial struggles in Salsify’s first years underscored the difficulty of selling e-commerce solutions pre-market recognition.
- Salsify’s breakthrough came with retailer mandates in 2014, compelling suppliers to enhance their e-commerce capabilities.
- Successful capital raises were built on early relationships with investors and understanding market trends over time.
- Looking forward, Rob envisions Salsify as a global standard for product information management and distribution across major retailers.
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Your email address is 100% safe from spam!**About Rob Gonzalez:**Rob Gonzalez, based in Boston, MA, US, is currently a Co-founder and CMO at Salsify, bringing experience from previous roles at The Digital Shelf Institute and \_Underscore. VC.
Rob Gonzalez holds a 1999 – 2003 Bachelor of Arts in Computer Science and Mathematics, Computer Science, Mathematics @ Williams College.
With a robust skill set that includes Product Management, Enterprise Software, Agile Methodologies, E-commerce, Product Marketing, and more, Rob Gonzalez contributes valuable insights to the industry.
See How I Can Help You With Your Fundraising Or Acquisition Efforts
- Fundraising or Acquisition Process: get guidance from A to Z.
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Connect with Rob Gonzalez:* LinkedIn * RocketReach * Bloomberg * Crunchbase
Read the Full Transcription of the Interview:Alejandro Cremades: alright Hello, everyone, and welcome to the Deal Maker Show. so Today, we have a really amazing story, a story you know of a founder that you know he’s building something remarkable. um i mean They are right now like over 500 employees, ah raised over $450 million. i mean Really remarkable journey. you Talk about you know scale and and also you know like the the growth that they have been able to achieve. But again, you know be prepared today to hear about product market fit, ah enterprise software, how to think about you know a two-sided network, and many, many more you know interesting stuff. so So without further ado, let’s welcome our guest today, Rob Gonzalez. Welcome to the show.
Rob Gonzalez: Thanks for having me.
Alejandro Cremades: So originally, you know a kid from Southern Connecticut, but they but I know that they i mean they the story of the family origins i mean is is quite interesting too. So there’s a walk through memory lane. How was life growing up?
Rob Gonzalez: ah I mean life growing up was fantastic. my My parents are a mixed marriage. My dad’s a Cuban refugee and my mom is a Yankee. and they met at the Financial Management Leadership Program at GE Capital. um so the one One thing people don’t know about the Cubans is a lot of them ended up outside of New York City. There was a big Cuban ghetto in Port Chester, New York, which is the town just over the border from Connecticut. um It’s right next to Greenwich, if you’ve heard of Greenwich. Greenwich is like the richest town in the country, and then Port Chester is absolutely not the richest town in the country, um especially especially back then. A lot of refugee communities find cheap places to live. so They lived there, and GE was a big
Rob Gonzalez: company in that area. that The world capital of GE was in Fairfield. um GE for many years was the biggest company in the world. And so was it was a good place to get to get jobs and build a career. So so my my dad was in that area, got a job in GE Capital, met my mom, and then and then started the family.
Alejandro Cremades: So I know, too, that the um you know talking about the the origins from Cuba, i mean how your dad got into the country you know and the origins, too, you know with your grandfather, i mean that I’m sure that shaped who you are quite a bit, too. So talk to us about this.
Rob Gonzalez: Yeah, that well, the um my dad was a kid when Castro took over. And my grandfather was a police chief in a Havana district under Batista. um And so that’s not a good look, right, when the when the communists first take over. And eventually they they decide they want to escape the country. And the US government in conjunction with with others in Cuba figured out a way that they could get tens of thousands of people out of Cuba kind of under the nose of the way that the Cuban government was keeping track of people that were trying to leave. And the method was effectively that you would get the kids out and the kids would leave with like nothing, you know, literally just two pairs of socks, one pair of underwear,
Rob Gonzalez: They would open your bag and search you to make sure that you just weren’t bringing anything with you. um No valuables of any kind. ah Although my aunt did so, um you know, family gold and jewels and stuff into the hems of her clothing so that she could she could leave with some kind of money. And they would go to the U.S. And the expected thing that and happened next was that they would sit in the U.S. without their parents for a couple months and the parents would come afterwards. um What happened instead is the the borders were closed and the 13,000 odd children, somewhere between 13, 14,000 children were stranded from their parents. And it’s the largest child refugee migration in the Western hemisphere in history. And a lot of the parents never made it over. um I mean, there’s there’s a couple thousand children never saw the parents again. ah My grandfather, because of his association with with the Batista government, was thrown in jail. his All of his friends were shot.
Rob Gonzalez: um People thought he was dead for a year and then they figured out he was still alive. We had a cousin who got promoted up the ranks of the Communist Party, managed to pull some strings and get him out of jail, and then took him and my grandmother to the airport and held a gun to the head of the Communist Party member that was running the airport and got them on a plane to get him out of the country. So he managed to escape my grandparents.
Alejandro Cremades: Well.
Rob Gonzalez: um So my dad and and his sister actually managed to see see their parents again, which was great for me. And so i you know kind of that that that experience in the family history does so shape you. I mean, you see a lot of immigrant families, in particular refugee families in this country, um do really well. You know, they come here with nothing. They just assured on their back, my grandfather was in his fifties. And when he died, he had over 400,000 savings in the bank. And that was just, you know, he didn’t even speak the language. that That was just him working whatever job he could and saving money and just through grit. And so a lot of immigrant families have that. They open up dry cleaners. They open up um Chinese restaurants and stuff like that. You know, my grandfather was a porter. um My grandfather did carpentry.
Rob Gonzalez: my My dad made made whatever money that he could as a kid, doing paper routes and working at restaurants and washing dishes and whatever. And so there’s there’s this sort of, you can actually make things happen. yeah that I grew up hearing. This is a country where you can make a life that you want, or you can start over, where you can start with nothing and become rich. i mean My dad, when he first came over here, he was poor. they my Him and my sister picked food out of trash cans, and he ended up as the chief risk officer for GE Capital Amiya at the end of his career. It’s a senior executive band of of GE Capital, which was the the biggest financial institution at the time. so
Rob Gonzalez: So you made quite a lot of money.
Alejandro Cremades: That’s unbelievable.
Rob Gonzalez: So it’s like, you know you can do that in the in the States and and this whole Horatio Alger rags to riches. Hard work pays off. Story was a big part of what I what i heard all the time.
Alejandro Cremades: the American dream and you got to embrace it. And you know as an immigrant myself, i can totally I can totally see it too. So so that’s unbelievable. Now, in your case, you know obviously you had the family roots and the background that shaped who you are, but then also the fact that your dad, as as as you were alluding to, you know he he moved quite a bit. And I know that you guys moved to London and going there for a couple of years and then coming back,
Rob Gonzalez: Bye.
Alejandro Cremades: It kind of like shifted gears for you when it came you know down to readjusting back here in in the US. So what what happened there?
Rob Gonzalez: I came back to the US in seventh grade, which is just a terrible time. If you’re a little, especially if you’re a little bit awkward, it’s a terrible time to so move. Everyone’s going through adolescence. And this is, what was this, 92, 93. And i man, I just had a real hard time adjusting socially back in the US. And so I wanted something to do with my time because I i didn’t have the friends that I used to have. That’s when I got into computers. I remember in the UK, they had an Apple system at the school, and I used to play games on it, and I also would do math on it. i I was part of this advanced math program, and I really, really liked math. And I thought, well, geez, if I could get a computer, that would be a good use of my time. That would be fun. So I convinced my dad to get an IBM PC.
Rob Gonzalez: um and And so that was you know my my first real exposure to a computer. We had one at home. And I taught myself how to program. I took programming lessons over the summer um and and just loved every bit of it. and And anything that I can get my hands on about computers, yeah I’d go to Barnes & Noble and I’d buy the magazines, I’d buy the books. I bring them home, like I play around with them, and I just had a blast doing it. I and you know i eventually made a lot of friends in the in in the US, but by that point, the kind of bug had caught me with the computers, and and and I kept at it.
Rob Gonzalez: so
Alejandro Cremades: I mean, obviously, you you you kept at it. You went to Williams, you know, to study their computer science and mathematics. But one thing that happened next is is saying interesting. I mean, you went to work for IBM, you know, also Endica. But one thing that is super interesting as part of your career before you actually got started with Salsify is that transition that happened from being on the engineering side to being more on the business side. So how how was that transition for you?
Rob Gonzalez: you You know, it was it was an interesting one. And it was um ah at IBM, I was a software engineer and I was in a research group. And I was there for a few years. And IBM was a great place to work, but I was kind of miserable. And at the end of the day, I didn’t really understand why. But um I think, in in retrospect, I was miserable because the stuff that we were building was never going to see the light of day. It was never going to get used. It was proofs of concept and things like that. And I really desperately wanted to make a difference and have things be used by somebody. And so when when I left IBM, I you know kind of blamed the programming, the software engineering side for for my sort of dissatisfaction and decided I wanted to get away from it. And I got advice from a guy who was a senior guy at IBM that made a ton of money there who said, look, the closer you get to sales,
Rob Gonzalez: the the more of an impact, the better off you’re going to be. And I thought, OK, well, what’s the next step that I can take there? um my One of my best friends from college, Jeremy Redburn, had been had already left IBM. And he was working at Endeca. And he introduced me to Jason Purcell, who who was taking over the product management organization. And Jason gave me a job as a product manager, even though like i like I literally had never heard of a product management job before. It wasn’t something I was exposed to at IBM in the research group. and And DECA sort of hired people just based on pure intellectual bandwidth. how that And that was it. And if you could pass like the IQ test, you could get a job there. And so they hired just absolutely set of brilliant people. And so I passed the IQ test for the for the product management job. So even though I didn’t know what a PM was,
Rob Gonzalez: They gave me a shot and that was my my first step out of there and then ever since that I’ve just moved closer and closer to the customer um you know, I from there I went into product marketing and then and In the early days, it’s all spies kind of doing everything, you know, the sales engineering the sales marketing a whole bit I always wanted to be one.
Alejandro Cremades: so So double clicking on that, how did you how did you get closer and closer then to becoming a founder? And what was that moment where you guys said, let’s let’s go.
Rob Gonzalez: I mean in in the 90s The startups were so awesome and I was so worried that I was born too late to do anything. and I remember in 99, Jeremy and I were were freshmen and at Williams and we would get white Russians and we would drink them and in my dorm room and we would talk about starting a company one day. you know And so it’s something that I always wanted to do. I just wasn’t sure how the hell to do it. you know How do you get money to do it? Starting starting a company back in the early 2000s was extremely expensive because you had to buy all the hardware yourself. and you know Cloud computing wasn’t the thing yet, really. And and so i wasn’t I didn’t know the path from wanting to start a company ah of the type that I was interested in, a software tech company, to actually doing it.
Rob Gonzalez: um And so for me, it was something that was always in my mind, and it was mostly a timing issue. And what allowed for it to happen was – and DECA had an and an exit. They were purchased by Oracle for $1.1 billion in 2011. um Cloud computing had sort of come along, so it made it a lot cheaper to to start companies. Jeremy was freeing up from Endeka. Jason was freeing up from Endeka. I mean, he he had to stay on as part of the transition team for a while. And so it sort of came together where where all of us were we free. We had the time. we Jeremy and I wanted to do it for years and that the setting was right to make a swing at it.
Alejandro Cremades: so Then let’s talk about Salsify. You guys ended up going at it with Salsify and making it happen. you know tremendous Tremendous journey that you guys say you know embarked on you know because now it’s close to 12 years now, which is unbelievable. right now For the people that are listening to get it, what ended up being the business model of Salsify? How do you guys make money?
Rob Gonzalez: We’re just an enterprise software as a service company. So we we charge a typically annual, um increasingly multi-year license fee for for usage of the software. um The category that that we’ve created is called product experience management. And you can think of the product as a way to manage all your content and data related to products and then syndicate that product out into the market. So if you sell, for example, if you’re I mean, most brands are omnichannel brands. Our customers are are folks like a L’Oreal or a Coca-Cola. They sell to many different retailers. They also sell direct. um So you know you might have your own D2C commerce site powered by Shopify or Salesforce, Commerce Cloud or Commerce Tools or whatever, but you also have product detail pages on Amazon, on Walmart, on Target, on Kroger that you have to set up and and maintain and optimize. And so the system allows you to both manage all your content internally, but also get it to Amazon, get it to Walmart, get it to Target, get it to Kroger and so on.
Rob Gonzalez: um And that process exists because e-commerce has become a big thing. I mean, when we founded the company, Amazon was not even a top 10 retailer in the U.S. E-commerce revenue for most of the branded manufacturers. Like if you’re Johnson & Johnson, your 2011 e-commerce gross revenue is less than a point, right? It’s just it’s not it’s not that strategic of a business. um and And our thought was e-commerce was going to grow and become strategic. And if you’re if you’re whatever, if you’re J&J, if you’re Coke, you should care about optimizing the conversion rate and the the search engine um performance on all the big retail sites. It’s just looks the same way that there’s a Google ecosystem where people are doing search engine marketing and search engine optimization. We thought there should be a search engine opt search center marketing, search engine optimization business around Amazon, around Walmart, around Target, around Granger. right
Rob Gonzalez: And all of these websites are different. And the difference between the world of Google search engine optimization and the world of retail search on engine optimization is that with Google, you only have to optimize for one algorithm. With retail, you got to optimize for possibly hundreds of them at the same time because they are all the websites are different. And so if you had a piece of technology that could manage all the content and then play the optimization game on all these retail sites, that would be valuable. So that was that was the original insight, and that’s kind of the the context in which the business was founded.
Alejandro Cremades: So at what point do you guys say, I feel like you were turning a corner and what did that product market fit look like?
Rob Gonzalez: the first The first two years were just freaking hard, man. is There’s no two ways about it. i mean i was on My wife ah was in medical training still, and we didn’t have kids. and So I had basically full freedom to just be anywhere I needed to be at any time. So I was on the road constantly talking to anybody who would take a meeting with me to get this thing off the ground. and we got some initial sales. I mean, 3M was one of the first 10 customers we had, for example. They had a digital center of excellence team that was doing experiments and they they brought us on. And and you know so we we had some initial success, but man, growth was not not not that strong. We raised a Series A
Rob Gonzalez: in 2013, largely from folks that were in town that knew Ndeka, that considered Jason, my co-founder, who was the CEO of Salsify, considered him in particular to be just an absolutely star and vestibule person. And so we we raised an eight million Series A in 2013, despite not having that much market traction yet, um be you know basically faith in in the founding team and and faith in the maybe the direction of the market. But man, I remember having an all hands maybe six months after that and our chief architect, Joel, we still joke about it for this day. Joel raised his hand and said, man, shouldn’t we have more revenue by now? And it it was like that. It was just an absolute crime. We were working our butts off, trying to take any meeting we could, talk to everybody we could, and sales were just sluggish.
Rob Gonzalez: ah Because at that time, people just, like I said before, people did not care that much about e-commerce. The person that was managing Amazon for a you know top 100 CPG company was just some junior person in a basement somewhere that rolled into the sales organization and nobody really paid attention to what they were doing. And they didn’t really have budget to spend on software. So what changed for us? And you know I think if we had founded the company a year earlier, we would have either failed and just shuttered the thing or we would have had to pivot and try something different.
Rob Gonzalez: Now what changed for us fortuitously was around, what’s that?
Alejandro Cremades: So then… not
Rob Gonzalez: So what changed for us fortuitously was in August, September timeframe, 2014, we’re about two years into the business, Walmart and Macy’s and a couple other major retailers not coordinating with each other just on their own started issuing kind of threats to their suppliers saying if you don’t start giving us calm content to power our e-commerce experiences, we’re gonna start finding you. they They call it chargebacks in the business. ah we So if you fail to give us images for the product detail page and a product title and some description that we can use for e-commerce, we’re gonna punish you somehow. Walmart was threatening to de to to take products off the physical shelf if they didn’t have a strong e-commerce presence. Doug McMillan had just taken over there recently and he had told the Walton family, we don’t wanna be Sears.
Rob Gonzalez: You want to not be Sears? We have to take this e-commerce threat seriously. Amazon is going to make a Sears if we don’t change. and do I mean, Doug’s been incredible. well I mean, what a CEO. But ah so all of a sudden you had all these major retailers sending emails to their entire supply base saying you have to shape up. You have to be a better partner for e-commerce or else. And so what the problem that we were solving went from a thing that was Yeah, maybe someday I get the value that you’re providing, but it’s not ah not important to us right now. You know, that type of response to all of a sudden, well, crap, we have to solve this right now for Walmart or we’re gonna be in trouble. um and And from that point forward, things got dramatically easier. The market just changed overnight. Like if we if you look at 2014, we absolutely were not gonna make our number that year. Absolutely not. We we were like 25% of our sales target for the year in August.
Rob Gonzalez: and we We were screwed. And we hit the number on the year by just in the last four months of the year. that like That’s how dramatically it moved. And then we did like back in the day, 10 years ago in in venture capital, they would look at SaaS companies and there was a rule you have to triple, triple, double, double, w once you get to your first million. And that’s what we did. We did the triple, triple, double, double, double thing right afterwards. ah So yeah, i mean we we had the first two years were a grind. They were stressful. It was just stressful the whole time. It just wasn’t clicking. And then the market conditions changed overnight. And and then and then we hit that growth curve. And it was awesome.
Alejandro Cremades: So how was the capital raising effort? you know How was that experience, too? Because I mean, you guys have raised $450 million. I mean, that’s a lot of money. So how has been you know the going through all those cycles, too?
Rob Gonzalez: So the the first cycle, the thing that we did really well the first cycle is ah Because of Indeca, we can we’re in we’re in Boston. like Boston’s a ah great tech town, but in terms of the, you compare it to Silicon Valley in terms of the amount of venture that that’s invested, it’s it’s a lot smaller, right? And you kind of, at some point, it’s possible to know most of the VCs that are in the town. It’s just a smaller smaller set of people. So because of Endeka, we could get meetings with all of them, and we met with all of them early, um way before we wanted to raise, wait way before we even started the company, just to tell them about our idea and get feedback and and all that type of stuff. um this is We were all first-time founders, so we were we we weren’t doing the, like, ask for feedback,
Rob Gonzalez: But really, I want to make money. you know I want to raise money from you someday. We were like legit just looking for advice. um And we built relationships with them. And so when we got time to raise our Series A, like I said, we didn’t have that much traction yet in the market. But we had multiple competing term sheets. And and it was it was based on having built those relationships and having built a conviction within a bunch of venture capitalists that the market that we were going after was a good market. It was going to be it was going to be a big market. It was going to support an IPO scale business. um So a the A round worked well. I mean, it was a it was a pretty easy round. The the B round, we got it in our heads.
Rob Gonzalez: that we wanted to get some of the West Coast money. We thought it would be useful to expand our network. The Boston network, you kind of like I said, it’s ah it’s a smaller community. um you’re go You’re always gonna be maybe one, two degrees of freedom from anyone that you might wanna meet. And Silicon Valley just looked like this giant ecosystem. And we didn’t really know, we didn’t have any connection out there. And we thought it would be useful to have somebody on our board that had deeper connections to Silicon Valley. Now, our A-Round was co-led by Michael Scott and David Scott. And they had invested in demand wear and Acquia and HubSpot. i mean So there were they were known as really good investors out of the Boston area. And based on their reputations, we could get meetings with pretty much the the who’s who of the VC firms in Silicon Valley. So I remember going out there with Jason.
Rob Gonzalez: um And we got like ah media training to do the presentation right. We got this guy who was a producer at CBS for 30 years to you know coach us up on on presenting our story and doing it live in front of in front of ah the people that you’re cold pitching, which is not something that we had ever done. And so we were we were buttoned up, man. We were psyched. We went out there. We went up and down Sand Hill Road. This is back when they were still on Sand Hill Road. And I mean, it was just, it was like a chilly reception. um People were really friendly, but they nobody really wanted to get in on a B round company. There was one one guy who was, I think it was just really funny, he was saying, man, I get the business that you’re trying to build, but it just seems hard. You’ve got this, it seems really grindy. You’ve got this network component to it. So it’s not just that you’ve got to sell
Rob Gonzalez: Coca Cola, but you also have to partner with Walmart. So you’ve got it just it just seems like a hard business. I don’t like hard businesses. And also that red eye flight to Boston sucks. I don’t want to get on that flight for board meetings. it’s This is long before zoom and everything like that. So we got a lot of receptions like that. And Ultimately, the B round was was led by Mike Terrell from Venrock. And and he’s you know he’s out of Boston. And Mike was a board observer for Endeka. So he knew us. And it was a great you know it was a great round for us. And i you know Venrock is its going to do extremely well out of that investment. um But yeah the yeah, the West Coast, is just we you know we were cold pitching. And man, it just did not work at all. And then so from that point forward, for CDEF,
Rob Gonzalez: We said, look, we’re goingnna we are going to keep a list of the next round of investment, even if the next round of investment might be two years out. We’ll we’ll get to know them all now so that when the time it comes to take the investment, we’re not cold pitching. We’re just talking to people who already know us and already know the story and know the value proposition. and and are you know can ah almost opt in or out right at the start of the the fundraising round. And that served us really well. So CDEF were were’re relatively um painless rounds from that perspective because we we had already gotten to know everybody for years. And that’s i mean that’s the biggest advice I tell everyone when they ask me about fundraising. It’s like, in my experience, the cold pitching did not work. I think it’s very hard.
Rob Gonzalez: um I think the the more that you get to know the VCs and they get to know you earlier, um you build conviction on the the team and the market in a way that’s just very hard to do and in one pitch.
Alejandro Cremades: So obviously, you know, like with the capital racing, you know, come say a bit on the vision. So if you were to go to sleep tonight and you wake up in a world where the vision of Salsify is fully realized, what does that world look like?
Rob Gonzalez: um it’s Well, Salsify, there’s there’s there’s there’s two aspects to it ah that are part of the vision. One is, it is the system of record for product within every single major manufacturer. So, you you know, if if you’re a business, you’ve got an yeah ERP system, right? and and that’s you know Contains all your financial data you should also have a product system if you’re a manufacturer and the product is your lifeblood you should have a core system that is a number one two or three in your tech stack important system that is your product system of record and
Rob Gonzalez: that’s what ah That’s what the company would look like. It would look like the sales force for product across the across the globe. um The other aspect is that there’s a network component to this, which is ah how do you make sure that the great data that a manufacturer is creating that ah that are in their systems shows up in front of the buyer, shows up in front of the shopper at the time of purchase. And that requires, for example, a relationship with a Walmart, a relationship with a Care4, Woolworth, so whoever, to be able to transmit data across the supply chain and ultimately have it show up on the website. And and I would like that network to be you know global and all encompassing of all the major retailers. And so Salsify becomes, in effect, like the system of record for product and for for product exchange and product training for the globe. um And yeah we’re well on our path there, but I mean i think there’s still
Rob Gonzalez: a significant amount of of world and markets and companies yet yet for us to work with.
Alejandro Cremades: Absolutely. so Rob, we’re talking here about the future, but I want to talk about the past. If you could go back in time, let’s say you go back to 2012 where you guys are thinking about you know a world where you guys would start something of your own, and and right before you know giving the notices and getting going, you know you have the opportunity of having a chat with your younger selves, maybe you know you took that younger self to, you know what is it, quinc Quincy Market or one one of those places there in in in Boston?
Rob Gonzalez: Yeah, maybe.
Alejandro Cremades: And they and and you’re able to sit down and and give that younger self one piece of advice before launching a business. What will what will that be and and why, given what you know now?
Rob Gonzalez: Oh, man, this is this is a tough question, because if I had given myself the advice, like the the things that I learned along the way, what I have with the company have have been have become what it had become, you know what I mean? Like I’ll tell you like a lesson that I’ve learned is to Relax a lot more be be a lot more careful about my the usage of my time ah be a lot more intentional about what tasks I’m doing versus versus not doing, and so on and so forth. And so just so much, like a lot more time management and a lot more space for just thought. In the early days, there was zero space, zero time management, it was just 100% activity, pedal against the ground 100% of the time.
Rob Gonzalez: And for for like the first whole bunch of years, five, six years, it was just all and all consuming for me in a way that probably wasn’t healthy. And you know so i it’s like, I would like to tell myself, um don’t do that. you know’ did see Take a little more time. You don’t have to be in as much of a rush. There’s a lot that you can’t control about this market. um you know It’s like I was saying, the first two years were just absolute grinds. I was pushing with 100% of my energy and it wasn’t moving. And it wasn’t until the um market opened up that that thing started moving. So it’s like not every activity, not every bit of effort is going to yield the results you want. And if you can be clear about what matters and what doesn’t matter and create some space, you’re just going to be happier throughout the whole journey. That would be the thing that I would tell myself. But I you know i don’t know that I would have listened to it. yeah see As a younger man, I don’t think i don’t think i the way I was built, just looking back in time, I don’t think I would have listened to that advice.
Rob Gonzalez: um At all right I think that if I had tried to calm down and cut things off on my calendar I just would have found something else to push on instead and So anyway that that would be the piece of advice, but I don’t think it would stick I
Alejandro Cremades: Well, that’s so profound, so profound. so So I guess that for the people that are listening that would love to reach out and say, hi, Rob, what is the best way for them to do so?
Rob Gonzalez: i Like i’m I’m not on the socials really at all. I will check LinkedIn in mails if they’ve got like a message attached to them. Um, that’s probably the best place to find me, but yeah, I’m not, I’m not on, uh, Twitter or X or any, any of those things. I kind of, it’s not my jam.
Alejandro Cremades: Amazing. Well, hey, Rob, thank you so much for being on The Deal Maker Show today. It has been an absolute honor to have you with us.
Rob Gonzalez: Well, thanks so much for having me.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Rob Gonzalez On Raising $450 Million To Build The Industry’s Only Unified Product Experience Management (PXM) Platform appeared first on Alejandro Cremades.
In a recent podcast episode, we delved into the world of non-dilutive capital and entrepreneurial ventures with Keith Harrington, a seasoned investor and co-founder of Novel Capital.
Keith’s journey from a suburban Kansas City upbringing to becoming a key player in the venture capital world is nothing short of inspiring. This blog post captures the highlights and lessons from his remarkable career.
His company, Novel Capital, has raised funding from top-tier investors like Ignia Partners, MatterScale, Gaingels, and Ulu Ventures.
In this episode, you will learn:
- Keith Harrington transitioned from aspiring to be a doctor to a successful entrepreneur and investor after discovering his passion for startups in college.
- Early experiences with startups during the dot-com bubble taught Keith valuable lessons about growth, crisis management, and corporate development.
- Keith’s venture capital career began by focusing on the strengths of entrepreneurial teams rather than just the ideas they pitched.
- Founding Novel Capital, Keith created a unique model for providing non-dilutive funding to B2B software companies based on their data.
- The SVB collapse underscored the importance of stable, non-dilutive funding sources for startups, leading to increased demand for Novel Capital’s services.
- Keith aims to make Novel Capital a comprehensive resource for entrepreneurs, helping them make informed decisions about various funding options.
- Keith’s core advice to entrepreneurs is to take action and learn through experience, emphasizing that perfection is less important than progress.
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Your email address is 100% safe from spam!**About Keith Harrington:**Keith Harrington is the Co-Founder & COO of Novel Capital, a fintech funding platform. Keith is also the Founder of RBF Network, connecting and supporting revenue-based investors.
With experience as a Founder, Managing Director at Upstart Partners and various board positions at companies like Health Outcomes Sciences, Inc. and TVAX Biomedical, Inc, Keith has a strong background in venture capital and investment.
Additionally, their education includes a Venture Capital Executive Program from the University of California, Berkeley and an MBA from Indiana University.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty. Hello, everyone, and welcome to the Deal Maker Show. So today we have a really exciting founder. you know We’re going to be talking about non-dilutive capital and a bunch of other good stuff, especially when it comes to building, scaling, you know financing, growing, and then you name it, all the good stuff. And and again, you know the um the episode today is going to be packed with adrenaline from you know the meltdown of Silicon Valley Bank and how they were able to help you know people out to how they raised you know literally over $100 million, whether it’s in equity or in debt. And we’re going to be hearing about the difference of one and the other. And then also, you know being able to implement the experience say of being pretty much an investor, um deploying capital for startups before he actually went at it. And he transitioned to the other side of the table. So without further ado, let’s welcome our guest today, Keith Harrington. Welcome to the show.
Keith Harrington: Thank you Alejandro, really excited to be here.
Alejandro Cremades: So originally from Kansas City, the place that has had quite the year where it comes to football, but you know give us a memory, give us a walk through memory lane.
Keith Harrington: Yeah.
Keith Harrington: That’s correct.
Alejandro Cremades: How was life growing up over there?
Keith Harrington: Yeah, well, I’ve been in Kansas City long enough to remember when the football team and the baseball team sucked. I was born here, I grew up here, all the interesting things that I’ve done. I’ve done here in Kansas City, if there are any things that were interesting, I guess. But I remember when the Royals won the World Series in 1985. I was just a kid at the time, but but yeah, I’ve been here all along. um you know i think I didn’t really have a very interesting childhood, to be honest. I had a regular suburban ah childhood, went to school, didn’t get in very much trouble, went to college, got in a little trouble. ah And
Keith Harrington: you know along the way really developed a passion for entrepreneurship and what would eventually become what what we launched at Novel.
Alejandro Cremades: So in your case, I mean, you went up to the um university over there of Kansas City and you thought you were going to be a doctor, but eventually that didn’t turn out the way you had hoped for.
Keith Harrington: Correct. okay yeah yeah i went to no no No, I wasn’t as smart as I thought I was. I went to the University of Kansas. um i I had big designs on being a doctor, and I took a chemistry class that taught me that I wasn’t as smart as I thought I was. um and ended up but over time transitioning to different majors. I ended up majoring in poli sci for a little while, psychology for a little while. I think everybody does that. Eventually wasn’t sure what I wanted to do in school and wasn’t doing a whole lot of school. And so I ended up getting a job at a startup here in Kansas City. And that was kind of the start of my of my trajectory, really.
Keith Harrington: I got a job at ah at a local ISP, which was a thing back in the 90s, an internet service provider for anybody who was under 30, I guess, listening to this.
Alejandro Cremades: Thank
Keith Harrington: um and And that was really cool. I was introduced to the idea of a very small company ah trying to grow and punch above its punch above its weight. I learned a lot there about early stage companies and about building a customer base. And then from there, I actually went to
Alejandro Cremades: you.
Keith Harrington: Another startup here in Kansas City, a startup which at the time in Kansas City was kind of a big deal. It was called Birch Telecom, ah raised just a ton of money from blue chip investors around the country in 1998, 99 and 2000. and then the dot-com bubble burst. And all of us like me who were counting our ah stock options, millions, ah watched them go to zero very, very quickly. We were actually slated to go public, if I remember the date right, April 24th of 2000.
Alejandro Cremades: Thank you.
Keith Harrington: And that ended up getting pulled. And we ended up spending the next three or four years really doing some emergency M and&A, pulling the business out of the, I guess, out of the dirt. a couple of different times. I went through ah an actual Chapter 11 filing, a bankruptcy filing. That was crazy. But ah all through that experience, I happened to be lucky enough to work for a guy who, because I was curious, because I was ambitious, let me do things that I had no business doing, to be honest. Along this path, by the way, I finished my ah my degree in finance is where I ended up landing. But that’s less interesting than the actual experience that I had at Birch.
Keith Harrington: I went from doing working in the technology and engineering group to eventually doing corporate development, ah helping with M and&A, helping with integration of a company or two, um transformative projects that were really cool. and And like I said, I really had no business being involved in those projects, but I pretended like I belonged in those rooms and it seemed to work at the time. ah I thought it was really cool ah when I would sit down and talk to the, i got to I got to be exposed to some different kinds of board members, different kinds of investors at that point. I got to meet some VCs. I didn’t know what venture capital was at the time. This is, you know, 2000, 2001. I had no idea what it was, but I was kind of captivated by the concept and by how those guys thought and the kinds of things that they would make bets on. I just thought that was super cool, very sexy at the time.
Keith Harrington: And I also met some private equity guys, and I didn’t really like them very much. They were you know very focused on spreadsheets and squeezing every dollar they could out of out of the company at the time, and that was their job, so no no harm, no foul. but um You know, I got super entranced by this idea of venture capital. And ah it was kind of a tough place to be in Kansas City in the year 2000, because there wasn’t any venture capital anymore in the in Kansas City in the year 2000. So I thought, well, you know, what better thing to do than maybe go get my MBA and set myself up for someday being qualified to get into that space?
Keith Harrington: So I did that. Eventually, the guy that I worked for at Birch Telecom ah called me in 2009 to tell me he had taken ah a role leading investments for a state-funded ah life sciences fund and asked me if I’d like to come ah do that with him.
Alejandro Cremades: Thank you.
Keith Harrington: And I said, well, I don’t know anything about life sciences or about early stage investing. and he sort of said, well, neither do I, but maybe we can go figure it out. So that was how I got into venture capital. It just happened to be lucky enough to have a guy who believed that I would be able to help him figure it out and believe that I would be able to figure it out along the way. So I was there for oh, six years, made a bunch of ah interesting investments, learned a lot about early stage companies. My whole job was to was to support early stage companies with investment.
Alejandro Cremades: but what What was the biggest biggest lessons? And what were some of those say patterns?
Keith Harrington: Oh.
Alejandro Cremades: and Because six years, you know, gives for a lot.
Keith Harrington: Yeah. Well, I’ll tell you, the big the biggest lesson, the first lesson that I learned was I should not give advice to entrepreneurs because I didn’t have any idea what I was talking about. So that was the first thing that I learned. The second thing that I learned was in early stage investing, The quality of the idea is critical, but it’s really about the people who are going to be doing the implementation. What does that team look like? ah is Is their capability to execute, iterate, and keep going? Do they have the persistence necessary to actually achieve success? That was something that you hear that in the sort of in the ether about, how do VCs think about making investments? um And you know I bet on the bet on the jockey, not the horse.
Keith Harrington: And it sounds interesting, but at the end of the day, it’s actually true. That is exactly how VCs think. And I had to learn how to think that way because when I first started doing ah ah work in early stage investing, I thought a lot about spreadsheets and models and how those would all come out. And nothing ever worked the way that the spreadsheet or the model said it would, right? ah But if you could get aligned with a founder or a team of founders who had grit and capability and persistence and were able to execute, then we were going to see something interesting happen. that That’s the biggest lesson I learned that in venture, it really is about the people. It’s about the team.
Alejandro Cremades: So tell us about meeting your co-founder.
Keith Harrington: Yeah, so after after making a bunch of life sciences investments, I left that that role. um I was a co-founder in another fund ah that focuses on ag tech investments. It’s still here in Kansas City, um and and they’re up and running and doing a great job.
Alejandro Cremades: you
Keith Harrington: But what I realized along the way, fundraising and starting to work on generating deal flow there, was I didn’t really like being a venture capitalist. And it’s because I would sit down and I would talk to an investor or ah to an entrepreneur, and I would listen to their story, and I would hear the dynamics of their business, the metrics of their business. And unless they fit a very narrow slice then there was no way that I would be able to help them. And I spent a lot of my time shrugging my shoulders, saying, I don’t know how to help you. I certainly can’t do anything for you, because maybe, for example, you’re a an entrepreneur with a million dollars in revenue, and you’re growing 30% year over year. Maybe you’re flirting with profitability. That’s not venture-backable, but that was 40%, 50% of the companies that I saw. They had something.
Keith Harrington: they maybe didn’t have a shot at being a unicorn, but they had a real business and they had a real shot at building something meaningful, having an impact on the community around them and building something that that matched their own aspirations. And so I started thinking, if venture doesn’t work, Maybe there’s something else that does. And I started doing some research trying to figure out how do you fund more entrepreneurs more broadly with some kind of tool that’s going to actually help them grow? You know, not like factoring or working capital finance, but something that will actually give them capital that they can use to grow.
Keith Harrington: And just coincidentally, I’m a Kauffman Fellow, ah which happened, I was accepted into that program while I was doing Venture. um And ah coincidentally, the Kauffman Foundation, which has no affiliation with the Kauffman Fellows anymore, invited me to a seminar, a design session day at their headquarters, which is here in Kansas City, to talk about funding small companies. it was ah It was a deal.
Alejandro Cremades: you
Keith Harrington: It was a conversation about microfinance. And the idea was, hey, we want to unlock a trillion dollars of capital for early stage companies and entrepreneurs who don’t typically see you know equity capital. And so at that meeting, I met a couple of people who would change the course of my trajectory. I met a guy at a firm called CIM who funds ah other funders. So he provides capital to lenders and other kinds of capital providers for entrepreneurs. Their whole goal is to create more capital in the ecosystem and new forms that are that are generally non-dilutive. And I also met a couple of entrepreneur entrepreneurs who had taken on a form of financing called revenue-based financing.
Keith Harrington: which I didn’t really know anything about. Once it was described to me, it made sense. I kind of understood it. I got so excited about it though. I left that meeting. and determined to build a revenue-based financing ah ah firm. And so I went out in Kansas City over the next 60 or 75 days, and I had two or three meetings a day with investors, with entrepreneurs, with lawyers, with accountants, with anybody who would talk to me and tell me that the idea was bad or that it would give me something that I could use to refine it. But the general idea was, OK, I’m going to go raise a revenue-based financing fund, and I’m going to fund a bunch of entrepreneurs.
Keith Harrington: Along the way, I sat down with a guy I knew from another program here in Kansas City called Pipeline Entrepreneurs. ah His name is Carlos Antiqueira, and he had recently exited his company, which was an ed tech business that coincidentally, when he was out on the fundraising trail, struggled to really raise money because he was an ed tech business, it wasn’t a very sexy industry, and his growth was solid, but it wasn’t venture growth. So he really struggled to raise capital. He ended up selling the business to VISTA equity partners, so he did very well. And it took him about seven years, I think, to find an equity partner that was that would write a check that was meaningful enough for him ah to to really be ah to help him grow. So we sat down to coffee over coffee one day, and I shared with him the idea. And he said, I totally get it. I would have taken that money in a heartbeat.
Keith Harrington: Because I knew if I pumped a dollar into my ah sales machine, I knew how many dollars I would get out. So if if you’re going to provide a revenue-based financing loan, which would pay back maybe 1.5x or 1.75x or whatever over three or four years, so I would have taken that money in a heartbeat.
Alejandro Cremades: Thank
Keith Harrington: ah Do you want to partner up? And yeah that the truth is I said, eh, I don’t think so.
Alejandro Cremades: you.
Keith Harrington: um I think i’ll I’m just gonna figure this out on my own because I’d had a bunch of people offer that to me. Like, hey, you wanna partner up? And and I thought, oh, I can do this on my own. It’s a good thing I didn’t keep that mindset, by the way. I couldn’t have done it on my own, not even close. But I went home that day and my wife said, she asked me how the meeting was and I told her and she goes, let me get this straight. You have said that you want a partner who’s built something, preferably someone who sold something and someone who isn’t the same as you, right? Like a spreadsheet and a finance and ah and a VC guy. And I said, yeah, that’s right. She’s like, what?
Keith Harrington: why why didn’t you Why didn’t you take him up on his offer? Why didn’t you explore that? And I was like, yeah, good point. So I sent him an email and said, let’s let’s go deeper. And ah we got back together and spent a lot of time working together on what would become novel. And that was the about the middle of 2017, and we we’ve been building ever since.
Alejandro Cremades: So then I guess for the people that are listening what ended up being the business model of Nobel capital. How do you guys make money.
Keith Harrington: Yeah, so I’ll skip the first thing that we did, which was just a standard fund, which really proved to us that the market exists and that we could build something that would serve the need in the market. ah Novel Capital, which we launched in 2021, is really a fintech business. And what we do is we take ah company data and use that to underwrite a business and determine the size of a loan that is useful and appropriate for for companies that come to us. ah So we are essentially a fintech lender. We provide non-dilutive capital to B2B software companies all around the country. um ah The business model is we lend and at the moment we are actually building new tools ah for entrepreneurs because one of the things that we’ve learned is
Keith Harrington: We have a really ah robust view of the companies that we work with. And so we are starting to turn those insights that we see, turn those insights around for the CEOs ah that we loan money to so that they can see what we see and start to make better capital decisions. Because sometimes getting a loan is not the right answer. Uh, just as oftentimes getting equity is not the right answer. So our goal is really to be a one-stop shop for insights and capital. We’re going to help you as a CEO make your capital decisions. And then when it comes to non-dilutive capital, we’ve got what you need.
Alejandro Cremades: So let’s talk about to the capital raising for you guys, because you’ve raised a over $100 million, whether that is a break broken down in debt or in equity.
Keith Harrington: Yeah.
Keith Harrington: Yeah.
Alejandro Cremades: So give us a breakdown of how that looks like, and and also what was the journey of raising both.
Keith Harrington: Oh, man. um Fundraising is hard. and Don’t let anybody tell you different. So, yeah, we’ve raised about $120 million in debt to deploy to the entrepreneurs that we fund. And we’ve raised a little over $15 million in equity for for the for the company itself to support growth and new initiatives, software development and the like. um You know, the the journey is
Alejandro Cremades: you
Keith Harrington: Like any fundraising journey, I think that that any entrepreneur has ever taken on. it’s just a it is It’s hard. And at the end of the day, it is a function of how hard are you going to work to get that fundraising done? i have a pretty And Carlos has a pretty great network ah in fundraising circles. So we know a lot of ECs because we’re both coffin fellows. So we can easily meet and talk to ah most of the investors that we want to meet and talk to on the equity side. um And that’s great, but it doesn’t get any he deals done. So at the end of the day, what always matters is
Keith Harrington: How do the metrics of your business stack up to expectations? um And what does the future look like for your business?
Alejandro Cremades: you
Keith Harrington: So you know we’ve been able to show ah really solid execution since the beginning, really solid growth on the loan side, also really solid ah product development that that we’re releasing you know every couple of months, we’re releasing a new a new feature or a new product. And that’s what got the VCs that invested in our latest round super excited. and ah They see that we’ve got strong credit standards, we’ve got a strong portfolio, we’ve got software coming out, ah we’ve got a business where revenue the revenue flywheel is running now and we’re growing and this is ah this is the right time to get to take on growth capital and really go.
Keith Harrington: um raising the debt capital. So we had neither one of us had ever done anything like that before. um ah That was one of the hardest things. I think that was one of the hardest things I’ve ever done professionally. And it was because i neither one of us, neither carlos Carlos nor I really spoke debt. It’s a totally different language. um And so we had to learn how to be credit guys out on the fundraising tour, how to talk the credit language. um I remember there were times our current lender is going to, I don’t know if they’re going to laugh at this or if it’s going to make them cry, but I remember sitting and in, i was so naive, I remember sitting in fundraising meetings talking to these lenders.
Keith Harrington: And they they would ask me for stuff. And I’d be typing notes into Evernote. I’d be like, yeah, totally. I’m mean i’m absolutely going to send you that. And I wouldn’t have any idea what I just agreed to. like I don’t know what you just asked me for. So I’m typing in a note. And then when I get off the call, I remember looking at Carlos one day and saying, what’s a loan tape? What what does that even mean? And but it was just the basics. We had to learn the basics about how to go raise debt. it was extraordinarily difficult. um But you know it’s one of those things where we learned so much in that process ah that it actually helped us become ah better lenders and a better steward of the capital that we’ve that we’ve been able to raise. So we were naive. I think we’re a little bit less naive these days. um But but that was ah that was a really hard that was a really hard fundraise.
Alejandro Cremades: So what about what about Silicon Valley Bank all that the back going and also how do you think that has shaped the app as well the way that you guys typically engage with the providing non-dilutive capital to companies.
Keith Harrington: Yeah, man, that was that was terrifying when all of that started to happen. i I remember just we were just watching what felt like the world falling apart in that moment. you know In retrospect, I look at it and I’m kind of like, it seems like a blip, but in the moment, there was just sheer panic. ah We did not have any exposure at SVP. We didn’t have cash there. But we had cash at banks that were starting to also ah Falter in that moment. So we had to do a bunch of movement cash movement and cash protection um ah Just to keep just just so that we could not be worried and we were able to do that pretty quickly What was I think?
Keith Harrington: really great about that time was we were able to very quickly engage with companies in our portfolio who did struggle and did have some exposure at SVP and help them ah navigate that crisis, sometimes with ah connections to other banks so that money could be moved, sometimes with capital in the moment.
Alejandro Cremades: you
Keith Harrington: But we did a lot to actually help the companies that we were already working with navigate that crisis and survive it and and then come out the other side. and to thrive. And you know that was tough, but one of the things that I think has been really interesting since then is We have seen demand for non-dilutive capital for early stage software companies just absolutely skyrocket. So, ah you know, SVP melted down. That was bad for a lot of people. um But what we are seeing is, and this has sustained over the last year plus now 15 months, I think, entrepreneurs are very hyper aware now of where can I get capital that, and where can I get it from a source that’s gonna be safe and reliable?
Keith Harrington: And we’ve really benefited from that because we’ve got a strong track record. We’ve got an excellent reputation in the market. We spent a lot of time making sure that we’re always doing right by the entrepreneurs that we serve. And so we’ve seen a significant uptick in demand and a significant uptick in originations as a result. And that’s been sustained over the last 15 months. So um you know I don’t want to say SVP going the way it did was good for us, but but it certainly helped us touch and help more entrepreneurs along the way.
Alejandro Cremades: So imagine you were to go to sleep tonight, hey Keith, and you wake up in a world where the vision of novel capital is fully realized. What does that world look like?
Keith Harrington: Yeah, yeah. Yeah, it’s like it’s an it’s a world where entrepreneurs have a single source to go figure out how to fundraise for their business. So one of the things that I know as as an entrepreneur, which by the way, I just want to say this, being an entrepreneur is way harder than being a venture capitalist. um I just want everybody to know that. I can settle that like can settle that question without equivocation right now. But I think one of the things that um entrepreneurs, one of the one of the key challenges that entrepreneurs have, right? They got to grow their companies. They got so many things to figure out. And then they’ve got this capital question. What kind of capital do I need? When do I need it? How should it be structured? Who should I get it from? What should the terms be? Who’s a good person to take it from? Who’s not a good person to take it from? That is so complicated. And if you don’t have a great network or a whole bunch of mentors who can help you think this through,
Keith Harrington: you’re in trouble because this is hard. And when you make bad decisions about capital, you can actually kill your company. So to me, giving entrepreneurs a single spot, a single source of insights and advice for capital and a place where they can actually get capital at the same time is absolutely critical. It can be game-changing for a company, right? Because what if they make a bad decision? I’ve seen tons of entrepreneurs make bad capital decisions, and I’ve seen them have to shut their companies down as a result. And so that’s the problem that we’re out there solving. We understand that it’s hard. We understand that it’s complicated.
Keith Harrington: But we also understand that it’s not rocket science. It’s not magic. We can actually build the tools that help you as a founder figure out, I need venture now. I need debt over here for this particular purpose. Maybe I need you know a different kind of capital, working capital financing, invoice financing for for this purpose over here. How do I stack this stuff up? How do I make it work for my business and do so while building value? That’s such a hard thing to do if you don’t have the tools at your disposal. Well, we do. So that’s what we’re trying to build.
Alejandro Cremades: So imagine now that you’ve been at it now for close to seven years, you know with Nobel capital. and It’s like a hundred years in the corporate world.
Keith Harrington: Yeah.
Alejandro Cremades: But then let’s say you let’s say you are able to go back in time, right?
Keith Harrington: True. True.
Alejandro Cremades: you know To ah over 2017, where you guys were kicking things off.
Keith Harrington: Yeah.
Alejandro Cremades: And let’s say you’re able to ah have a sit down with that younger self, with that younger Keith, and being able to give your younger self one piece of advice before launching the business.
Keith Harrington: Oh, yeah.
Alejandro Cremades: What would that be and why, given what you know now?
Keith Harrington: Just go. Just go. um that that’s That’s it. ah it’s it’s It’s the simplest advice. one of the things that and This is just a ah feature of my programming. It’s the software that runs in my head. um i will I think a little bit probably too much before acting. and And I think you have to be careful that there’s a balance there, right? But i I spent a lot of time trying to optimize for things that in the end didn’t matter. And it was just a ah function of inexperience and a function of a little bit of fear of failure. And so
Keith Harrington: What I would tell myself, if I could go back and have coffee with myself seven years ago, I would say, just go. You’ll figure it out. you’re not You don’t need to have the answer to every question now, but just go and you’ll figure it out as you go. And that’s that’s the the thing that was most difficult for me starting this journey. And it is also the thing that I enjoy the most about this journey is that I will end up in a predicament that I don’t have an answer to. And now I got to think on my feet and I got to figure it out. And I enjoy that a lot. That’s actually one of the most fun parts of of entrepreneurship.
Alejandro Cremades: So, Keith, for the people that are listening, I would love to reach out and say hi. What is the best way for them to do so?
Keith Harrington: Yeah, you can get me, uh, my email address is keith at novel capital.com. Uh, you can get me on LinkedIn, uh, Keith Harrington. You’ll find me Keith Harrington, novel capital. Uh, those are the two best ways to get me.
Alejandro Cremades: Amazing. Well, easy novel. Keith, thank you so much for being on the Dealmaker show today. It has been an honor to have you with us.
Keith Harrington: Thank you, Alejandro. The honor has been all mine.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Keith Harrington On Raising $120 Million In Debt Capital To Build A B2B Hub To Provide Financing To Entrepreneurs appeared first on Alejandro Cremades.
From humble beginnings in Sunnyvale to leading a groundbreaking AI company, Varun Mohan’s journey is a testament to resilience, innovation, and a relentless pursuit of impactful solutions.
In this interview, Varun shares his story, insights on the evolution of technology, and the strategic pivots that led him from autonomous vehicles to the creation of Codeium, an AI code acceleration tool transforming the software development landscape.
Codeium has attracted funding from top-tier investors like Kleiner Perkins, General Catalyst, Greenoaks, and Founder’s Fund.
In this episode, you will learn:
- Varun Mohan, co-founder of Codeium, emphasizes the importance of resilience, mission orientation, and accountability in building a successful startup team.
- Codeium pivoted from a GPU virtualization company to an AI code acceleration tool, now serving over 600,000 developers and 700 enterprises.
- The company’s rapid growth and success are attributed to its focus on providing tangible value and leveraging internal talent to solve problems before hiring specialists.
- Codeium’s technology aims to significantly reduce the time developers spend on repetitive tasks, thus increasing their overall productivity.
- Varun stresses the importance of humility and truth-seeking in navigating the uncertainties and challenges of startup life.
- The company has raised $93M to date, with a strong emphasis on responsible capital management and avoiding unnecessary expenditures.
- Varun’s transition from engineer to CEO involved learning to effectively communicate business value and building a robust go-to-market strategy alongside technological innovation.
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Your email address is 100% safe from spam!**About Varun Mohan:**Varun Mohan is the Co-founder and CEO of Codeium. He was previously a Tech Lead Manager at Nuro from January 2018 to May 2021, working on autonomy infrastructure.
Prior to that, Varun was a software engineering intern at Databricks from June 2017 to August 2017, working on ML systems.
Varun has also interned at Cloudian Inc., Quora, Cloudera, LinkedIn, Samsung Electronics, Stony Brook University, and UC Santa Cruz. His research interests include storage systems and data infrastructure.
Varun Mohan has a Master of Engineering degree in Computer Science from the Massachusetts Institute of Technology (MIT).
He also has a Bachelor’s degree in Electrical Engineering & Computer Science from MIT, with a minor in Mathematics. He attended high school at The Harker School.
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Read the Full Transcription of the Interview:Alejandro Cremades: All right. Hello, everyone, and welcome to the Deal Maker Show. So today we have a very exciting founder, you know a founder you know that has been through through all the different steps that you can think of. Okay. So we’re talking about a founder that you know basically ah has gone with the people thing, with they Basically, we’re going to be talking about the future, the technology that they’re in. We’re going to be talking about to the transition from perhaps you know like autonomous vehicles to like more generative AI and a bunch of other stuff like raising money and and and also growing and and scaling the business that I think you’re all going to be ah very much a you know inspired by and and enjoy. it So without further ado, let’s welcome our guest today, Varun Mohan. Welcome to the show.
Varun Mohan: Hey, Alejandro, glad to be on.
Alejandro Cremades: So originally from Sunnyvale, so give us a walk through memory lane. How was life growing up over there?
Varun Mohan: Yeah, so I was born to immigrant parents, Indian immigrant parents from Sunnyvale, went to school in the Bay Area, did a lot of these math and computing Olympiads in high school. Actually funny story, a lot of us at the company at Codium actually competed against each other in middle and high school. And that’s how we originally knew each other. After I went to MIT, MIT is also where a lot of us at the company sort of met each other as well. um and And that’s where me and my co-founder worked ah together a lot. And then afterwards, joined a company called Neuro, which was an autonomous vehicle company.
Varun Mohan: Finally, I joined the company even before knowing what it was going to what it was doing, because they were so in stealth mode.
Alejandro Cremades: you
Varun Mohan: um But I just realized I wanted to work on where the future of robotics and autonomy would ultimately end up going. um I was there one of the first 15 engineers at the company and ended up being a manager of a team running large-scale deep learning infrastructure offline and then after that decided hey I wanted to start something and actually build a product that people used at scale and built a company that wasn’t what Codium is today. It was actually a GPU virtualization company. So we actually built software to make GPU applications run significantly more efficiently.
Alejandro Cremades: you
Varun Mohan: And at peak, we were managing upwards of 10,000 GPUs for a handful of companies, which actually accounted for 20% of GCP Google Cloud Platform’s GPU inference capacity in multiple data centers. And we were doing this with a team of eight people. But in middle of 2022, we saw the advent of the transformer in these generative models, which is where the GPT started taking off. This was pre-chad GPT. And we realized that that would usher in a brand new set of applications, but also that would mean everyone who was going to run transformers.
Varun Mohan: so And if everyone ran this type of model architecture, we didn’t see much value in being a GPU virtualization company. So we actually decided to verticalize and pivot and build a company that we see called Codium, actually.
Alejandro Cremades: Thank And we’ll talk about that in detail. ah But let’s let’s let’s start you know from from the beginnings, from the roots. you know let’s Let’s go back in time you know when you got into math. you know What got you into math to begin with? Because I know that was a big deal. You did competitions, you know whether it was there in in high school or or then going to MIT and still doing you know this kind of competition. So what got you to really develop that love for math?
Varun Mohan: Yeah, so I think the big thing is just the objectivity. and It was one of those things that you just can’t BS. And the fact that you can kind of like wrangle with a problem for a long time is very attractive. I’ll just say like an interesting statement. In seventh grade, I made this competition called the USAML, which is the top 250 kids in the entire nation, including high schoolers. And I took the contest and it’s a contest that is two days. Each day is four and a half hours and you have six problems and the score is out of 42 and I got a one. I got a one out of 42 and that’s the median score. The median score is a one. So I think there’s something so beautiful about basically problem solving for a long period of time and potentially not even solving the problem.
Varun Mohan: And I think that gives you a level of courage of solving hard problems. um And I think that’s what all of my peers really enjoyed. We liked not solving problems where we could instantly solve it in like a minute. We wanted to be able to wrangle with hard problems and Olympiads were sort of at and ah a form factor that that ah that was conducive to that.
Alejandro Cremades: So you eventually you know graduated from MIT, and and it was a really interesting transition that you did there from being an engineer to all of a sudden becoming a manager. So how was that transition for you?
Varun Mohan: Yeah, i think I think at the company, if I can just say something, it was it was pretty natural because I was so early there that I built a lot of the systems and infrastructure at the company that I naturally ended up leading people at the company. I think what I realized is my dream was not to just manage people. It was to to actually like build a product that people use at massive scale. And I think the unfortunate thing is in autonomous vehicles, the timelines to actually do that were quite high. And that’s because the problem is so hard. And I think because of that, I sort of moved, wanted to do something where I could have an impact, but but an impact today rather than a delayed impact where where we potentially build something that would work 10 years from now.
Alejandro Cremades: So you actually were an employee for a bunch of time you know on on other companies. So at what point you know did it become clear that it was your time to to take a stab at it you know on your own and create your own destiny?
Varun Mohan: Yeah, so me and my co-founder, actually, Douglas and I, we’ve we’ve known each other since middle school. um We’ve always wanted to start something together, but it never seemed like the right time. And I think for us, we we decided to, I guess, just jump off the deep end and ah probably irrationally. Irrationally, that the idea that we originally had, we didn’t completely understand why it was the best idea possible. um But I would say, like, you will never rationally come up with the best idea to to work on after quitting your job.
Alejandro Cremades: So then let’s talk about starting what thing obviously was at that at the time AXA function, and and obviously that would develop into a pivot, you know which is what you guys are doing now with coding. But how how did that start? How do you guys get going? And and then what happened?
Varun Mohan: Yeah, so this is um this is the the sort of interesting story here. As I was saying, we ended up building GPU virtualization software. So the idea was you could take applications that would previously run on GPUs and you could run them on computers, normal s CPUs, and we would transparently offload the computations to a remote machines. And we ended up being able to, I guess, optimize some workloads by five to 10x. So it was a big, big improvement, especially in 2021 when GPU supply was under shortage. There was shortage for many reasons during COVID. And for us, though, what we felt is, and this was the hard part, we were a team of eight people. We were making between two and three million in revenue.
Varun Mohan: And which was good, we were free casual positive as a company. But for me, I did not know how could we scale this thing to be 50 times bigger. And this is maybe a hallmark of the company, which is that if I or someone at the company cannot figure out how to increase the revenue by $1, we don’t just hire someone to increase it by 10. which is to say we make really, really strong generalists try to solve problems. And if they can make no progress, the solution is not to hire a specialist and see if they can succeed. So this is a big thing where we never hired a sales rep, even though the business was doing millions of dollars in revenue, we never hired a sales rep internally, ah which was a good decision in retrospect because it enabled us to pivot the business significantly with significantly more ease. Right.
Alejandro Cremades: and In your guys’ case, i mean you you actually raise money, you know quite a bit of money, i mean over $20 million dollars for this, and then all of a sudden you realize that it’s time to pull the plug and and and and and orient you know kind of like the path you know towards a different day site, a different type of future that you would you know be living into. a show What triggered that? you know and and and Also, how was that you know type of conversation with some of those existing investors too?
Varun Mohan: Yeah, so i think I think at the time we were probably doing more revenue than a lot of companies that had raised more money, which is more of an indication of the zero interest rate phenomena environment ah in 2021. But I think what really flipped the switch in my head was I was looking at some of these other generative AI companies or application companies and seeing them with small teams getting to substantial amounts of revenue very quickly. And what it actually showed showed to me was the right comparison for us to do wasn’t to compare ourselves to other ML infra or ML ops companies, but to what the best company we could be was. And I just realized we were not operating at our potential as a company. And then at that point for us to be a worthwhile or or useful sort of venture investment, we couldn’t just be a company that made tens of millions in revenue. That is not a venture return.
Varun Mohan: ah right And I think for us, we had much larger aspirations for the company. I want this company to to be making billions of dollars a year. And once that that sort of switch triggered in our head, we had an option. right We either die die a slow but certain death, or we die with a non-trivial chance or we succeed for a massive reward. And yes, the thing about taking the second option is we would die significantly faster in the case where we died, but we decided to go about that approach because it is never good to do the wrong thing for longer. And I think right now, if you were to ask any of our investors, did we make the right decision? I think all of them would say uniformly, this was the right call.
Alejandro Cremades: so then So then walk us through how was that you know communication that you guys endured with the investors to make sure that everyone was up to date, that everyone was OK with the decision. And in that moment where you were like, OK, now he is saying it’s time to to get going.
Varun Mohan: Yeah, i think I think we were able to convince ourselves, both the founders, at the time like we have we had control of the board. We obviously have like a great conversation with our investors to make sure, like hey, this is what we will be pursuing, and here’s our thought process. ah But ultimately, like for for us, you know if If we felt in our gut this was the wrong call, like we could if the investors told us like we have to do the ah thing that we believe is wrong, like the company was going to fail anyways. So I think our investors, largely speaking, ah were like did not oppose our decision to to move forward in this direction.
Alejandro Cremades: So, for the people that are listening to get it, what ended up being the business model of Codium? How are you guys making money today?
Varun Mohan: Yeah, so a little bit about Codeium, we’re an AI code acceleration tool. our Our purpose is to provide the most amount of leverage to developers in the world. um A little bit of a backstory on the company. In the beginning of 2023, we had less than a thousand users on the product. And now we have over 600,000 developers that use the product. We process over 100 billion tokens of code every day, which is over 10 billion lines of code every day. We’re one of the top five largest Intervia apps in the world. And we actually train our own models and run them at massive scale ourselves. And this is where one of our massive advantages is.
Varun Mohan: And currently, over 700 enterprises use the product with over 34 to 500 using the product internally. And the big reason why enterprises want to use the product is for two reasons. First of all, we support all the places where their developers are on every ID, on every single language that the that the users can write. We provide self-hosting capabilities when necessary. So a lot of companies don’t want to send their code outside of the company. And because we train our own models, we can deploy it entirely within their own environment so the code never leaks, right?
Varun Mohan: You can imagine for some of the largest companies, code is their most important IP.
Alejandro Cremades: you
Varun Mohan: The second piece is we actually work on every source code management tool. The big competitor in this space is this product called GitHub Copilot, which is owned by Microsoft. And it’s a massive product. But we don’t care about if you’re running things on GitHub, GitLab, Bitbucket. And there are many, many different source code management tools. And some of the largest companies actually have many source code management tools used internally. on And finally, we actually give you a personalized experience. which means that we actually tailor make the suggestions to the private code that lives inside the company. And we found that actually for a lot of companies, they have noticed that their developers, their new developers onboard onto codebases in four to six weeks instead of four to six months now with Codeium because our system actually deeply understands the software that exists inside the company. And they’re also noticing that over 45% of all software that is getting committed is generated by Codeium.
Alejandro Cremades: So in total, how much capital have you guys raised too late for the company?
Varun Mohan: $93 million. dollars
Alejandro Cremades: So at what point do you guys realize you’re turning a corner here with this new pivot? And also how did that look like from a you know going from life cycle to life cycle and putting in parallel a financing cycle with new reinvestment to really keep things you know pushing along?
Varun Mohan: Yeah, so interesting fact, by the time we raised our Series B, we had barely spent our seed round. So we are not a company that I guess goes in and Series B was $65 million. dollars We’re not the kind of company that goes out and spends a lot of capital unless it’s actually making the business work in a material way. And we didn’t try and go out, once we did the pivot, we didn’t try and go out and raise capital. We actually just went out and built a product. and scaled the product to, I guess, a massive number of users. And a lot of large enterprises started to use the product. Companies like Dell that currently have 40,000 developers inside the company um were starting to use the product.
Varun Mohan: And I think the the key aspect of this was we were never in a position where the only thing that would make us go from not exist or existing to not existing was the lack of existence of capital.
Alejandro Cremades: you
Varun Mohan: um And because of that, actually, we were we ended up being able to raise around fairly easily ah from the folks at Kleiner Perkins, who it’s a very well-repeated sort of venture capital firm.
Alejandro Cremades: So what did you ah guys learn about? Obviously, you know when you’re doing well like that, you know you have a little bit more leverage when it comes to the capital raising um efforts. So I guess from you know a perspective of really developing a very streamlined process when it comes to fundraising, what have you learned?
Varun Mohan: Yeah, so this is maybe a little bit of an anti pattern, but in terms of our fundraise process, we have never we’ve never actually done a very, very proper sort of fundraising process, largely because for different points of the business, we have been getting we ended up getting preempted ah by folks that were particularly interested in the progress that we made and the proof points of the company. And I guess for us. The reason to fund to really go out and want to fundraise really badly is if if you believe that you will you will not be able to make it unless you get that amount of capital today. right And I think for us, we have largely been good stewards of capital in a way where we are willing to invest a good deal of money to see the company work, but we don’t invest millions of dollars into different aspects of the company if we can’t see a clear ah ROI. right um And because of that, we always operate in a way where we could be cashflow positive if necessary.
Alejandro Cremades: and And I guess you know here when we’re talking about building the company too, if you were to go to sleep tonight, Varun, and you wake up in a world where the vision of Codeum is fully realized, what does that world look like?
Varun Mohan: I think in a world in which the vision of Codeium has been realized, developers are now have 10 times the amount of leverage. That means that they can generate code 10 times faster, deploy code 10 times faster, or debug, test, review, um and finally finally actually navigate code 10 times faster. And in that world, the best thing that I envision happening is the next time Nvidia goes out and does something very hard, they’re building the X100, which is their newest chip, let’s say. And that chip takes 12 months. I want the time it takes for that chip to get built to go down from 12 months to one month with Codium. And I think if we are able to do that, we will capture a lot of value at that point, but the sheer amount of value we will be able to generate is going to be so massive um that i think I think that would be the the true north star for us as a company.
Alejandro Cremades: So when you put the technology in parallel with that, you know on where we are today and where it’s heading, you know what where where can you tell the listeners that the technology is going?
Varun Mohan: Yeah, so I think, you know, I previously worked in autonomous vehicles where every year we said the next year was the year autonomous vehicles was going to ship. ah Right. I don’t know if you’ve you’ve seen this but in 2015 TechCrunch said ah this is going to be the year of AV and in 2024 they are now saying is this the year of AV. right So that’s largely because we underestimate what is possible over a long time horizon, but overestimate what is possible over a short time horizon. So I believe we will still be, developers will still be writing code inside applications in the next couple of years. But I think what is going to happen is the amount of work it takes for them to write boilerplate applications to do tasks like migrations, to do tasks like refactors is going to go down tremendously.
Varun Mohan: But then for every piece of the pie, you know, what I like to quote is there’s this principle in computer science called Andas law. And what that says is if you, if you take many steps of a process and you make one step faster, there’s a limit to how much that makes everything faster. And I’ll give you an example. in a world in which there are 100 units of time and 30 units of time is being spent writing software. If all we do is make the 30 units of time writing software 10 times faster, we only reduce the total amount of time spent from 100 to 73. This isn’t a complete game changer, right?
Varun Mohan: The game changer is how do you reduce the remaining 70 units by a factor of 10?
Alejandro Cremades: you
Varun Mohan: And I think the way I would like to think about it is it will be a gradual process or incremental process to continue to shave down time from every single aspect of this process, right? Because even today, if you could write code instantly, the time it takes to review code will become a bottleneck. The time it takes to deploy code will become a bottleneck, right? And people are not willing to completely deploy arbitrary software than and that an ML or AI system generates into production without any review. We are far from that right now.
Alejandro Cremades: I mean, in your guys’ case, you know you have um about 50 employees. And for a company like this, I mean, obviously, it’s very heavy on the technical side of it. So how do you go about really getting incredible engineers and not only getting them, which is tough, but even tougher is retaining them. you know What does that look like in an organization like this?
Varun Mohan: Yeah. So I think, I think first of all, as a company, we want to hire people for resilience. That’s ah a big one. And I think us having gone through the pivot is an important piece where we realize right now things are going well, but there will be, there will be low points for the company. And we don’t want people that are here just because of some, some great vision that we promised them that the company will always be having a great time. Right. And I think what that means is. We want people that are incredibly mission-oriented. That means that for them, hell or high water, they want to see this thing succeed. right And even if that means that we have some some struggles along the way, they will be around. right Because ultimately, what drives them is the vision of the company, which is providing as much leverage as possible.
Varun Mohan: And I think the reason why that’s really, really critical is, you know, and and it’s important to me also is let’s say we were building software to make tax accountants more efficient. ah Right. That is not a vision that particularly excites me. And if the company gets hard, I’m going to lose motivation to work. Right. So we look for folks that are incredibly mission oriented, but also we look for folks with, with just very high sense of accountability. right and And aptitude is ah is a non-starter, right? We have a very high technical bar at the company. It’s one of the highest technical bars in all of Silicon Valley, I would say. but But accountability is very important. We want people who ultimately, if something doesn’t go right, their goal isn’t to point the finger at someone else.
Varun Mohan: And I think a lot of people misjudge high-trust environments as very nice environments. But that’s actually not true. You have a high-trust environment if you have people that are very capable that are high accountability. When you tell someone, hey, are you going to do this by X? They not only say yes, but they deliver. right And I think we look for these characteristics. right People with inbuilt resilience, people who are mission-oriented, and people who are high accountability. And if we see those aspects in someone, we’re very excited to move forward with them.
Alejandro Cremades: So I guess, say as we’ve been talking about the the future earlier, but I want to talk about the past and in doing so with a lens of reflection. If I was to put you into a time machine and I was to bring you back in time, you know, let’s say, you know, a few years when you guys were thinking about doing something here, and let’s say you’re able to stop that younger self, that younger balloon and give yourself one piece of a advice before launching a company. What would that be and why, given what you know now?
Varun Mohan: i think I think the only thing I would i would tell that younger Varun is ah be significantly more humble. And I think that is largely because having a company is a very humbling experience. You may be able to convince investors that your vision is good. You may be able to convince employees that your vision is good. But ultimately, the water finally settles. The company really needs to work. And there’s a level of humility you need to have that milestones like fundraising don’t really mean much. Milestones like like building a technical product don’t really mean much.
Varun Mohan: If the end result is not you providing value to someone. And focus ruthlessly on providing value to other people and and and the rest will figure its way out.
Alejandro Cremades: you
Varun Mohan: But that requires a deep amount of humility because the first idea you’re going to have when you start a company is very unlikely to be the right idea. It is incredibly unlikely that it’s the right idea. and actually needing to constantly sort of change directions and assume you were wrong, right? The hardest part about a startup is you need to operate with with two modes in your head. You need to be irrationally optimistic because if you aren’t irrationally optimistic, then you will do nothing, right? You will actually just say a big company is going to be able to do it, right? Because why a big company has more people, more capital and more distribution.
Varun Mohan: So you need to be irrationally optimistic that you will be able to execute faster on on an important vision. But you also need to be uncompromisingly realistic. And that requires a tremendous amount of hum humility and and a truth-seeking nature for the for the company. And I think i would just I would just give that piece of advice to myself.
Alejandro Cremades: I guess the the other thing that comes to mind too is, I mean, obviously say you are a trained engineer and you’ve you’ve been very heavy on the on the technical side of things. and And now is the first time, you know, that you’re encountering having a CEO role and and more on the business side of the equation. I know that transition from engineer to business, you know, ah kind of like mindset, it’s not very easy. And it’s a tough bridge to cross. How have you gone about that transformation to make sure that you know you were able to be as effective as possible as a leader?
Varun Mohan: Yeah, I think the biggest thing is I actually did sell the software even before we hired our first sales rep at the company. I don’t know. Once again, for Codium, um we didn’t hire a sales rep until 10 Fortune 500 companies reached out to us. So we are not the kind of company that goes out and asks other people to solve our problems for us until we have a rough sense of what success looks like internally. So I had to go out and do that. I had to understand, hey, like we’re running a bunch of these sales processes. How do we actually convey a message that is compelling? And what is compelling is not just talking to them about technology. right Technology is not business value.
Varun Mohan: right How do we actually properly build champions in inside companies? How do we actually, in ah in a lot of ways, prove business value in a way that is not just hand waving, right? In a way that we can actually go to an executive and and convincingly give them a vision that, hey, if we did deploy Codium across the organization, it would give you this kind of a return, right? And you would then see this kind of productivity improvement inside the company. And I think for us, It is, in a weird way, go-to-market, as you said. Our company is not a product-led growth company in a conventional sense. We are actually an enterprise sales motion company. And this made this is like ah ah like ah a decision we made consciously in the early innings of the company. And we’ve embraced go strong sort of go-to-market team internally at the company. We’ve hired an amazing, amazing go-to-market team. And the technology is is as important as go-to-market, right? Because when you look at the success of a company,
Varun Mohan: It’s three things that ultimately matter. right The first is distribution. but And a startup naturally, when it starts, is not going to have amazing distribution compared to a large company. The second is technology. How great a product can you build? And the third is partnership. How great a partner and a go-to-market organization can you actually build? And these three pillars are what make a company succeed. And if a startup can’t do the last two successfully, it will not get distribution.
Alejandro Cremades: I love it. Varun, for the people that are listening, I would love to reach out and say hi. What is the best way for them to do so?
Varun Mohan: Yeah, just reach out at verun at codium dot.com. That’s C O D E I U M dot com. We’re hiring across the board on both engineering and, and the go to market team. Um, and if any of this sounds interesting, please apply.
Alejandro Cremades: Amazing. well Hey Varun, thank you so much for being on the Dealmaker Show today today. It has been an honor to have you with us.
Varun Mohan: Thanks a lot, Alejandro.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Varun Mohan On Raising $93 Million To Build A Free-To-Use AI-Powered Toolkit For Developers appeared first on Alejandro Cremades.
Eric Chen, the visionary behind Injective, has a remarkable story that spans continents and industries. From his early years in China and Colorado to his ventures in the crypto world, Eric’s journey is a testament to resilience, innovation, and a forward-thinking mindset.
His company, Injective, has attracted funding from top-tier investors like Jump Crypto, BH Digital, Block Tower Capital, and Pnyx Ventures.
In this episode, you will learn:
- Eric Chen’s upbringing across different countries has given him a unique, globalized worldview.
- Growing up in Hong Kong, Eric’s early interest in computers was fueled by the challenge of accessing cutting-edge technology.
- Despite his initial academic foray into finance, Eric’s passion for computer science and cryptography redirected his career path back to tech.
- The creation of Injective was sparked by groundbreaking cryptographic research and the need for improved decentralized exchanges.
- During 2018’s crypto winter, Eric and Albert operated economically, prioritizing long-term sustainability over immediate growth.
- Injective has grown from its original concept to a robust infrastructure for financial applications, facilitating significant trading volumes and transactions.
- Eric envisions Injective becoming a foundational layer for global financial systems, solving critical issues like T-plus-2 settlement delays.
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Your email address is 100% safe from spam!**About Eric Chen:**Eric Chen is a blockchain personality and the current co-founder and CEO at Injective Protocol. Prior to Injective Protocol, He was a researcher at Innovating Capital, working on trading strategies and protocol Research.
Eric Chen attended New York University, where he gained a Bachelor of Science- BS, CS. He also holds a Bachelor’s degree in finance from the Stern School of Business at New York University.
Eric Chen is renowned for co-founding the layer-2 decentralized derivatives exchange protocol, i.e., the Injective Protocol. After a career as a researcher at NYU Blockchain Labs and Innovating Capital, in 2018, Eric founded Injective Protocol with Albert Chon (current CTO at Injective Protocol).
Eric has worked with several organizations during the course of his career. He was involved in risk analysis and algorithmic trading while working with the Sino Partners Fund for about three months in 2014.
He assisted with the construction of mutual fund products in Essence Fund Management (Located in China) as research. He worked at Innovating Capital as a researcher and had practically been in between an analyst and researcher before co-founding Injective Protocol.
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Read the Full Transcription of the Interview:Alejandro Cremades: alrighty Hello, everyone, and welcome to the Deal Maker Show. so Today, we have an amazing founder. you know We’re going to be talking a lot about you know the good stuff that we like to hear, the building, the scaling, the financing. Also, you know like how? you know They didn’t really get a great start, but now they’re actually making a killing. And then how they think about really shaping and having a long-term view where it doesn’t matter you know the short term because the vision you know is always way beyond that. So again, super inspiring the conversation in front of us. And without further ado, let’s welcome our guest today, Eric Chen: . Welcome up to the show.
Eric Chen: Hey guys, thanks so much for having me.
Alejandro Cremades: So originally born in China, but you don’t remember much of that because you moved to Colorado quite early on in your in your life. So give us a walk through memory lane. How was life growing up?
Eric Chen: Yeah, um basically like born in China, moved to Colorado. like I don’t know, like six months or like a year old, et cetera, I don’t really remember. on And kind of like how like a kind of formative years spent in like a Boulder, Colorado, which is kind of like a very, very like Midwest type of setting an environment. It was honestly like kind of like very fond memory thinking back, just ah kind of like getting in like a sense of community and kind of like ah like a small like summer community kind of like upbringing environment.
Eric Chen: But then like moved to Hong Kong pretty quick, which is a very, very drastic 180 degree shift into something that’s very urban, very packed. So definitely yeah had to spend a lot of time like getting used to that since elementary school.
Alejandro Cremades: And how do you think that your worldview, you know, shaped up, you know, like with being in all these different places, all these different countries?
Eric Chen: Yeah, um it’s it’s very difficult to like compare myself against like, you know, like a standard upbringing or like, you know, what what would most would be considered to be like standard upbringing, just because so over time, it’s very much of a kind of like a subconscious type of difference that you realize after a fact. And for me, it was more like you know like I just in generally have like a much more globalized view, um being able to tell the difference between like ah kind of like the environment or like the biases growing up in America versus the biases you see like growing up in non-American settings like in Asia, et cetera. But more more importantly, it’s it’s more about like ah the propagation of technology and innovation
Eric Chen: Um, you oftentimes don’t see that or you see that in like a secondary effect in like, uh, non, uh, um, kind of like American nations, most of the new innovations, most of the new, like, uh, kind of like technology. It’s typically only available in America or selected European countries first before it makes its way into Asia. yeah Or worse yet, like it ends up being like a localized Asian counterpart of those like similar type of technology that like shows that shows up to everyone’s daily lives instead of you know like the original like ah innovation itself.
Alejandro Cremades: And in your case, how did you get into computers?
Eric Chen: Yeah, honestly, like first of all, like just being able to access us a lot of content and in Hong Kong, like you would you would simply not be able to access like the you know like the latest and greatest. So you have to like really fiddle with the internet back then. And I say that like you know pretty loose term, trying to like ah go through like the dark web sometimes or like you know so trying to like hop around. so So that was kind of the initial impression. I didn’t know the implications of Everything, I just know, you know, which tool to use, you know, like what are the some of the concepts and primitives with within those, you know, like ah kind of like an open web ecosystem. And over time, like ah moving moving from Hong Kong to, you know, Northern California. And when I was like, you know, closer to high school, that was truly what shaped kind of like
Eric Chen: computer slash software for me, getting in touch in the tech scene, like being next to all the you tech company HQs. But more importantly, you know just so seeing everyone’s you know parents or seeing every single peer like dr in drench within something related to tech. And also like a very, very strong like coding scene, like always starting from high school, being able to join like hackathons and stuff like that. It’s almost like you know like I was forced to learn how to code to be able to get to know my new peers at the time.
Alejandro Cremades: Now, in your case, it sounds like ultimately you decided to to take ah a little of a different path. And instead of like going into the whole software engineering thing, you ended up and going for finance in college. What was that the case?
04:37.69
Eric Chen:
Yeah, I mean, like, imagine just like being in like a space or like, you know, being in like a region where like everyone is in software, software engineer, right? Like everyone is working on something related to software, everyone is working on something related to tech, you’re gonna think like, oh, like maybe this is a bit of a bubble, you probably want to get out of it just to get like a fresh perspective, or maybe like this industry is a little bit like oversaturated. It probably doesn’t make sense to have that many like, mind share or you know like that that many like ah high value job postings out there. And so you know I needed to get like a different perspective of things. So I decided to pursue you know something more on the finance side, kind of having like the impression of finance is more quant driven, et cetera, and figure I can like think of or develop more like bleeding edge research over there. um
Eric Chen: And then upon like kind of like actually going to college and like taking all their like courses and so on, I realized at the end, STEM is still like the most so important like undergraduate like education that I could possibly have. you know Tossing away just CS, maybe even going down like math, et cetera. And you know basically went back into the embrace of tech pretty much right after like ah the first few courses I took in college.
Alejandro Cremades: Now, you wanted to go into perhaps academia and research. what what What really caught your interest about that potential path?
Eric Chen: Yeah, I think, you know, like, ah in in like a weird sense, I found a lot of the curriculums offered in like business schools are like, you know, a lot of stuff related to finance, it was a little bit too simple, it was a little bit too rudimentary. And, you know, it just wasn’t really like stimulating, how do I call it, like intellectually in a sense. And it was very difficult for me to like, because like everyone, you know, starting off college, they’re just trying to find like what they’re truly passionate about and what they’re interested in. Definitely, you know, what are the major to decide in or whatever career path they decide in, it’s probably a little bit premature to do so.
Eric Chen: For me, it was for the very first time. I found a lot of joy looking into a lot of theoretical side of computer science, especially down the cryptography path.
Alejandro Cremades: you
Eric Chen: I think cryptography just so happened to be a specific discipline where you know prerequisite for a lot of the knowledge is actually pretty easy to grasp and like pretty easy to catch up on, ah it’s considering the fact that you generally like can cover that very quickly in the first year of like first few years of like pure math. And I just got a lot of you know almost like instant gratification from like and like focusing and concentrating on the cryptography path, being able to like you know be 100% concentrated for days on end, forgetting to eat, to doing research, and reading all the textbooks just like all by myself without any type of like
Eric Chen: ah course requirements, et cetera, and just kind of like enter there. And then before I know it, like I realized that, you know, life progressed much further and much quicker than like most of my peers are going down that path and being able to like kind of like contribute alongside a lot of more senior like, ah you know, first year or second year PhDs.
Alejandro Cremades: So then dropping out you know ends up being becoming an option. you know What point was it clear that they you needed to wrap up you know the school years?
Eric Chen: I think it’s also about like timing. Basically at that time, like it was like roughly 2017 or 2018, it’s when the space, you know, crypto or like blockchain got very, very exciting. And you start to see a lot of real world application of a lot of theoretical stuff. I was working on a researching in cryptography and I realized that it’s time for me to like get my toe into the industry. And, you know, that this is kind of like an hour and a half or a type of chance for me to like go into it. And honestly, like I was also in a bit of, a you know, fork in a road in terms of like my academic career, in a sense, which is like, you know, it’s probably time for me to like switch into like, a you know, major at a different college, etc. that, you know, can
Eric Chen: uh, prime me better for like, uh, uh, cryptography, you know, research path and like, you know, uh, uh, PhD, et cetera. Um, or, you know, like ah getting some industry experience, I don’t like revisit that path later. And, uh, I realized, you know, like, uh, um, industry knowledge over time is probably just a lot more valuable, especially after interfacing with a lot of, you know, seasoned academics. And I realized that it’s not necessarily what I want to be doing for the next 10 years. Uh, um, at least, you know, right away.
Alejandro Cremades: So then let’s talk about the the idea you know that they came about you know with really venturing into the unknown, really becoming an entrepreneur entrepreneur with Injective. How did that happen? How did the idea come knocking and how did you go about incubating it and being like, okay, let’s let’s go with this?
Eric Chen: Honestly, like the start was pretty pretty kind of boring in a sense. um cause Because like for me, it was never the plan to like ah start a company or like start a project.
Alejandro Cremades: you
Eric Chen: Maybe at most, to build a a product that other people would use in an open source way, just to get some like real world like ah end-to-end like ah ah kind of like engineering experience, in a sense. um i would say like really like what what kind of like uh kind of like uh spark like the initial like or like the genesis of uh you know injective labs and also like later on injective is um we were working on like a research uh that kind of looks into the kind of like implementation of a specific like cryptographic primitive um called like verifiable delay function that was uh kind of like uh developed by like the professor like i was working with a little bit um and um basically i realized uh
Alejandro Cremades: you
Eric Chen: It was like very, very groundbreaking. It was very exciting. So like and first of all, I tried looking into like ways to improve upon it, and then in parallel, also looking into like potential applications for it, kind of like far beyond like ah you know what what they have initially like outlined for it. And one of the applications was basically kind of like envisioning or like realizing like a safe and fully decentralized on-chain exchange mechanism ah within you know Ethereum and any other like smart contract enabled chain. Um, and back in the day, like there were like punching Texas, et cetera, but all of them were extremely like, uh, um, primitive and they’re also like, you know, very, very difficult to use and, you know, unsafe to use as a matter of fact, that scale. And it was honestly simply like, Hey, here’s a.
Eric Chen: you know, new like cryptographic primitive. Here’s like a problem that’s, you know, addressing like a small, kind of like, a adjustable market at the time. And here is, you know, like a solution that we came up with utilizing, you know, this specific like mechanism to address it, to bring it and like, you know, solve some of the headaches that could probably add like a few hundred thousand dollars or like a few million dollars of value to the ecosystem. And yeah like like like it got a lot of you know interest from like various like kind of like engineers like and also founders within space. And that kind of drew us into potentially you know like ah going into like ah building it out, giving the scale of the project itself, and really scaling it from that point on. And obviously, got us into a few
Eric Chen: a lot of incubation program offers, et cetera, like i right off the bat.
Alejandro Cremades: so then So then for the people that are listening you know to really get it, what ended up being the business model of Injective?
Eric Chen: Yeah, so interactive has evolved a lot since then, as a matter of fact, like you know and as a pivot quite drastically away from like the specific initial like idea and implementation. But at this point, it actually never deviated from like what it’s trying to do and what it’s trying to offer, which is building like ah base layer infrastructure that’s a hyper-optimized for like general financial applications. In a sense, it’s basically like a blockchain that’s focused on like you know financial apps. um Currently, you know like ah as a decentralized ecosystem for the injected chain, um imagine a facility like facilitate like
Eric Chen: 38-ish to $40 billion dollars of trading volume, um you know, like ah close to a billion transactions on chain at this point, and also like a a lot of value kind of like entrenched within like an injective ecosystem. And for injective labs, you know, it also contribute to a lot of like ah research and development work for a lot of open source software and also protocols, mainly obviously to an injective chain, but also a lot of dApps on top of it. um So yeah, like definitely it’s ah you know like the idea of kind of like what sparked the creation of Injective Labs remained, but obviously like ah um yeah like the product itself, the general like ah you know a tech stack has evolved drastically since then.
Alejandro Cremades: so then So then I guess for the people that are listening here to to really to really get it, I mean, this this is this has not been like a straight line. you know It has been bumpy. And in fact, the early beginnings you know were not as fast as you guys would have hoped. So at what point do you guys realize that you were finally turning a corner here?
Eric Chen: Yeah, I mean, it’s been like six or seven years almost since like the initial start of injective labs. um so So it’s been you like a bumpy ride to say the least, starting off in 2018-2017, and you know like iterating on the initial product, realizing or running into like you know like ah engineering roadblocks, and then like you know slowly refining the product, refining like the mechanism and a protocol. And it also happened to be like by a time like we finished the initial incubation program with like, I don’t remember, like probably like $500,000 or less in like cash. um It was also like the peak death of kind of crypto winter at that time, like, you know, end of 2018, like, you know, going into 2019.
Eric Chen: And for us, it was just very, very difficult to like you know like ah get like ah venture funding to like you know progress, to like you know scale a up. um And yeah we were forced to be very, very economical and very, very lean ah in terms of the development process to like get the product out, to like you know sell everyone on what we’re trying to build and like you know what what are the promises. And definitely, you know, DeFi wasn’t even like a term or a thing back then. So ah there weren’t a lot of like promise from people or like in people’s mind about like, you know, doing like financial applications or financial utilities so in an on-chain fashion.
Alejandro Cremades: you
Eric Chen: So going from there to like 2020, I believe, was the first time, you know, like DeFi really picked up and people are seeing the promise. We finally built out, you know, a lot of like ah initial like demo and like test ah applications and yeah like got like the seed round and then progress very very quickly after that but I think you know to stir it and like the the DNA kind of like persisted throughout which is you know planned for like ah years and years of runway, planned for like years and years of longevity, planned for the worst. And for our case, you know, like it’d be extremely conservative, knowing that, you know, nothing kind of like a glamorous or like, you know, like a how to call it like a good times, you know, just simply doesn’t last forever. And no matter like how, how, how
Eric Chen: uh uh optimistic is my scene for like the future of the space even uh like as for example like in 2021 uh where like uh basically it seems like you know like uh the the industry was going to balloon like uh by like an order of magnitude day after day um always you know plan for worse and like uh uh basically make sure like you know you can always ah persevere uh with what you have for the next five to ten years and honestly that helped a lot like we never had to you know downsize because of runway issues we never had to like you know, like ah kind of like retract or like scale down or, you know,
Eric Chen: um kind of like uh how do I put it like uh cancel a lot of things due to like uh wrong way concerns etc for us it was just you know like another day uh being extremely consistent at a current pace and uh being able to uh output significantly more when everyone has like burned through their like uh uh kind of like a treasury um expecting you know like there would be like rounds and rounds of like uh ah venture financing, et cetera. And for our case, you know, like we were just consistent regardless of uptimes and downtimes.
Alejandro Cremades: Because how much capital have you guys raised today?
Eric Chen: I think continuously over time, I would say it’s around like 67 or 68 million dollars, um probably a little bit more. It’s been a while. But I think, you know, like ah we we always planned for us if, you know, like um we’re not going to get a single dollar from that point on or a single dollar in revenue, especially from that point on. And we need to last for, you know, five to 10 years. So that’s actually very, very critical for our planning where, you know, even at the current scale for an objective lapse, you know, contributing to like a ah chain a network, that’s, you know, like close to like $3 billion dollars in value. um It’s only really like powered by like 50 plus core team members.
Alejandro Cremades: So I guess say you know when you’re raising money too, you know the vision is a critical one. So double clicking on on what you’re sharing here. If you were to go to sleep tonight and you were to wake up in a world where the vision of Injective is fully realized, what does that world look like?
Eric Chen: Um. I would say that’s that that’s also like very, very exciting thought, and at the same time, a very daunting one. Because you know like ah in the future, where’re like you know what we’re building for, or like you know currently what we plan for like ah truly materializes and achieves. It means that some of the most critical staff within a financial system utilizes an injective network, one way or another. you know like ah New York Stock Exchange, NASDAQ, cb CBOE, et cetera, for any type of exchange house for securities derivatives or anything like that. um It sells on top of an injective one way or another via different venues. and
Alejandro Cremades: you
Eric Chen: Also, like a lot of the financial transactions eventually treats Injective um as like the final like ah final stop for clearing, et cetera. And this is to you know like ah resolve like one of the biggest issues currently that exists within finance, which is the T-plus-2 settlement issue. And it is showing its you know shortfalls and you know limitations time and time again by GameStop and many, many more other such instances.
Alejandro Cremades: So I guess, say you know, the whole world of crypto and and blockchain, you know, as a whole, where is it heading? Because I mean, right now it sounds like the summer is back.
Eric Chen: Yeah, I think basically, you know given the cyclical nature of a lot of these rapidly growing like technological trends, ah you same case for AI, et cetera, it’s going to be you know like a very, very strong spiking interest and then you know like a tapering over time. and sometimes you know like you’re going to see like overzealous or sometimes you know even to the point of a rational like ah allocation of capital or interest etc and you know you’re going to see like a a plateau period where like a lot of them starts coming back down
Eric Chen: And then like things are starting to be coming undervalued oftentimes. So it’s going to reverberate like these type of like oscillating cycles time and time again until it reaches a maturity stage. The bright side is that ah you know the amplitude of all these ah you know like up and downs it will slowly go down in like a close gap over time. um So for me, like I think honestly the most exciting thing about like these type of technology trends is that like it gets boring over time. where like, you know, you’re not going to see like ridiculous stuff, like people are just, you know, randomly like, just honestly, at the end of the day, it’s just luck. Making like millions and millions of dollars from like, you know, like capitalizing on something that, you know, definitely doesn’t make sense in hindsight and definitely doesn’t make sense at the time being. And yeah, like, basically becomes a mature industry where really the true progress and true milestones are kind of like traditional financial institutions and
Eric Chen: ah you know, like general like ah financial financial applications are slowly integrating incorporating it and it kind of like makes the way into people’s daily life without most people maybe even knowing it.
Alejandro Cremades: So as you are now you know over six years into this, you know if you had the opportunity of going back in time and and maybe you you’re able to see that younger Eric that is maybe you know coming out of university that day that you made the decision, I’m um dropping out of this thing and you know building my own future. and Let’s say you were able to see that younger self coming out of campus and there’s a table there, and you’re able to sit down with that younger Eric and have a conversation. And during that conversation, you’re able to give that younger Eric one piece of advice before launching a business. What would that be and why given what you know now?
Eric Chen: um Honestly, I would just lie to them and just say that everything’s going to be fine. I think honestly, like all of the experience that we had, oftentimes when we kind of like a ah kind of like blame it and just say like, oh, like, you know, if we were lucky in terms of timing, et cetera, like, you know, like ah we we would have ah you know reached a scale like 10X of like ah but where we are now or like, you know, had a much, you know, smoother growth or like ah kind of like hit like a lot of like ah the stats that we’re looking for a lot sooner.
Alejandro Cremades: you
Eric Chen: But honestly, like ah in hindsight, like those are all necessary for us to, you know, reach the level of maturity and also like kind of like acumen ah that we have now. And, you know, to be confident about like ah sometimes like being conservative during like ah um kind of like ah 3D times, it’s like very, very important, and you know it’ll pay off. And like sometimes you know being aggressive for like everyone else ah being like extremely conservative is also like ah equally important. um So I think you know like this is one of those things where it’s like, just because someone told you, um it’s it’s not going to be meaningful or helpful, or it’s not going to be really truly like ah manifested in the way of doing, like through through through and through. so
Eric Chen: Really, it’s about experience, like having like ah the tough times and being extremely economical in terms of decisions, ah having to go through like a very, very, how do I call it, like scrappy periods where like yeah you have to do ah almost everything he yourself in every single layer, learn all this stuff even if you don’t want to, um to to get it off the ground running and to build up that experience so that you know like you you make the proper and sound decisions later on. Um, I think, you know, like, uh, only like, uh, a real life experience where will help you with that. Um, if, you know, like, uh, if I were to have like a slightly, you know, like a better starting condition, let’s say, you know, just somehow got lucky and like got like a nice, like a few million dollar seed round, et cetera. Um, I feel like my advice to my younger son will be like, um, basically it’s like, don’t, uh, don’t waste the money, like, uh, uh, treat as if you only have like, you know,
Eric Chen: Like a one-tenth of that, like if you raise 2 million, like just treat us if you only have $200,000 and you’re gonna be thankful for it later on.
Alejandro Cremades: So for the people that are listening, Eric, that would love to reach out and say hi. What is the best way for them to do so?
Eric Chen: Um, so, so I’m pretty active on, uh, Twitter or X.com. Um, my handle is like, uh, at Eric injective. And, uh, I think honestly, like the best way is to, you know, like learn more about injective at injective.com or through like our company, which is injective labs.org. And, uh, you know, you should go find my email there and reach out to me as well.
Alejandro Cremades: Amazing. Well, hey, Eric, thank you so much for being on The Deal Maker Show. It has been an absolute honor earth to have you with us.
Eric Chen: Yeah. Thank you so much. Appreciate it.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Eric Chen On Raising ~$56 Million To Build The Web3 Blockchain Infrastructure To Facilitate Smart Contracts appeared first on Alejandro Cremades.
Imagine a startup that doesn’t fit the usual mold—one that manages over $100B in assets with a team of nearly 600 employees. This is the incredible story of Matthew Fleissig and Pathstone, a company that has experienced tremendous growth and continues to innovate in the world of finance.
Pathstone has attracted funding from top-tier investors like Kelso & Company and Lovell Minnick Partners.
In this episode, you will learn:
- Matthew Fleissig’s early passion for computers and entrepreneurial ventures set the foundation for his future success in finance and tech-driven solutions.
- His experience in competitive tennis fostered a resilience and drive that he carried into his professional life, particularly in the challenging finance industry.
- College was a crucial period where Fleissig engaged in IPO trading and software development, sparking his deep interest in finance.
- Fleissig’s journey included diverse financial roles, from wholesaling mutual funds to comprehensive training at Goldman Sachs, which rounded out his expertise.
- Pathstone was born from a vision to provide a full suite of financial services to ultra-high-net-worth families, driven by Fleissig’s diverse skill set and experience.
- The firm’s unique model of offering unbundled, personalized services and solving clients’ diverse needs has been key to its rapid growth.
- With a current $100B in assets under advisement, Pathstone aims to become a national brand, addressing the underserved ultra-high-net-worth market with innovative, technology-driven solutions.
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Your email address is 100% safe from spam!**About Matthew Fleissig:**Matthew Fleissig is a Co-Founder and served as Chief Executive Officer at Pathstone Federal Street. He is also a partner of the firm and a voting member of the firm’s Investment Committee. He also serves on the firm’s Executive Committee and Board of Managers.
Prior to his role as President, Matthew served as a Managing Director at Pathstone Family Office. Prior experiences include the role of Principal for Harris myCFO Investment Advisory Services and a Financial Planner at The Ayco Company, A Goldman Sachs Company.
Matt was a member of Harris Bank’s Outside Advisor Review Committee, a select group of 12 senior investment professionals, which directed manager due diligence, search and selection for the bank’s $60 billion platforms.
He was also a member of Harris Bank’s Investment Management Committee, where policies for asset allocation, alternative investments, equity and fixed income managers and compliance are decided at the firm level.
At Ayco, Matt provided comprehensive financial counseling to Fortune 500 executives and high-net-worth individuals. Clients were advised on investment opportunities, complex tax issues, estate planning and benefits and compensation decisions.
Matt earned a Bachelor of Arts in Economics from Muhlenberg College in Allentown, PA and obtained an MBA in Finance from Fairleigh Dickinson University in Madison, NJ.
Matt also holds the CIMA® (Certified Investment Management Analyst) designation and is a member of the Investment Management Consultants Association.
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Read the Full Transcription of the Interview:Alejandro Cremades: All right. Hello, everyone, and welcome to The Deal Maker Show. so Today, we have a really amazing founder you know that they you know we’re going to be learning a lot. and they Again, you know like the whole stuff that we like to hear, the building, scaling, financing, all of that good stuff, ah but also you know like their their business. i mean it’s It’s not the type of startup that we hear. It’s pretty amazing. you know They’re managing over 100 billion, 600 employees, you know tremendous growth that they have experienced too over the past years, and they it’s going to be super inspiring, the conversation that we have ahead of us. So without further ado, I’d like to welcome our guest today, Matthew Fleissig: hew Flasek. Welcome up to the show.
Matthew Fleissig: Thank you, Alejandro. Thank you so much for having us.
Alejandro Cremades: So originally growing up there in Jersey, how was life growing up? You know, tell us tell us about yourself. how was how How was life? Give us a walk through memory lane.
Matthew Fleissig: North Jersey, I don’t think you can make that interesting at the end of the day. yeah Some people will call it a communist state as we yeah as we sit here. but But ah life was good, grew up playing tennis, ah ah probably playing way too much with computers at the same time and computer science. And, ah you know, yeah dad was a lawyer, mom was an occupational therapist. And I will say, ah you know, my dad to this day, 72 years old, ah still a real estate lawyer and one of one of those real lawyers that like really liked the law.
Matthew Fleissig: So ah always really aspired to be like him ah growing up and showed the same work ethic ah that he had. But ah life was good, tennis was good, Livingston tennis was always a top 20 in the state, and we always got beat by Newark Academy. Not that that still bothers me to this day.
Alejandro Cremades: So, so how would you say that the competitiveness, you know, in your spirit, I mean, obviously playing tennis, playing tennis in college too, how do you think that has impacted you as well as a founder, you know, as a professional?
Matthew Fleissig: Yeah, well, I mean, I’ll just say what we see and in no different when we’re hiring people, ah folks who played competitive sports ah gives you a little bit of an edge. And ah you know it was always fun in a competitive nature. And especially in ah in ah in a North Jersey town where you had top tennis players and then playing tennis in college, ah it was you know I’ll just say it was definitely a part of the fun is you were ah as you were growing up. I’d say on top of that, though, is also a mixed tennis, but trying to find entrepreneurial things of ways to make money. ah Getting a job was fun. But, ah you know, in the early days of ah I’ll say the Internet and eBay and others, you know, I say I really try and mix that ah with with finding interesting ways, ah ah you know, the early days of the Internet to find ways to make money at the same time playing tennis and being competitive.
Alejandro Cremades: So out of all things, you know you you talked about computers and then also you know you ended up going into finance. Why why finance you know instead of maybe like law school? Because obviously you ended up like you landed in New York City and and you went and added in the finance space you know versus anything else. Why?
Matthew Fleissig: Well, now I feel like Alejandro can have me start telling some secrets, but ah ah in college, it was also the dawn of IPOs and in the late 90s. And if anyone remembers, E-Trade was offering IPOs for every account that you had. And I ended up writing a bunch of software to auto-confirm IPO trading and various other things. It might have hurt my ah performance freshman year of college a little bit ah ah from doing that.
Alejandro Cremades: You
Matthew Fleissig: But I’ll say I learned an unbelievable amount in a short period of time. ah My favorite part of that is that every dollar I made, I i spent some and had some fun. Don’t get me wrong. But I invested it all in ah in stocks that, ah if if anyone remembers, Lucent and Cisco. ah They went up and then they went back down. So ah however money much money I made, I learned every lesson ah from that, from losing it all, going back to about the same money I started. And I’d say that was really my entrance into the finance world ah that I had a passion and a love for.
Alejandro Cremades: So then you moved to New York City after college and then you um yeah you were basically working as a wholesaler calling on brokers for mutual funds. You know, I guess what was the experience like of of calling, putting yourself out there? How was that for you?
Matthew Fleissig: Well first is you have to remember if I was a computer guy what I what I really did and and coming out of college in the early 2000s after the bubble burst there weren’t a lot of jobs and I was lucky enough ah to ah to meet some folks at Lord Abbott. ah who are still in ah Jersey City to this day. And it was the most out of the comfort zone a job that I possibly could have taken. um You know, I was debating at the time whether, you know, do you look for a job that we’re in a computer science, ah where you’re, you know, I’m gonna say no windows in a back room and not talking to people, or doing something like this, which was an opening that I thought was gonna really, you know, expand what I was looking to do.
Matthew Fleissig: And I’ll tell you, you know, calling brokers throughout the country um and getting hung up on over and over again, at the same time, the firm kind of rated you on how many calls you could make and how long you could be on the phone. um It was amazing. The training program. ah It was literally four to five months of training, of storytelling, presentation skills, ah you name it. And it was just this unbelievable experience. ah And I’ll just say it gave me confidence that has stayed with me in training for my entire career and my entire life. So did something way out of my comfort zone. I felt like it really paid off and it and it really ah opened the door to the world of finance to me as my ah career went on.
Alejandro Cremades: So then eventually you landed at Goldman Sachs and that was you know really the pivotal moment for you because you had that exposure to the world of family offices as well. So how was that the immediate step for you to to to really get going with Pathstone? How was that?
Matthew Fleissig: Yeah, I mean, I will tell you, so there’s a division of Goldman Sachs called ACO. The culture, and I think this is again, you had this incredible training at Lord Abbott. ah At ACO, ah you were you did taxes, you did accounting, you did investments. The whole business was working with working with Fortune 500 CEOs and and the Goldman Sachs partners. And they had things like ACO University, where they would send you away and you would learn about estate planning. and It really rounded out, I’ll say, the experience that I had from the straight investment, wholesaling side, investment side to a much more holistic business plan. And what you saw is that, you know, this was, again, in the early 2000s, there was a real need for this. And there really were not other firms out there that offered, um you know, your full suite of services more than just direct investments.
Matthew Fleissig: And the culture part really left another lasting impression on me of just how much training was done to grow their people in-house and make you smarter and better advisors to be able to work with with more and more clients. So those two experiences you know now having, I’ll say, a computer science, a ah investing background, and now an accounting, tax, estate planning, ah really rounded out a skill set as we continue to push forward, I’ll say, in life.
Alejandro Cremades: So how did you meet Steve? Because that was a very important you know thing in your in your path.
Matthew Fleissig: Yeah, I mean, i we were a pathstone today, which is again, started about 17 years ago, 18 years ago. I randomly met this incredible entrepreneurial family named the Braverman family and and Steve Braverman, and his family invented the powder-free latex glove ah during the age crisis. And the most amazing part about Steve and his family is that that was not actually the liquidity event. um That was actually the third time that ah that Steve’s dad, I’ll say, retired and is still working today at 86 years of age as as a deal guy. And it’s just an incredible thing to say. But I was lucky enough to randomly meet him where our families had a ah ah cabin in the Catskills. And I’ll never forget when I met Steve at a barbecue and he said to me, hey, can you do asset allocation?
Matthew Fleissig: I was like, yes, Steve, I i could do asset allocation. He’s like, you want to come in on Monday and talk. And that was the start of it. He had this vision um around services, ah where families and specifically his family was looking for a solution. He had the investments covered as being a financial engineer and running his family’s single family office for years. But the idea was is you know all these other services that are hard to find ah for ultra high net worth families, all the tax, the accounting, the bill pay, et cetera.
Matthew Fleissig: Steve’s family sold the rubber glove business for safe skin to Kimberly Clark um in 1998 for a billion four. And, ah you know, families of that size and single family offices have trouble finding ah the right capabilities or software. And that was the business model was ah how do we create a ah single family office ah for multiple families?
Alejandro Cremades: So then obviously, path stone is born and the rest is history. So at what point did it become clear that the that it was time to to get going with path stone? ah was that day
Matthew Fleissig: Well, we originally were together at a bank. ah We quickly realized that it didn’t make sense, ah the business we were doing inside of a bank. And so after the financial crisis in 2008, a group of us got together, there were seven original ah shareholders, and we formed PathZone in 2010. We had ah the most amazing part. We had 19 people, 19 prominent American families, I would say, about a billion, four in assets. and ah And we went on our way. And the most amazing part is this business model as we launched it, ah it ah it just took off. ah We effectively tripled in and four years.
Matthew Fleissig: It was a wild time. We were building the house while we were living in it. There was no technology, so we wrote our own optimizers. We wrote our own rebalancers. ah We helped design our own reporting systems. ah It was just a wild, awesome time that you know I was sitting there saying to myself, you know wow, all the everything I had in my past, from the ah computer science and programming to the estate planning ah to the tax, et cetera, you’re getting to use all of it.
Alejandro Cremades: you
Matthew Fleissig: And we got to a pivotal point pretty quickly where we grew to 4 billion um with about 50 families. So families were slightly under $100 million dollars and average net worth. And ah that we quickly realized that we weren’t going to be able to keep this pace ah without scaling in a different manner. And we met with ah two pretty important investment bankers ah that I’ll say changed the direction of PathZone forever. And they came to us and they’re like, you know you need some more adults in the room.
Alejandro Cremades: you
Matthew Fleissig: You need more capabilities. You need scale. um You need to take on and out outside capital and ah and find a firm to merge with. And so ah we took on outside capital in 2014. We took on convertible debt. And ah I’ll say that team there gave me an MBA in ah M and&A, which I’m internally grateful for and thankful. And we went on a national search and acquired our first firm in Boston. It was another $4 billion dollars firm in 2015. And all of a sudden we are in the outside capital and M and&A game, which ah I can’t tell you that was part of the original business plan.
Matthew Fleissig: And all of a sudden, we’re an $8 billion dollar firm. There was another firm of friends of ours that got ah they had some issues. ah So all of a sudden, we we had another office in l LA and another office in DC, and we’re 10 billion. ah We grew it to 16 billion in ah over the next couple of years, all organic. So from 2015 to 2019, we quadrupled. and ah and And it was just part of the story. And all of a sudden, we we realized that ah this wasn’t just going to be a club or I’ll call it a cult ah for a very select group of families, that there was a blue ocean opportunity in a un completely underserved market ah for the ultra high net worth.
Matthew Fleissig: And so
Alejandro Cremades: So I guess for the people that are listening to to to get it, what ended up being the business model of past of Pathstone? How do you guys make money?
Matthew Fleissig: ah We are a completely unbundled business ah around services and investments. So anything that you can dream of on the investment side to reporting to admin, ah we buy planes, we hire pilots, we background check the dog walker, we’ll do the payroll for the household staff, we’ll collect your mail from five homes. um I like to say we don’t say no for a living. And it’s offered in a completely unbundled manner, very different from the world of the of the banks and the broker dealers.
Alejandro Cremades: you
Matthew Fleissig: um and And that’s where effectively we actually charge separately for what you consume versus trying to charge a percentage percentage of your assets and kind of hoping that someone doesn’t use those services ah because it reduces their margin.
Alejandro Cremades: And it sounds like you guys have been using M and&A to ah to grow faster. I mean, and like you were alluding to it. I guess you know one question that hits me here is that 99% of acquisitions you know fail because of the integration, right? The integration is the toughest part.
Matthew Fleissig: Yeah.
Alejandro Cremades: So how do you guys go about acquiring service-based business where it’s all about the people? How do you go about making sure that these people are going to stay in on the long run?
Matthew Fleissig: So first of all, I love the question because I’d say the other big differentiator from us on the acquisition side is that we fully integrate. And the learning probably started in Boston where I pretty much moved to Boston for a year as we got together. As you know, with PathZone, we don’t have a product to sell. We don’t have any widgets. it’s ah it’s we give We give advice. ah you know In our world of of AI and people thinking of chatbots, You know, families still want to be advised by other people. on So we have a very robust equity program that’s been another big piece of the outside investment in private equity world that I feel like just doesn’t get the right justice. ah Sometimes here, hear private equity or VC, and they think it’s like some kind of, ah ah you know, evil thing that’s coming in and stripped to something for parts. It’s quite the opposite. um So when we take on a firm, a couple of things. One, we we try and equitize the next generation.
Matthew Fleissig: So if our we’ll have close to 600 people ah by the end of the year at Patstone. Almost half are shareholders. And so when you live in a world that you know, and we’ve now had three rounds of private equity come through Patstone, we know that every four to six years we’re going to have a transaction. The shareholders who are here here, yes, they make great cash comp. Don’t get me wrong, but they also build net worth with a lot of these incentive unit programs that we create ah with the private equity firms as part of the transaction. So all of a sudden, ah you know folks every four to six years kind of have little mini transactions that they never would have had if we would not have an outside provider. And we know that every four to six years, we’ll keep stair stepping up to larger size private equity firms for the foreseeable future.
Alejandro Cremades: So then, so then how does the, um, I mean, that’s amazing, you know, like, so how do you guys go about then identifying some of those? Because I mean, you’ve done, uh, you’ve looked at horizontal deals, also vertical deals.
Matthew Fleissig: Yeah.
Alejandro Cremades: So how how how do you go about one another and then also how do you go about executing on it?
Matthew Fleissig: So first, everything is culture. And so we’ve done 14 deals in 12 years. ah So it’s it’s very targeted in focus of when we do a deal. Historically, up until about two years ago, we were mainly focused on acquiring other RIAs ah who fit our culture and people. I will tell you, ah we have met ah some some you know i’ll say good businesses, but people who won’t mix. Or sometimes you go and you have the social activity and it’s something very important. We do going out to dinner going out with the people that you’re going to meet. You quickly realize who they are and what they’re going to be like and are we perfect. No, are we have we been close to it. Yes. I mean, there’s still this reality of trusting your gut ah knowing the culture and knowing the people and what are your
Matthew Fleissig: you know What are the things you accept and don’t accept? And what is the business model ah that may be out there? But we’ve done a very, very good job of building a strong team, building a large equity base. And what we started to realize is that the firm grew is, holy cow, if we’re claiming we’re this multi-generational firm for multi-generational clients, we’re missing things. um The other piece of it is, is every time you make a referral out to a law firm, to an accounting firm, to ah to an aircraft firm, a travel firm, you’re effectively taking a risk with your relationship with those clients because you can’t control the experience any longer.
Matthew Fleissig: And so part of this journey has been this obsession of insourcing.
Alejandro Cremades: you
Matthew Fleissig: And we don’t release things until it’s at, a I’ll call it the pathstone level. And so ah we acquired a trust company two years ago. That was a big gap in our business um ah to be multi-generational. Another big piece of it on the automation side was how do we manage portfolios on an after-tax basis in an incredibly efficient manner. And ah we ah combined with a firm in Walnut Creek ah that is effectively, I’ll call it an AI automation portfolio implementation technology that ah tax loss harvests portfolios on a daily basis. So some pretty advanced things. And right now we’re looking ah
Matthew Fleissig: on the property and casualty insurance side. We’re looking on this um the cybersecurity division side of ah what our clients face when things like that come up. We’re looking potentially to acquire a law firm and bring that in-house. How do we really like perfect the client experience ah and and not take on that risk every time we see it of an outside party?
Alejandro Cremades: That’s incredible. Now, obviously, you know for your guest’s operation, you’ve seen it all. I mean, not only you are a helping you know with the investments of of those families, but then also helping them with anything that they need. I mean, you’re in the business of not saying no when they ask you for something.
Matthew Fleissig: yeah
Alejandro Cremades: So what what what are some of the crazy, crazy things that they that you guys have done for some of your families?
Matthew Fleissig: Well, ah first, yes, we’re in the business, we don’t say no for a living, but ah I will say we also we solve problems. And, and our job is to be that first phone call. ah And I’ll say it’s really an interesting part of the of the client journey and you see it is, is that first time you get that phone call, where someone’s asking you for something that’s not about investments or tax, that’s when you know that you’ve really become part of the family. And that’s what we try and do. But you’re right. We’ve, ah we’ve seen a lot of interesting things. I’ll tell you a couple weeks ago, we were a tough touch situation. um We, we had a client who’s, whose parent fell ill, and they thought there was going to die in a different part of the United States. And, ah you know, you get the call, we’re 24 seven. I mean, I think that’s part of the bargain of what happens. But ah
Matthew Fleissig: got a call over the weekend and they said, Matthew Fleissig: , I think my mother’s dying. um you know How fast can you get me to ah to New York? ah We had a plane on the tarmac in 90 minutes. ah But yes, I’ll tell you, we have delivered goats. We delivered a lot of gold.
Alejandro Cremades: you
Matthew Fleissig: um We’ve done mock trials from when someone was ah in a lawsuit to get them prepared and we hired the marketing. people and we hire jurors and prosecutors. um So you know we’ve we’ve purchased engagement rings ah for clients and their children. I’d say there’s a lot of neat things that we do and it’s and it’s a really important part of becoming close to the families and it’s just it’s just it’s just what we do but we what we do for a living.
Alejandro Cremades: that’s amazing Now, I guess for the people that are listening to get a good understanding on the scope and size of the operation, what can you share with us?
Matthew Fleissig: Yeah, no, ah we have, ah like I said, almost 600 people towards the end of the year. we If you look at the business, it’s organized into a trust company, a technology company, and the family office. um The assets are about two thirds in the and the family office and about a third in in the trust company. I think the really interesting part about PathZone as you go into that is the trust company is a non-depository trust company. very similar, very different than a JP Morgan or Goldman Sachs where they have to hold the assets and be the trustee. This allows this unique flexibility ah for the firm as we sit here today where you know we can administer and be the trustee and not actually control the assets. So it really opens the door ah for different types of families and services ah that we hear.
Matthew Fleissig: The other big piece, I’ll say, on the on the data side is technology. um There is absolutely no technology in the family office space. You could buy a package of software here and there, um but we’ve spent the last, I’ll say, five or almost seven years building something called Arrow, ah which is accounting, reporting, rebalancing, optimization, and workflow. ah and and basically making data as the new oil for the system. So we’ve a centralized data warehouse, a front end on top, connects to the investment custodians, it connects to tax, it connects to accounting, ah and all the users work through that at our firm. and And when we sit here and you look at this and you need it, because I don’t think the market’s big enough for somebody to actually make this software. So when you meet other families and family offices, they’re literally sitting in Microsoft Excel and it would would blow your mind.
Alejandro Cremades: So then imagine if you were to go to sleep tonight Matthew Fleissig: and you wake up in a world where the vision of pathstone is fully realized.
Matthew Fleissig: Heh.
Alejandro Cremades: What does that world look like?
Matthew Fleissig: As you sit here today, PathZone is $100 billion, but you realize that’s that’s tiny. And you know you look at Goldman Sachs, it’s $6 or $7 trillion. dollars ah It’s a tiny firm. The other thing on the numbers is ah today, PathZone has about 700 families that average north of $100 million. dollars ah But you look in the market, ah the last study I saw is that there’s now about 230,000 families in the US with north of $30 million. dollars And so you sit there and you say to yourself, ah we have zero market share.
Matthew Fleissig: And so as we move forward, I think there’s this unbelievable blue ocean where the where the market for the ultra high net worth is completely underserved. There is no national brand ah in the fiduciary space and an independent firm that’s out there. And so I sit here and I said to myself ah that ah we have a chance to become the national brand and create a firm that does not yet exist. And we’ve had success. And you know yes, are we almost 100 times bigger than when we started the firm? Is that exciting? Yes. ah Have we 4 and 5x’d each time we’ve had ah investors come into PathStone? Yes. But we’re still on the first or second ending of this thing. And I think the interesting part is is that ah as we sit here, I don’t know what the dollar amount is. And you know if PathStone continues to grow, i don’t I’m going to throw out a number like a trillion dollars.
Matthew Fleissig: You know, is it that there’s a couple firms ah like a Patstone that equal trillion that starts to disrupt the bank and the broker dealer model? Or is it Patstone having to get that size? But I sit here, we’re in the first or second inning of this thing. um It’s an exciting time. And, ah you know, I don’t think there’s a I don’t think there’s an end game yet to to start pointing to or to pick a number.
Alejandro Cremades: So I mean, incredible journey now. You know you guys have been at this now on your way to two decades, right? you You’ve already passed the decade.
Matthew Fleissig: Yeah.
Alejandro Cremades: You’re on your way to two decades. Now, I guess on the on that front, you know if if I was to put you into a time machine, And I bring you back, let’s say, to that moment where you’re sitting you know in front of your computer you know after having met Steve and wondering, maybe you know it might make sense to give your notice and and and do something you know with Steve. and And let’s say you’re able to just show up right there in front of that younger self, and you’re able to give that younger Matthew Fleissig: one piece of advice before launching a business. What would that be and why you what you know now?
Matthew Fleissig: i I would have pushed myself to make us leave the bank and start the business sooner. ah The entrepreneur, there’s nothing more fun. This is an adrenaline rush. I don’t think there’s any other way ah to describe it. and and And to bring it back to computers, I’m not going to say that Patzones likes the video game SimCity, where you’re building something. But truly building something, there’s nothing more satisfying. And and doing this with with partners and changing people’s lives ah you know, around you as you build the business and spreading equity out throughout the entirety of the firm. I think those are just things that have been incredible success. But ah I would just say if I could go back ah in time, maybe we would have started the business ah a couple years sooner than being inside of the bank. ah But ah but no regrets. And it’s just, ah you know, very thankful and blessed from where we are today and look forward to where we take it in the future.
Alejandro Cremades: So, for the people that are listening,
Matthew Fleissig: I would love to reach out and say hi. What is the best way for them to do so?
Matthew Fleissig: our website, pathstone.com, p-a-t-h-s-t-o-n-e dot.com, and ah ah feel free to take a look and click the contact button and ah reach out. And one thing i’ll you’ll notice, and you’re welcome to test it, is ah if you fill that out, you’ll get a phone call with, ah i’d say I’ll say within 10 minutes, but I’d like it to be less than five minutes. Even if you do it at night, you’re welcome to test it out and see if ah see if that actually works.
Alejandro Cremades: I love it. Well, hey Matthew Fleissig: , thank you so much for being on The Deal Maker Show today. It has been an absolute honor to have you with us.
Matthew Fleissig: Thank you, Alondra. It was fantastic. Thank you.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Matthew Fleissig On Building A $100 Billion Firm To Provide Asset Planning And Other End-To-End Services To Ultra-High-Net-Worth Families appeared first on Alejandro Cremades.
Welcome to another exciting episode of the Dealmakers Show, where we delve into the stories of entrepreneurs shaping the future. Today, we have the pleasure of speaking with Matt Luongo, a visionary in the realm of Bitcoin and freedom technology.
Matt’s company, Thesis, has attracted funding from top-tier investors like Andreessen Horowitz, Asymmetric Ventures, Boost VC, and Dan Held.
In this episode, you will learn:
- Matt Luongo’s journey demonstrates that dedication and resilience are crucial for entrepreneurial success, even through personal and professional hardships.
- Transitioning from a tech-focused role to a more comprehensive business role taught Matt the importance of understanding all aspects of a startup, not just coding.
- The influence of dedicated teachers and mentors can significantly impact one’s educational and career trajectory.
- The stress and lifestyle of startup life can take a severe toll on health, underscoring the importance of balancing work and well-being.
- The failure of his first startup, Scholarly, provided Matt with invaluable lessons about the intricacies of business and the importance of having business insights alongside user insights.
- Discovering opportunities in everyday situations, like turning Starbucks gift cards into a business, can lead to significant entrepreneurial breakthroughs.
- With Thesis, Matt emphasizes creating a nurturing environment for new businesses and founders, focusing on projects aligned with his expertise and interests.
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Your email address is 100% safe from spam!**About Matt Luongo:**Matt Luongo is the current CEO at Thesis. Matt has also worked as a tech lead at Agency Spotter, technical advisor at Insightpool, CTO at Scholarly, software developer at The Proven Method, and undergrad assistant at the College of Computing, Georgia Institute of Technology.
In 2007, they tutored for an introductory logic course, CS 1050, through the College of Computing at Georgia Institute of Technology.
Matt Luongo received a Bachelor of Science in Computer Science from the Georgia Institute of Technology.
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Connect with Matt Luongo:* LinkedIn * Crunchbase * TheOrg * RocketReach
Read the Full Transcription of the Interview:Alejandro Cremades: Alright, hello everyone and welcome to the deal make or show so today we have an exciting conversation ahead of us. You know we have a founder that is really talking to us a little bit about bitcoin and you know everything between you know I’m beyond. You know that you can think of on the freedom tech you know type of stuff. We’re going to be talking about the death of his first company you it was ah very painful way in the way that that happened and then asked what he’s learned about raising money and and other stuff without farther ado let’s welcome our guest Matt Longnggo welcome to the show.
Matt Luongo: Um, hey all Andra thanks for having me.
Alejandro Cremades: So originally born in the suburbs of Atlanta in Georgia you saw I walked through memory lane. How was life growing up for you.
Matt Luongo: Yeah, ah, yeah, you got it I mean ah you know George is a purple state now but it it was not when I grew up. So I mean I was the computer nerd when everyone cared about football. It’s pretty typical stuff. Um. Did I do I did a lot of scouting camping programming computers. Um south my family but ah, but yeah I sort of always felt like I don’t know I was the guy that wasn’t into football wasn’t in the sports and kind of had to find my own group.
Alejandro Cremades: So you were into computers. So how did you get into computers to begin with.
Matt Luongo: Ah, good question because my parents didn’t give a crap about them. Um, my dad was into carpentry and my mom was a psychologist so I’m really not sure I guess I guess one of those days I had a teacher who showed me like oh here, let’s ah. You can program the turtle or it was one of those early like painting programs I remember in like fifth grade and I just kind of got obsessed with it. Um I somehow found like 2600 like the the famous kind of hacking magazine and I don’t know I always just liked. Ah.
Matt Luongo: Like rules because you can exploit them if that makes sense you know and I realized kind of young that ah you know rules are great for people who will read the rulebook and take full advantage of it and I think that ah computers are just an extension of that right? um.
Matt Luongo: And one of my friends where it’s like being technically correct is the best kind of correct. So now I mean I remember um I got I got pulled in high school for quote unquote hacking and and enabling a bunch of people to cheat in my high school class and.
Matt Luongo: And they brought the it people in they were like you know we’re going to suspend you This is a big deal Yada Yada and I remember saying you know guys if you read your policy. What I did was actually allowed and so I just made this case like look this wasn’t unauthorized access because when how you defined it. You said it need to be authorized by the other user and all I did was let people basically chat on their local network. So. It’s funny. Everyone who participated in that was suspended but me and I got to walk. So I think I think that’s what I kind of liked about computers. It was nice to feel like you knew like something you had an edge. Um, when other people thought they were lying.
Alejandro Cremades: So you were also a gifted kit you know and obviously you know with that there is a positive and then also a negative you know to if if perhaps you know you don’t have the right type of resources or support you know around you I Guess you know in your case, you know you were on the underperforming.
Matt Luongo: Um, yeah.
Matt Luongo: Yeah, yeah, yeah, yeah I think um as an adult. The worst thing someone can tell you is that you’re smart because I’m like that isn’t something that you earned that’s not something to be proud of.
Alejandro Cremades: You know side of things. Why wasn’t the pace.
Matt Luongo: And as a kid when you hear that it really messes up your worldview because you think like like I am going to be praised for something that I didn’t earn so how that went for me in school is I got bored really quickly and um and it was just you know I mean it was stuff like ah. Was especially bad at math which is interesting I was terrible at math until senior year when I found calculus and I loved it why because physics and I love physics and suddenly math had a reason and I remember um this one chemistry teacher a mine who ended up being a big influence and kind of helping me turn school around. Because I was in this class and I was I had my head down and I was kind of ignoring everything and and she got on someone else’s case for I guess for closing their eyes or something and they’re like well what is Matt get to and she has Matt and she threw whatever question she had up she was like Matt can answer this and I answered it and then I put my head back down. She’s like that’s why. And I think um, that same teacher I remember I almost didn’t get a chance to learn calculus in high school because my math grades were so poor and that same teacher asked my peers who had a few classes with me like hey can he actually not do the work or is he just refusing to do the work like is he just not do something he said I he’s just refusing to do the work. And so she wrote a letter and she asked the calculus teacher to accept me and I mean you know that ended up being a cornerstone to to my engineering education later and and and a lot of the work that I’ve done professionally. So yeah I think um.
Matt Luongo: You know it’s really easy for people to talk about education and like too fast and too slow and and all that but I think teachers like that are really uncommon who will actually look at you as an individual and that was really my my takeaway.
Alejandro Cremades: So then in your case you know it didn’t take long for you to to get going with tech startups. You know the the first one actually was quite ah, an interesting journey where you go more from the engineering to the business side of things. So.
Matt Luongo: Now.
Matt Luongo: Um, yeah, sure. Yeah, so this was back in 2010 to 2013 and the project was called scholarly and it’s funny if I talk to a startup for now. It’s so obvious in retrospect, but.
Alejandro Cremades: So what were you guys doing there and and how did that transition happen. So.
Matt Luongo: Was an ed tech startup and we were focused on research search. So how could you more easily find papers. How could you dig through the citation graph. Um, both me and my co-founder had been considering academia and going deeper. And we were both really interested in How do you commercialize recent research and um and we had we had what we thought were insights but it turned out you know in retrospect they were user insights but they weren’t business insights and so yeah I mean a couple takeaways from that company I was the cto at the time and I used to remember um. You know, raised on like old Apollo Graham blog posts I remember reading like ah you know, just keep coding and talking to customers then your company can’t die and kind of like all these things that now are now are tired but we’re pretty new at the time and and well it turns out that’s wrong. You can keep coding and your company can die. And um, you know I think a lot of what I learned I learned a lot about the incentives of venture capitalal I learned about um, you know it’s really hard when you’re the tech guy and you’re just trusting your business person and even if they’re great, um, things don’t always work and and it’s hard. To like looking back There’s so many things I would have done differently and so part of my takeaway from that is I just didn’t want to just be the tech guy ever again I wanted to have more more control and more more input and um I mean the other part you know the way the company ended was pretty awful.
Matt Luongo: So we um in a time when it was a lot easier to get funding West Coast and there was a lot more I mean that’s that’s still true, but it’s very different after covid but there was a lot more infrastructure. Um, you know we stayed East Coast and we got a couple small angel checks in Atlanta. Ended up moving to the the Boston area and um and then you know things went sideways. We. We couldn’t get around after this accelerator we went through and and this is where it gets a little grim. You know my I knew this. Moving up to Boston but my dad had been diagnosed with cancer so part of my um, you know part of my kind of like rules for working was I’m I’m going to go back every other weekend and see my dad so like we need to set aside you know money for that. Um, and you know my dad my dad was sick and. We were low on money. We’re just trying to find a way to to keep alive and pivot and keep going and um and yeah, eventually my dad passed we we knew what it was terminal when we got the diagnosis. But through that I I kept just like trying to work out and code workout code workout code and go harder and harder and kind of just like cope and do something to distract myself and and I did all these things that are supposed to be good for your health I had a standing desk I was I was moving around a lot but it turns out the stress of my lifestyle actually triggered an autoimmune disorder.
Matt Luongo: And so the way this company ended was my dad died I found myself in the hospital for six months um you know we’re losing money. My co-founders trying to trying to find some more cash and like the low point like the rock bottom for me was um I was. Coding at like 1 of those little hospital tables those really small ones they kind of look like airplane tables on us but they like looks extend up and down and I had ah you know I had like a hospital gown on like bareassed coding and I remember taking a picture thinking. This is so hardcore and then I just felt sick to my stomach after I’d done that because.
Matt Luongo: What terrible priorities you know that wasn’t my life like this was one company and and users liked us but they didn’t love us and you know, no one was going to die if I stopped working but I might die and I was still working and um and so all that was really formative for me. Because you know after that what happened my cofounder did the dirty Work. He shut down the company. But I now had this I mean I’m fine now I’ll jump to that part I’m I’m fine but like I had this huge abdominal surgery that took half a year to recover From. Most of my hobbies like martial arts and whatnot I couldn’t do anymore anything high impact and um and so you know I just had to think to myself. Well I Want to do this again like that was the funny. That’s how you know your cut out for it is like oh I want to do this Again. That’s your response but but I knew that. You know next time I started a startup I wanted it to be I wanted more control over my destiny and I wanted it to be a lot closer to money I wanted to really understand how revenue was going to flow and not just do this.? Well we’ll figure it out thing because you know most of you don’t figure it out. And and people on podcast that’s survivorship bias and so you have to think like wolf doesn’t work. It’s important to be all in but it’s also important to know where your where your line is um, yeah, and that’s but that all is what land founding my current company which is quite a bit rosier. Yeah.
Alejandro Cremades: Well then let’s look about that. How do you bounce back? How do you bounce back from from all those dark days.
Matt Luongo: Oh oh gosh. Yeah, it was miserable. Um I I’ll first say I have a fantastic family I had I had just gotten married. Um and I’m fairly young and part of the reason is we wanted to make sure that my dad was ah was there at the ceremony. And so um, you know I mean in my case if I hadn’t had the health insurance from my partner I don’t know if we would be on this podcast chatting today. but um but yeah so how did I bounce back I mean I I worked in the local Atlanta startup scene for a little while. Um I met some new people I helped I was basically a cto for hire at a couple startups and um, but I knew I was building towards something and I wasn’t quite sure what yet and then I just you know if people are ever talking about startup ideas. You know you just have to be interested in something startup ideas are everywhere that part’s quite easy. Um, and for me I looked in my drawer one day and I was like trying to make rent and like piece things together and and I found this huge stack of Starbucks gift cards that people had just been giving me over the years and I was too snobby to ever drink Starbucks. So um I had all these gift cards and I like countered them up and I was like oh my god this is like 81200 somewhere around there like big money from gift cards for money that you didn’t think you had at all and so it’s like I wonder if I can sell them and so I found. There’s okay, there are secondary markets and of course instead of doing the normal thing sell them move on with your life.
Matt Luongo: Like well what does the secondary market look like and so then I started diving in buying for my friends reselling I worked with a local coffee shop so that they could accept starbucks giftff cards and then give store credit so you’d be like here I have the starbusff credit I want and then oh cool I’ll give you like you know, sixty cents on the dollar and here’s store credit. And then I would use them to buy and so I kind of built that up and um and then finally I was like why am I even doing all this work with coffee shops like money had started moving. Why am I even doing this why I can just go right to the public and so I did and Paypal shut us down like that. Um. And like for anyone who does fintech now. It’s like oh my gosh. That’s great finance and you have like all sorts like alarms and you’re thinking about um but it’s a nicely like it’s nicely carved out like gift cards are not nicely carved out on the regulatory side in the us but it is like high risk and so at the time there weren’t a lot of other options. This is back in late 2013? Um, and so I was trying to figure out. Okay well I don’t have enough cash to like set up like a proper merchant account and do all the other stuff I would have to do again back in 2013 and so I discovered this thing called bitcoin and we relaunched and we did $50000 in volume in the first two days. And and then I discovered this thing called float and all of the other pieces that you know any fintech founder can can turn on about.
Alejandro Cremades: So I guess for the people that are that are listening. You know, Obviously you ended up building thesis you know which is a studio where you guys have rolled out you know, multiple companies right now seven that you’ve made public I Guess for the people that are listening what is thesis you know what? what ended up becoming thesis.
Matt Luongo: Yeah.
Matt Luongo: Sure yeah, so thesis is a bitcoin and freedom technology interest studio. So what that means we’re not like normal vcs. We invest off our balance sheet. We build things ourselves. Um. It’s very exceedingly rare that we that we write an outside check um, and then yeah, we we aren’t sweat equity. Typically if I’m talking to a founder. We’ve already built the company and we’re looking for someone who wants to take it and make it their own. They’re not quite an external ceo or professional Ceo. But they’re like ready. Um. And so that first company that I was just talking about ended up turning into fold and which today is a bitcoin back rewards card that was built off this gift card business and it spun out its series a was by craft. They’ve got some new fun stuff. They’ll be announcing sin but and I won’t spoil I won’t spoil their news. Um. But then we kind of kept going and we realized that like you know something I had to learn about myself is I’m like a pretty good 0 to 1 founder. But I I haven’t been quite ready to be like 1 to 10 like I don’t I um I lose interest I’ll find someone else to do it and I’ll move to a different part of the company. And so part of thesis was just understanding that about myself and realizing that I really wanted to what I want to what I want to do is discover new businesses and then help help new talent run it.
Alejandro Cremades: So then I guess say for thesis you guys have raised a 120000000 you know about 120000000 yeah so so what? what makes you know you you were talking about 0 to one. You know how do you come up with an idea. How do you balally data and and how do you go to the point of hey you know what we’re going to turn this one into a company.
Matt Luongo: Across projects. Yeah.
Alejandro Cremades: And we’re going to roll it out. So.
Matt Luongo: Yeah, yeah, so I think um, there is a lot of different ways to think about this so like so again I told you I was kind of like raised on like early Paul Graham kind of like idealistic. 0 interest rate phenomenon kind of blog posts not all of them some from were obviously earlier than that. but um but so some things I’ve learned so one of them making the transition from like Cto to Ceo for me was understanding that like product market fit. There’s there’s market fit with investors and there’s market fit with users and there’s market fit with customers and all those things are different. So like if you can grow ah if you can grow a product and users. Love it. But no, one’s paid for it. You have fit with users. But that’s they aren’t customers yet right? In fact, they might. The things you’re selling later. Um, and similarly you can get an investor excited about something and they might love a narrative or love an idea so much that they don’t care about the numbers and and so what you want to find is like how can you get traction and line it up so that you get a little bit of everything everywhere. So um, you know for different products you know I think trying to do all of these 3 things that’s insane. You should really focus. But I think you have to you have to ask yourself who am I selling to first am I selling to a user am I selling dude like which is not really much for sale. Um, attention am I asking them for their attention.
Matt Luongo: am I am I actually selling to a customer how big or how small or really am I selling to an investor first and then trying to get the capital to find product market fit and um, yeah, so I mean as far as how we do it at thesis. It’s it’s so different because we’re so deep in our particular area. So every time we launch a company. There are things that we need that we don’t have um so across cryptocurrency a lot of the things that you’re used to and other startups where it’s like you know attribution just like attribution for marketing or just like a lot of basic growth tools or a lot of basic um obstacles don’t work. Um. If you look at how like thinops works people still struggle to get paid in in bitcoin they’re still mostly just getting paid in usd. It’s quite a bit of pain. But so like it’s very obvious There’s so much missing from our space that things kind of jump out at you and rather than deciding what’s the best. Idea which um, you know I think a perpetual motion machine is the best idea like right? That’s not really what you what you want to decide what you want to decide is like what am I best positioned to do with the pieces that I have on the board and um and so for us, it’s like okay well, what’s our existing portfolio. And then what’s our talent. Can we use our portfolio to get distribution in this new market. Um, can it help our portfolio and have like kind of like that moneyball effect on on projects. We already have um but that’s how we think of it and I think um, you know this is really bitcoin specific. But.
Matt Luongo: For the longest time people were too afraid to build for consumers in the cryptocurrency space because it’s very easy to get investment to build infrastructure and it’s very hard for an investor to have the guts to choose an application that they think will succeed and um. And so I think that’s the other thing you know with us is you know we have to kind of we we focus on infrastructure and then occasionally make an application play because you know it’s it’s more conservative. You know you’re going to have funding in 1 area but in the other the win is bigger and and I think you know. You always want to ship something at least I always want to ship something that my family will use and my friends will use. They might not even know I’m associated with it and um, and yeah, so I think it’s I think in our case because we’re building portfolio we get to balance. But if I order.
Matt Luongo: You know, talk to just ah, a new entrepreneur, especially if they already had a little bit of savings I would say like go go for the big thing you know.
Alejandro Cremades: Ah, hundred percent now I guess say you know obviously you guys have raised money you know across all these projects you know under the umbrella of thesis and obviously you know with that there comes you know a betting on a vision too. You know not only for this project but I could also for for you guys. So.
Matt Luongo: Yeah.
Matt Luongo: Um, yeah, of course.
Alejandro Cremades: If you were to go to sleep to and and you wake up in a world where the vision of what you guys are doing at thesis is fully realized what does that world look like.
Matt Luongo: Um, yeah, yeah, so um, it shouldn’t look in the happy case. It shouldn’t look that different but in the unhappy case. Um, it’s it’s completely completely different. So what I mean by that is um.
Matt Luongo: Everyone ah who wants to which in my in my in my view is going to be almost. Everyone will have opted out of the us financial system. They’ll be primarily holding bitcoin that’ll be where we store wealth. Um, which should mean ah. Less pressure on housing. It should mean you know there’s all sorts of like second order effects when you talk about hyper bitcoinization I mean in a big way. Um, but just holding bitcoin is super boring like that’s great. Um, like cool. There’s an asset you can hold maybe the number will go up but the exciting thing is then everyone should be able to. Trustlessly take usd loans against that. Um, and then at this point you are your own venmo you are your own like you know every fintech should now be something that you can do but the difference is that there’s no custody involved. So now you can send money to your friends. You can mess around on your fun local robinhood equivalent. Um, you can do you know, just sort of like all the usd things you you would expect. You could do um but the difference is that it can’t be. You can’t be rugged by a paypal by a venmo you can’t have these people decide that you’re now politically unpopular. And so I think one of the things that’s been hard in our space and especially with kind of like my perspective is people want what will how will this change my life and like in the us’s like it won’t that’s not a life change but you know that doesn’t change your life at all, you’re not getting targeted people aren’t deplatforming you um.
Matt Luongo: But anyone who has been in that situation either. They’re a refugee or or they’re just like our intense capital controls in their country that resonates quite a bit because what we’re talking about is you know you should actually deeply own your money. It shouldn’t be like you think you own it and then a middleman actually tells you it’s theirs. So um. So Yeah for the Us It’s more of a negative fish and what can’t happen. But I think for folks who who are are actively struggling with their local regimes. That’s the positive vision rule rule of law enforced by software.
Alejandro Cremades: And what have you seen too. You know like on as you’ve seen you know so many so many rounds you know capital projects. What have you seen that they is different from a financing roundout ends up being successful to another one that ends up being unsuccessful.
Matt Luongo: Yep.
Matt Luongo: Sure, um, so I think that so much of fundraising is about momentum and you can show momentum a lot of different ways. But ultimately you know the round that you’re going to be happiest with. Um, is going to have a couple things. It’s going to have a competitive dynamic but it’s also going to have people that you want to work with long term. So if you go to like 1 extreme and you’re always putting together party rounds and you’re always trying to pit people against each other. Um you can. I mean you know, especially for entrepreneurs who have never successfully friend raised before that that sounds like a dream because people want you and you get to kind of invert the relationship and especially if you’re working on something really ambitious. You’re used to being told that you’re doing something silly. Or that it’s a long shot or whatever and so now suddenly you have people competing for you so it feels really good. It’s great for the ego. But if you go that way too hard. Um on the other side. You don’t have anyone supporting you right? because if it’s everyone’s problem. It’s no one’s problem. So I think um. What I’ve seen for a good fundraise is you have to have this feeling of momentum every time you talk to an investor they need to know what you’ve done with your time and they don’t want to hear from you and be like oh nothing has changed well, it’s been two weeks how could nothing change in two weeks they want to see and and this is like almost cliche but they want to see a line. They want you to you be drawing a line.
Matt Luongo: And sometimes it’s user numbers and traction. But other times it’s like oh well I’m not an engineer but I found one? Oh ah, well here’s how I prototyped this business before I could write the software. Um, so I think I think that. Ah. Yeah, when I see success. You kind of see this momentum where there starts to be.. It’s kind of like when you see product market that there starts to be Suck. You start to you start to feel pulled and I think that’s ah, that’s a good sign that something’s going to go well but then on the other hand you know you really don’t want to see see that go to a founder’s head and have them get overfocued on on valuation or something like that. When really at the end of the day. Their job isn’t to be a good fundraiser. It’s It’s actually to to build a business. So.
Alejandro Cremades: Absolutely now Matt obviously looking back now you know after all these projects you know these years you know as you’re looking back now and you had the opportunity of getting that younger Matt you know 1 piece of advice for launching a business. What would that be and why given on you know now.
Matt Luongo: Yeah I think you know this is weird because I it’s it’s it’s funny. You would give yourself. You always give yourself different advice than you would give other people so maybe listen to what I say now more than what I would listen to if you just ask advice. But um I think looking back. It’s like. Ah, stick to your guns more like the you know in 2 14 everyone thought bitcoin was insane and it was right after Mount Gox and some people were like you know this thing’s dying what you’re spending your time on and um and I spent 3 4 years just sort of dedicated to to building fold. And then of course we launched the studio and and more projects and um like it would have been really reassuring to have someone tell me just you’re right and keep doing that and um, and so I guess you know that’s that’s probably what I’d say it’s just you know you’re right, keep doing exactly what you’re doing. Um, it doesn’t hurt to make money along the way it doesn’t hurt like suffering is not required to be to be successful I think a willingness to suffer is required but actual suffering is typically not helpful. So I think that’s the other one is just like letting the image of what a startup should look like lead you to make decisions. Also not good.
Alejandro Cremades: I hear you so Matt for the people that are listening that will love to reach out and say hi where is the best way for them to do so.
Matt Luongo: Um, sure I’m still on ah good old x dot com it’s Mh Luongo and yeah, hit me up with love chat.
Alejandro Cremades: Amazing. Well Matt thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Matt Luongo: Thanks a lot Alan Andre
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The post Matt Luongo On Raising $120 Million To Build The Infrastructure For Bitcoin Projects appeared first on Alejandro Cremades.
Federico Malek, a seasoned entrepreneur from Buenos Aires, Argentina, has navigated the complex waters of startups and acquisitions, establishing himself as a prominent figure in the business world. His journey, marked by strategic decisions and keen insights into the dynamics of emerging markets, offers a wealth of knowledge for aspiring entrepreneurs.
Federico’s latest venture, Wonder Brands has attracted funding from top-tier investors like Alarko Ventures, Kube VC, Mountain Partners, and Spectra Investments.
In this episode, you will learn:
- Building startups in emerging markets like Argentina requires strong unit economics and sustainability from day one due to macro and political fluctuations.
- Early exposure to successful entrepreneurs inspired Malek to pursue entrepreneurship in Argentina’s burgeoning tech scene.
- The high-growth, high-burn model is less suitable for emerging markets, where stable capital markets are scarce.
- After selling his first company to Groupon, Malek shifted to developing sustainable, profitable business models.
- Wonder Brands focuses on creating consumer discretionary brands for Latin America’s rising middle class, emphasizing sustainable and profitable growth.
- Raising capital in Latin America is more challenging and time-consuming compared to more mature markets like the US and Europe.
- Aspiring entrepreneurs should carefully choose their market, considering both potential and challenges, rather than being attached to their home country.
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Your email address is 100% safe from spam!**About Federico Malek:**Federico Malek has over 12 years of experience in the business world. In 2020, they became Co-Founder of Wonder Brands and a Member of the Board Of Advisors at Salesforce.
From 2017-2020, they were the CEO of iúnigo, an Insurtech carrier focused on customer experience. From 2014-2017, they were the Co-Founder and CEO of Avenida Inc., a pure-play e-commerce with end-to-end fulfillment.
From 2010-2014, they were the Managing Director at the South Cone of Groupon, where they led the company from scratch to insane growth rates. In 2010, they were also Co-Founder of Walooz, which was later acquired by Groupon.
Lastly, from 2008-2010, they were an M&A Analyst at IB Partners (currently Landmark Capital), where they worked on M&A projects in Argentina, Chile, Brazil, and Colombia.
Federico Malek obtained a BA in Economics from Universidad de ‘San Andrés’ in 2007. In 2009 and 2010, they attended Georgetown University McDonough School of Business to pursue a GCL 2010.
Entrepreneurship, Leadership. In 2019 and 2020, they attended Stanford University Graduate School of Business to pursue an Executive Program in Leadership.
Currently, they are pursuing a Master of Business Administration – MBA from Kellogg-HKUST Executive MBA, which they are expected to complete in 2022. In April 2015, they obtained an Endeavor Entrepreneur certification from Endeavor.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the dealmakerr show. So today. We have an amazing guest. You know I guess that has done it multiple times you know, um, he he has some exits too which is amazing and we’re going to be talking about fundraising and emerging markets versus let’s say what you could be experiencing fundraising. Let’s say in the Us. In other places. Ah that are similar also thinking about regional operations going regional scaling teams and also scaling the operations in parallel as well as you know what happens you know when you go through that full cycle of building. You know, scaling financing.
Federico Malek: Um, um I would say.
Alejandro Cremades: And also reaching the finish line with a company that you founded from the groundup. So without far ado let’s welcome our guest today Federico Malik welcome to the show.
Federico Malek: Thank thank you! Thank you and it’s a pleasure to be here.
Alejandro Cremades: I so originally born and raised in Argentina because I walked through memory lane. How was life growing up. Okay.
Federico Malek: It oh it was great. It was great Argentina it’s I always say the same I think that I’m im in love with my my my hometown buenosidis I think it’s one of the best cities in the world. Super eclecive. It’s great to do you know the type of thingss that we do and and you know a lot of there are there are a lot of ah tech startups here. There’s a lot of talent. So so one of item was great. I love soccer I love beef. So it’s kind of like the perfect city for me. Yeah.
Alejandro Cremades: So in your case How how did you get into the world of entrepreneurship and business I mean I know that you studied economics but they but this whole venture world. How did it come knocking to you.
Federico Malek: Ah, so yes, um, I’m in my thirty s right now Mid thirty s so so when I was in in college um in in probably early two thousand here in in Argentina we had. This amazing success stories for kind of like the first wave of entrepreneurs of ah web and internet entrepreneurs with you know that they were making great companies like vericali they like deremate. You know all the first. Very successful. Let’s say wave of companies and I was really inspired by them when when I was tatting in college when I was in school high school and I probably knew from the early beginnings that I just wanted to go there I just wanted it to be. You know this kind of. You know guys you know raising money ah from international and global investors. Um, you know, funding companies and doing companies that were really with very inspiring. Let’s say purposes and missions that were really trying to. To change the way we do certain things in light am so I guess that up from the early beginnings I knew I just wanted to go there. It was just a matter of time. Um, so so when I had the chance you know after college I went to started doing investment banking m and a.
Federico Malek: Probably 1 of the most typical let’s say outcomes for for a photograph graduate and after that I just you know after two years two years and a half I just thought hey this is my time I need to try I need to to risk and and to take some risk and and and I just you know took the the shot right.
Alejandro Cremades: So let’s talk about that because I mean it was ah you know, kind of like a similar model to to group on and they were talking about. You know I mean the the company went public. You know a group on you know back then but but but I guess. Groupon ended up acquiring you guys and then you kind of like started developing or or doing the expansion you know across latin America so how is that journey like.
Federico Malek: We it was an amazing journey. So the first company we were really lucky because ah so when we were like 24 years old we started we we started learning about this this when we started kind of like analyzing what type of companies we wanted to do we understood that ecommerce.
Federico Malek: Was an amazing opportunity for latin America and we learn about this new you know project that was really um, doing very well in the us and back then um, rubon and we started analyzing and we thought you know we reached the conclusion that. For that time for for different reasons. Um, this model was going to be very successful and indeed after you know a couple of years after that the penetration that we had with Groupon in the region was higher that in certain time you know and you know, ah. European countries so we had like ah, an amazing success with the Groupon model and attempt. But you know back then we we knew it was going to be successful and we started ah a groupon clone you know a Groupon kind of model a heart discount. Company called Wallus that was offering hard discounts in different local services in in in bonoitis and um, you know 1 year after we started, we got approached by one of the ah by the roupon team. That they wanted to go international. So we we started talking and we ended up selling. You know our company. Our startup to to them. No.
Alejandro Cremades: So what was it like to go through an acquisition process because this was you know the the first time around and and I’m sure he was frightening. It was exciting but but how was that like.
Federico Malek: It it was it was um, it was very exciting because we knew that. Ah, um, this this was of course changing our let’s say the dude was going. You know take us to a. Totally different level. You know and and six months after the acquisition we we went from a team of 16 people to almost 180 so we knew that um you know this was really going to change the the our company for the better.
Federico Malek: Um, ah you know we were young. We were kind of like eager to to take the experience. Um, and we we didn’t think you know we didn’t thought about it like ah us like ah like ah um, like a frightening experience. We.
Federico Malek: When when we had the chance to do it. Um, we just took it I mean it was like and it was obvious for us that we should you know, go over that. Let’s say path and let’s say the only problem that we had back then is like hey we are a startup we’re doing Well. Um. Maybe this is like ah an early exit for us and maybe we shouldn’t take it but the way that we structure it. You know with earn out made us possible to capture the future growth that that the company had So um. So It was overall I think it was a good deal. A very good deal for us and ah and and um, much better experience.
Alejandro Cremades: So in the end, you know you guys send it up a starting an e-commerce company. You know, right? after the whole you know, seeing the company going public and you know all of that day. Good stuff. You ended up venturing you know and going at it again. So. Call us about tell us about what happened with Avanita how? How did you guys come up with a concept and and the idea of going at it with it.
Federico Malek: Yeah, yeah, so after we saw the the kind of like the penetration that roon had in in in latin especially in countries like Argentina and Chile Colombia um, the you know the the model really. was’ really successful in these countries and um, ah you know there was kind of like ah it was obvious for us that ah a more pure play ah player of ecommerce multicategory more alike more similar to Amazon. Was going to be really successful in in in Argentina as well. Um, so we started with that idea so in Argentina back then we had a groupon we had medical daily that back in in that moment in 2013 2014 it was a model that was very similar to to to ebay. Um, and we thought hey we there’s there’s a big room here to create an Amazon business model. Let’s say a pure pure play commerce with own fulfillment doing marketplace for other players selling 1 party. Um. Stock and inventory as well with a great customer service with a great customer experience. So we started you know we started a company in 14 we raised you know $50000000 from 3 subsequent rounds from global vcs like tiger global by naspers.
Federico Malek: And probably what we didn’t realize back then is that ah you know doing doing business in emergent markets. So and raising money for emergent markets is a little bit difference than that in the us we. We you know. The the the business model of a pure play commerce. It’s extremely Let’s say relay relies you know a lot on on on capital and and the problem of emerging market says that especially in Argentina is that the macro and the political fluctuations are very extreme. Um, as you can see right now from what’s going on right now. But um, so so um, so in you know in 1 of this downturns. It became really difficult to continue you know raising money for the original model and back then we realized that we had a you know, very good. Um.
Federico Malek: Techg for for to sell it as software as a service. Um for other players because our platform was really good and um and and so we kind of like Pivoted. We sold the business we pivoted it to to more of ah, let’s say software. As a service platform for non ecommerce players that wanted to to to to be um or become a marketplace like banks like other retailers and um, those type of players so that is what we realized back back back then you know.
Federico Malek: If You are thinking about a business that relies on Capital to grow and you know you you really need to think about what’s your Target market right? because emergent markets the problem that you have is that you know these fluctuations make it really difficult. Ah, to to kind of like continue this type of business for the long run. Yeah.
Alejandro Cremades: So then so then obviously we have Anita you know there was quite a a bit of lessons learned I think I guess which one was the top one that you took away with you from the Avannia experience.
Federico Malek: And it’s it’s what we said I mean top 1 is is um, you know if you are doing. Ah so so everyone is talking about probably kind of like ah you know ah becoming profitable right now and you know having profitable growth. And probably for a lot of companies on a lot of startups this highrow high burn model. It’s it’s not working anymore what we realized back then in 20152016 is that the highrow high burn model was not suitable for a lot time. Um. Because you you cannot rely on having let’s say a very mature capital markets that could um and you know a lot of you don’t have a lot of investors that are willing to invest like big amounts of money in laan to sustain a high-growth highburn model. You know. So um, so like ah so so so that’s that’s that’s the main lesson that we learn if you want to do a startup in emerging markets. You better. You know you better figure out how to become sustainable from the early beginnings and have strong unit economics and. Ah, probably instead of ah starting a highburn high-growth business model. You should become really aware how to make a sustainable business from the early beginnings because probably and and this is everybody that is doing you know business in emerging markets face it in some way. Um.
Federico Malek: The you know in 1 year you the the the markets where you are operating might you know be really hot for some investors and you know in in eighteen months the situation can change dramatically and you can find in yourself in a very tough situation to raise money. Although the company might be doing well and might be doing great. So so so that is very important. You know if you’re starting a business here. Um, you know you need to figure out how to become sustainable from day one if you like to do like let’s say a highrow highburn type of business.
Federico Malek: You probably should go to a more mature market like Europe like some places in in Asia or in of course the us. Ah, but but not in but not in latintime not in in in kind of like mid emerging markets.
Alejandro Cremades: So then it’s quite a shift going from ecommerce to insure take so why different segments. So what? what? what trigger that.
Federico Malek: Um, yeah.
Federico Malek: I just wanted to I always felt um, very curious about doing stuff outside of ecommerce I wanted an experience there. Um, after Aveita I just wanted so so so you needo. Was the first insurete. Um, let’s say end-to end insure tech of latin um, you know we had some let’s say ah websites like comparisons. Um, you know, but we were an we we are on an authentic.
Federico Malek: Ah, end-to-end insurance company and um, when I watch you know our you know main shareholder was one of the largest um insurance companies of of the region. So when I got approached by them. You know I guess I needed an experience where after Aviita I needed an experience of like Okay, let’s let’s let’s let’s try to do something different. Let’s try to do something within like a large institution and um, you know, just ah.
Federico Malek: Keep it. Let’s say come for for a couple of years and and so I started this. You know it. It was a great experience. I really enjoyed um because it was really different. It was much more. Let’s say tech than than than doing ecommerce. Um, because we had to ah. Software for underwriting for fraud prevention for issuing ah of you know policieses. We had to create an entire interface and digital interface to to interact with the you know with our digital customer that was acquiring. our our products um so it it it was it was a great experience after ah, you know some years I wanted to go back and you know be be. You know to you know start my own business again. Um. And that’s what we did and and and and we wanted but you know with all the experience that we had um before with you know my you know my founding colleagues and you know my my partners we we we wanted to go back to ecommerce because the ecommerce opportunity is yeah. Huge in latan la time is is the fastest rowing e-commerce market in the world. Especially Mexico it has a lot of room to continue expanding but we wanted as I said before you know we had a lot of experience and we we started like kind of like um, creating some dogmas like.
Federico Malek: So dogma number one is like we’re not going to make a company that um, that loses money I mean we are going to start a company that is sustainable and profitable from from day one number 2 we we don’t want a company that relies exclusively on customer acquisition. Customer aquisition is like insanely high for for for Latin America as it is in other countries and other parts of the world but we want to do ecommerce so we we decided that that ah the way to kind of like ah when you mix all this. You see we saw and an amazing opportunity on creating digital brands. You know for the digital buyer for the digital consumer. So that’s what we’re doing right now in wonder runs that we started in 2021.
Alejandro Cremades: So let’s talk about the business model there now of wonder brands. How do you guys make money.
Federico Malek: So so we create ah we create consumer discretionary brands for the rising middle class of latin america so we are serving a huge market of 400000000 people. Um by serving them and providing them. Um, consumer brands in discretionary categories such as home garden and ah pets accessories, baby accessories, tools and all the you know do- yourself essentials mattresses and sleep products we have more than 16 brands over 3000 products that we sell. On online marketplaces on our own d two cs channels as well. We are right now one of the top 10 marketplace operators in Latin America and of course yeah, but.
Alejandro Cremades: So so so how how is it going to the um, the whole approach for example of because I know that you guys have raised 35000000 here what has been the experience of raising that money and then also what is it like to raise money.
Federico Malek: In it.
Alejandro Cremades: You know in the us versus let’s say raising money in a place like Latin America
Federico Malek: It’s very different. So so yes, so um, we have a tech backbone that help us develop this brands. Um, and you know it’s it’s it’s I mean probably the.
Federico Malek: The success that we had because a lot of the brands that we have right now in our portfolio have become really champions on their categories. So for instance, we have the number 1 selling mattress brand of online channels in Mexico we’re selling more mattresses than anyone else. Our. Ah, luggage brand that is called Rumbo it’s ah you know it’s the number 3 luggage brand from Amazon in Mexico as well. So we have a lot of success storieies we we were able to really penetrate in some categories with our brands and I think that the main reason is that ah because we are doing it very different. We are developing brands as you develop software with you know, starting with and Mvp and from an Mvp. We iterate the the products and we get to kind of like the winner product very fast. And once we get that we start investing heavily on on that product. But once we know that it’s it’s going to be a successful product so it’s it’s a very lean approach that we learn from you know, almost ten years doing software and we took it to the real world and that’s kind of like our secret sauce. that’s that’s our main differentiator. Um.
Federico Malek: And you know raising money for this model raise money in emergent markets raising money in Latin America it’s very hard all right. It’s it’s very difficult we had I think we had like ah um, like a golden age from 2016 to 2020 1 2022 with all this money coming from softbunk and a lot of other you know funds that were really active in the region I think that some of them are still active. But the options that you have. To raise money and latin in America are are much more reduced than in the us and when in a moment of like low interest rates a lot of investors go to this type of um, emerging markets to seek you know for growth alternatives when you know. Interest rates go up. There’s a fly to quality and this regions tend to try up so it becomes more challenging I think that great companies are always going to get funded somehow. Ah, regardless of the region. But it’s it’s it’s the options that you have in a lot time are a little bit more reduced so you need probably so to ah have a lot of friends that are raising money and have raised money in the us and and we were kind of like aware of the process. There. So.
Federico Malek: A typical process that in the us might take you know three weeks four weeks to get a termate and you know probably close a deal in like you know, like probably a month and a half two months it probably takes four months here in in la ham you need to see. It’s a lot of other investors. Investors are a little bit more cautiousuchious about investing in laam. Um, they they probably start doing like a very tough due diligence. You need to be prepared for that. Um, and um, you know, just the.
Federico Malek: You need to be aware that the process is here in in in that time are they they take more time they are more difficult they end up being like very different from the original plan that you designed so so you the the companies need to be prepared for that. Um, in in the Us I’ve seen companies you know, running out of cash doing it. You know, just knowing that they can raise money because the the market is the capital markets are much more Ma material. It doesn’t happen here in that time so you need to be more careful when you when you plan ahead.
Alejandro Cremades: So when when planning ahead you know I’m thinking about the vision here. Obviously that’s what the investors reallyly betting on. So if you were to go to sleep tonight feday and you wake up in a world where the vision of wonder brands is fully realized what does that world look like.
Federico Malek: It’s so it’s it’s it’s probably a very similar world than than than the one that we have right now I think that um latam has made a lot of progress and some of the latin american ecommerce markets are have become really big right. So we just need. We just need time to realize our mission. We are right now. Um on a $100000000 run rate in in in terms of net revenues and we know and we we still didn’t launch Brazil and we with Brazil we can. Triple you know the size of our company on a very short term. Um and we know that it you know very in in a very short term. Let’s say in less than three years we can be doing $500000000 in sales. So that’s a big company even for the us right? so. So it’s it’s it’s just a matter of time of continue deploying and continue taking our brands to the rest of the latin american countries. Um, so so so it’s a matter of time I mean the the market is ready. There. It’s already big. To create huge companies like the one that we are creating right now at wanderbras.
Alejandro Cremades: So let’s talk about the past here because now you know you’ve built several companies. So if I had to give you the opportunity where let’s say you’re coming out you know of now being a graduate you know they’re at the university that day and on this and you are now thinking about the. You know, maybe like a world of your own a world where you know maybe you can bring a solution to a problem that you’re encountering. Let’s say you had the opportunity of having a chat with your younger self. You know, maybe maybe even that younger self that was coming out of of giving the notice at the investment bank where you were at you know, initially and. You were able to give 1 piece of advice to that younger self that younger feday before launching a business. What would that be and why given what you know now.
Federico Malek: Well probably you know one of the best advicees that um I would give to any entrepreneur coming out from argenino or any any other merchant market is that you you choose you choose you need to choose very wisely the country where you’re going to to. To start your business because we tend to have let’s say um, we tend to you know store our business in our hometowns and in our home countries and that’s because we think that it’s going to be easier to start there than in any other country or in any other market. Ah. In in the world you know and and yeah because I’m I’m from Bonociis or I’m from Spain or whatever probably it’s easier for me to start my business there but you know, starting starting your own business. You know this I hand rate it’s it takes a lot of effort and it’s it’s it’s a pretty hard. It’s it’s a very hard business to start a company and um, you know, just don’t be attached to to your home country. Don’t be attached to a country where you were where you were kind of like born. Ah. Because that probably not be the best option for you. You know like ah so so so so probably I would have started. Ah, ah you know a startup or a company in in in other parts of the world when I was younger. Yeah I mean.
Federico Malek: Younger people tend to be a little bit have a lot of more liberty to to travel around and you know move to another country is move to another regions. Um I would probably you know recommend that to to my younger self just you know if you want to start a business. Choose wisely where you want to to to to do it because it’s going to be hard anyway, it’s goingnna be hard here in the Us in Europe or in India or whatever. But if you choose your your market wisely. You might you know you, you won’t have to to fight or let’s say. You won’t have the obstacle of ah of the ro market for your business. Do you know? what? what? I’m saying like it’s the same I mean it’s it’s us hard. You know probably doing ah the business in India and ecommerce you know e business in India it’s as hard as as probably doing it in Mexico. But India is 10 times biggerer you know? So so so that’s that’s it. So probably you know when you’re in your thirty s in your 40 s you know, moving to India. It’s a little bit more difficult but when you’re starting out you know, like probably that’s an adventure. You know.
Alejandro Cremades: A hundred percent fed it for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Federico Malek: Ah, probably Linkedin Twitter ah, you can find me there and happy to answer any questions or you know engage into any conversation.
Alejandro Cremades: Amazing well faith it. Thank you so much for being on the deal maker show today. It has been an absolute honor to have you with us.
Federico Malek: Thank you very much alejandro and hope to see you soon.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Federico Malek On Selling An E-Commerce Company To Groupon And Now Building A $100 Million Revenue Brand In LatAm appeared first on Alejandro Cremades.
From a humble beginning in South Africa to becoming a serial entrepreneur in the United States, Wayne Slavin’s story is one of perseverance, adaptability, and relentless pursuit of innovation. As a young immigrant in Southern California during the late 80s, Wayne experienced a world where possibilities seemed endless despite the initial challenges his family faced.
Wayne’s latest company is Sure that has attracted funding from top-tier investors like BluePointe Ventures, FTAC Ventures, Menlo Ventures, and Cohen Circle.
In this episode, you will learn:
- Wayne Slavin’s immigrant background in Southern California instilled a strong work ethic and entrepreneurial spirit.
- Wayne’s passion for technology started early, leading him to pursue education and hands-on experience in tech management.
- His entrepreneurial journey began with bootstrapped startups, learning the importance of controlling destiny and profitability.
- Wayne transitioned from bootstrapped ventures to seeking external capital and mentorship to scale businesses effectively.
- His experience across consumer electronics, enterprise software, and payments led to the creation of Sure, a contextual insurance platform.
- Sure evolved from a consumer-facing app to an enterprise-focused SaaS infrastructure provider for the insurance industry.
- Despite significant venture capital raised, Slavin emphasizes the importance of profitability and financial prudence for sustainable growth
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Your email address is 100% safe from spam!**About Wayne Slavin:**Wayne Slavin is the CEO and Co-Founder of Sure, a VC backed insurtech startup. Prior to Sure he was the VP of Product Management at Tapingo, TechCrunch’s Most Innovative Company of 2013.
His other past projects and companies include NetStumbler, a consumer app with more than 1,500,000,000+ billion downloads, the Barnes & Noble Nook eBook reader, Buddy Media (now part of salesforce), and BackupRight the enterprise SaaS company he sold in 2012.
He has a Masters Degree from Columbia University.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the dealmakerrs show. So today. We have a really exciting founder. You know a founder that has done it a couple of times you know I would say and you know the building the scaling the financing the exiting. So all the things you know that we like to hear you know in this show you know. Also we’re going to be hearing what he’s up to with his latest baby. You know which is quite a ah rocket ship. You know that he has been pushing now for 9 years but really exciting and inspiring conversation ahead of us so without further ado. Let’s welcome. Our guest Today. Wayne Slaben welcome to the show. Thanks.
Wayne Slavin: Thanks so much for having me lovely intro happy to be here.
Alejandro Cemades: So so originally from outside of the us South Africa but obviously you came you ended up coming here. You know to Southern California San Diego and then the rest is history so give us how walk through memory lane. How is life grow00:54.54
Wayne Slavin: So yeah, life growing up. Um, was something that I think probably tough to replicate these days but it seemed like an amazing time a coming with an immigrant family to the states. Into Southern California in the late 80 s ah time where I think there was anything was possible. Feels like that was ah in hindsight how the world looked from a place like San Diego in the early eighty s you know the freeways were empty I remember being told stories about how. Freeways were so empty that the cars would gather together because it was too lonely to be on the freeways by yourself and you know here we are thirty years later and wow how things have changed and progressed but very blessed to have ended up in a place like that. And ah grateful for ah for my family for having brought me out of Africa quite literally to the states and let me pursue my dreams and.
Alejandro Cremades: How was I like to of um, you know how do you think it has shan you up to have um, immigrant parents. You know to to come here. You know with nothing build a better you know future for the family. How do you think that has shapen you up.
Wayne Slavin: I think the the key there is sharing stories sharing knowledge sharing perspective of each generation getting getting to a different place and having an appreciation for. Generation before was just was just awesome and and the work ethic is also really touching reflecting a couple of years ago during covid as a parent now as a parent of ah you know ah of young kids. Really thinking about where the next thirty years are going to be that were like the thirty years I you know really enjoyed in California before I made my way around the states and and reflecting on that moment and how you know the stories repeat in people’s lives generation after generation. And picking my family up and leaving California and going to you know Texas in this case during covid but really ah, having that appreciation for I’d say the grit and the the bravery to just pick up from a place where you quite literally had to leave everything behind. It’s hard for us to imagine these days. It was a country that people were leaving and you actually had to leave your stuff. You couldn’t just book a flight on Delta put your stuff in a bag and just go you actually had to leave things that you wanted to bring with you. You had to leave them and start quite literally fresh and and that.
Wayne Slavin: That grit I think is just embedded in your Dna after after you, you see your parents go through it. So.
Alejandro Cremades: So in your case, you ended up getting your undergrad in San Diego then you got your grad in in New York City actually in Columbia but it sounds like management. You know it’s all over whether it is technology management. You know, but management you know seems to be like something that you really were going for so white management.
Wayne Slavin: Yeah, um, say that there’s people who love to ah, go deep. They want they figure out what they love and they go deep but they want to go deep in the area that they’re already passionate about and they go academically deep as well. And then there’s folks who go after the thing that like that is not their sweet spot by default and so I grew up in tech my entire life right? It started with dos and dial up and. Bulletin boards and literally breaking the computer every day my dad would have to fix it. My older brother would have to fix it and I would break it from like 3 years old and eventually I started to fix the computer for other people for for my parents etc and so the tech part. Came easy for me and I maybe naively believed that like the best product would win. It didn’t matter all the other stuff didn’t matter. It was like a tech beauty perfection purist right? If you built the best product you would win and. As I had built early businesses early experiments early ways of trying to make money on the internet in like pre two thousand it became clear that that wasn’t the case and so I think always knew that the piece that would be hard because it just wasn’t a natural skill.
Wayne Slavin: Would be how to build and scale out a company and a team and a culture and so rather than go get a degree in the thing that I already knew how to do and had been doing for 20 years why not go to that other thing that is I think more art than science. And more situational than actually data-driven and empirical which is code product things working together and people don’t always behave rationally systems don’t always congregate around the most efficient solution. Maybe over millions and hundreds of millions of years you could argue an organism does that but companies don’t usually live that long and so what are the things that you could learn about managing that ah more effectively and so didn’t see the need to like go get a stamp of approval for technology. When as an undergrad is a funny side story here as an undergrad went to you had to pass a mandatory technology course went to the professor and said hey after the first class hey’ going to come visit you during office hours in the office hours. It’s probably a little. Cocky about it but said literally either I’m going to disrupt the class and correct you every time you make a mistake or I just want to show up and take the final and he said know what we can do though is you could teach a class I will.
Wayne Slavin: Let you take 1 of the semester classes and teach the whole class something and decided to do that and it was funny as an undergrad was waking up at seven thirty a m to take classes leaving by lunch to go to my day job. Which was like running a data center for a big startup in San Diego and so um, didn’t didn’t see the need to like get the stamp of approval that I could do tech it was always It was always there. So.
Alejandro Cremades: So then talk to us about venturing into the world of entrepreneurship.
Wayne Slavin: Yeah, I’d say this Spark started pretty simply and I do think about this a lot these days as a parent.. How do you instill this in kids and I’m sure lots of your listeners think about this too and read books on how to you know motivate your kids etc. But I think my parents ads entrepreneurs. Um, really just maybe by accident maybe intentionally just told me if you want something you got to go figure out how to do it How to get it and just go figure it out and then the beauty of I think that moment in time was that.
Wayne Slavin: They just then let me go figure it out. So if I wanted a you know landline phone in my bedroom or I wanted a Tv in my bedroom I to go figure it out and it was a moment in time you could figure out how to make money on the internet. There was lots of innovative ways to do that. And it was before everything was commoditized and we all had shopify and wordpress and all these awesome tools and so there was a moat. There was a barrier to entry but it was just a question of you know time and your dedication to figure stuff out and so I think my parents just said. You can have anything you just got to go figure out how to get it and that was really the journey and you know I’d I’d I’d argue there was maybe too much imposter syndrome because it was like wait that actually worked why not go do it more. Do it bigger. Do it larger? Um, but it was always with you know, big, big dose of skepticism of will this work in hindsight many of them worked and probably could have been even more successful if we had poured gas on it and that ties back also to why management. How do you know that? something’s working when do you know to pour gas on it. It’s not always obvious when you live and breathe it and eat it and you know that’s your whole day. Sometimes you don’t know when when it’s actually working or not.
Alejandro Cremades: So so in your case you know you actually ended up going to grad school. But 1 thing that is very interesting here. Is you go to grad school and then you go back in into joining other teams into joining more like the corporate side of things because. 1 thing that is striking me is before grad school. You actually built a couple of companies and in fact, you even sold one. You know, ah, essentially so once you’ve seen the full cycle of building scaling financing and and exiting I mean why going to corporate versus you know. Going at it again.
Wayne Slavin: Yeah, my early startups were all bootstrapped back to that immigrant mindset I think being in Southern California might have been different if I was in Northern California around the world of venture. Southern California vc I think is still not taken hold right? It’s still not part of the culture. It’s a great place to live and in remote world. You have venture back companies that have people all over but at that time that was a foreign concept and so everything was built bootstrapped. Tied together with you know, shoelaces and duct tape and you know the skin of an avocado in San Diego like that’s what everything was held together by and they happened to work because what other way was there that was the only disciplined way to build a company was to bootstrap it and make it profitable and so. First company helped cash flow and bootstrap the second going from an ad-driven revenue model which is unpredictable. You know Google is the overlord of that they control your your clicks and they control your top of funnel and they control their cost per. Click and that was it and that wasn’t a comfortable place for me to be because you couldn’t control your own destiny which has really been a theme throughout my life and throughout companies and the culture of the company controlling your own destiny and moving from that business model into a saas model.
Wayne Slavin: And at that time there was no sastster and it wasn’t even called Sas. It was just like how can you get people to pay you monthly so that you wake up on the first and you don’t have to start from 0 you start from some baseline and built a company scaled it um to a point. But. But like I said earlier you you don’t necessarily know when to pour gas on and nor do you know how and so built a company to the point at which you know I reached my ceiling for that moment in time and decided hey. I built it. It worked we you know our retention numbers in hindsight were elite retention numbers for a saas company and our nrn our r was elite company status but it just didn’t it just wasn’t known right? The history hadn’t happened yet and and so I said well. A linear growth business things were starting to go viral if you remember in the early you know early two thousand s that was like this whole idea of things going viral at Jcurve a rocket ship and I was like but that’s not what’s happening here. This is like put money into marketing and it grows and it compounds. Linearly and and so I actually thought that there was something I was missing and maybe I wasn’t missing it. Maybe I pulled the rip cord too early but decided hey I want to go where somebody understands outside capital and how do you pour fuel on this thing and so.
Wayne Slavin: Decided to go to grad school in New York could have gone to the bay area but decided to go to New York to to get a change of pace and the reason I went to the program I went to was that only about 20 people accepted to the program I think they made a mistake um on you know my application. Maybe ah, they just to hit the wrong button that the system didn’t allow them to undo it but I showed up on the first day and the the reason I wanted to go there was that they matched every student with like a sitting fortune 500 cio or cto of a big company. Whether as a bank. Private equity etc. And I said I want to be around a mentor who knows that world of you know venture outside capital etc and so tailored kind of my work and my thesis work and my coursework around really attracting that mentor and. Ended up successfully doing that with an awesome venture investor who’s still to this day on our on our board. Um, and that’s where I said hey I want to do 2 things in parallel I want to go to school to learn how to be a better manager. Want to find someone who knows this thing I don’t know about and instead of learning by failing I just want somebody who’s done it to explain it to me and successfully did that and then said well I’ve always done 2 things at once studied and worked or worked 2 things in parallel and so.
Wayne Slavin: Didn’t want to be working on my own gig wanted to learn from others and so joined you know, initially a big company trying to go online and struggling with it and then later on a scaling saas startup. 1 of the biggest successes in New York tech history and I think actually all 3 of those things have helped me to level up watching great managers watching terrible managers watching politics watching aligning incentives and and and just learning as well. Academically I think it’s all it all plays together in.
Alejandro Cremades: So so what do you? What do you thinking? I mean are obviously incredible companies now that you were alluding to I mean one that got sold you know which was burn So no digital. Um, you know it was part of that then body media which got acquired by Salesforce that was actually an incredible exit.
Wayne Slavin: In ah in a Symphony and.
Alejandro Cremades: And then also tap Lino that was acquired by grubhop. So I mean obviously this is incredible experience that experiences that you were achieving and putting under your belt I Guess what do you think needed to happen for you to be okay with the idea of going at it. You know again.
Wayne Slavin: So yeah I I want to say that the the we’ll get to you know this? the start of sure and how we you know came up with the idea for it here in a minute but I’d say the thing that gave me the confidence honestly was.
Alejandro Cremades: Ah, show founder first.
Wayne Slavin: Came up with the idea and laughed about it I thought it was hilarious like this was actually a joke of wouldn’t it be funny if Xyz was possible and just couldn’t get it out of my head and you know when. Started sure this was like peak vcs subsidizing uber ubers across San Francisco were like $2 and twenty five cents I mean it was like any idea you could throw at the wall. You could probably be able to go build it right? And. At least raise some seed capital and really waited for that thing that just got under my skin and just couldn’t put it down and waited for I guess the confirmation on a long weekend that hey I’m going to go build this thing and see if it works and if it doesn’t work. Okay. But at this point I can’t ignore it anymore that was that was the moment that.
Alejandro Cremades: So when you realize I can’t ignore this any longer what happened next.
Wayne Slavin: And um, well I’ll back up a sec if I if I could so I’ll give some context had gone through consumer electronics business gone through an enterprise software business then into a payments business and you know. Payments I thought was a perfectly challenging. Great company. You know moment in time of how are we going to do ah food ordering mobile payments on closed ecosystems and we had done an amazing job. Changed college campuses changed the you know the the world of ordering food and actually to Pingo where I was a Vp of product before starting sure we ended up being Techcrunch’s most innovative company of 2013 and nobody had ever heard of us. But this was ahead of snapchat. Amazon Tesla all these companies and it was like this little company in San Francisco is actually doing amazing stuff and I think that that was always an important thing of fighting above your weight class just because you didn’t raise the most capital just because you didn’t. Have a name. Everyone knew just because you were under the hood rather than the brand didn’t mean you couldn’t do awesome things and so I thought coming out of that experience that nothing can be harder than what we were doing like it was just so.
Wayne Slavin: Difficult from hardware to software to the adoption curve of mobile to you know ipads having lte versus just wi-fi like we were dealing with so many interesting problems and ah and then on the enterprise side dealing with huge institutions. Not just you know, payment and money movement but selling into quite literally governments and universities and like how challenging that is and people who want to control their own areas and I thought nothing can be harder than this this like anything will be less complex than this and boy was I wrong. Um, but basically I was on flight to to Las Vegas and I think you come up with ideas in a couple of good places one in bathrooms and if you’re in the bathroom. Maybe you’re taking a shower. Maybe you’re doing something else I think you come up with some good ideas there. And I and I think you come up with good ideas. You got nothing else to do you know these days you have a lot of distractions but on a flight and I was on a flight to Vegas and I saw the people sitting next to me gripping the handrests because we were in a little bit of turbulence and they were so you know so super scared. It is scary. But. Then took a step back and said this is one of the safest places you can be It’s much safer than riding a bike or taking a car trip. This is super safe and I said we do hundreds of millions of mobile transactions a year like this is what we’re really good at.
Wayne Slavin: And at that moment I said I wonder if I could sell these people life insurance before we took off. They are so scared right now I wonder if we could contextually target them and say hey you’re about to get on a flight from Baltimore to Miami amazing. Why don’t you buy life insurance right now and that was like the the. Kernel of inspiration and actually stood up on the plane and asked 3 rows ahead of me and 3 rows behind me hey if before we took off, you could buy life insurance for ninety nine cents would you buy it and everybody obviously they were scared at that moment. Their heart rate was you know one 50 said hey how could I not buy it and again. Like I said a minute ago I thought it was hilarious I’m like wow that was just so funny what ah what a funny observation okay back to selling smoothies on college campuses through a mobile app and took about a year of just joking about it and laughing about it to to really? ah, build a prototype and um. That Prototype was really approached blank slate I knew nothing about insurance knew about ecommerce knew about about you know, contextual commerce and said hey I wonder if people are going to buy $50000 of insurance 5000000 of insurance. Are they going to spend ninety nine cents are they going to spend twenty bucks I had no idea but built the entire flow if you will to go through purchasing quote unquote life insurance and it was purely a test trafficked it with ads.
Wayne Slavin: And had a few hypotheses that I wanted to prove I wanted to see if people would buy it a week in advance or 5 hours in advance or if they were going to buy it for just the one trip or their round trip a few different things so needed to figure out price and product mix needed to figure out some data about when they’re going to buy it. Um, because there’s you know insurances sold to people or maybe there was going to be a change where people would buy it if they could buy it right now. Ah and and ended up testing that mix and having a conversion rate at its best converting offerings. Ah, 15.9 one and I said wow and Jeff Bezos would be jealous of click to buy of 16% I have to build this business like at that point that was the moment where I was like okay now I have to build it like it worked I thought it was a joke. thought it was funny I thought I could spend a weekend testing it out and then some confirmation now. You got to go build it but still knew nothing about insurance I mean all of it was just hypothetical from the name to the landing pages to what information was needed. And and then said okay, ah I can’t be the first person to have wanted to start something in insurance and go do some research find an article about a guy who tried to start a life insurance company and the article was titled something very inspirational. The startup from hell quite literally.
Wayne Slavin: And it was a story about a guy who went and tried to start a life insurance company after um, after a moment in in his life and it didn’t go so well and I said whoa. Okay, he obviously learned some things another theme in my life I like to learn from other people rather than fail at it. And so reached out to to him and said hey man I read the article I’m a serial entrepreneur. Um I want to know if I’m an idiot and if I’m wasting my time in insurance and he responded back and said too early to know if you’re an idiot but you’re not wasting your time and insurance. Let’s. Get on a call and that was kind of my first introduction to anybody that knew anything about insurance. He ended up ah running a large life insurance company years later and I went on to start sure and it was based off of that idea that like eventually insurance was going to come online. And didn’t know how we would get it there but you know that’s kind of part 2 of the story first.
Alejandro Cremades: So for the people that are listening to get it. What ended up being the business model of sure. How do you guys make money. Yeah.
Wayne Slavin: So change over time is more of an evolution than a hard pivot I think people fantasize about this idea of pivoting I mean it’s amazing. That slack was a pivot So. There’s some other amazing pivot stories. We don’t have a pivot story per se. Ah, we originally started out with a mobile app to sell lots of different types of insurance through one interface. So hey I can open this up. Not unlike I’m going to go to doordash and I see every restaurant. Okay. I’m going to open up this app and I’m going to see every type of insurance I’m going to be able to buy it right now. I don’t need to reenter my information I don’t need to do anything.. It’s just automatic and um and it turned out that management all all those those degrees didn’t teach you anything about Marketing. So. Customer acquisitions. Not the the sweet spot Ltv- to Cac ratios that are Crazy. Don’t make me sleep well at night and so eventually we went through this process I went through the process going and seeing the c-suite of. Many major insurance companies in the Us and we had a pretty simple conversation. The conversation was hey we want to sell your product through our mobile app but didn’t matter if it was home insurance or pet insurance or travel Insurance. We want to sell your product cool.
Wayne Slavin: Here’s the demo. The demo took 30 seconds that was kind of the point is that it took 30 seconds to buy it and then we would spend the remaining part of that meeting that I had to travel across the country to go do for you know 1 hour spending multiple days on the road to go do spend the rest of the time showing them what we had built that. Ran the business. Really the backend and um and the first part of the demo would go great. They’d be like. Okay yeah, you could sell our insurance product through through your app. No problem. We love that. But show us how you do that thing show us that. That system that you were running your operation off of and that’s when they would start calling people into the room like literally being like hold on. Let me go get so and so he needs to see this or she needs to see this and I mean I’m pretty slow on the pickup. And it took about 6 of those meetings going exactly the same way for me to realize actually that’s the thing like like we’re really good at building enterprise software the distribution piece and the customer acquisition piece. It’s just not the sweet spot for us and so really. Evolved the business to be much more enterprise- focused infrastructure focused and that worked out well with kind of the how the ins ensure tech market unfolded going from insurance companies that were trying to bring technology.
Wayne Slavin: To where we are today and I would call the first part of that insure tech 1.0 to where we are today which is thriving burgeoning. It’s called insure tech 2.0 really focused on software infrastructure and rails and that’s and that’s really been the. Unfolding of the business and what we do and so in summary, we really provide the saas infrastructure and solution today ature to run an end-to-end insurance program. We. Do it go ahead. Click.
Alejandro Cremades: So I was just going to say that they obviously you know like this this is capital intensive. You know, ah you know some as I’m listening the um, the infrastructure that you guys have built and what you have accomplished is is really remarkable I Guess. For the capital side of it. How much capital have you guys raised to date and what has been the experience of going through the cycles there.
Wayne Slavin: So yeah, we’ve raised to date where I call us a pre ipo company because Ipo Market hasn’t really opened up yet. But we’ve raised through our series c which we raised in 2021 and we’ve raised about one hundred and twenty three million dollars in venture capital from traditional vcs and corporate venture as well. So corporate corporates that are in our space that understand our space and kind of did it in the normal way right? go. Meeting lot of meetings with vcs lots of pitches and and and finding our way but always knew that I wanted to rather than make fundraising the thing that we’re the best in the world at. Always knew that that’s just the means to an end and just because you raise the money doesn’t mean you have to spend the money and wanted to control our own destiny and so even though we had raised our series b and were profitable as a startup before it was cool to be profitable people used to say why would you want to do that. And here we are four years later and people are like The only thing they care about is are you profitable. Go speak to any Vc who who you meet on ah on a daily basis and they’re like that’s all we care about but four years ago they laughed they were like what why would you want to be profitable.
Wayne Slavin: And so we built that muscle tying back all the way to you know immigrant Bootstrapped origins. We knew how to do it and when we raised our series c we raised $100000000 from some awesome investors and we did that we had every dollar of our series b still in the bank. And that I’d say capital efficiency that attention to when is the time to scale when is the time to grow really allowed us to navigate this turbulent past four years of covid furloughs. Layoffs profitability ventures drying up deals and valuations and structure and term and I think that that’s just a contrarian way of building a company and you can do it even with traditional sources of capital. Ah, and so that’s really been. That’s really been. Experience to date and we’re in a fortunate place where we don’t need to raise money and can just continue to build and.
Alejandro Cremades: You get to control your own destiny which is beautiful now obviously with with investment you know comes um also betting on a vision. So as we’re thinking about that Wayne you are to go to sleep tonight and. You wake up in a world where the vision of sure is fully realized what does that world look like.
Wayne Slavin: Yeah, the vision of sure starts off with something that people think is just a crazy statement and and that crazy statement is really that today if you trust Mckinsey data but also our real world experience running. Billion Dollar insurance programs is that 1% give or take of insurance. Transactions are truly online meaning there’s no human involved. This is not my pivot to Ai. Believe me, it’s more to say that. Even today in 2024 the internet’s been mass adoption curve since 90 95 like this been happening for a long time There’s a human involved in 99% of the transactions. And that could be an agent that could be somebody who shows up at your house to look at your roof or your pool or your fence that could be somebody who is just entering information from 1 system to another because they never automated it or down to a claim somebody getting involved there and so if we’re at like 1 % truly online we’re actually pretty parallel to the moment in time when credit cards started emerging in the early sixty s where prior to that. Everything was cash and check like there was no other way to make a payment but there were a few people a few companies that made.
Wayne Slavin: A bet that Mastercard and visa come to mind that cashless transactions were going to be the thing that dominated commerce and it took a really long time right? I’m sure you can remember being in New York city not that long ago where you couldn’t pay for your taxicab with a credit card like. Went industry by industry business by business accepting credit cards and here we are today you go out for lunch on your break and there are places you can’t even use cash anymore. It literally says on the door. We are cashless and so people. Get wrong what will change in 1 year um they overestimate what’s going to happen. It’s a venture problem right? They think in 1 year this whole thing’s going to be solved and they underestimate what’s going to change in 10 years and if you have a 10 year mindset the vision of what we’re doing at sure is yes, we’ve built a ton of technology infrastructure. That required capital and investment and you know ah pragmatism to do but what we’re building is really the visa of insurance and the rails to bring insurance transactions online between 2 constituents and I’ll give it to you this way. In the world of visa and Mastercard. They’re the network I’m going to simplify this I know there’s a lot of fintech nerds and they’re going to yell at me in the comments and that’s fine. But in this simplified network you’ve got issuing banks and underwriting and lending and you’ve got merchants who are the distribution.
Wayne Slavin: In what we’re building in in our rails insurance companies are underwriting and in essence issuing policies and what we’re doing is enabling a new set of distribution global fortune 10 fortune 500 consumer brands that don’t sell insurance today to sell insurance. So we’ve helped the world’s largest ev manufacturer launch their auto insurance business. We run the auto insurance digital and auto insurance business for the largest car manufacturer Toyota do the same thing for small business insurance with companies like Quickbooks and. Mastercard and folks like revolu and money lion. These are companies who have millions if not billions of consumers that they have nailed their first act they get their product people. Love their product. They use their product all the time and they’re looking for. How can we expand our Ltv. How can we drive more revenue from our customer base and they naturally arrive at what about insurance and and it’s just really hard because that insurance companies never built the technology these consumer or b two b companies aren’t going to learn insurance and that’s the same way. Every merchant is not going to integrate to every bank and every bank is not going to build their own merchant network they’re going to use an independent so you talk about the vision. The vision we have is not to build an enterprise software company the vision we have is that.
Wayne Slavin: If we’re at 1% adoption of insurance is truly online today by 2030. We want to be 9 % of insurance transactions and behind payments insurance is the biggest dollar value in the biggest tam in fintech. So there’s about 6000000000000 some people think it’s double that 6000000000000 of insurance dollars to play with. We want to bring the next nine ten percent online in the next five years and right now we’re doing it. We’re already running. Billion Dollar insurance programs through our rails. For example.
Alejandro Cremades: I love it so Wayne for the people that are inspired that will love to reach out and say hi. What is the best way for them to do so.
Wayne Slavin: Um, certainly hit me up on X can shoot me an email. It’s my name at our domain name dot Com happy to respond and be helpful where I can and give advice if it’s worth anything. Feel free to not listen to it. Yeah.
Alejandro Cremades: Amazing. Well hey Wayne thank you so much for being on the deal maker show to it has been an absolute honor to have you with us.
Wayne Slavin: Yeah, thanks so much for having me on.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Wayne Slavin On Raising $123 Million To Build The Rails That Connect Consumers To Digital Insurance appeared first on Alejandro Cremades.
Steven Zhao has had an inspiring entrepreneurial journey that started from humble beginnings to groundbreaking innovations in the world of virtual reality. He is the dynamic founder behind Sandbox VR. His story is a testament to resilience, innovation, and the relentless pursuit of a dream.
Sandbox VR has attracted funding from top-tier investors like Andreessen Horowitz, Gobi, Katy Perry, and Alibaba Hong Kong.
In this episode, you will learn:
- Steve Zhao discovered his passion for game development during his college years, laying the foundation for his career.
- Zhao learned to pivot and adapt, recognizing the importance of building for the future and not just the present.
- Despite setbacks in mobile gaming, he leveraged lessons learned to pivot to VR technology successfully.
- Sandbox VR’s unique business model offers immersive, interactive experiences that can’t be replicated at home.
- Surviving the pandemic through strategic restructuring and investor support, Zhao showcased remarkable resilience.
- Sandbox VR has grown to 47 locations, generating significant revenue and serving over 100,000 customers monthly.
- Zhao emphasizes the importance of continual learning and adapting, advising entrepreneurs to read extensively and learn from others.
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Your email address is 100% safe from spam!**About Steven Zhao:**Steven Zhao is the founder and CEO of Sandbox VR, a leading developer of virtual reality games and apps. Steven has over 10 years of experience in the gaming industry, having founded Blue Tea Games HK Ltd in 2006 and served as its CEO until 2016.
Blue Tea Games is best known for developing the popular Dark Parables series of hidden object games.
Before his career in gaming, Steven interned as a QA engineer at Intuit from June to September 2005. He has a bachelor’s degree in computer science from the University of California, Berkeley.
Steven Zhao received their Bachelor’s Degree in Electrical and Electronics Engineering from UC San Diego.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today. We have a really exciting founder. We’re going to be talking about all the good stuff that we like to hear building scaling financing and all the above. We’re going to be talking about putting all your savings into your business. You know taking your company out of. Almost bankruptcy into really scaling it and going in rocket ship mode and then also you know how they dealt with for example, getting funding from from some of the best vcs or even surviving covid so without farther ado let’s welcome our guest today. Even so welcome to the show. So Steven so give us a walk through memory lane. How was life growing up because I know that even though you were born in China you came to the us to San Francisco quite early in your in your life.
Steven Zhao: Thank you for having me.
Steven Zhao: Yeah, immigrant parents I came when I was one years old I grew up in San Francisco and pretty much have um, a pretty standard upbringing went to college and ucsd studying electroengineering but during that time I found my passion in game development started making game selling them online. And I built my first company out of my own dormitory and after I graduated I went to Hong Kong first created a pc mobile game company and went from there.
Alejandro Cremades: So how did you get into the whole gaming thing because I know that that was say during the college years. But how did you get into it. Okay.
Steven Zhao: I love playing games I grew up on Mario Zoda um and final fantasy so I wanted to see well I want to create my own games and I want to be able to kind of Yeah yeah, I love the whole creative process of it and it just became ah you know a passion hobby of mind. That eventually became something I could actually make money from and it was timed very well because internet gaming was ticking off so you know independent studios were just popping up left and right including myself.
Alejandro Cremades: So then tell us about how the first company came together. Okay.
Steven Zhao: So one day. Um, we were donating games I was working with a publisher and I realized I need to start you know growing my team we were making a little bit of money and I decided you know what? Why don’t I try doing this another country so in 2009 I packed my bags and went to Hong Kong and at that time I hired um, you know 2 artists to help me out and within the course of 4 Years it grew to a team of 45 people donating pc mobile games.
Alejandro Cremades: So then so then tell us about like how were you guys making money there. What was the monetization model talk to us about that. Okay.
Steven Zhao: Yeah, so um, the way it works is people go to a website and they’ll try a game for an hour and if they like it they will pay probably between $6 to $20 to play the full version of the game and each of our titles are usually around you know 6 to 10 hours long so we we have a team that will create you know 2 titles every year and just create that cadence and we would build like rooty deep stories and sequels and and just stuff like that.
Alejandro Cremades: So whatever. Ah happened you know with a company because as they say you either succeed or you learn and in this case, it was big lessons. You know to be learned and you ended up winding down the operation. So why? what happened.
Steven Zhao: So we did very well for pc games and I felt like I got a bit too comfortable when mobile came along I ignored it I thought that you know there weren’t going to be enough people to play games on the phone until when I realized it was too late. That you know when we decided going to mobile. We were faced with fierce competition. We didn’t have the necessarily skill set or the knowledge and how to attack on a mobile industry. So for the you know following 3 years of you know, trying to make it work in the mobile industry. We weren’t able to secede. I went from a team of 45 just down to a team of 5 by the end of 2016 and the learning lesson I had was you should never build games on what’s popular today because by the time you’re done nine months later it’s gonna be old news. Your job is to figure out what people want in the next year or so.
Alejandro Cremades: So at what point did it become apparent that it was time to pull the plug because I mean you were 10 years you were 10 years in so I mean is is is not easy.
Steven Zhao: Um, it was around. Ah.
Steven Zhao: It was around 2015 Um, that was our biggest game that we’ve ever done and we’ve even gotten support from Apple They featured our title. But even with that in mind we were not able to turn a profit from that title and I felt like we’ve done everything we could with a resource that we had. And we were fighting against company with more and more resources So we’re like okay that’s it I’m going to need to wind this company down.
Alejandro Cremades: What was that the roller coaster of emotions like for you because I mean it’s not like a couple of months project you know over almost a decade there you know, pushing this forward I mean what? what was that like for you of just being at peace with it.
Steven Zhao: I think it was it was definitely a slow burn because it was a pretty drawn out 4 year process to make mobile work I mean personally for me because I’ve been doing games since college it was you know I think a realization is maybe for the first time I’m not. Good at what I’m doing and that was very tough because I built my identity around building reallyy great games and for a time period. We’re doing really well because of that. So so it brought a lot of introspection and you know a lot of uncertainty and a lot of lack of confidence kind of like ending. 2020 twenty 2015.
Alejandro Cremades: So at what point you know we see you you ended up putting the the plug on this but at what point you know that’s the idea of Sandvox Vr you know, come knocking. So.
Steven Zhao: It was you know funny thing it was also in 2015 um I think that was you know one of many lucky breaks I had because at that time the vr industry was blowing up in 2014 Facebook bot oculus.
Steven Zhao: 15 and 2016 the first commercial headsets available. The playstation headset the oculus headset an htc five. So there was a lot of buzz around that time and for me because I knew how to build games. You know, um I figured is this another opportunity to try something new. Vr was this brand new medium that no one knew about and for me, it felt like a redemption because my mistake of being late in mobile could be redeemed by being very very early in vr so what I’ve done was um I told my team that was remaining saying hey I’m going to start a new company. I think it’s worth fighting for um, you know to try to build a new future in vr and then luckily I also have a group of friends who believed in that vision and they told me if you start a new company. What invest in you. And asked actually how the company was formed. It was formed by a group of friends who all pitched in a little bit of money to get this company off the ground.
Alejandro Cremades: So then for the people that are listening to get it. What ended up being the business model of Sandbox Vr How do you guys make money.
Steven Zhao: Yeah, so Sandbox Vr is we open physical retail locations where you can book tickets online to play any of our experiences so we have original titles that we built like zombie experiences but we also work with branded titles. So we’ve lately partnered with Netflix to bring scrid game and also the za scenario justs rebel moon inside sandbox we have 47 locations today with over 100000 customers coming in every month so the short of it is insideandbox. You are basically inside this immersive world where you can embody the character and play a narrative journey with you and your friends you can physically interact with each other and you can have this very high intense moment.
Alejandro Cremades: So then at what point do you realize hey I think we are into something here at what point did it feel like you guys were turning a corner because I know that you are literally putting all your savings into this thing until you guys were able to hit product Market fit. Okay.
Steven Zhao: Well, certainly not in the beginning. Um, when we really started building our sandbox. It was in 2 16 you know with fresh funding from my friends. Um, we actually pivoted in the beginning we were. We started with just building games for the quest and for the htc 5 just like a lot of vr studio. But my learning lesson from the mobile days was never built for the current always built for the future. So when we thought deeply about it. We felt the future was like the matrix right? So you can physically interact with one another. Um, in this large space and play these highly immersive experiences and that’s just not something that can be done in your and living room. There’s a constraint of space. But there’s also limited by just a headset alone will not give you that outcome and even if you reduce you know the cost of the head settinging improve the technology. Over the next ten years you still won’t get there so that was the moment we realized that we have to build something outside of home and that really sucks for us because I know nothing about retail. You know, seven years ago and I don’t know how hard it was I didn’t know how to even start it. But I knew that this was the future. So um, we’ve actually separated to a separate project where we built the infrastructure um to enable this matrix experience which is how can you physically play an experience where you can touch a friend’s shoulder.
Steven Zhao: Vr and actually physically touched them in real life That’s how you create a deep immersion. So what happened was in the n of 2016 when we launched our first vr consumer game it it did it was like a top 10 percent game but the market wasn’t big enough so we end up ah losing money on that project. And we felt oh man this is going to be very difficult to make it work and that was true for many vr developers. So in 2017 we put our our our aches into this like location based project. Um, but in 17 it was also known as the winter of Br because after Christmas people realized that. Not many headsets were sold and those that were sold um were not very retentive people use it and they put it on the shelves and they leave it alone so ah, Vc did not want to invest in vr in 17 and that was when we needed the money the money that I raised for my friend. It wasn’t that much. Um, so we went out in pitch and we we’ve gotten a few things that really was very difficult for us number one was you know you’re you’re basically doing retail you’re doing vr and you’re doing content 3 things. That Vc. Don’t want to invest in and you’re doing all of them together. So that was very hard and you know because my team was formed in Hong Kong the geography was also really difficult because they didn’t know we we have the talent necessary to do that and number 3 you know we were not the only copy doing.
Steven Zhao: You know outside of home vr the biggest company raised $50000000 with a team of probably 50 to hundred people. We were just a team of 6 people. How are you going to beat them right? So so we had so many stuff against us at that time and we only had about three months of runway left you know starting in 2017 so I told myself okay, the only way to make this work is if I basically take my took my life savings and reinvest it back into the company and before I done that you know I talked to my friends I talked to my parents I was like hey should I do this. And you know all them said no you know, save the money do something out continue life. You know, get married. Don’t dump everything into that company because it’s very hard. You’ve done your best already. But a part of me felt that you know this was gonna be the future. You know we. Genuinely felt at least I genuinely felt that people wanted this because it’ hot immersive is’s very social and I think people will get really meaningful connection out of this so I didn’t listen to any of them I just put on of money that I had into the company and I told my team hey. Only have six months left this is all the money I have should we all fight for it if you disagree I’ll just disband the company. But if we all fight for it. Let’s do it. So luckily my team all agreed to fight for it and then we decided to take basically the concept that we had at that time and bring it to market.
Alejandro Cremades: How many people how many people were on the team at that point.
Steven Zhao: Because the um it was 6 people. It was 6 people we have to build the technology infrastructure that enables full body play with a group of people and because it was a brand new platform. We also have to create our own content on top of that. And because this only happens to us out of home. We also have to build a retail center.
Alejandro Cremades: And how was the journey to of raising money because you guys have been able to raise money from top vcs. So I guess first question is how much capital have you guys raised in total and then what was the journey of raising the money.
Steven Zhao: Yeah, in total including venture debt. We raise almost a $100000000 today. Um, but you know at that time in 17 how do we get to that journey was kind of fast forward six months we launched our first location in Hong Kong and then ah right off the bat. You know we launched it. We got picked up by a media and it went viral and we sold out a hundred days worth of tickets from morning to night and you know nothing sells like traction and that’s when we got our first institutional Vc that was Goby Vc auddibaba Hong Kong fund they came in and said you know what? this is the best vr we ever tried. So we’re gonna give you the first check. So that was the first validation we had and that was that was only about like 3 to 5000000 I mean looking back. It wasn’t that much but to us at that time it was like um it was a saving Grace. So we took that money and then we were able to build multiple locations. We had a project we work with Imax we disfranchising and then you know one of the ah bottlenecks. We’ve got 10 at that time was like hey your project is great but I don’t think it works outside of Asia. And that kind of pissed me off because I grew up in the us I know this we work in the Us. So I decide. You know what we’re gonna put it in the middle of Silicon Valley so we put it in San Mateo in the hillsdale ma that was in June of 2018 and then that’s when we pitched to Silicon Valley Bcs
Steven Zhao: And and it was a tough time too because 3000000 to do retail business to build your own content. It’s not a lot and we we pitched to 50 people before we went to Silicon Valley and Allum said no and I can understand why it’s ah it’s a very you know unusual business of three things that. Investor Don want to invest in but when we launched in Silicon Valley same thing happened you know people heard about it people want to be part of it. They were booking. We were like sold out for weekends. Um, and then Bc started to come and then one day Andreessen Horowitz I remember during a week and mark andreesen came to a location on a Sunday on you know on flipops and he just tried out experience with Andrew Chen and Apple came out. He’s like whoa this is pretty cool and then the partnership came and played and basically they did our term sheet for series. A. And it created a lot of validation for us.
Alejandro Cremades: No kidding I mean when it comes to signaling and and and validation when you have like a Vc like that betting on you. How did that change things you know and and how did you see a shift on the way that you were perceived by the pc community.
Steven Zhao: I think it went from before en increase and funding at least in the eyes of like general vcs or American vcs it was like oh yeah, you know Sampas probably couldn’t work because they’re a team in you know Asian Asia doing something that’s very shall out be with retail with content with vr to oh Sandbus could work because they have a team in asia they able to be very conscious of how they allocate a resource and you know individually you know vr gaming and ah retail wouldn’t work. But once you combine them. It’s like 1 plus 1 plus one equals to 10 so it changes the whole narrative and it created a lot of validation for us across many fasted in terms of you know getting ips soon after we got in an ip for star trek. Um. For real estate. We started to work with Brook field and Westfield to bring sandbu to other locations across the us. So and then we also got the additional funding from celebrities including Katy Perry will Smith and Kevin Durant so it just created a lot opened a lot of doors for us and allows us to scale pretty aggressively. And that’s basically what we’ve done. We went from one location in the us back in 2018 to about 7 at the end of 2019 and we thought okay, you know we have all these locations open now and then we’re ready to do our series. B.
Steven Zhao: And then Twenty twenty happen so so that was basically the next um, hurdle of our a burner attorney.
Alejandro Cremades: And yeah, no go no kidding because I know that they when Covid hit almost. You guys went to like nothing So what happened there and how were you guys able to bounce back.
Steven Zhao: So essentially we were pitching our series b meaning that we needed more capital to scale growth and then you know soon we’ve learned that everything was in lockdown. We were told to shut down all our operations. All the locations that we had we lost more than 100% of revenue like how do you go over 100 % because we actually had to refund customer and we cannot even open us door at all. So it was um.
Steven Zhao: Oh it. It was really tough at that time. But I think fortunately we were lucky to have good investors in Andreesen and in alibaba and goby and kraft to to really get us over the hurdle. They gave us an emergency funding and they said okay, why don’t you guys fight through this and and try to get out of it. Because fundamentally their belief was which we also believe was we had a great product. It’s just where the world was right now. So as long as you can weather out the pandemic. You know people are going to be pent up. They want to go out. They want to meet other people. They want to spend time with their friends and family. And they’ll go to a sandbox. So we fought? Um, but the first thing I had to do which was really tough was we had to let go 80% of our team. So and not only that. Um, after we let go of.
Alejandro Cremades: M.
Steven Zhao: You know of the team. The people that stay we had to continue to motivate them to stay with the company and that was really tough and we didn’t know how long.
Alejandro Cremades: How do you do that? How how do you do that because I mean obviously people are seeing that they things are crumbling and people are leaving and you’re letting go people. You know they’re probably thinking hey we’re gonna be next. So how do you How did you go about? um. Doing it I think with with a level of transparency and and authenticity so that the people that would stay you know would really stay and would be fully committed versus thinking hey I’m going to be next I rather just have one foot out and and and start looking around. How did you guys go about balancing that.
Steven Zhao: And and that did happen. Um for the folks as state. There were about another um, good amount that actually left in the next you know 3 to five months so the first thing I did is all we started with communication like being very transparent about everything that’s happening. And just being no bullshit about it that like look we’re in a really bad spot right? This is the reality I’m not gonna sugar code anything because I think you deserve the truth and then the next thing I’m gonna say hey is hey we also have investor that believe in us right. Because this is a future that we want to build and um and I give them a very clear plan. It’s like okay this is what we’re gonna do in the next twelve months to get past this and it’s just a very clear outline of what our outcome is and how do we execute to it which essentially was. We had to cut cost to the bone but this was an opportunity for us to really optimize our business every single facet of our store level pnl has been rigorously like inspected and optimized right? because when we can reopen and you have such an optimized pnl. Then um, we’re going to be able to grow very quickly out of it. So so.
Alejandro Cremades: Short What point does the up What point do you see the clouds disappearing.
Steven Zhao: It was around when things really got better. It was around the beginning of 2021 so it was pretty much a twelve month process of just getting past that and of course during that time we also have to go through chapter 11 bankruptcy. Because we had all these leases that we could not fulfill and there was no way for us to pay it so going through bankruptcy allowed us to restructure all our debt but that was the only way to survive and then we’ve been able to get out of that within nine months but during 2021 when vaccination you know started to kick in and then people felt much more comfortable reopening the world. Um, what we’ve seen is which was true. You know twelve months before that people were pent up. They want to go out. They want to have a reason to go out and they want have a safe place to go out. And Sandbus was all of that and I remember because all the moths were empty at that time but a hundred percent of our customers book ahead online and then when they got into the mob because it was so empty we actually had to meet them at the parking lot to guide them to a store but man. The moment they’re in and they were playing I experience it coming out sweating laughing having fun. They would tell us that they needed it. They needed this so and because you know we spent twelve months optimizing our pnl. These stores were phenomenally profitable.
Steven Zhao: Numbers higherred than some of the best retail business that ever that could have gotten and because of these 2 in combination. We went to landwind and say hey you know we’ve proven that we can get 80 to hundred percent of customers to book ahead and go to your location and then because our economics are so strong we can work out a deal with these landlord. So they end up funding the buildoff for our subsequent stores and maybe.
Alejandro Cremades: So So so I mean here here you are you know, like bouncing back you know and and and now one thing that is like absolutely unbelievable is that you guys are now scaling like crazy I think that for the talking about you know turning a corner here. For the people that are listening to to get an idea on the scope and size right now of the operation I mean anything that you can share that you feel comfortable with.
Steven Zhao: Yeah, um, you know we have over 100000 customer every month now. Um I mean as a company we’re expected to hit you know over $70000000 this year. Um.
Alejandro Cremades: Wow.
Steven Zhao: You know back in 2020 where we just because it was shutdown. We were just a couple million dollars in revenue so we went a long a really long way going from where we were and we were you know how to go to Cho eleven we could have died during that process.
Alejandro Cremades: no kidding. So kidding so so now obviously it sounds like a blue skies ahead and Steven which is incredible I guess as you are thinking ah ahead and and thinking into the future if I was to ask you? You know if you were to go to sleep tonight and. You wake up in a world where the vision of Sandbox Vr is fully realized what does that world look like.
Steven Zhao: There would be a San bus in every neighborhood will have new content releases every single week and you know we’ll work with some of the biggest Ip holders to bring their world into sandbox as far as creators. And um, there will be a reason for people to go out more to and build these you know human-to human connection I mean that’s our vision and if we can fulfill that you know for us. It’s like becoming the new movies.
Alejandro Cremades: That’s beautiful. So always he you know that’s talking about the future I want to talk about the past but talking about the past with a lens of reflection if I was to put you into a time machine and let’s say I bring you back in time you know I bring you back in time to that moment where. You are still. You know you see San Diego you know getting your degree. They’re in electrical and electronics engineering you know let’s say it’s about 2005 where you’re about to get your degree and to venture into the world of being an entrepreneur and let’s say right there on the ceremony. Of getting your graduation. You know you’re able to sit down next to your younger self and you’re able to you know tap that younger Stephen and give that younger Steven 1 piece of advice for launching a business. What would that be and why given what you know now.
Steven Zhao: I would say a lot of knowledge can be taken from what other people write about so one and piece of advice I would give is read a lot read the success and failures from others so you can incorporate them into your own. Rucktwarf.
Alejandro Cremades: That’s beautiful now as they say you know like history too repeats. So it’s nothing like getting influenced now by and and inspired by you know other stuff that you have around you. So 1 thing is Steven here that I like to do is I’d like to thank you to thank you for. For the incredible you know time that you’ve graciously graciously you know, given us and truly it has been an honor to have you with us. So thank you so much for taking the time to be on the dealmaker show today Steven.
Steven Zhao: Well thank you for having me all Ajandro and thank you for your time.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Steven Zhao On Raising $100 Million To Build An Immersive Virtual Reality World For In-Person Interactions appeared first on Alejandro Cremades.
When it comes to building a billion-dollar company, doing it once might be considered luck, but doing it twice is a testament to skill and perseverance. Sami Inkinen, the entrepreneur behind two successful ventures, shares his journey from humble beginnings on a Finnish farm to founding companies like Trulia and Virta Health.
Sami has raised funding for Virta Health from top-tier investors like Tiger Global, Sequoia Capital Global Equities, and Caffeinated Capital.
In this episode, you will learn:
- Sami Inkinen began on a humble farm in Finland, showing that big dreams can stem from modest beginnings.
- His interest in computers and software was sparked by a simple Commodore 64, highlighting the importance of nurturing curiosity.
- Inkinen’s journey through the 2008 financial crisis with Trulia exemplifies resilience and perseverance in tough times.
- His first company, Match’em, served as a “million Euro MBA,” teaching him invaluable lessons the hard way.
- Experience at McKinsey sharpened his ability to break down complex problems, strategically approach solutions, and calibrate execution vs. planning.
- Inkinen’s mission with Virta Health is to reverse T2 diabetes in 100M people.
- Success doesn’t happen overnight; Inkinen emphasizes the importance of dedication and playing the long game in building impactful companies.
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Your email address is 100% safe from spam!**About Sami Inkinen:**Sami Inkinen is the Chief Executive Officer and Co-Founder of Virta Health, which provides the first clinically proven treatment to safely and sustainably reverse type 2 diabetes without medications or surgery.
A data-driven technology entrepreneur, Sami’s personal connection to diabetes and passion for advancing health on a global scale was the motivation behind Virta Health and its innovative approach to diabetes care.
Previously, Inkinen was the co-founder of the leading online real estate marketplace Trulia, serving as its COO and president and board member until its IPO and eventual sale to Zillow Group.
He also worked on Microsoft’s strategy team for MS Office and as a consultant for McKinsey & Company in the software, telecommunications, and government sectors.
To raise awareness about the dangers of sugar and its connection to diabetes, Sami started Fat Chance Row.
During the summer of 2014, Sami and his wife rowed from California to Hawaii—2,750 miles, completely unsupported. He is also a triathlon age group world champion and 8 hours 24-minute Ironman with seven Hawaii Ironman finishes.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show. So today. We have an amazing founder you know founder that not only has done it once he has done it twice when it comes to building a billion dollar company as they say once you’re lucky twice you’re good. So why I think that we’re gonna be learning quite a bit on the show Today. We’re going to be learning about you know how he went about. You know, just starting a company ah being an immigrant in the us actually that company ended up going public then also being an outsider and then becoming an insider as well as you know the process of building a unicorn as well as. Shifting from one segment to another just like he did real estate then he went into healthcare care so quite the changes so again building scaling financing exiting all of the good stuff that we like to hear so without further ado. Let’s welcome our guest today Samy Inkin in welcome to the show. Jeff.
Sami Inkinen: Well, all a hundred. Thank you so much for having me. Yeah, excited to be here.
Alejandro Cremades: So originally born and raised in Finland on a farm give us a walk through memory lane. How was life growing up.
Sami Inkinen: Um, it was pretty wonderful now looking back there. But yeah I grew up on a farm in Finland not far from ah the russian border my parents did not even go to high school so as you could call pretty humble beginnings. We had bunch of chickens and couple of picks and. Behalf the food we ate we grew on a farm. So I certainly learned the value and actually the joy of hard work and manual labor pretty early. It wasn’t really by choice always because I had to work hard. But yeah was it was it was a beautiful time to.
Alejandro Cremades: So you got into physics you know there in Finland and then eventually you know things say took a different shift and you got into software and and computers. So tell us what? what really sparked the interest for software and computers for you.
Sami Inkinen: And way to grow up as a kid.
Sami Inkinen: Yeah I guess going from potatoes and chickens to computers. It’s it’s a little bit of a quantum leap. But yeah, what happened to me is I got excited about computers through the pages of of magazines I’m talking like late. Actually mid 80 s and so I convinced my father to spend a couple of hundred bucks on a commodore 64 commodo 64 so I think that opened my eyes already in my before I even turned 10 years of age did the choice of computers and then just to fast forward a little bit. Um I read about modems us robotics and bbs is pre-internet bulletin board systems and so I actually ended up starting and building and running one of the first not the first but 1 of the first bbses in Finland from my you know bedroom for my parents’ house and using our phone line. Um, for people to dial in into so that’s kind of all those experiences opened my eyes to like wow there’s much more to life than you know, chickens and farm and potatoes and and I just got very excited about computers and that’s more or less. It’s been the the hammer or the tool in my back pocket ever since I was 10 years of old and. Of age and it’s really been the tool that I’ve used professionally ever since.
Alejandro Cremades: Well 1 thing that was very helpful. You know talking about learning you know was joining what was the equivalent to e trade there in Finland you know, basically a stockbroker and you had the opportunity here of not only seeing something being built from scratch but then also taken public. What do you think you know you gain access to in terms of visibility on on the full cycle of a business like that.
Sami Inkinen: Yeah, it’s it’s a cute question and and indeed I was in the middle of doing my masters in physics and as as a software developer and it support person I kind of financed my way through college and then these couple of folks were starting a company called Eq online which you could. Call it the e-trade of Finland and I was probably the number 1 or 2 or 3 anyways, one of the first 5 employees that they hired and literally this company went from 0 to ipo in Finland which is all the more remarkable because it’s it’s not like at the time it wasn’t really known for. Building high-tech companies from so from 0 to ipo in I think less than 18 months. Um, yeah, it’s I think a lot of things so one was just the um. I guess the emotional excitement of a team coming together and literally building something out of a scratch that within a year is used by. You know a large portion of the entire counter whether that was one hundred thousand a million users I don’t even remember how many. Ah, but to be able to create something from scratch is as part of a team that people use and and like to use I don’t know it was just a very special experience that alone was was amazing and then a second thing is I’m just a huge believer in the extreme power of example and inspiration.
Sami Inkinen: And to be able to see that these wonderful and smart human beings and professionals who at the end of the day were just no different from me were able to make all that happen was very inspiring. Um, and it wasn’t like I was thinking at the time like oh I want to replicate this so that process is but it clearly planted the seed in my mind at the time so that was 19 Yeah 1998 and 1999.
Alejandro Cremades: Now you actually went at it on your own you know, eventually you know you worked with the companies like Nokia but then eventually you started your own business. Ah, which was the first attempt you know, call match him and and as you say you know it day you guys you know, ended up getting that company Ac acquired but.
Sami Inkinen: Yeah.
Alejandro Cremades: It perhaps didn’t go as far as let’s say like a verta or let’s say like a trulia how was that experience. You know that first rodeo.
Sami Inkinen: Yeah I call it my million Euro Mba Million euro mba and the reason is we raised a million Euros of funding serious a and blew all the money and all we had to show was not much so so I call it my. My million year Mba but yeah it was an amazing 3 year journey a software company mine first like I would call real company that I co-founded in in Finland I lived a year in Singapore year almost two years in Hong Kong as part of that trying to build the business there. Ah. And we ended up selling it to a german acquir at at the end of that but I would say it literally was like an Mba you know I was an engineer by training into computers and physicists for my training and then suddenly I’m literally living in in Hong Kong and trying to make the business and business development work having never even traveled in a country before. So. Yeah, probably learned more through mistakes in 3 years that you would learn in in a regular job in in a in a decade and at that point I knew absolutely certainly that you know there’s no way I should be building a career in a large stable company in my life. Ah, the experience of coming together with the team building something the excitement of not knowing what’s around the corner which is so captivating that I was like oh if I if I can replicate this in bigger circles kind of like in the big leagueaks. It would be the most amazing thing I could do in my life at this at that point.
Alejandro Cremades: So eventually, you went to mckinsey you know which was this segue into your Mba real and Nba you know we sta for at least you know when it comes to degree and Nba ah and in in and one of the things that is very interesting that hits me here is 1 what did you get from working at a place like Mckinsey when it comes to breaking bigger problems into smaller problems now to really be able to um to to to have a strategic direction when it comes to bringing a solution to market but then also. Going from a farm you know where you were more like seeing potatoes to then all of a sudden you know, living in places like Singapore or even now the us I’m sure that your worldview and the lens in which you approach problem solving to shift it quite a bit.
Sami Inkinen: Yeah, and then first of all your listeners may be like wait a second you started a company you sold it whether it was a huge success or not and then you joined Mckinsey are you freaking crazy like that doesn’t make any sense and in some ways it probably doesn’t make any sense. But. The reason I I wanted to join and was lucky enough to be able to join Mckinsey was in addition to this and Nba path. It was actually my way of hopefully and potentially getting into America getting into America legally in Silicon Valley so that was kind of in my mind at the time like oh if I get into Mckinsey’s this global, amazing management consulting firm. I’m sure I can somehow would go through 1 office to another and end up in America legally so so that was kind of the motivating force. However I learn a ton and I’d say one of the main sort of problem solving and approaching a business that changed was. When I went from doing my physics degree to starting a company I went from all analysis and math to literature shooting from the hip all the time First time founder like everything’s. I felt like I always had thousand things to do. But I only had time for 5 no time to think it was just literally shooting from a hip like just running 100% of time. No deep thinking. No analysis. So I was in one end of a spectrum and then I got to mckinsey after that experience for 3 years and it hits the opposite. It’s like.
Sami Inkinen: 0 execution and 100% analysis like just analysis and the end product is basically bunch of slides to a bar client so it was actually a very useful calibration that I went both of the bookends that coming out of that my makey mckinsey experience. It was like okay well. Whatever you end up doing the truths usually somewhere there in the middle. So I think that helped me to calibrate like even if you’re building something from scratch. You have to be running kind of pan of miles an hour sixty miles an hou hour sixty miles an hou hour all the time you do have to find the time to analyze and think. So you aren’t running through the wrong directions I said that was one of the bigger things I I picked up the mckinsey the the ability to then have these different tools and mode so operating and building a company.
Alejandro Cremades: So talking about building a company. You know you ended up going to Stanford and that was kind of like the reset button because that allowed you to maybe a slap across the face and hey you know I got to go back to building companies now. So why? at this point is where you know. Ah, massive success story you know was born and that was truly a so and for the listeners. You know we also did an episode with your cofounder there with Peter Flint recommending and listening to that one too. But. But tell us your side of the story. You know how? how did the company come together. How did the band come together. You know while you were there at Stanford.
Sami Inkinen: Yeah, and and I got very lucky obviously that I I met Pete Pete Flint my my co-founder and it was an amazing journey together. But um, yeah, it. It might be surprising and interesting for your listeners to hear that you know I’m a physicist by training I came from europe I come from outside of us. And no experience in residential real estate industry in the Us. Well guess what? my co-founder Pete also physicist by training also comes from europe also our real estate experience and he’s my stand for classmate. So. It’s basically 2 completely unqualified immigrants. Ah, who who meet up and decide to start this company to take on one of the largest industries in the us which is the residential real estate in the us um, but how did it come together. Well obviously we were classmates and we both knew that and respected each other and knew that we are entrepreneurly minded. We want to start something so we had. Were kind of both at the right time at the right place so there was that element. Um, and I think we were less. It wasn’t like oh we both want to start a real estate company or on our real estate marketplace I think we both came into it through slightly different reasons and slightly different personal experiences. But at the end of the day we both realized that the way surge and these vertical specific companies like Expedia for airline tickets mats.com for finding a spouse and hotels dot com for finding a hotel and so forth.
Sami Inkinen: What had happened in these different verticals. What what you might call classified verticals online in that there was a consumer first internet marketplace or internet service would happen in residential real estate but it had not yet happened 2003 2004 so it’s very clear to us that somebody is going to own the minds share of consumers who want to buy a home or sell a home or rent a home and that could be us and so I think that’s where we both landed and then we have this inspiration and energy and both as immigrants. Basically just wanted to build something in Silicon Valley that’s the and I’m here in San Francisco and Silicon Valley right now. So that that that is the place to really try and spread your wings if if you’re an entrepreneur and and off we went.
Alejandro Cremades: So at what point do you realize we truly are that you are writing a rocket ship.
Sami Inkinen: Ah, that that is I love that question. Um I’ll answer this in in 2 different ways. 1 is that when you’re an inside a company. You’re building. There’s no such thing as you’ve made it or success. In fact, once you start thinking, it’s kind of like things will go sideways. So. Inside this to some extent. The answer is never you always feel like you’re in the middle of a cardhouse and you’re just trying to kind of like keep it together so you’re in your own fish bowl. So it never just feels like done and safe and um, stable and whatnot. So I think that’s one part of it. But then the other way to answer the question. Obviously there’s some objective measures. Um, um, obviously when company goes public pretty objectively, you have a substantial business and it’s worthy a public market investor. So certainly at that point. But um.
Sami Inkinen: I think maybe maybe end of 2009 and I say this because we had survived the drought of 2008 Lehman Brothers collapsed and the industry that really got hit the worst. Was mortgates and residential real estate and we in the middle of that and our clients are going out of business. We knew we can’t raise more money. Our revenues are basic going down. It’s like if we don’t die now we are probably going to survive anything so I would say. Yeah, that moment of maybe a year after the 2008 crash when we turned the corner and knew that we are onto something that probably was the first moment when I was like whoa. This is this thing truly is here to stay truly here to stay.
Alejandro Cremades: And the company ended up getting acquired for two point five billion by sillo so make us an insider you know here? What? what how? how was that process like and and also what was the moment like when. All of a sudden you ink the deal. You know a company. Ah you found it from nothing you know is it acquired for two point five billion you know a company that was cofounded to by an immigrant. You know an immigrant that was born in ah in a farm of potatoes I mean it’s say is absolutely unbelievable, right.
Sami Inkinen: Yeah, well well a couple of things there. Well first of all, we went public 2012 and our ah peer company and competitor zillow had gone public a little bit ahead of us so we were two public companies at the time when we got the final offer. For for the merger as I was two public companies basically coming together or obviously they were a little bigger than us and they they acquired us um, but leading up to that we had had which is is public information we had had multiple conversations about potentially teaming up. Um, because the Nba term industrial logic industrial logic made sense that while are we trying to do the same thing in many ways and we could have 2 brands and this would be more beneficial for our customers and efficiencies all kinds of stuff so we had had a couple of conversations. But quite frankly particularly when we had these conversations as private companies is very hard to agree in valuations to this and that once companies are public. It’s way more objective. All the information is out there share price kind of tells. Or the market cap. What the companies were so it’s just actually much easier for public companies to do that which probably made it much more likely. But I’ll just finish off saying the very moment is kind of crazier than crazy I had left my operational role 2014.
Sami Inkinen: And I was on a board of the company and I was a co-founder but I wasn’t running operationally and but what I was doing at the time was my wife and I were rowing in a robot across the Pacific Ocean Unsupported it was kind of ah trying to you know, raise awareness about the dangers of bad food and sugar. So we are literally on a halfway point between the pacific ocean or between California and Hawaii halfway point like more than thousand miles of just water both ways and we have a satellite phone and I get a text message to the satellite phone like Zillow wants to acquire us for whatever two billion three billion will you accept this transaction like this sounds like a movie scene but this is actually true like that was the moment and I look at my wife while sweating and in pain and you know trying to keep rowing the boat forward. Can you. Believe this? What do I answer and it was actually in many ways, very confusing and emotional moment because it’s kind of your baby. Obviously we built together with the team and everything but in the middle of the ocean. It’s kind of your. Thing for a decade and yeah, that’s kind of how it happened and obviously the answer was yes and in many ways it felt like ah ah, a chapter in my book or in my life was absolutely truly coming to an end so it was it was.
Alejandro Cremades: That’s amazing.
Sami Inkinen: It may sound like it’s only sweet but it was. It’s definitely was bittersweet. It was very mixed mixed emotions.
Alejandro Cremades: I Hear you I mean always when you go through a transaction like that and it’s a complain that you’ve co-founded it it it. It tends to feel like a loss in the family you know, kind of thing you know it’s ah it’s a rural roller cluster of emotions so I can totally understand that now now.
Sami Inkinen: Ahead and have.
Alejandro Cremades: In your case, you know 1 chapter closes another one opens and the next one is another billion dollar company that you’ve created which is called Verta. So for the people that are listening. You know to get it. What are you guys up to adverta. What is what is the business model. How do you guys make money.
Sami Inkinen: Yeah, well first of all on a high level. We’re solving the biggest metabolic health or health crisis in the world that is type 2 diabetes and obesity and you know missing to reverse diabetes in half a million people and and we achieve that as a telemedicine company. But therapy is through nutrition and behavior change. So we’ a healthcare tech company in terms of how we make money. Well it turns out reversing or curing diabetes is very valuable and so we go and sell to Healthcare Payers employers helplands and government. And say hey we can clean up the diabetes mess. We’re going to help you save money we work with companies like Papa John so yeah uhaul or United Airlines and Blue City California and the veterans administration so they pay for our service to help people reverse diabetes and lose weight and then. The service for the actual patients is is completely free. So so that’s the model and so we get paid a couple hundred bucks per patient or user per month and that’s that’s how it works.
Alejandro Cremades: And how much capital have you guys raised to date sunny.
Sami Inkinen: We have raised 10 times more equity capital than we raised for Trulia from 0 to ipo so truly are we raised about 33000000 of equity 0 to ipo and for verta we raised about 360000000
Alejandro Cremades: I mean I’m sure that it was a little bit easier to raise money this time around now with your with your background. So How did you go about raising money. You know like what? what? What did you look for in the people that you were bringing on. From one cycle to the next and how do you think the expectation shifted you know as you were going from one cycle to the other.
Sami Inkinen: Yeah, well first I should say personally I don’t glorify fundraising or the money raised or amount raised and the way I describe it internally for my team I’m like it’s like a mortgage but these days you get mortgaged for seven or eight percent guess what this equity from vcs. We. We want to pay back at 50% 100% year of year so this is very expensive money. We can’t take it lightly. We have to take it super duper seriously so and and the amount of money raised to me is not a measure of success. It’s literally is a three hundred and sixty million dollars mortgage that. We have to and we want to want to pay back but in terms of fundraising. Obviously there’s a balance. So some people say raise as much as you can and some people raise as little as as as you can. To me the truth somewhere there in the middle for our type of a business with long b two b sales cycles. We did a clinical trial. You just need set amount of capital you absolutely set them amount of capital. Um, and then of course you need some buffer um, like if something doesn’t go to plan so so that’s kind of how I think about the amount. But. And then you do need to time the market as as well like when money isn’t available. It’s hard to raise it when it’s available. Um, you want to be racing even if you aren’t feeling like you need it right now. So I guess it’s a balance of being opportunistic which we were in.
Sami Inkinen: 2021 when we raised money at at the peak. It wasn’t like oh we need desperately need money but I had seen the dance before. In fact, truly we raised money very early 2008 and then Lehman Brothers collapsed and there was no money available at all and so had we not done that March April Two Thousand and eight fundraise we would have gone out of business. And I remember thinking the same thing 2021 I was like we don’t really need capital but I’ve seen this dance before it may come in handy. Well we know what happened 2022 so it has come in handy. so so ah trying to be pragmatic but and also opportunistic.
Alejandro Cremades: So Obviously you know like when it comes to investors you know and where you were saying the 360000000 mortgage. You know it. It comes with a vision. You know they’re really betting on on a vision. So if you were to go to sleep tonight Samy and you wake up in a world where the vision of Verti is fully realized. What does that world look like.
Sami Inkinen: Um, it probably looks like Europe in 1970 s that is that we don’t see a lot of obese people with type 2 diabetes like quite frankly, this may sound very idealistic but I was so done building companies and for-profit companies after tru. It was an amazing journey but I was pretty exhaust and I was like okay I’ve I’ve done that no need to do that again. However I I did come out of like quasi retirement to start vert to hell but I did not start verta in any way to like oh I want to start another company or build another company or that was not the point. The point was. I accidentally stumbled on a way to basically help hopefully billions of people reverse type two diabetes and and and lose weight and this this whole metabolic health mess is that’s bankrupting us healthcare it is solvable. It can be solved. And then I just chose a for- profit company as the best tool to do that because you can raise capital you can attract talent you can do everything so but the fact that we a company the fact that we are a for profit company and hopefully very successful. It literally is just a tool It’s a means to an end. It’s like a car for a road trip. The point is not the car. The point point is the road trip and and enjoying that so that’s kind of like the vision that I have is that hopefully we’ll fix the problem or at least a big part of that problem and guess what if we do that we are going to make a shitload of money for our investors and employees and everyone and so it’s hopefully that’s how how.
Sami Inkinen: Um, we things up working up.
Alejandro Cremades: So obviously this is the second company that ah the third company that you do, but the second one that is a billion dollar business what’s the formula. You know Sami you know, obviously this is the second time around. You know you can compare with the first time around that he was not in the in the billion in the billion mark. But. This is the second time. So what’s the formula. What can you share with the people listening.
Sami Inkinen: Yeah I Guess like you said once you are lucky twice you are even lucky. That’s how that’s how I I like to think about um, well honestly I do not think there’s a formula like there is no formula and that is part of the formula.
Sami Inkinen: Little circular reference there but it there is no formal is is part of the formal but I do think there’s a couple of things that are sort of universal I’ll just throw you if if you here number 1 if you never start or take the first step Nothing’s going to happen. And so sounds very simple but there’s so many people like I want to start a company and do this and they just talk. They just never take the first step. The first step is actually way more important than people realize and and it’s kind of like drawing across the pacific people. How? Why were you able to do that I’m like once you take the first ora stroke like you actually have no choice. Just have to take 1000000 of them and then you end up in in Hawai from from California. So so that’s 1 thing. Ah second one is I’ve always started from a problem like hey here’s a meaningful thing to solve. And then you introduce the way in which you do and the technology and I think way too many people are like oh now we’ve got this ai thing like um, what? how do we apply? This ai I just think that’s completely backwards the world needs and values solutions to problems. Ah, but so. So being very clear about like what what is that you’re trying to solve I think starting from there is is very very important and then the third universal thing I would say to build a growth company to a sustainable business. It is like the archa like winning an olympic gold which is to say is very hard.
Sami Inkinen: Is very very hard and so to achieve that there’s are 2 things that I to me very universal, you want to be a plus in everything your investors your employees everything like if you want to win olympic gold like you better have the best coach best intrition is best training plan. Best genes best everything like you just want to stack up everything for your benefit and then the other one is. It’s always the long game. Um, if you just stay in business for a decade. You’re very likely to do something very meaningful and like I am. August Twenty Twenty four it’s 10 years that I’ve been working on verta and with outside investors in others 9 years but so it’s ten years so that’s and particularly first -time founders they may read headlines. It’s like oh billion dollar company and you know they want to like I don’t know put the money into k crypto in the right time. No, no, no all overnight success stories or almost all of them are 10 years in the making.
Alejandro Cremades: So let me ask you this just to expand on this. Let’s say put you into a time machine and I bring you back in time you know, let’s say it’s year 2000 you know you’re literally giving your notice to leave Nokia and you’re now for the first time becoming an entrepreneur. Venturing into the unknown. Let’s say as you’re coming out of the you know, big building of Nokia you know and and wondering what the future holds let’s say you’re able to stop that younger self on the tracks and you’re able to give that younger sammy one piece of advice for launching a business just one. But will that be and why given what you know now.
Sami Inkinen: Ah, um, well honestly I’ve had a lot of fun throughout the journey and and at least the last 2 companies while virtual business is still private but they’ve been objectively very impactful and and successful. So I don’t know i. Probably anything I would say I would mess up my my naivety and and everything but ah, what would I tell? Um I think um, maybe even more patience. Ah, pace yourself I certainly? um, yeah so 2 things actually because I have learned this sort of a hard way pace yourself meaning to really take care of yourself because it’s it’s always like this ah like a decade plus journey to build something so you have to. It’s like like running a marathon. Yeah, you may make a sprint over hill but you cannot be sprinting all the time its otherwise you’t going to finish the marathon so pacee yourself is one um and then the other one is you cannot finish work by working. And this isn’t just like bullying all others or something like that. But you can’t finish work by working therefore be very thoughtful about like what really matters and how do you allocate your time and I did not realize this during the trulia year. So I constantly had this feeling.
Sami Inkinen: Which is not positive that oh there’s eighty things I need to do but I only have time for 2 now or something like that. Well of course that’s effect. But there’s usually only a couple things when you look back at the end of each year as a founder like what are the 1 or 2 or 3 things that truly move the needle and so. The sooner you realize that and the more time you spend on like really understanding that I can uniquely affect this thing and that will have disproportionate impact on the outcome the more you can actually have impact in that area and less stressful. It is and all that stuff. And I think that’s been much easier for me at aver it doesn’t mean that it’s easier or less work or whatnot but you can really kind of it’s kind of like starting a fire with the magnifying class like you aren’t going to start any fire unless you really focus the sunbeams or the photons into this one little piece. And that’s how you certify you and I think that’s needed in in building a company as as founder.
Alejandro Cremades: I love it so Sami for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Sami Inkinen: Um, I actually surprisingly read my Linkedin messages pretty well or you can dm on on Twitter as well. So yeah, you online I’m I’m pretty responsive.
Alejandro Cremades: Amazing, well easy enough. What hey samy thank you so much for being on the deal maker show today. It has been an absolute honor to have you with us.
Sami Inkinen: Well thank you so much that handra.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Sami Inkinen On Building Two Billion-Dollar Companies, Raising $360 Million For The Second To Reverse Type 2 Diabetes appeared first on Alejandro Cremades.
Shahar Alster’s career is a testament to the power of resilience, innovation, and strategic thinking in the tech industry. As a multiple-time founder, Shahar has navigated the complex landscape of startups, scaled businesses, and led successful exits.
Shahar’s latest venture, Ourcart, has attracted funding from top-tier investors like New York Angels, Partam Hightech, Pereg Ventures, and Roni Michaely.
In this episode, you will learn:
- Discipline and resilience learned in the military can significantly enhance entrepreneurial success.
- Moving to innovation hubs like Silicon Valley can provide unparalleled opportunities and exposure.
- Thorough market validation and solving real problems are crucial for startup success.
- An MVP should solve a core problem effectively, even if it’s not perfect in appearance.
- Strategic exits can amplify a startup’s mission and leverage greater resources.
- Continuous adaptation and openness to new challenges are essential in the dynamic tech industry.
- Building a strong, cohesive team from previous ventures can accelerate new startup growth.
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Your email address is 100% safe from spam!**About Shahar Alster:**Shahar Alster has a diverse range of work experience spanning several companies and industries. Shahar is currently the CEO of Ourcart, a position they have held since 2023. In 2020, they worked as an entrepreneur, executive, and startup advisor while being self-employed.
Before joining Ourcart, Shahar was the General Manager of the Subscription Product at Yotpo, a SaaS eCommerce marketing platform, from 2022 to 2023. Prior to that, they served as the VP and GM of SpaceIQ at WeWork from 2019 to 2020.
One of Shahar’s notable career achievements was their role as CEO, Co-Founder, and Board Member at SpaceIQ, a SaaS startup providing workplace and real estate management solutions.
Under their leadership, SpaceIQ became an industry leader and served prestigious clients such as Facebook, Uber, Nasdaq, and Disney. Shahar held this position from 2015 to 2019.
At Deutsche Telekom, Shahar was the VP of Technology from 2013 to 2014. Before that, they held the same role at ChooChee, a company acquired by Deutsche Telekom, from 2011 to 2013.
Shahar’s work experience also includes being the Senior Director of Data Center & IT at Bezeq from 2007 to 2011 and the Director of Information Technology at 012 Golden Lines from 1998 to 2004.
In summary, Shahar Alster has extensive experience as a leader and executive in various industries, including technology, SaaS, and telecommunications.
Shahar has a track record of successful entrepreneurship, building and managing businesses, and providing strategic guidance to startups and established companies.
From 2008 to 2010, Shahar Alster studied at The College for Academic Studies, where they pursued an MBA degree specializing in Economics and Marketing.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So today. We have an amazing founder you know founder that has done it multiple times a founder that has built scale raised exited a founder also that has been brought in. You know as an external ceo to ah make things happen. And again, we’re going to be learning all the ins and outs you know from the insights you know of going through an acquisition process into really thinking about how to validate an idea or how to go about you know building an and Mvp deciding on whether it makes sense to raise a b round or to go through an acquisition. And then also on entrepreneurship in general you know because a lot of people think that is about sprinting but it’s more about the long term game so without farther do let’s welcome our guest today shahar oster welcome to the show.
Shahar Alster: Thank you, Thank you? Thank you for having me. Thank you.
Alejandro Cremades: So originally born in Israel startup nation so give us a walk through memory lane. How was life growing up over there.
Shahar Alster: Ah, you know Israel it’s very very interesting country as you can probably hear lately. But you know it was good. You know born in Israel you know, long time ago unfortunately moved to the Us. . you know like um after ah served three years in the military walked 15 years in a technology in local industry in Israel running a technical company in Israel and then I’ve been fortunate to move to the Silicon Valley for like you know. 11 years ran 2 companies, one company acquired by Doche Telecom and another company called space aque also acquired by a we walk and after you know 11 years in the us you know one wife at least for an hour 2 kids I decided to go back to Israel a walk. There’s 1 year as a general manager in a company called Yotpo then recently like a year ago I joined a company hour cart I was brought to. Around this interesting company. Our car is a company that kind of a specialize of understanding consumer behavior in a retail in the other resource companies. So that’s cut that is kind of in a natural. My journey.
Alejandro Cremades: Well, that’s say quite the executive summary at a thirty thirty thousand food view level and obviously as you were mentioning kids you know they are like the best startups. But unfortunately there is no exit and you only get to break even when they let you sleep at night. So yeah now.
Shahar Alster: Um, yes.
Shahar Alster: Um, yes.
Alejandro Cremades: Now, let’s talk about let’s talk. Let’s let’s do a deeper dive here. So the military so you were in the military for about 3 years and that’s a mandatory thing in Israel I guess what? What do you think you learned when it comes to discipline you know because I think that that’s a really amazing. You know, ah, period of time to really learn to grow to mature. What do you think you know you got from the military.
Shahar Alster: It’s a good It’s a great question because as you said it’s right in Israel you know fortunately, or unfortunately you have to go to the military and serve for 3 years and serve the country and I think it’s kind of a nice thing because it’s the opportunity to give back to the country. And but what you can take from that. Especially if you are and you know kind of in combat or infantry units. You can really understand that you have no limits you’re really as a person you have no limits and we as people are much much stronger than we think. You know our limits are much beyond and our mind and our capabilities and we can do much more and you can actually take that and implement that not just for the military you can implement that in life in your crisis because there are always crisis and for me it was. Great thing to do also to implement in terms of business how you can coach people how you can find good people and how you deal with crisis. So I think that’s the main thing that you know serving 3 years in Israel that’s the gift that you actually get in from the military.
Alejandro Cremades: So for you, you’re ultimately the the what you ended up studying you know what’s more regarding economics you know and also marketing What do you think you know like um, got you into the tech industry.
Shahar Alster: So I think just the curiosity you know when when I started in 2099 you know all the tech tech industry was kind of new. It was new to the world. You know the the big challenge back then was to connect everyone to the internet you know today. No the internet or the connection and the network it’s something given we don’t even think about it back then the challenge how we connect more people how we can make sure that every place in the world. Every person. It’s become connect to this thing that call internet. And for me, you know after I studied you of my b and my Nba in marketing I was kind of really curious about how we can just you know share this knowledge and how we connect more people to the internet which back then was again a big thing today. It’s a given you know I can see my kids. Yeah of course internet wi-fi everywhere. But.
Alejandro Cremades: So you were actually for 15 years you know in the take a industry more at a local level when you ended up a running you know one of the companies you know there but eventually you decided to pack the Boxs and move to Silicon Bali what do you think trigger that move and I’m sure that was quite a culture shock for you too.
Shahar Alster: You know, twenty years ago it wasn’t like that.
Shahar Alster: It was ah a culture shock. But at the end of the day Israel you know it’s a great startup nation but you know we have our limits. It’s a small country. You know it like we are like a 10000000 people. It is a small country. We are very good in innovation. We are very good in technology but we have our limits. It’s a small country. It’s a small market and if you really would like to walk in big companies or to do something really big and you know, kind of walk with the big boys if you know what I’m saying so you need to walk for a few counts. Few years sorry outside of Israel and the best thing to do it is you know it’s the us the silicon valley it is the best place in the world for innovation and for people you know in entrepreneurs that they would like to kind of extend their skills and build companies. It is the best place. So I was very lucky to have this opportunity to join to a friend of mine that decided to open a company and hey char you should join me and I packed my family I have a wife and 1 kid back then and was really cut culture shock for me. The first year wasn’t easy, but. It definitely was worth it. I you know my personal again. It’s completely subjective my personal recommendation. It’s every person is to live outside of your country of your comfort zone for at least three or four years you can learn a lot from that.
Alejandro Cremades: I mean I got I got I have to give it to you because I mean when I got into startups I was him you know 2023 or so and I was single no wife no kids I mean now that I have a wife and and kids I mean i. Would be quite the transition. You know I got to tell you venturing into the unknown. So how was that for you because I mean I’m sure that was not easy.
Shahar Alster: It wasn’t easy. All I was married with a pregnant wife with a three year old son and but we moved to a very nice place in Silicon Valley in Sunnyville which. Hard and still. You know have a very big israeli supportive community. So this is important. You know if you if you walk in a place that you know there is a good community over there. It’s still hard but it’s become every day that passing by. It’s become you know, easier. And after 1 year you understand kind of the mentality. You understand the people and you can actually be more focused and walk because you have kind of more quiet at home if you understand what I’m saying so again, it was a culturally shock and we said you know we are moving for 3 years but we stayed for almost eleven years so
Alejandro Cremades: So so that the first rodeo you know, ended up ah being a quite you know they good outcome. You know because the company ended up ah quite being acquired by Deutsche Telecom I guess from that experience. Well.
Shahar Alster: Ultimately was good.
Alejandro Cremades: What kind of disability did you get into the full cycle of a company you know from start all the way to reaching the finish line.
Shahar Alster: Yeah, it’ it’s good because you know it was a really good process because we started like we’ll what 4 or 5 people you know where I wasn’t the Ceo at the beginning you know after only like 2 years you know I started from kind of a. Vp of technology and then I move on talk so actually to manage other part in the company so we started like 5 people 2 years later we were 55 people more customers more customers and in that time the Ceo left and it saysha how you should run the company and then 1 year after that the company was acquired but don’ your telecom. We stayed another year at doche telecom under Butche telecom. So it was the full cycle the full journey you know from presentation almost to a small team to a funding team to a full scale to m and a to one year with a another company so that gave. Me kind of the whole spectrum how you start from almost from nothing and you finish with M And N transaction and that’s really helped us with moving to the signal did the whole cup. The whole did this whole four years four years in total from start to finish for years.
Alejandro Cremades: So Two years two years at the Deutsche and I mean for 4 years especially if you if you count to the. They the time that you guys had to spend Deutsche Telecom doing the vesting and resting I’m not sure how much a resting that was but but I’m sure that that gave you you know some some of an idea on on on what will be the next chapter because the next chapter is definitely one that you took on. You know, starting as the cofounder and Ceo you know, right? off the ah bat.
Shahar Alster: Um, yes, yeah, yeah, yeah.
Alejandro Cremades: And that was with the space Iq So why space Iq at what point you know that’s the idea of space Iq come knocking. How did you go about ballyating it and to make sure that you know he made sense for it and and yeah, tell us about how how you brought it to life.
Shahar Alster: The the block.
Shahar Alster: So let me start by you know at the end of the days after we finished and let say hour kind of 2 or 3 key people at Doche Telecom after we finished our you know time at the doche tech. We said know okay, let’s. Do something else together. We were a great team back then you know and they said well really like walking together. Let’s do something else. Let’s open a company a new company so we spend like a few months of validate just ideas you know how we can do that how we can wear out the area in the b two b wall because all of us coming from the b two b section. How we can help companies small big enterprise companies to do what they’re doing better from network management to security to any problem and then completely by accidents. You know one of the people said hey we have this idea about workplace management and all of us. What the hell is workplace management. What what is that you know we knew nothing about that and we started to dig in a little bit and what we have found we found back then it’s a huge market that no one ever heard about this market workplace management real estate management facility management who cares about that. It’s kind of. You know we have some person you know sitting in the back moving some chairs. What is that so we we you know as more as we dig in to that idea we found that you know there’s a lot of problems and we found an industry that hasn’t been digitized.
Shahar Alster: A huge industry that’s running still with paper and pencil and maybe maybe spreadsheets and we found some companies that try to do something around that and all of them kind of old school companies. Then we said wow there is something big here. But before in actually building our deck and presentation and let’s speak with potential customers and we spoke we interviewed more than forty forty facility managers and real estate managers from any companies from companies from Silicon Valley and companies outside of the Silicon Valley and this is the validation answer to your question and we ask them. How do you do it today. How do you do all those activities today’s what are your problems and then we came back to them Two months later two months later with a mock-ups and it said here’s our solution here’s how we can solve it. And are you willing to pay for a product like that and all of them said yes, please give us this product and I said great we have something we have the full validation. We have the market size. The time is big enough. We have you know competition which is an old school competition and we have. Potential customers that are willing to pay for this type of product and this product can be even involved and become in the more and more and more a kind of rich to our customers and I will stop Iraq and continue the journey but like I will stop here and let you ask more questions.
Alejandro Cremades: So so so in this case, you know how did you guys go about validating to the the Mvp I mean at what point were you guys like okay I think I think we’re we’re we’re into something here.
Shahar Alster: So here is here is our approach on on devp and remember I I had a big argument with 1 of our investors and he said you know your and Mvp should look like that and should look like this and I said look it’s not my quote someone else said that. But. If you are not embarrassed in your and Mvp the way it looks you probably wasted too much energy and time and money on your Mvp. Your Mvp doesn’t need to look need to look that great but he needs to solve 1 problem in a very very good way. So during this interview process when we interviewed all these 40 facility managers and real estate and our potential customers. We asked them. Okay, give me what is your five six problems the men problems the the one that really hurt you and then please put them in some kind of order. And we took kind of you know the first one and sort of got the first one which was the move management by the way we decided that’s going to be our Mvp It’s going to be ugly like hell. But it’s going to be you know something that’s going to solve solve the problem and once it’s actually solved the problem. And once we see people using that we can take it we can design it. We can add the layers of the ux and the ui mainly the ui because you ex come at the beginning and we make it polish and make it clean and make it nice. This is exactly how we validate we lucky us we had customers even before we had a company.
Shahar Alster: Again customers even before we had a company because of this validation process. This is so important this validation process.
Alejandro Cremades: So then so then for the company I mean know you see the company ended up getting acquired by wework but prior to the acquisition you were talking about they are having investors how much capital that you guys raised to to to int until the acquire. The acquisition happened.
Shahar Alster: So by the way, the beginning was really hard for us to raise money you know I had to you know the seed round which was like you know $2000000 the seed round you know back then was a lot of money but still it was really hard because when we pitch. To many vcs to say yeah we have this big problem. The market is big. Okay, what is the problem. It’s the workplace management and all of them. What what is the workplace management and who who cares about that this is cost of done business. So why is why do we should should we invest. In something that no one care we said no, we are bringing. You know we’re taking a market that hasn’t been digitized and that’s the opportunity and we’re doing that and we’re doing this so I think like ah after 25 maybe even 30 you know meetings you know, vertex ventures decided to they believe in us and said you know. We like it. We like the team we already you already have the team from the previous company. We like your energy. We think there is something there so they gave us like $2000000 and to run the company and we ran really fast and 1 of the reasons for us to run very fast because. Was no need to build the culture. There was no need to build a team building. We I took the previous team from the previous company. So it’s the same people. That’s why it’s so important to invest in people. We just took the old team say hey no more digital teleico now. It’s space. Aq.
Shahar Alster: And we focus on that server ran pretty fast two and a half years after we started the company two and a half years the list of the customers that we serve. It was unbelievable from all the big guys. We stole all the big guys. All the big companies. From out from the competition for our competitors you know from tesla to nasda to Facebook from to splunk to slunk to just name it everyone even everyone from the big company that you actually know walk with us. And and the reason I’m happy to talk about it but but kind of in a heart level. The main reason because we came to the industry with fresh eyes. You know we were the only technology company in the industry that the the founding team of this. Um. Company. We are all technology people and we came to an industry that hasn’t been digitized and we ask all the the tough question why you doing like that and we came to our customers tell me what is your problem I already give you the solution. Don’t tell me what you need tell me what is your problem and that’s the big difference and we built completely different products. And our approach was very different from our competition and that because of that we’ve been you know able to actually steal all of ah these ah big customers from our competition.
Alejandro Cremades: So you did the seed and then you did the series a how big was the series. A. So you. So let’s say you were you were at about close to 12000000 and then when it comes down to when it comes to time to do the series b a different turn of events happen and then your approach by wework what happened next.
Shahar Alster: A was 9 9 nine point five sorry um, almost 10 almost then yes yes.
Shahar Alster: So just me precise that so we were about to close the b round about the the b round almost like $20000000 and we were short of ten two million we had a goal we said $20000000 we were short in 2 so I sent an email to the Ceo of wewalk I just met him like you know a year ago to say hey shiva how are you remember me? Shaha we met a year ago we are short of $2000000 for the b round. It’s about to close and do you want to invest and be a strategic partner with us. You know, 5 minutes later he send me an email a shaha great to hear from you are you willing to hear something bigger than investments. Okay, you know, always happy to hear what do you mean. of course I knew what he meant but I said what do you mean and he said and and he said it in a very nice way was a super nice guy. Super smart guy and he said you know we would like to participate it in your kind of duetilligence process like an investment are you’re very small and we are already at the end you can talk with the lead of the fdb round and he said you know what. Let me run the due diligence process and then there are few options if we like you you know we going to invest if we don’t like you we can still befriend if we’re going to like you very much. We just going to buy you are you are you open to that and I said yeah I’m open.
Shahar Alster: So we put it on hold and we sent them all the material we met with them for two weeks and then um I met him in San Francisco the headquarters in San Francisco they have 2 1 in New York one San Francisco and I met him and he said yeah shaha what you’re doing is amazing. And I definitely would like to buy the company and offer some price and we’d start talking about numbers and it said you know shiba let’s put the numbers on the side. Forget about the number tell me why do you want my company I was I never thought I’m going to sell my company so soon and I said why do you want. But seq you’re big. We walk remember that wasn’t in in 2 in 2019, you know we walk back then was the biggest company and you know the big promise why you big we walk would like to buy space aqueue and say your product what you guys develop. It’s amazing and it’s actually fits to our future needs your capability to connect to every data source in every company to take all these data to run your um technology and you kind of for secret source. And to speed out a lot of insight that can really help a big organization. It’s amazing. We would like to do that. So okay, great now. Let me tell you what exactly? What we are doing and what is our vision I went to the white board and I did all of that kind of you know draw on the white boat. We’re doing this. We’re doing that and say wow that is amazing.
Shahar Alster: Have you made Adam Newmann and I said no I never met Adam Newman you should fly tomorrow forget up on the numbers. You should talk with him about the numbers. You should fly tomorrow morning to New York tell Adam Newman what you guys are doing and just go and meet him. Okay, fine on the following day I flew to New York and met Adam Newman he’s really really interesting and charismatic character I met him for like 2 hours and then I met him later on the same night in his house in New York and we shook hands and we closed it in.
Alejandro Cremades: Wow! So how was the um were the yeah were the terms of the transaction disclosed alright or anything made public on all.
Shahar Alster: Yes.
Shahar Alster: So it’s not when public was a really nice deal and let me put it this way. You know it was a very nice also exit for our investors and around four x which is pretty nice after two and a half years
Alejandro Cremades: Yeah.
Shahar Alster: For x three and a half years no everyone is looking for the 10 x but you know three and half years after sorry 4 x after three and half years it’s not it’s pretty good. So of course you know they send a lie and of course it’s always this argument. We win the ball then some of the board and.
Alejandro Cremades: I Know kidding.
Shahar Alster: You know people say yeah Shari you should definitely go and sell it. It’s a good It’s a nice outcome and for us. It’s like forx and some of the other board member which is other investor is a no It’s amazing company why you’ll sell the company. You should take it you know and take it to know and then sell it in a few more years always this conversation but the end of the day we decided to sell it and and the main reason by the way why regardless of the personal outcome which was very nice. It was. We were kept completely independent. So after we walk a chore sptheq you know for the next year we welcome you know completely independent. So my budget was you know doubled in what even I thought I’m going to raise in this b round so we hire more people more engineers more market in Mosel so for us just was amazing. We did exactly the same thing we just with more budget so will really help us to kind of to. Achieve more and we brought more and more customers. So but just to finish that story. But unfortunately as everyone knows probably you know we walk and you know the Ipo didn’t walk you know and they released Adam Newman the Ceo and then they decided. To sell the entire ah list of companies that they acquired we will acquired many companies over the last few years and say okay we shall sell everything and we should just focus on real estate normal technology and then approach me and say okay shaha you need to sell spaceq again.
Shahar Alster: As part of we work I was kind of back then Vp and gm at we walk. So I sold my company again a year later to my competitor as part of wework. So I sold it to so yeah, yeah, really well so they took the company. Of course they took the team of course they released me and said to my wife you know.
Alejandro Cremades: Wow.
Shahar Alster: It’s probably a good sign to go back to Israel after 11 years in Silicon Valley so we use that opportunity. Yeah, go ahead.
Alejandro Cremades: Yeah, no kidding now in your in your case as you were saying I mean you you went back to Israel. You took that opportunity to go back to Israel after 11 years and then 1 thing that you decided to do is you’ve taken a ah different direction in your career. No I mean. Starting with yotpo I mean you joined yatpo where you and by the way you know we’ve had the founder of yotpo to on the podcast. So for anyone interested in that journey feel free to take a look at it. But there you join them for about a year before you know things say you know took a different day path and took you to our card. So. Walk us through what happened there? What were the sequence of events.
Shahar Alster: You know it’s it’s a great question and many people ask me shava why you being threetime ceo join yotpo. No now yo boy. It’s amazing. Company. You know it’s a really amazing company. They are doing very well. But you know for me, it’s all about the team. You keep hearing me saying that a few times and for me going back to Israel after 11 years you know my network was mainly in the us and my network of people of good people in Israel were only in the executive position. And for me to open a startup in this um environment in Israel and to bring in start building this kind of team of good engineers and all of that I didn’t have my network back then again on my network were executive people from you know, long time ago and also I’ve been pro from with one of the one of the venture. One of the. Board member sorry of Yotpo Adam Fisher um and he said you know Shaha there is amazing opportunity in this big company. You just came back to Israel. You know, maybe it’s too much pressure for being a Ceo and a co-founder and moving back to Israel after 11 years
Shahar Alster: There is a very nice opportunity come be general manager build something completely new, but under the umbrella and without the pressure of board and all of that and so you know that’s interesting. Let’s do that and so that was kind of the rationale for me to join a big company even to be. You know one of the management people over there and as an executive person over there I was able to focus just on the execution without you know, fundraising without the board interaction and all of that without some of the pressure some of the pressure. Of course there was a pressure. And then a year later unfortunately this company although they did very well they decided to close the product. The the project story they decided to release like 10% of the ah people in the in Tel Aviv and in the in the us and because of them. The ecommerce status globally they decided okay shahar project is amazing, but we can afford it now. So unfortunately we have to say goodbye and then I’ve been approached by some headhunting. Let’s say shahar there is I know that you were a founder a few times. And a Ceo but there is a company here called a workout a really good company. They are looking for a Ceo and I said okay I’ve never been a Ceo that brought externally you know for me I’m starting from scratch I love that you know from presentation.
Shahar Alster: Execution raising money and m and a hopefully and said okay so I spent some time at hour cloud like six weeks of you know, validate and run my due diligence process to. 1 is the market and what is the opportunity in our workout and last week just you know was 1 year celebration of me in ourout.
Alejandro Cremades: That’s amazing and and and I guess for the people that are listening what what does our car Do what’s the business model. How do you guys make money.
Shahar Alster: So our car is a company again. We are specialized in kind of you know, understanding of consumer behavior and how we do that so we have kind of a technology that we develop a few years ago and continue to develop that technology mainly today with Ai and the other ah good tools that we have up there. What we’ll do we are scanning receipts like physical receipts from people that you know buying in a grocery shop at quittos we know we have this program that you as ah as a person you can upload your receipts. We have the capabilities the technology and to scan that receipt. And by only scanning you know talking about millions of receipts we can scan all the receipts and understand you know the consumer behavior really kind of the consumer behavior in markets in the us in Europe in Asia and that consumer behavioral analysis and data. And you know insights. It’s really really interesting and valuable to our customer which is written. It’s a market research. It’s a big brands. It’s really people that you know ah care about understand what the shoppers are doing. Why they are buying the merchandise. What why they are not buying their merhandise why they’re buying in that grocery or why they are buying another grocery so. There’s a lot of insight and a lot of behavior that you can understand by just reading the physical receipts.
Alejandro Cremades: That’s amazing now. Obviously you know in this case, a little bit different. You know the experience of coming in as an external. So what were some of the things that you did you know in order to like put this thing in the right path.
Shahar Alster: Great. So you know first and when you come to an organization that have been running for a few years you need to understand kind of the major assets. You know what? what areas? what areas of the companies are running well and what areas of the company. They need a little bit of. Different structure and need help and how you can adjust them to the opportunities that you have in the markets. So so as an example, you know I replaced like you know 3 people the Ceo the head of product. Great people really really great people. But you know they were really good of kind of the market that was relevant for us like you know three years ago four years ago and today the opportunities are a bit different so you need people that you know, um, different level of skill set. As example. You know the new cto is someone that’s specialized in Ai and Jen and I can actually can understand you know what are the opportunities that we have out there and how we can implement that to the current technologies that we have same with product how you can. Use the the cpg industry that wasn’t available for us at the company two years ago and and it’s available. So you change some of the key people Although unfortunately we ought to say goodbye to really good people that was responsible for running some of the things in the company. You replace some of the.
Shahar Alster: And then you make some adjustment to the road map of the companies at me understanding the market replace some of the people and now kind of focus on how to even become a better technology provider how you can help your consumer your customer because they are consumer we are customer how you can help them. What. To gain more value in what we’ are doing and once you get that and once you’re a big customers and their consumer. You know, getting more value from your product. You become really enabr for them. They can do your job without you and that’s a really really key and. You know a kind of phase in your journey how you become a must haveb solution how you become nebli and that’s by the way to your previous questions jumping a little bit. You ask you know about the Mvp you know the journey its Mvp and then you become a neblaer then you and become a must have.
Alejandro Cremades: So imagine shahar that you were to go to sleep tonight and you wake up in a world where the vision of our cart is fully realized what does our world look like.
Shahar Alster: I think this wall is looked like in that every brand every major brand you know, even the meatize brand and everyone that you know deals with Cpg. You know and markets can’t do their job if they don’t use our accounts. So. It’s exactly the same terminology like you know if you have a financial person. You use spreadsheet and if you are and you are an engineer you have a Jira and if you have you know you can choose an example that you that you want at the end of the day if you want to be a successful you know marketing manager in any big brand or any major brand to be successful. You need to have our accounts. You need to have our car to understand fully your customer journey. You need to understand your customer behavior even more than that you can even understand other markets and other opportunities in kind of real time without spending millions of dollars
Alejandro Cremades: So shahar let’s say put you into a time machine and I bring you back in time you know I bring you back in time to 2011 you know and you’re right there in Tel Aviv at the airport you know that airport where.
Shahar Alster: For you.
Alejandro Cremades: You are packing your backs. You know you’re checking your backs in and you’re venturing in into the unknown with your with your wife pregnant wife and your 2 3 year old child and let’s say you get on the airplane and you’re able to sit down next to that younger self that is sitting there on the airplane going into. Into you know, achieving the american dream into into America and let’s say you’re able to give that younger self that younger shahar right? there on the spot. 1 piece of advice before launching a business but will that be in why you know what you know now there you go.
Shahar Alster: Can I give 2 advices.
Alejandro Cremades: Ah, for it.
Shahar Alster: Um, the one one believe in yourself no limits. You know, believe in yourself if you ask me shahar you know. Are you going to in a few years to sit with Adam Newman and negotiate with him a tough. You know negotiation about you know the size of the company and the deal structure and all of that I would say me never so always believe in yourself and there are no limits to the things that you can do whatever you can do. You can do much more than that always remember that number 2 patient. Patient. It is a marathon It’s not a sprint if you want to be an entrepreneurship you want to be a Ceo if you want to be a co-founder be patient. Enjoy the moment. Enjoy every day because it’s going to be very long. It’s going to be very painful. Make sure the people that surrounded you the people that you’re going to share this experience you all enjoy walking with them and be with them. That’s important because you know maybe this journey at the end. It’s not going to be worth it and maybe whatever you have. In your vision in mind. It’s not going to be there. So at least enjoy the journey and the the best way to enjoy the journey is with the people that you know sharing this journey with you. Those are my 2 pieces of advice.
Alejandro Cremades: So for so for the people that are listening now that will love to reach out and and say hi. What is the best way for them to do so shahar. Okay.
Shahar Alster: Um, Linkedin you know my Linkedin is always available I can see linkedin.
Alejandro Cremades: Amazing, well easy novel hey Shahar thank you so much for being on the deal maker show today. It has been an absolute honor to have you with us.
Shahar Alster: Thank you, Thank you? Thank you for having me.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Shahar Alster On Selling A Company To WeWork And Now Helping Companies Harvest Retail Consumer Behavior Data appeared first on Alejandro Cremades.
Poland’s entrepreneurial landscape is not for the faint-hearted, but Maciej Zawadzinski’s journey is a testament to the power of resilience and innovation. Born at the tail end of Poland’s socialist era, Maciej experienced firsthand the seismic shift from socialism to capitalism, shaping his perspectives and aspirations.
His story is a remarkable blend of determination, technological prowess, and strategic foresight. In this exclusive interview, Maciej talks about his experiences building his company, facing rejections when trying to raise money for it, and eventually exiting. He has now transitioned to an investor’s role.
Maciej has now started a venture capital fund, Hard2beat, designed to provide early-stage funding to tech startups.
In this episode, you will learn:
- Resilience and adaptability are crucial for navigating Poland’s evolving entrepreneurial landscape.
- Early hands-on experience with technology can lay a strong foundation for future entrepreneurial ventures.
- Building a successful business often involves learning from initial failures and leveraging those lessons.
- A hybrid model combining services and products can be a strategic advantage if managed well.
- Direct founder involvement in sales is essential for driving significant business growth.
- Securing investment may require finding investors who understand and value your unique business model.
- Transitioning to an investor role allows successful entrepreneurs to mentor and support the next generation of startups.
Alejandro Cremades · EP 891 Maciej Zawadzinski On Building A $13 Million ARR Company With Minimal External FundingSUBSCRIBE ON:
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Your email address is 100% safe from spam!**About Maciej Zawadzinski:**A serial entrepreneur and angel investor with a background in AdTech, MarTech and online privacy. Over the last 15 years, Maciej has built and scaled several enterprise SaaS and services companies, including Piwik PRO.
As the CEO of Piwik PRO, he grew the company from €0 to €10M ARR. He is currently focused on Hard2beat, an operator-backed fund that invests in entrepreneurs and brings deep expertise in scaling global B2B SaaS products and IT services companies.
See How I Can Help You With Your Fundraising Or Acquisition Efforts
- Fundraising or Acquisition Process: get guidance from A to Z.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So very exciting the conversation that we have in front of us. You know, very inspiring to you know a founder that has done it a couple of times you know and very successfully so with a really good exit. You know with a company that he almost bootstrapped. You know they raised almost like no money. And then they had an incredible you know exit especially being a place like Poland you know, very remarkable. So again, the building the scaling the financing early experiences before building a product company raising money and getting nose left and right also thinking about succession and removing yourself so that you can build. On the business versus building in the business and then also what he’s focusing right? now. It sounds like transitioning to the investor role but without further ado let’s welcome our guests today macia sawainsky welcome to the show. Thanks.
Maciej Zawadzinski: Um, yeah, thanks for having me.
Alejandro Cremades: So originally born in Poland give us a walkthrough memory lane. How was life growing up in Poland.
Maciej Zawadzinski: Um, um, it was goat. Um I’ve ah was born and the end of the socialist time in Poland so I experienced in my youth. The the the big transition from the. Socialism to to capitalists in Poland and and basically all the time very high globe. So so things has changed a lot even in my childhood. Um I I was born in Katavia which is a more like industrial town now. It’s. Transitions more to techn technology but it was used to known for coal mines and heavy industry et cetera back in the ah days when I was young whether I was very young. Um, and.
Maciej Zawadzinski: I moved to to broadswap to to study computer science but I did’t manageage to actually finish my studies because I I started my first startup which was from advertising network. It was actually the first block advertising network in. Holland back in the days when they said that like if you pay bloggers they will lose their independence and you will um you will actually hurt the industry and the people who who wants to publish for the just for the sake of like you know, telling the truth. And but it wasn’t the case it. It wasn’t hugely successful startup but I learned a ton of things that um, that actually helped me to build the successfuls that I did um afterwards.
Alejandro Cremades: So then let’s talk about the getting into computers. What got you into computers.
Maciej Zawadzinski: Yeah, so so I was self-taught and I was actually self-taught developer software developer as well. Um, also this was when I was in high school. So actually I I started with like um, installing my first linux when I was. I think thirteen years old or so um and then I like you know wanted to learn how to understand how it works and like you know why? it’s so complicated and so on. And 1 thing led to another to to me being a like 14 year or 15 fteen year old and buying books about like programming and learning to to program. So. I learned like you know from low level how the operating system works then learn programming and it was always my passion That’s why I went to to studies. But then it turned out that building actually the business is as as. Maybe even more exciting than actually like just just programming.
Alejandro Cremades: So obviously yeah I mean you went and studied computer science. But you dropped out So let’s talk about that You know like what was that process of you know you dropping out and getting started with that advertising network that day ended up not having the outcome that you had hoped for.
Maciej Zawadzinski: So um, I was always involved in too many things in that days. So I couldn’t focus just on the studies I was like organizing computer science courses conferences with some friends and so on and. It was actually I think a friend of mine called me with the idea and said like perhaps maybe maybe we do that and we developed the idea it wasn’t like advertising network in the the first let’s say iteration. But. We developed the idea over like multiple meetings and calls because we weren’t like he was from the city that I was born from kata it said but I was already living in broadmot where I studied and we actually started coding it I was coding he was doing some graphic design and marketing and we. We launched it after the ah the summer break and then it started like we started having clients. We started fundraising and so on. So um, it was so much time that I dedicated to that that I forgot even to go to the university and. Continue that and actually there was just theor there and in the computer science at least in Poland in these like first year courses you have and second year you have a lot of theory and I was like interested very much in the practice so that was something that was naturally I was driven to and so.
Maciej Zawadzinski: And I dedicated my entire time to that.
Alejandro Cremades: So then so then four days you know like what happened with the company because the same goes you either succeed or you learn in this case, it sounds like there was a massive lesson for you? yeah.
Maciej Zawadzinski: Yeah, so so so we we we got some traction. We got really nice like campaigns for like consumer brands from like you know, ah some smartphones. Some like other consumer products and blogs that we run we had like probably um, a couple hundred blocks in the network. So it was good. We had where like 15 in yeah I think in the peak we were almost twenty people in the component. Ah, we had an investor which ah was one of the big portals in Poland but it was time where the investor came and they they took the majority package. Um, if they they wanted to invest so pretty much. Um, after 2 years of running that. We. We hit some like um like the company wasn’t growing anymore. We had some we didn’t have the idea on how to to like you know, develop it further. Um, we wanted to like get more capital to experiment with with some additional channels and. And the techile the technology buildout. Ah but we basically didn’t get along with our majority shareholder which was this portal and um, we left the like it wasn’t like that. We just. Ah.
Maciej Zawadzinski: Said that we will no longer do it and leave but we they basically bought our shares ah from us at a like more or less nominal but we got some money to support ourselves for and start the next business but it wasn’t like an exit with it.
Maciej Zawadzinski: And we transitioned that to the team that was in this portal and and they run it for like I don’t know 2 three years and they basically incorporated it into their structures so it wasn’t existing after 2 2 or 4 years. The component was no longer existing as as a.
Alejandro Cremades: So what happened next first.
Maciej Zawadzinski: Separate identity. Um, so next I I found that a software development called clear code because we had this experience with building advertising technology for the for this network. Um, so I said okay, let’s do it for ars for money because we have some expertise and this actually worked that was a. Ah, good decision and we we started um like we we acquired some customers we we grew the team. This company is actually like quite nice accent that we did after several after after a decade of it. But what happens was interesting that. In clear code. We incubated several other ideas that we had including puwic pro which we will talk about which is probably probably the most successful I mean this is the most successful component that I’ve built so far but also others where we like Kanawa. Nast and advertising platform which we sold just the technology we didn’t even get to the traction but we had a client that was looking just for that. So we soldd them the technology. Um, we had a couple failed ideas as well. Um, so but it it what it showed is that. We kind of just do work for hire as a software developers and a company that specializes for developing technological for others. We’re always driven to to build um some products on our own or at least I was very driven to do that.
Maciej Zawadzinski: Um, and that that led to piwwick po which which actually initially was an open source project which I joined back in the days when I was like a part of this advertising network but over the years we’ve built a copyary version of that and. And build the whole component around it.
Alejandro Cremades: So then talk to us because I mean it ended up being your biggest a success late you know pewwe. So what ended up being the business model of pewwick. How are you guys making money.
Maciej Zawadzinski: Um, so it’s a um, pretty much Sas license fee for using the product based on the usage that so the amount of data that you are processing. with with pw broad the platform is like it’s a privacy-friendly alternative to Google Analytics it has some extra capabilities that may not be found in avavert other analytics platforms. But. Basically over the years it become an choice for enterprises especially data sensitive industries but nowadays pretty much any other industry as well. Um, to. Replace Adobe Analytics or Google analytics which are 2 other leaders and in the space.
Alejandro Cremades: So obviously you know like this was really venturing into the product a based type of sphere you know, very very different from like the service-based you know whether it was the advertising network or the software development you know services that you were providing. What was that transition like first.
Maciej Zawadzinski: So it was um, at first difficult because as a compound that was always like um service base especially with clear code where we had majority of the company was developers because you are basically selling development hours. Um, um, and. What we the the early mistake that we did is we thought that okay um, the component should be mainly driven by I t and r and d the product not the business site so we had probably like. 70% of people technical doing product and only 30 % doing everything else marketing sales et cetera which was an early mistake because we should at least have an equal effort on that even if if not more at some point. Um, but. You know we had technological background we knew techlogia it. It helped us to create great product. Ah but it cost us to have ah some years before we hit really traction where where our growth like um, got to this like. Ah, 70% or 60% year -over year year earlier is we we didn’t have that that much growth but we could afford it because we had the software development where we were making profit and basically we were eating up this profit to build the product and the technology for the.
Maciej Zawadzinski: for for piwwick co um, which gave us a lot of buffer and we we could bootstrap for for ah years we we rise on that like two million um usd of the outside investment. And we did it only after we had all over the 1000000 of you annual were queuing revenue so till then we were basically spending our own monday and time on on bootstrapping it.
Alejandro Cremades: So so then in this case I know that they too with a pe week. You guys say raise some money I mean you ended ended up racing about 2000000 or so but I know that the racing money was not easy. You know there was a lot of rejection.
Maciej Zawadzinski: Um, is it.
Maciej Zawadzinski: Yeah, so so that the rejection was mainly driven by that software that this services side of the business. So we basically had a um, ah clear code which is software development component and a subsidaryary which was the the product component that could be with withdraw and. There was a lot of rejection from the Vc funds because they wanted on the investing product and we said okay you can invest into the product but then the discussion was okay, but you cannot walk. And have your software development on the side because we want you to focus half the percent on the product and that was difficult because this company was already like making profit had like 70 engineers on board or so. So it wasn’t like okay we will close it and basically write it to zero because it was too valuableluable for us and um on the other side this was too much to move to the product business. We couldn’t absorb at Kiwwick Pro like 70 people being like ah at that time probably like 20 or of. 15 to 20 people of staff so it was it was difficult from that standpoint. We ultimately found a venture like not a classical venture capital fund but like an evergreen fund that invest their own money without like even investment term.
Maciej Zawadzinski: Um, and they actually found what’s interesting. They found an advantage in that that they will invest in the holding with two components and basically the services business will be the hatch if the product fails and what happened at the very end which is. Ah, ah, just it confirmed exactly what their tesses was we sold the um services business clear code exactly like almost exactly for the valuation where they were coming into the company. So Basically they returned the Capital. We returned the capital from the say of the services business and the product business which was much more valuableable several times more was just the profit pure profit from the investment.
Alejandro Cremades: I mean you guys grid to 12000000 arr which is a really a spectacular you know, given the amount of money that you guys had raised to me. It could be even viewed as a a bootstrapping because obviously you know like do the the.
Maciej Zawadzinski: And.
Alejandro Cremades: Kind of exit that you guys got you know which was reported for over fifty Million Euros you know is really a spectacular. So I think that you know for this you know one thing that is an interesting do is and and and you did this not not only with piwweekck but then also with cannery which was another. Ah, you know business that you incubated under you know, clear call I guess the yeah the the what did you learn around to building a team around you so that you could remove yourself and and really have that succession going. But more importantly, allowing yourself for. Being able to build not in the business and be under the weeds but more on top of the business. You know where you’re able to push strategy.
Maciej Zawadzinski: Yeah, so that that was particularly difficult for me because I’m very hands-on so I was always very close to the product and very close to the sales and and developing the company I was never that um I I even had a lot of. Problems in the beginning with delegation. So I was always like okay I will do it I will do it faster better etc. So with that like mindset and over the years of course I learned the litigation and running like in that. Peak we had more than 200 people because it was services part and piwwick product that was ah while I was running at the same time but um, it it was hard to to remove myself from the business. Um I started by just it was done mainly with internal promotions. Of the people who were almost from the very beginning in the compound and they proved themselves in several other roles over the years and they we basically were increasing the sea level suite in nature of the compound and then removing myself. As ah as a Ceo to to more supervisory role but it took like you know in each case in clear code and in inivic poet took almost 2 years this this whole process. But on the other end I had the feeling that.
Maciej Zawadzinski: The the team is delivering more.. The team is like taking over my responsibilities and it was done gradually and um I had this like feel okay that I’m still a bit in the control over the process and when I felt that they are actually doing better job than I am. Then I was okay I let it go and the funny the story of that is that? Um, Ah, when we were spinning off that to compound Cliff code and piwi 12 Actually when we ah. I Totally we removed myself from clear code because we are preparing it and for the say the management team was already in place the moment I focused on them pwwick pro and did nothing more at clear code. Ah but only Pwwi pro started doing better but also clear code started doing better. So It showed that Ma that. Like know keeping the focus of the team was super super super important. Um and and and and it drove the results in in in both of the businesses.
Alejandro Cremades: So what was like going through the acquisition of pewwick because I mean that acquisition was incredible outcome. So so what was that like give make it make us insiders in here.
Maciej Zawadzinski: Yeah, yes, and so so so that was like actually very long thought because we had 2 failed transactions. So one failed transaction was early in 2022 when the yeah the war broke out in new ukraine so we had an for in private equity funds with offer actually that was a pick of valuation so we had ah an offer that was almost like as good or better than the one that we solved a company for almost two years later um with with company almost. Twice as as big. Um, so it shows like what was the disconnetic between the valuations today and at at the peak of the end of 2021 more or less but we basically were after the due deliance. No word flax.
Maciej Zawadzinski: Some things to like you know solve but nothing that would ah ah derail the transaction and we learned that okay because of the economic environment and Dr. political environment. This fund is basically putting on hold all the transactions in Central Europe so that we were devastated a bit by by that and we we whooped and we thought okay we will start the the organized process because that offer we got from the network and from the market. So we we like it was good. That’s why we were processing it. But we we didn’t have the process after it failed we into the end of 2022 we started the process and we it was probably the worst timing to start pitching to private equity funds. Ah. Um, because we had all the good matrix and we had like not too much interest. There was interest but nothing was progressing till term sheet or term sheet that we would accept because that’s the upper thing. So. Um, it took us several months to to get to the offer that was acceptable for shareholders and me and we started the digital regions every 2023 and um, it went well again, we negotiated the.
Maciej Zawadzinski: Ti and we were over the setting up meeting at the notarway and the investment committee of this fund that was they said that this will be just formality. But actually the investment committee at the last like finish line said. Okay, we we will not do the transaction for no apparent reason we didn’t we never got to the real reason. So um, so that was another time where we had like. Another private equity fund that that’s pulled off the that’s pulled for out from the transaction and then the third transaction was actually we had like 2 competing offers that were very good. Um and we choose the one that we knew it was actually so that. The party that that bought biwi 4 is cookie information that is owned by ki capital so with the financing of capital and the the cookie information was actually our client at clear code back in the days. So we knew them. We had their relationships with them like for many many years we never thought that they would be a buyer because they we didn’t think that they have the capacity to that. But with the support of the private equity that is in in their capital. They said like it’s perfect scenario. It’s also privacy product.
Maciej Zawadzinski: We want to make that offer they actually like make an offer because they learned that our transaction failed and we we we mentioned that to them not because we were looking to find the buyer but because they because we’re acquainted with them. So after many years of business relations. So we actually sold the component of the party that um, we never like reached out to Ivan with the with the offer and it shows like that sometimes the offer may come from an unexpected. Site in the deal.
Alejandro Cremades: So so what was it like when finally the deal is inked. You know what? what was that like for you I mean was it. They.
Maciej Zawadzinski: Ah I was exhausted because we had we were almost two years of the transaction because of this like first offer that came from the market then you we group? will you start the process that it like you know drag for months because it was the really bad.
Alejandro Cremades: Yeah.
Maciej Zawadzinski: Timing when it comes that nobody wanted to do transactions at at the end of 202022. So um, I was quite exhausted but at the same time I was a bit relieved that I can now focus on the things that I have planned for myself. So. Um, after I sold clear code a couple years earlier I started angel investing and working with early stage entrepreneur entrepreneurs helping them a bit of like um using my experience as an entrepreneur in their like way of growing the business. And I really enjoyed that and I wanted to do it. Let’s say full time. Um, and so my plan was to start a venture capital fund that that I’m working right now on um and the moment I I closed the transaction I I had basically like two months of like getting a bit of rest et etc and um, actually I I started the fundraising for the Vc fund early 2024 um, and with 2 2 partner and I felt um. Ah, life again because it’s like building something from scratch again and I felt that I um like my history with clear code biwick pro that’s like and and also the advertising network which was like I had no overbreak in between that was like 15 years
Maciej Zawadzinski: And now I’m doing something completely from scratch that I’ve chosen to do and yeah, it’s it’s it’s great. Great time.
Alejandro Cremades: So so then it sounds like now you’re going to the other side of the table and more on the investment side I mean what? what does the future hold for you.
Maciej Zawadzinski: Um, we’ll see what the future has for me. But I think I given that in Poland we don’t have many Vc funds run by entrepreneurs. Um I think we have a very interesting value proposition to the startups. Ah. That’s that this is the 1 thing and the second I I learned a lot on my transactions and I know like how certain things are I’m comfortable for entrepreneurs and how things could be better and still beneficial for before the both sides. So I hope to introduce some. Some new quality for this early stage investments as well as I think we will have quite a lot of success of attracting the the need the founders to the fund that is run by by by serial entrepreneur.
Alejandro Cremades: So Let’s say I put you into a time machine and I bring you back in time I bring you back to the time that you were you know,? let’s say dropping out of school to start the advertising network. Let’s say right on your way out from that class. You know you’re pulling the backpack. And behind your back and saying okay, it’s time for me to say goodbye to to this environment and to go out it on my own. Let’s say you’re right there you know, ah in the entry of the of the classroom you know, right? when you’re getting out for the last time out of the classroom and you’re able to stop that younger self and you’re able to have a sit down.
Maciej Zawadzinski: Are in.
Alejandro Cremades: And you can give that younger self one piece of advice before launching a business. What would that be and why given what you know now.
Maciej Zawadzinski: I Think ah the one big piece of advice that I could that would make a lot of impact for me is that founders needs to do sales of their product by themselves.
Maciej Zawadzinski: I did the mistake in the first business that I wasn’t like I thought that as a technology founder I can focus on the technologies I will hire somebody to do sales and marketing for me and that was a huge mistake of course and. I repeated it only to certain extent in in some some other occasions. But every time I got back to like almost full time doing sales. The company was Growinga awake the fastest in the history. No matter. What was the base. From which we were starting. So I think faers let sales is super important and I would convince myself that you need to focus on that and it’s great that you know tech technology because you have a better grip of like what’s happening and what you are offering but that’s not the most. Ah, important in the business that you will be valued.
Alejandro Cremades: So for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Maciej Zawadzinski: Ah, find me on Linkedin I think that’s the the best way to connect. Also you can just type in my surnames abajisky dot com where there’s links and contact information and some some inform on on my Android investments.
Alejandro Cremades: That’s amazing. Well ma I have to say thank you so much for taking the time you know to be with us today. It has been ah, an absolute honor to have you here on the dealmaker show. So thank you so much.
Maciej Zawadzinski: Um, yeah, thanks for having me great.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Maciej Zawadzinski On Building A $13 Million ARR Company With Minimal External Funding & Now Supporting Aspiring Founders appeared first on Alejandro Cremades.
Embarking on the entrepreneurial journey is like diving into a vast ocean of uncertainties, challenges, and opportunities. In a recent interview with Guy Willner, an experienced entrepreneur with a string of ventures spanning decades, we gleaned invaluable insights into surviving crises.
Guy’s latest venture, IXAfrica Data Centre, has attracted funding from top-tier investor Helios Investment Partners.
In this episode, you will learn:
- Guy’s journey underscores the power of resilience in navigating challenges and turning setbacks into opportunities.
- From failed A-levels to founding startups, embracing adaptability is key to thriving in the entrepreneurial landscape.
- Entrepreneurs must grasp the cyclical nature and operational language of private equity firms to navigate fundraising and partnerships effectively.
- Maintaining a balance between professional pursuits and personal well-being is crucial for sustained success and meaningful relationships.
- Understanding the implications of AI on computing demands and technological trajectories is essential for businesses navigating the digital frontier.
- Lessons learned from the dot-com bubble emphasize the importance of strategic foresight, agility, and learning from past experiences.
- Embracing change, seizing opportunities, and fostering resilience are paramount for entrepreneurial success in an ever-evolving world.
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Your email address is 100% safe from spam!**About Guy Willner:**Guy Willner has worked in the data center industry since 1999, namely and most recently at IXAfrica. He started with his co-founders five years ago with the hunger to build a startup; he brings a wealth of experience to IXAfrica.
Guy’s entry into the data center industry started with his Engineering degree at Oxford Polytechnic — now Oxford Brookes University — where he specialized in electrical engineering, electronics & computing and wrote assembly language.
After graduating, he took a job with Phillips, working in assembly language programming before rising through the company and moving back to the UK to work in telecoms with Vivendi.
Founding IXEurope in 1998, Guy built the company from the ground up, turning it into a company that made eight acquisitions and floated on the LSE before being sold to Equinix in 2007 for US$555m. He also more recently founded IXcellerate, a leading operator of commercial data centers in Russia.
Among Guy’s other accolades and experience is being the President of Equinix Europe, a six-year stint as Non-Executive Director of South African-headquartered Teraco Data Environments, and eight years in the same position at technology leader Numecent before moving on to Swedish internet infrastructure giant Flexenclosure AB and Digital Realty Company Lamda Hellix.
He currently holds positions at Brazilian edge data center ecosystem Elea Digital, International Data Centre Group, IX Acquisition Corp, and Helios Investment Partners.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today. We have a very exciting founder. You know a founder that you know have done it a couple of times you know in a in a very exotic and unique way you know I think that you’re all going to really enjoy his journey quite inspiring. You know again, the whole building scaling. You know, financing exiting. You know we’re going to really cover that you know on this episode you know stuff? like for example, how to survive crisis how to go about you know, raising money understanding really the role of private equity firms. I mean we’re talking a lot about venture capital firms I think it’s going to be quite refreshing to to tackle the pe angle. And then also work life balance and ai and the future so without further ado. Let’s welcome. Our guest today Guy Willner: wellner welcome welcome to the show.
Guy Willner: Yeah, hi there. Nice nice to nice to be on the shower hunter. Yeah.
Alejandro Cremades: So originally from Oxford give us a walk through memory lane I was life growing up.
Guy Willner: Know? Well my parents were not english so and my mother was norwegian my father’s french austrian so I was kind of ah a foreigner born in England um, brought up near Oxford and and went to Oxford Polley and to study engineering there I um. Had to go to ox pollly because I kind of failed my a levels because I was playing bass in a rock band and I was too focused on that not enough on my ah a levels I think.
Alejandro Cremades: Now in your case you know one thing that it was very interesting is that you thought that the army or the air force was perhaps you know like the way to go Ah, but why? why not? why? not.
Guy Willner: Yeah mean yeah I mean I was because I went to ox poly I thought well this is this is not the best university on the planet. So maybe I could join it with a military sort of training with it and then I have a more of a complete education. So I applied to the air force to be an engineer officer. And and after a while at the time I felt that the engineers were kind of second class to the pilots you know in in peace time. The the pilots are still flying but the engineers are are making sure that the annual fate at the ah you know the air base runs smoothly and the toilets are clean and stuff like that. So it was a bit I found out a bit bit difficult and also I saw friends. Going off, you know a friend of mine graduated and went off to drive road trains across Australia and ah, another one was selling euro bonds in the city which sounded all very exciting so I wasn’t sure if I wanted to be in a radar base. You know, sort of ah out in the stick somewhere. So I resigned after 2 years and was really nice is that the Guy Willner: at the um, the officer’s college at cramwell um said to me. Well we don’t want unhappy people in the air force because I I was an officer cadet at the time he said well let you go? Um, but promise me 1 thing don’t get yourself in a rut and. I thought that was really nice because I basically slapped him in the face after 2 years and said i’m’m I’m out of here. Um, and he’d given me some gratuitous advice so I was driving back from cramwell sort of North of Cambridge down to Oxford in a clapped- out morris minor that cost me about one hundred and sixty pounds
Guy Willner: And I was probably the happiest day of my life because the world was my oyster I could do whatever I liked and I think based on that I thought well I had a job offer with Bt in Houndslow and that didn’t sound like the world is my oyster. Um, so I decided to go to Paris because I had ah my older sister was living there. She was a fashion designer in Paris. So thought I’ll go Paris and find a job there learn a language at the same time.
Alejandro Cremades: So I mean obviously obviously you know there you were doing phillips. You know that was the corporate life. You know how he was treating you but I want to ask you? How do you decide, especially you know like being in Europe. At that time you know it was all about being a lawyer or being at a company or being a consultant or a doctor. You know the the whole venture world was not as developed. So I’m sure it was not easy for you to say hey I’m I’m I’m saying goodbye to corporate world and starting my thing you know how how was that transition like.
Guy Willner: It was very interesting because I remember when I started when I decided to try and start my own business I was 35 and I needed a chairman or I wanted a chairman for the business and this had this sort of chairman candidate this old guy and he said right meet me at the club. With your wife and um and so I met him at his old club with with my wife and he looked at her and he said do you realize what your husband’s getting you into and he was you know he basically he was good I mean he didn’t become chairman in the end but he um, he basically said you know yes this is a different this is going to be hard and um. But I’ve always been slightly off the wall slightly outside the the mainstream I suppose so it was perfectly normal that I’d try and start a business. Oh starting the business I mean that was that was way after Paris ah, after 5 years in Paris 5 years in the u k.
Alejandro Cremades: So then what happened next.
Guy Willner: Um, including ah ah, 3 years in Hungary with vivandi building up telecoms networks which was kind of like running a startup but for a very big company so it gave me a lot of training. So um, starting up the business I think I needed to be naive. Ah. Because if I knew all the risks. Maybe I wouldn’t have done it. Um and I remember the first thing I did was try and raise like two million pounds to build a small data center and nobody was interested and then a friend of mine in banking said, ask for 20 and I phoned up three I and said I need 20 and they they were interested and and said we’d like a business plan. So I started working working on that and in the end we raised 10000000 on what was essentially a powerpoint show. Um, this was in 99 so the bubble had just. Or the the wave had just hit the uk in sort of June ninety nine um in the us the wave had started earlier. Um so he raised 10000000 a year later we raised another £42000000 and a few months later we were on a roadhow trying to float the business. Um. Road showing across the us as well, but not for a London Stock Exchange Float and of course then we hit October 2000 which is when the whole bubble started or popped basically everything started falling apart so that was a bit.
Alejandro Cremades: So so I guess hey just for the people to get it What what was the business model there. How were you guys making money.
Guy Willner: So it was basically a box to house computers. So it was a data center so we were we were raising money to invest in data centers and by then the business plan had sort of iterated into 4 countries so or or at least 2 anyway. France uk to start with. Um, and then potentially Germany and Switzerland um during that journey. Jp Morgan had already invested in some businesses and they contributed there. They had two data centerers one in Zurich and one in Frankfurt so they contributed them into the business. So then we suddenly had 4 of these four of these things growing but very early stage. Um. Trying to flirt the business.
Alejandro Cremades: So Then how was you know the the transaction because obviously you guys ended up you know going through a through kind of like a I mean the dotcom bus you know, like kind of like hit you guys and then they the company ended up getting acquired. You know, which was you know at least you know you guys got an outcome there. But. What was what was that journey like of going through a crisis situation in the market like that.
Guy Willner: It was a really hard. You know I remember there was a senior management meeting and and and somebody kind of stood up and said I know I took easy jet for £49 to Frankfurt last week and slept on the floor of the reception area in the data center you know and everybody applauded it was like alcoholics anonymous. Um. So we had this sort of culture of you know we were really trying to keep this tight really run it tight and and you know we were very committed to to the business and then we started getting smart and started buying distressed asset. Um, which you know did us very well.
Alejandro Cremades: So you guys ended up selling the business and it was for a reported the 555000000 to equinix so what was that the you know transaction like I mean how was it going through an acquisition for you.
Guy Willner: Well, it was I mean if you think of it you know the management team’s been. We’d been through 9 years of of building this up from nothing. This is our first ever startup. So we’ve been really on a rollercoaster learning doing an Mba in life sort of during the whole process and then we’d been hit by as you say hit by the bus of the dot com. Bubbles so we were pretty you know battle hardened maybe battle weary I think as well. So I think we were quite happy to sort of go quietly and and get this business sold I mean we had floated on aim on the secondary market in the uk and during the sort of eighteen month period the shares went up about four and a half times so it was a. You know we we? The data centers were beginning to be understood, but you know we needed a change and maybe that’s the difficulty with entrepreneurs is sometimes they got such a short short span of attention. Um, they always want to go on the next thing which is certainly like me unfortunately.
Alejandro Cremades: What do you think? what kind of exposure or insights did that same journey. You know going through the full cycle of a business you know from start to you know finish. You know what? what? what basicability did that give you into the full cycle of a company being an entrepreneur.
Guy Willner: I think really, ah you know you got to understand really what your skills are personally and what you bring and and what you don’t bring and sort of laugh and joke about your weaknesses and and make sure you don’t you know, bring those weaknesses to the company with you. So it’s all about. Being humble and and understanding what you’re capable of and and and whatever you’re weak on makes sure other people in the company are strong with so it’s it’s about building it a tight team I think 1 thing that saved me from a complete breakdown was was that we were 2 co-founders. So um. I think if I’d been on my on my own. It would be horrible I mean the 1 big lesson is don’t start a business on your own.
Alejandro Cremades: So then for you the next chapter you know was say terraco. So in this case, you know you decided to join a board versus start another company. So what was that what was that thought process like of hey I’m just gonna join a board now.
Guy Willner: Yeah I think um I literally was probably battle weary probably burned out after my 9 years you know building this this thing which was basically full on from day one for 9 years and ah, so I was kind of euphoric when I’d left Equinix after because they bought the business and after six months I thought right? Okay I’ll let them run it. They don’t need me anymore and on the Monday the first Monday of course I had nowhere to go I had no office to go to I had nobody to have a chat about you know the weekend or whatever too. You know obviously my wife but. Um, didn’t have anybody at work to to talk to and ah joining the board of terrika gave me a bit of structure because at least every month I’d be on. Ah you know in South Africa or or on ah ah on a video call or whatever with the board in an area which I knew intimately so that gave me a bit of structure. It was.
Alejandro Cremades: So then so then for terraco you know how was that but what did you learn to from the dynamics of being at a board you know because obviously Terraco ended up being being acquired. You know it. It went through a transaction I mean multiple transactions but the company was sold initially, you know when you guys were pushing that for one hundred and thirty five million
Guy Willner: It was fun.
Alejandro Cremades: So what were some of those dynamics that you learn about you know, being an effective board.
Guy Willner: I think that what I brought with me from Iax Europe was the importance of company culture and the importance of of of a team working and and ah and a positive constructive environment and that that really helped because um the investors in Terrao were also positive and and and. And benevolent sort of magnanimous to the management team and that was really important because in the early days in sales in data Centers. You really? don’t know when the next customer is coming can be bit touch and go.
Alejandro Cremades: So right after this, you know you decided to start you know a couple of things you know one in Russia and then another one in Kenya so tell us about me this this sounds quite exotic a Guy Willner So why and unique.
Guy Willner: Um, yeah I mean um I was I was sort of trying to build a business of global a club for global club for data centers. Um as my sort of next. Thing after ixirup but it wasn’t working nobody was interested. It was too early and and it was beginning to fail but I had a bunch of trainees with me from sort of Lsc and and and um, whatever a but bunch of graduates and and then the european bank approached me and said we’ve got this project in Russia. Do you want to? um. Could you be chairman and so I but I thought why not you know I’d never never been to Russia. But and in the end I went into ebrd and they said well we’re changing focus. We’re not for funding it and I thought well I’ll go out there anyway. So I went out there and met um, an english Guy Willner who had. Been living 25 years in Moscow and was trying to build ah a data center business and it looked like it could fly. So um I then talked to iffc the world bank who were investor in the previous business in terrika and and they said yeah, we’ll take a look and in the end ifc invested so that was back in war 2010 something like that.
Alejandro Cremades: Because all in all, how much did you did you guys raise for the operation.
Guy Willner: Before anything nasty happened.
Guy Willner: Oh that’s I mean that’s been through many many rounds. There’s probably 350000000 something like that in total.
Alejandro Cremades: And what did you learn to about and dealing with you know, let’s say like investors you know of that profile.
Guy Willner: I mean the the russian business I mean notwithstanding that it’s Russia and that’s a terrible place these days. Um, when it was a good time I was dealing with bigger and bigger institutional investors. So you know by the time we you know by the time the war started we had. Ifc Goldman Sachs Pim ko mubardola semi turmo group so we had we had the great and the good as as investors and that’s quite a tricky thing to manage when you got lots of institutional investors.
Alejandro Cremades: So talk to us about private equity firms. You know what? what kind of breed is this I mean we’re we’re more used to listening to venture Capital you know type of profiles but private equity. You know what should people listening you know, know about.
Guy Willner: Private is is the fund I mean I’m advising 2 pe funds at the moment. So I’m learning that it takes a long time to understand how a p firm ticks and p firms are only as good as their the last fund they raised so they have a. Ah, sort of a five six year cycle and every five 6 years they have to go and raise another fund and and they go through this really really difficult really complicated and you know hard process to try and raise a whole load of money and then they can breathe a sigh of relief for four or five years after that. Um. So it’s it’s it’s a very cyclical business. It needs results within four or five years so ah it’s not not good for a long play. Um data centers are typically 10 year plays so that it’s it’s quite complex. The relationship between p and and the data center industry. Um. But yeah, it’s it. Ah, you have to understand that there’s a different language It’s ah I speak sort of operational language and management language or whatever and and mps speak a different language.
Alejandro Cremades: So so then in this case for you I mean eventually there was like some obviously the war started and that kind of like disrupted. You know everything that you guys you know had going I mean we’re talking about an operation that was say worth about a billion you know at the time but what happened.
Guy Willner: Um, in a world now.
Alejandro Cremades: You know how was that thing for you. Um I know that you’ve disengaged you know with with with this but I’m sure it was not easy.
Guy Willner: No, it was a bit like going through dot com again bubble again. So you know here I was you know having built the business side spent what 1011 years building it and um and then you know we’d been in ah, an office in London with Jp Morgan and Lehman Brothers Not ah Goldman Sachs and Lehman Brothers Ah that was the first time around Goldman Sachs and Morgan Stanley ah in London to push the button on the float nasdack float this time and two weeks later the war started. So um, suddenly everything was off you know and I was being kind of made redundant from the company I founded. And I could see my bank account going down. You know I had a big mortgage and children and studying and stuff like that I was beginning to get worried because suddenly that I was expecting to take ah a chunk out of the equity out of the business in Russia and suddenly that just disappeared. Um, so.
Guy Willner: That’s ah that was a real shock and so I had to kind of pick up the pieces and luckily I had my kenyan business which I’d started a few years earlier knowing that emerging markets are always high risk and so I thought it was better have 2 than one and at that point there was ah an investor who came in.
Guy Willner: Who decided to invest in the kenyan business and then asked me if they could if I could advise them across Africa so I joined them as senior advisor on that and then on top of that pimco in Europe came in and said well we’d like you to help us with with western europe um with the plan we’re we’re doing. Ah. To roll out big data centers there. So I ended up from jettisoning sort of Russia to advising on Africa and western europe with two separate fee funds.
Alejandro Cremades: And so tell us about to the operation in Africa.
Guy Willner: So Africa you know every every you know I’ve just been doing data centers since 90 ninety nine but every country is different. Every culture is different and when you’re building up a team. It’s it’s always different. Um Kenya is is lovely place because you know the average age is like 21 ah, versus about 49 for europe so it’s a very young country. You know our head of hr was born in Ninety Ninety Nine um and young enthusiastic. Well-educated. Ah so it’s been really exciting. You know we built the whole data center. So it’s like a $50000000 project for phase one. Ah, we built the whole thing with local contractors. We had no ex-pas out there. Um, so that shows how sophisticated some of these countries are in across Africa.
Alejandro Cremades: And how is it you know also for you like when it comes to to to lessons you know because I’m sure that doing business in places like Russia or places like Africa it’s a little bit different from maybe the way that you would do business in the Uk or the way that you would do business in the us. So well. What are some of those differences that they that you encountered.
Guy Willner: I think the main the main difference is this is not a transactional world. Um, you know the the american way is you know I’ll get you know we’ll have a 250 page contract and if you don’t do what I tell you I’ll sue your pants off. Well you know, try and Sue Somebody in Lagos. Um, so it’s all about trust. Ah so it’s totally not transactional. It’s all about trusting people so the first thing you do if you go into a new country or new jurisdiction or whatever is to find people you really intimately trust and who are absolutely straight down the line and. Demonstrate to them that you’ll straight down the line as well and build a relationship and if you can’t do that then it just doesn’t happen.
Alejandro Cremades: So also you know like for now for you. You know? what’s what’s gonna be next day Guy Willner. You know you see an entrepreneur entrepreneur. Always an entrepreneur. It sounds like you’re keeping busy you know with advising but they but what are you thinking.
Guy Willner: I’m thinking I need to change because I’ve been doing data centers for far too long? Um, but at the moment that’s what I’m doing you know I’m on the board of a brazil data center company with Goldman Sachs as well. So I’m I’m sort of doing global. Um, but I’m I have no full time job anymore. Um, so I’m I’m just sort of. Sitting on boards and advising different p funds. So. That’s that’s quite much more enjoyable so I was out in Ireland a couple of weeks ago on the west coast getting my um getting my sale training in so getting my skipper’s license. Um, so I’m doing. Um, spending more time for myself which is nice and more time with the family which is nice as well.
Alejandro Cremades: So talk to us saying Guy Willner about Ai and the future.
Guy Willner: So ai in the future I mean if you look at the data center market started off in ninety nine with sort of little telecoms companies putting their telephone exchanges in buildings and then morphed into the internet where everybody from Spotify to you know to to meta wanted to put their equipment. Somewhere near the end user and that kind of carried on and grew up and then suddenly you had the cloud which was Microsoft and Google and Amazon and people like that bringing cloud compute so that was another type of data center big sort of regional hubs and then suddenly on top of that. Post covered. We’ve had Ai coming in and you know if you’re using copillot on in the office on your Microsoft as your service or whatever. Um the thing is it needs a lot of compute and so we’re beginning to run out of compute across the planet at the moment. So that’s. Story of digital infrastructure in general is there’s’s always a weak link somewhere. Um at the moment I think meta has bought half the annual production of Nvidia and that’s about three Gigawatts of ah of power energy needed to power those machines. But. Where ai takes us nobody really knows yet. The only thing that seems to be clear is the more machines that you’ve got the more intelligent your um product is going to be.
Alejandro Cremades: Now I Want to go a little bit deep into into a topic that you know is something that people don’t really think about it as much and that is work like work like balance right? I mean in your case you know we’ve talked about successes. We’ve talked about. You know lessons learner along the way you know when when shit hits the fan and you know it gets real too because it’s going to Happen. You know at the end of the day when you’re building startups Now you can’t you can’t be successful all the time. But when all of us sudden you know when perhaps you know like a painful moments happen I get I Guess you get to realize you know the stuff that you gave up.
Guy Willner: Yeah.
Alejandro Cremades: Right? You know in order to to do what you were doing and then you know you’re like my God you know we got there and for what kind of thing. So I Guess as you’re looking back right? I mean you’ve been doing this now for decades being in the venture world building companies. What have you really gotten From. Being able to balance the personal side with you know, being on a entrepreneurp.
Guy Willner: I think certainly from my experience I could write quite a few books about what I’ve done I haven’t been sitting behind a desk in London for for 30 years I’ve been out all over the shop with all sorts of different. You know in all sorts of different countries. So I mean that’s been fascinating that whole human. Adventure is is great. You know a couple of weeks time I’m doing a twenty fifth anniversary dinner for the founding of my first company and we’ve got about 30 of us coming together and and I haven’t seen some of these people for 20 years so that’s going to be really nice. So I think the relationships is the main thing. I think it is a difficult thing for an entrepreneur because if you are an entrepreneur you know certain qualities of character and necessary and some of them are things like shorts span of attention. You know you’ve got to get moving. You. You don’t have time to sort of get into the detail. You’ve got to build a team around you who you trust. And as a result you know it’s life life can be difficult. You know I say you know you ask me what I want to do next and I saw I’m going to calm down and probably do something else, but you know who knows I’ll get excited again. You know if I if I took three months off I’d be I’ll be going mad after three months I want to get onto a next venture. So it. It is addictive. To build big companies. The one the 1 thing at least that I did right from the beginning is when I first started my first business. My co-founder said yes I’ll join you as co-founder but on 1 condition I don’t work weekends and so i’ve.
Guy Willner: Hardly ever work weekends. You know I might take a plane on a weekend but it’s not very often, but my weekends have been kind of that’s it that’s it I’m off however as an entrepreneur you’re kind of thinking about the business twenty four seven that’s the only that’s the downside. You know you can’t put your pen down on it Friday and take a weekend off.
Alejandro Cremades: And from so now obviously as you were saying 30 years you know that you haven’t been behind a desk pushing paper and obviously a lot of stuff that you’ve learned along the way so talking about lessons here. Um, if I was to able to transport you. Back in time and maybe we’re going way back in time you know like maybe to that moment where you were giving your let’s say your notice and we’re talking about maybe like the I don’t know you know like let’s say the 90 s okay, late 90 s when you’re now thinking about entering the venture world. And let’s say you had the opportunity of stopping that younger Guy Willner: that was coming out of maybe Phillips after giving the notice and you’re able to stop that younger Guy Willner: and give that younger Guy Willner: on the spot. 1 piece of advice before launching a business. What would that be and why given what you know now.
Guy Willner: I think um as it’s your first business if you can take money off the table early and get on and do do another venture. Do it. You know, just move on. Don’t don’t hang on forever I think that’s probably.
Guy Willner: Ah, piece of advice. But then if I play it back. You know we did go through the dot Com bubble so it was it was tough. Um, yeah I don’t know I mean I I Definitely wouldn’t say don’t do it because ah it was amazing thing to do once you cross the line. You can never go back once you started you know started Businesses. So I don’t know I Guess um yeah I think it’s probably take take money off the table as early as you can I think that’s one of the mistakes Entrepreneurs make is that they’re they’re waiting for the big one and and if the big one doesn’t happen. They got nothing.
Alejandro Cremades: I Hear you so Guy for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Guy Willner: Ah, on Linkedin I’m all over Linkedin with all my different projects.
Alejandro Cremades: Amazing there you go well Guy Willner. Thank you so much for being on the deal maker show today. It has been an absolute honor to have you with us.
Guy Willner: Thank you very much Ellen andro.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Guy Willner On Selling A Company For $555 Million And Now Advising PE Firms As A Board Member appeared first on Alejandro Cremades.
Leor Catalan is an innovative founder whose story embodies curiosity, resilience, and relentless innovation. Join us as we delve into his remarkable trajectory, from his formative years in Tel Aviv to the helm of a global company with over 600 employees.
In this exclusive interview, Leor talks about building his startup and scaling it by reinvesting $100M worth of revenues as against raising from external investors. That’s how Leor successfully built his company, PassportCard.
In this episode, you will learn:
- Leor’s childhood curiosity laid the groundwork for his entrepreneurial journey, emphasizing the power of inquisitiveness in driving innovation.
- Leor’s transition from the public sector to consulting underscores the value of diverse experiences in shaping entrepreneurial vision and strategy.
- PassportCard’s approach to reinvesting profits over traditional venture capital highlights the importance of challenging conventional norms in business growth.
- Leor’s emphasis on listening to customer feedback and fostering a culture of innovation underscores the significance of customer-centricity in business success.
- PassportCard’s entrepreneurial spirit thrives on a culture of collaboration, where every team member’s voice is valued and contributes to the company’s evolution.
- Leor’s emphasis on focus, humility, and adaptability serves as a guiding principle for navigating the dynamic landscape of entrepreneurship.
- PassportCard’s vision of empowering travelers worldwide reflects Leor’s commitment to creating meaningful impact through innovation and customer empowerment.
Alejandro Cremades · EP 889 Leor Catalan On Rolling Revenues Worth $100M Back Into His Company For Insurance CoverageSUBSCRIBE ON:
iTunesGoogle PlayStitcherTuneInRSSSoundCloudSpotify For a winning deck, see the commentary on a pitch deck from an Uber competitor that has raised over $400M (see it here).
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Your email address is 100% safe from spam!**About Leor Catalan:**Leor Catalan, based in Israel, is currently a CEO of Corporate Ventures at DavidShield – PassportCard, bringing experience from previous roles at Robin EB Inc., TravelCard Real-Time Travel Insurance, and PassportCard Nomads.
Leor Catalan holds a 2002 – 2005 BA in Economics @ The Hebrew University. With a robust skill set that includes Economics, Valuation, Business Strategy, Business Analysis, Analysis and more, Leor Catalan contributes valuable insights to the industry.
See How I Can Help You With Your Fundraising Or Acquisition Efforts
- Fundraising or Acquisition Process: get guidance from A to Z.
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- Investor and Buyer Access: connect with the right investors or buyers for your business and close them.
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Connect with Leor Catalan:* LinkedIn * Crunchbase * RocketReach * Zoominfo
Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So today. We have a really incredible story. You know we have a founder that has built a company that is ah, an incredible rocket ship. You know they have really reinvested. You know the proceeds the founders versus a really raising money. From outside investors we’re talking about reinvesting 100000000 plus a company now with over ah 600 employees keeping that entrepreneur entrepreneurial mindset that we’re going to be talking about but you don’t see many companies like this and I find that the whole building scaling I find that you’re all going to very much enjoy it so without further ado. Let’s welcome our guest today Leor Catalan welcome to the show. Hello.
Leor Catalan: Thank you handle. It’s a pleasure to be here. Thank you for having me.
Alejandro Cremades: So obviously giving that last name you know there’s some spanish origins but born and raised in Tel Aviv so give us a walk through memory lane I was life growing up there.
Leor Catalan: Yeah, well, ah you know Tel Aviv fantastic city to grow in um, ah the naive 80 s and 90 s early days of person computing and the internet age. Um. You know, fantastic time I was a very curious kid and well my parents never got tired of my questions which which is great always dismantling and rebuilding stuff and I think this has remained part of my Dna into entrepreneurship. Um. Yeah, so fantastic time.
Alejandro Cremades: What do you think? got you into assembling things looking into the design of stuff I mean that that engineering mentality.
Leor Catalan: Like I don’t know I always say that it’s It’s Engraved. It’s something that I was born but born with but it’s ah you know from a very early age looking at how things are designed trying to rethink how they could be designed maybe better. Um, you know, sort of. A very early on dream Career dream was to become an architect of all of all things. So ah, you know it’s all part of the same story I guess.
Alejandro Cremades: So Your parents were very very very supportive now of you asking questions. You know, thinking about the world thinking about problems I Guess say it sounds like you have very much that engineering Mindset. So I’m just wondering like. Why did you ended up going into business economy and law versus maybe like getting an engineering degree.
Leor Catalan: Well, you know it’s it’s it’s I think that it it is at that point of of getting into um you know my so my academic studies and looking into my career I wanted to have as many doors open and really try to.
Leor Catalan: Um, get as much of the world as possible. Um, you know, having many international relationships beforehand. It seemed like a logical step to start with ah but you know from very early on in my career. It was very clear to me that.
Leor Catalan: The building stuff element is is very much there and and this is what I would eventually do so you know history remakes itself I guess.
Alejandro Cremades: That’s Amazing. So then so then in in this case for you when you ended up getting your degree. You ended up going into ultimately corporate right now as part of that before corporate you decided to take a look into the public sector. So The Ministry. The ministry there of finance. Why were they like the ins and outs that they that you experience or that you learn from let’s say like being exposed to the public you know sector.
Leor Catalan: Look I Think what’s what’s amazing about that stage in my career is the impact that you have as a very young person right right out of University Very early stages in in my career. The level of impact that you have is is amazing. And just looking at how life changing decisions are made what um, what type of um, ah questions you need to ask yourself in order to make the right decision. And make sure that it’s balanced and it’s it impacts positively. Ah, people’s lives for for generations I think is is amazing and you know it’s It’s a a responsibility exercise if you wish you have to grow up very very quickly because you understand that. If you make the wrong call. Ah the implications are are immense. Um, so I think you know it It was an incredible experience. Um, and you know I’d recommend anyone to try and and and. Look at that at the world from that angle as well.
Alejandro Cremades: So so then obviously you know like here you spend you know quite some time. So how do you go from being in the ministry to all of a sudden you know getting into consulting because you were there in the ministry for about 2 years and then in consulting you spent quite a bit of time I mean you were there for about 5 years you know doing you know stuff around financial advisory services and and and and helping on valuations. So what exactly were you doing and I guess out of this consulting work. How did you also shape up the way that you were thinking about. Resolving and addressing problems.
Leor Catalan: Look it’s it’s it’s exactly that right? It’s I think that management consulting and financial advisory The whole point was that creation piece that that entrepreneurial sort of element still under a corporate element I didn’t have I wasn’t brave enough at that point to to jump. Ah, all the way to to entrepreneurship. But um, you know, being there working very very closely with management in order to solve problems rebuild processes um trying to bring. Um. Information and and make discovery into decision making I think this this excited me at that point and I really wanted was you know a first jump into entrepreneurship or or. Um, that rebuilding and and design of of things that engineering of things. Um and and you know it’s I think that what’s great about consulting is. How dynamic it is and and the way you’re able to see so many industries in a very short while and and be there to solve problems and and working with fantastic people. You know the really the the cremdala cram if you wish.
Alejandro Cremades: So obviously it was just a matter of time you know, given that the background of yours of looking into things you know problems assembling and assembling stuff since you were a kid. It was just a matter of time for you to really join the venture world and.
Leor Catalan: Practice.
Alejandro Cremades: Obviously you know you joined backed In. You know it was about 2010 when you decided to join the founding team as a cofounder there of passport card and that’s what you guys have been doing and pushing for quite some time. But. How did the idea come knocking to you and how did you guys really get the band together and and go going with this. Okay.
Leor Catalan: Yeah, so you know it actually goes back to management consulting because a good friend who was 1 of my clients named Aone Ketsev was into international health very traditional at that point but they have this. You know novel idea of how do you How how do you make insurance easier for people and really wanted to do something about it as they’ve had a vague idea of somehow using or combining a debit card in claims payment. And he ah you know he offered me to jump ship if you wish and and join the founding team of what later became passport card and there we completely reversed the way insurance is. Made this run if you wish and completely which we set out to do completely solved the inherent conflict between an insurance company and the insurance member. You know if you come to think about it. Insurance is is a pretty bad industry because you know the insurance company. For them to pay a claim means more losses. So it’s not in their interest to play a claim. So how do you solve that conflict that inherent conflict and and what we did is to put the insurance the insured member to put them first to put them in control of the process.
Leor Catalan: And essentially we tied 2 industries together. The fintech financial industry banking industry if you wish with insurance and created a new new ecosystem where a person can walk into. Um, any service provider around the world and instead of paying out- of pocket and then being reimbursed just hand out a debit card that we issue for them and pay for the claim and that’s it and though the the engineering part that came into that was not only putting those 2 industries together and 2 completely significantly. Different logics together but also not compromising the controls that are so gravely needed in the insurance space. Um, and that I’m sorry.
Alejandro Cremades: And how do you guys And how do you guys make money and how do you make money. Obviously you were sharing there the the way that the company works. But how do you guys monetize.
Leor Catalan: So We um, um, we eventually we control the the ecosystem from a to Z so we sell insurance plans to our members mostly international health and travel Insurance. Um. And um, we operate the entire business in a completely seamless way for the member. So for them. They only deal with us and and that’s it where are their insurance plan wherever they go whenever they cross a border and wherever they grow they go in the World. We are their enterings plan.
Alejandro Cremades: So for you guys, you know like what were the early days like for the company because I mean know you see 2010 you know you’re coming back now from the craziness of the a recession in all the crises that we had in the economy.
Leor Catalan: I.
Alejandro Cremades: Ah, and and how how is it like you know those early days and and also at what point do you realize hey I think that we’re we’re into something here.
Leor Catalan: Look I think that the first challenge that we had was convincing um those 2 distinctly once again, different industries and and the different players within that those the different ecosystems. Come together and work together and create 1 seamless product. This didn’t didn’t come easy. Um I remember you know, walking through offices all across the us and Europe talking different to different entities which. And and people you know fantastic professionals but they just didn’t understand what we’re we were trying to achieve and it took a while to find those people who were willing to take that leap of faith. Um, um, and and and tell us you know what we’re with you. We’ll give you our support. And and really create that seamless user journey that that we ah were trying to to do so this was a struggle obviously mostly in the financial services space after the credit crunch. It was even. More difficult and and you know it was even harder to get people’s trust at that point. But I think that you know from the get go. We were um, willing to put our money where our mouth is and and that I think was very much appreciated by the different partners that we worked with.
Alejandro Cremades: And you know in in your guys’ case the way that you have gone about capitalizing. The business is is quite unique. So walk us through the thought process behind you know, not doing the whole Vc.
Leor Catalan: Back in the day.
Alejandro Cremades: Hyper growth. You know style of taking external money and and really you know taking the decision of going the way that you guys did.
Leor Catalan: Um, yeah, well I’m not sure there was actually any specific point that this was an actual decision. But I think that very early on. Um, we.
Leor Catalan: We were able to see how the business is growing and and becoming a very um, very well established from a financial perspective and this allowed us to start looking into different growth initiatives different ventures which. Is what I do in my my ah day-to-day. Um, you know, incubating new ideas new products going into new markets and at a certain point and looking back This became sort of a a method almost a machine that we’re working on a daily basis. And fortunately we were very very fortunate to very quickly establish a business that created significant Cash flows that allowed us to ah to invest heavily into those new ventures and you know different discovery of of different ideas.
Alejandro Cremades: But I mean obviously given the size I mean you guys have reinvested you know of of your guys’ money you know a 100000000 plus here and given the size of the business toys. It’s it’s It’s easy to get distracted because there’s people that are knocking on your door people that are offering term sheets people that are offering an acquisition offer. How do you? You know filter through that and and really get real with with just rejecting all of those distractions and just. Keeping it moving.
Leor Catalan: That’s a great question I think you know we’re we’re a group of people who are so ah, focused and convinced in what we do in the value we bring to our customers which to an extent makes it easy. We’re focused about creating value to our members. Um, and you know this is we always? Ah, we always say and it’s and this flows through the organization even in training of of new recruits that what? what counts first is our team. Our employees. Then it’s our members and lastly it’s it’s the shareholders, the partners and I think this is this is part of the mindset here. It’s really being focused in what we do Um, and and we feel that on the long run this would create. The the highest value for for everyone involved. Shareholders include.
Alejandro Cremades: So one of the strategies that you took on is the corporate ventures. You know So what? What? What are you guys doing there. Okay.
Leor Catalan: Correct. Yeah, so you know it’s it’s really all about how do you grow a business and um, you know insurance traditionally is a very local business by nature and while. 1 approach might be okay, we do one type of insurance in our case in national health and travel insurance we do that? Well so why don’t we do car insurance or home insurance or whatever and our decision was different. Our decision was to grow internationally number one but also really see how we can expand. Ah, the value that we bring to our customers who recognize us in that cross-border space and this created a methodology where under you know the corporate ventures which which I personally lead we have if you if you wish a 3 hree-pronged approach where. We have those you know a global expansion into new markets. We’re constantly building new products which you you know is if you wish to look at it as as an onion always expand the value proposition to our customers and an incubator of new technologies. A new um product approaches. These are the things we’re busy, busy with constantly and and we’re in a constant mode of building new stuff. Um getting you know the right team around it and releasing it to the world.
Alejandro Cremades: And.
Alejandro Cremades: Obviously a big component of that to is the mindset. You know that that you guys have I mean there’s like a couple of mindsets here I think that the first one you know which is a perspective and flexibility on the way that you view the world talk to us about this.
Leor Catalan: Um, look. It’s it’s ah you know it’s really never taking anything for granted I think it’s part of our Dna and you know part of the challenges. Is really making sure that that Dna flows through the entire organization as we grow in internationally but it’s really looking at every problem and never being convinced that we’re already doing the right thing but always you know, um, challenging our own thinking. Um, and and never um, never taking any answer we’re taking we’re getting from a consultant or or any other person as as a given. Um it’s it’s almost um and it’s it’s a challenge. It’s something that is hard to do on a daily basis but eventually I think the the value that we we see that that is being created out of it once again, creating value to our to our customers is what makes us you know, keep going. Um, albeit or or despite the the hardship that is included in it.
Alejandro Cremades: And what about to the entrepreneurial mindset as well because now you are over 600 employees and when you have so many employees. It’s tough not to get into the whole corporate dish. You know, look and feel.
Leor Catalan: So I think you know it’s I would say it’s I would divide my answer into 2 1 is first of all the approach we’ve taken with the whole corporate ventures approach. So how do you grow the business right? And and um is it just. Sort of mixing the same water all the time or trying to constantly look how to expand the footprint and this by itself creates a a very flexible thinking um that flows through the organization because. You know we are always We’re constantly introducing new stuff and people are constantly on their toes. But it’s not only that because it’s you know to create the culture that goes all the way to the last ah person who you know the youngest person who was who just was recruited. And join the team It’s really, um, making sure that their mindset their opinion their idea and the way they challenge what we do that it counts and we take it in every inch of seriousness and and once. People understand that they understand they they are partners to something bigger than than you know each individual in the company people fall in love and play the game.
Alejandro Cremades: And what about the um division to know when we’re thinking about playing the game too and and and and keeping people rowing in the same direction when it comes to vision. You know is is everything. That’s the way that you get employees. You know, excited about the future that you’re living into you know also customers. You know, excited too. But when it comes to the vision imagine that you were to go to sleep tonight and you wake up in a world where the vision of the company is fully realized what does that world look like.
Leor Catalan: Wow. Um, look I think you know our vision is is um to be um, people’s first choice when they travel when they cross borders. To be their point of confidence when they travel and this is what we’re working towards and we’re constantly adding more capabilities more services in order to um, fulfill that that vision.
Leor Catalan: Um, and you know I think that one of the one of the you know main success factors that I would say we’re looking at is whenever whenever we get feedback from our teams. The 1 thing that always pops up is that they feel that we’re we’re there for our customers. We’re creating value for our customers and this is what drives this organization. This is what drives us as individuals. And you know there is no beer success in my mind.
Alejandro Cremades: So obviously we’re talking about here the um, the future but I want to talk about the past with with a length of reflection. So if I was to put you into a time machine you know and I was to bring you back in time maybe to 2010 now today moment where you guys were thinking about. Launching this and let’s say you’re able to give a piece of advice to that younger Leor that just put in the notice at Deloitte and let’s say you’re able to stop that younger leo and give that youngerlyor one piece of advice before launching a company. What would that be and why given what you know now.
Leor Catalan: I Think that the the main thing that took us some time to understand is to believe in what you do believe in the values you stand for and. Um, listen carefully carefully to your customers because eventually it’s it’s all about the relationship you build the long-term relationship you build with your customers and and this will eventually drive the best decisions. For you as a business.
Alejandro Cremades: This is amazing. So now when you listen to the customers have you have you come up with or have you thought you know during this fourteen years of pushing you know the company on maybe like maybe like the best. You know the top 3 ingredients. You know that can be really helpful when it comes down to listening to a customer.
Leor Catalan: Um, so one I I think is is to an extent an opposite because you know customers when they believe in you when they believe in in your. Brand and your ability they feel that they’re associated with you. They want you to be involved in in many aspects of their life. But I think focus is important and to an extent understanding what you’re good at and being focused in that and making sure you’re the best in what you do is. Ah, is super important. Um, so this is definitely the number one for me. Um the other is um, not disregarding. Anything that your customers say it’s very easy to come with a you know, sort of a precondition if you wish and you know where we all believe in in our creations but being very very open listening very open and and listening not only to the words but also the music is key. And that applies by the way to customers that applies to to your team and everyone you know that that you have the benefit of getting information about what you do And lastly I would say it’s.
Leor Catalan: It’s a value set. Um I know it may sound romantic but I think that business is not only about making money. It’s it’s about being impactful as Well. And. If You’re impactful in in in the right way it’ll it’ll prove itself to be successful also from a business perspective.
Alejandro Cremades: I Love Allure for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Leor Catalan: So Linkedin look me up the or catalan passport card. You’ll find your way.
Alejandro Cremades: Very easy, very easy is he enough so lear. Thank you so much for being on the deal maker show today. It has been an absolute honor to have you with us.
Leor Catalan: Same here my pleasure. Thank you very much for the time.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Leor Catalan On Rolling Revenues Worth $100 Million Back Into His Company To Streamline Insurance Coverage appeared first on Alejandro Cremades.
In the fast-paced world of entrepreneurship, the journey is often as captivating as the destination. Duncan Logan, a seasoned entrepreneur with a trail of ventures behind him, sat down for an exclusive interview on the Dealmakers Show, providing a captivating narrative of his entrepreneurial odyssey.
Duncan’s latest venture, 9Zero, is in the process of raising a friends and family round.
In this episode, you will learn:
- Specialize and stay focused within your chosen industry vertical to maximize impact and success.
- Thorough due diligence is crucial in all business dealings, especially during acquisitions.
- The entrepreneurial journey is filled with highs and lows, but resilience is key to overcoming setbacks.
- Building ecosystems fosters innovation and accelerates progress, as seen with RocketSpace and 9Zero.
- Climate change presents both challenges and opportunities for entrepreneurs to drive sustainable solutions.
- Compounding knowledge and networks within a niche industry can lead to exponential growth and impact.
- Embrace serendipity and strategic partnerships to navigate the ever-evolving landscape of entrepreneurship.
Alejandro Cremades · EP 888 Duncan Logan On Raising $336M To Support Unicorns And Now Working To Reverse Climate ChangeSUBSCRIBE ON:
iTunesGoogle PlayStitcherTuneInRSSSoundCloudSpotify For a winning deck, see the commentary on a pitch deck from an Uber competitor that has raised over $400M (see it here).
FREE DOWNLOADThe Ultimate Guide To Pitch Decks Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
Access The Pitch Deck TemplateUnlock the pitch deck template used by founders to raise millions. Just enter your email below.
Your email address is 100% safe from spam!**About Duncan Logan:**Duncan Logan is the Co-Founder & CEO of 9Zero, a company focused on investing in solutions to tackle climate change.
Duncan is also a Board Member at Renaissance Entrepreneurship Center and has a background in founding and leading technology-focused companies such as RocketSpace Inc. and OneLife Ventures.
With experience in various leadership roles and a degree in Agricultural Business and Management, Duncan is committed to empowering entrepreneurs and making a positive impact on the environment.
See How I Can Help You With Your Fundraising Or Acquisition Efforts
- Fundraising or Acquisition Process: get guidance from A to Z.
- Materials: our team creates epic pitch decks and financial models.
- Investor and Buyer Access: connect with the right investors or buyers for your business and close them.
Book a Call
Connect with Duncan Logan:* LinkedIn * Crunchbase * RocketReach * TheOrg
Read the Full Transcription of the Interview:Alejandro Cremades: Alright, hello everyone and welcome to the dealmakerr show. So today. We have an exciting founder. Ah the founder that has done it multiple times you know I and T we’re gonna be talking about the building the scaling the financing the exiting So all of the good Stuff. You know we’re going to be talking about. How to think about acquisitions. How to do diligence perhaps on the potential acquirers How to raise money? How to think about raising money and the lessons you know along the line you know of of raising capital and then also why climb it you know with a his current business which is a rocket ship but again very inspiring conversation.
Duncan Logan: I.
Duncan Logan: L.
Alejandro Cremades: We have in front of us so without further ado. Let’s welcome our guests today Duncan Logan welcome to the show. So originally born and raised in St Andrews you know which people may recognize you know for golfing you know in Scotland so give us a walk through memory lane. How is life growing up.
Duncan Logan: Thank you very much good to be here.
Duncan Logan: Yeah, well I’m probably living proof that there’s nothing genetic, genetic about golf. Um I love to play it but I’m not very good. But yeah I was very fortunate to be born and bred and in the kind of home of golf in St Andrew scotland my parents were farmers. Ah, they had a ah pretty large, but 5 six Thousand acre agribusiness up in Scotland my father was very pioneering and trying to grow new crops like broccoli or or lettuce or or so forth in Scotland so that was my yeah, my upbringing I then went to. University up in Aberdeen which is an an oil town as most people know for norse sea oil and studied agriculture up there? Um, but at the end of the the course decided to go into derivative trading in London so I first worked for Lehman Brothers and then for swiss bank. I did their graduate program and became ah a drift of trader in London um, after a couple of years of that I I really longed to do my own thing. So I I broke out and became an entrepreneur and I’ve been an entrepreneur ever since and.
Alejandro Cremades: So then let’s talk about the becoming an entrepreneur entrepreneur. You know what was that what was that thought process you know because obviously you were coming from you know, humble beginnings. You know your parents were farmers. You know here you were you know, grading from school being in banking you know corporate job. You know that was quite successful. You know So why.
Duncan Logan: Can.
Alejandro Cremades: You know, throwing everything you know to the side and and venturing into the unknown I’m sure that was not an easy process for you to to really take the um the stance and go.
Duncan Logan: Um, yeah I think a lot of people thought I was crazy at the time. Um I think that the actual trigger point was bonus time in the bank and realizing that you know a large part of my. Um, my income and my career was in the hands of other people and one year I felt I got sort of passed over a little bit on on bonuses which are a big part of of why you’re doing banking and I just said you know I need to be more in more control of my destination and um. I found an opportunity to to set up a customer relationship management business actually focused on banking and we we set that company up and I got it going and three years later we sold it so it it turned out to be a really good decision.
Alejandro Cremades: So I was citipro you guys ended up selling it for eight million bucks so I guess the yeah the question that I have for you. There is I know that on the diligent side. You know there was like quite.
Duncan Logan: Yeah, yep. Yeah.
Alejandro Cremades: You know a few lessons that you got you know I Obviously you know like the the they were doing a ton of diligence on you guys. But perhaps you did not reciprocate So what? what was that lesson there to we learned.
Duncan Logan: Yeah I think um, we we built the company. It grew very quickly and then we got this offer for acquisition from actually what was a publicly traded company on the small. So called the in market and um. They came in and did their full due diligence on us and we were sort of wowed by the the money in the terms and and really did no due diligence on the team that were acquiring us um and you know they acquired us in the year two thousand things got tough. Ah, for the company but the deal terms at the last minute were were swapped from sort of high cash low equity to high equity low cash we still we still took the deal which we shouldn’t of in hindsight. But um, yeah, the equity turned out to be worth zero and. It was only when I I got into the company after the acquisition that I realized you know they had sold us on something which really was pretty fanciful to what the truth was so that was a a lesson there and if you’re if you’re going to get if you’re going to get acquired do your due diligence on the chorer. As much as they do it on you and and the people running the deal I mean at the end of the day so much of business comes down to the quality of people. Um you know and you you got to do your your diligence on how those people have behaved in the past and.
Duncan Logan: You know that gives you a pretty good indication of how they’ll behaving the future.
Alejandro Cremades: So then so then in this case too I mean what was that full visibility into the full cycle of a company you know from building to scaling to reaching the finish line.
Duncan Logan: Yeah, well it it happened very quickly I started the company when I was 24 and we sold it when I was 27 so um I think and it was you know I always talk about these these stages of competence you know from unconscious incompetence to conscious incompetence. Um, you know that’s a ah huge step I don’t think we really ever got out of unconscious incompetence. We were just lucky on timing. Um, you know as long as there was paper in the fax machine. The orders kept coming in and we just deployed assets against it and made sure that. Um, you know our people costs were were less than the revenue coming in and and the business was on ah on a tear. So um, we we never really you know it was ah it was a quick Mba into how to run a business but um I was probably more I was definitely more lucky than good. And getting that business to to an exit.
Alejandro Cremades: So talking about getting an Mba in business. You know you joined your friend you know and you got going with message laps as the next chapter that was a pretty smashing outcome of ah of a transaction so walk us through how was that journey like I mean why joining a friend versus.
Duncan Logan: Um, yeah, so um, one of my customers at Citibro is a company called star internet and ah.
Alejandro Cremades: Doing it again on your own.
Duncan Logan: It had this really awesome founder Ceo a guy called Ben White and um Ben and I had become pretty close and and he just described to me this idea he had for scanning email rather than scanning it at you know at the desktop of actually scanning it at the Isp. And it just made so much sense to me I I just within ah within 15 minutes of him telling me the idea I was like this is going to. You know this is going to change the security market this is going to be a huge company and so um, the timing was fortuitous. So i. Jumped on board joined the company and I really only meant to stay for six months or maybe a year um but I learned so much in that business and you know we built the company from you know, just a few of us up to 700 people and we ended up selling the company to semantic. And I think I stayed for you know over six years because I just learned so much so much about sales so much about product and and market fit and scaling and and I just loved every every day of working for that company and um, you know thought it was it was a good. You know I was learning stuff every day and you know we’re fortunate in 2008 that semantic came along wanted to buy the company and that transaction went through even though 2008 was a pretty hairy hairy time to get a a deal done.
Alejandro Cremades: I mean 700000000 was the transaction mean what is smashing I’ll come. What do you think worth the mean ingredients that allowed for that incredible all outcome to happen.
Duncan Logan: Yeah.
Duncan Logan: Um, so um, it was it was a well you know I think it was a well-structured deal in that the the company you know I had learned all the the Sas metrics about you know arr and recurring revenue and and so forth. And this was you know Ben was a real pioneer in the sas space and companies were learning that this idea of people paying you know per person per month was just a very sticky good business model. So when you take that that revenue. And then you look at where you are in the market adoption and I’ll I’ll never forget that you know when semantic came in they said you know we think you’re just getting to an interesting part of the market where you’re moving from the you know the early adopters into the the majority and that’s going to see. Incredible growth over the next four or five years and you know here we were thinking oh my god we must be far further along in market adoption than just you know 7 8 % but they were they were absolutely right? and it was a great deal for them. They they took the took the company and and grew. Revenue significantly over the next three four or five years and um I think everyone was super happy with that deal. You know I think it was a great deal for semantic. A great deal for message labs and all involved there and um, yeah, it was a great great learning opportunity.
Alejandro Cremades: So here what was different. You know when he came to the acquisition to the money experience that perhaps you know it it. It just felt different from what you guys did on the first transaction.
Duncan Logan: And yeah, you know Message Labs was a much bigger company. It had a much more professional executive team. It had you know Citippro didn’t have any investors message Labs had loss of Investors. So there. There was far more experience. Heads looking at the deal. Um, and it it was a risky time to get that deal done. But um, you know it was It was just quality people who had experienced dealing with other quality people and I think everyone was happy with the deal that got done and and that that also triggered.
Alejandro Cremades: So then.
Duncan Logan: Ah, a really you know, big thing for me which was to get out to Silicon Valley
Alejandro Cremades: So talk to us about getting to Silicon Valley you know how how was that for you to because I mean obviously quite different from the Europe you know and scottish you know type of look and feel.
Duncan Logan: In.
Duncan Logan: Um, yeah, so I think um I think whatever you do in life. Um, getting to hang around the best people who do that is really critically important. So I don’t care if you want to be a ballerina or a sportsperson or a musician or whatever but being able to practice your craft while surrounded in an ecosystem of the absolute pioneers and and best of that ecosystem is is phenomenal. And and it kind of comes into the model that we’re building at Nine Zero at Nine zero but um I just was like ah a moth to the flame of wanting to get to Silicon Valley and you know had the opportunity to do it I got a visa and and got out here and it’s been the. The best move I ever made with that event.
Alejandro Cremades: So then let’s talk to ah talk to us about the next chapter then because the transaction happens with message labs and and then you’re like okay, let’s go again. Rocket space so rocket space why rocket space out of all things. At this point you know you had 2 transactions under your belt. You really had this ability into.
Duncan Logan: So yeah.
Alejandro Cremades: Business models into building and scaling companies or rocket space. Why.
Duncan Logan: So rocket space was an ecosystem play and the the basic I started rocket space in 2011 and you could just feel It’s kind of interesting because it kind of feels the same as where we are today but in San Francisco in 2011 there was just this feeling of where. We’re through the worst of the you know the the financial crisis and things are going to start building and and growing again and the the idea of rocket space was really taken from ycombinatorycombinator is this phenomenal accelerator program where. People go in and and turn their ideas into a business and the program lasts for you know, twelve weeks and then at the end of that they all they all disperse and and go their own way and I I just had this idea of why don’t we build a space that y combinator companies could could stay in that. That ecosystem in a kind of graduation school and we we called it rocket space. We were. We weren’t affiliated with y combinator in any way. But I put the idea together and and put it out on the internet and the response to it was just incredible. Um. You know companies started funu I hadn’t found a building hadn’t found space but people started calling me and saying hey I hear you’re building this thing and we get some desk and we move in and it was sort of co-working before coworking existed but with a very focused approach that you had to be a technology company to get in.
Duncan Logan: And you had to have raised one round of funding before we would we would consider you and um it you know it just took off like a rocket and we were fortunate to have you know people like Spotify and uber and kabam and mogg and supercell and all these unicorn what turned out to be unicorn companies. Coming into rocket space and I think the ecosystem just harnessed this idea of of building big fast-moving companies and when you’re surrounded by you know when when so many companies around you are unicorns or building unicorns I think you get. You know the the struggle to build a unicorn becomes less. You know it’s a bit like running the 4 Minute you know if everyone else around you is doing it then it just feels ultimately more possible to do and yeah, it was just an incredible ecosystem. An incredible environment and. You know people like flexport Ryan and and all these amazing companies just came through rocket space at this same sort of time. So.
Alejandro Cremades: That’s amazing. So with Rocket space you guys raised quite a bit of money you know how much did you raise and what was that experience of raisingcing the money.
Duncan Logan: Yeah, so we we raised? um a total of 3 rounds of funding. There was sort of friends and family early investors and then we raised this. A big round of funding 336000000 from a chinese entity called Hainan Airline Group H and a and I had spent because we had uber and uber were pushing into China I had been going to China and had a kind of interest and everything I heard was you know. America was growing rapidly but China was just growing at this different pace and and the the people of China had been given a sort of taste of capitalism and they were just loving it and so the more time I spent in China the more I just thought there was a really. Big opportunity there um to help connect China and America through technology and ecosystems so we we ended up taking this deal 336000000 from hainan airline they were. They were great people. They they did a lot of investing into the us they bought ingram micro for I think 7000000000 they bought temp percent at Deutsche Bank 25% of Hilton They bought gate group menzies a lot of airline service companies Avalon And Aircraft leasing so they were.
Duncan Logan: They were very experienced deal team very western thinking. They had a big team in New York and everything seemed to be going. You know, really great until ah the chinese government I think had a change of heart and said listen all this money leaving China needs to come back and they were. Relentless and brutal about it and very quickly. It became clear that things at h and a were were changed I think some of the executives put in a house arrest. Um, you know it just became really impossible to get things signed off. They were obviously a board member and. I don’t think we would have learned anything different doing different due diligence on them. They were a very aggressive, very gregarious company. Um, and and I generally enjoyed working with them. But once things changed politically in China and then obviously. Ah, Donald Trump became president and and kind of the the China American relationship soured and it just became. You know we tried to to bring in an investor to buy them out. Um, but they they wouldn’t sell their position and it just became. You know we started losing key members. Staff and it just became a real hardship to the point where we we had a meeting one day and we just decided to to you know we would wind the company down and return the capital so that was an unfortunate end to rocket space. Yeah.
Alejandro Cremades: That’s amazing. So what a wild journey now I guess I guess for for for Rocket space. Obviously you know the um, incredible lesson learned there. No I mean I think that you know you either you succeed or you fail no and in terms of the journey and the journey that you had with Rocket space is absolutely amazing. You know from.
Duncan Logan: 9
Duncan Logan: Me.
Alejandro Cremades: Start to finish I Guess the ah the the outcome obviously is not what everyone had to hope for but without a doubt you know I’m sure that the journey was unreal. You know for you too know? So I guess what? what was the take. You know as a whole you know when it comes to to the lesson that you’re taking you know, especially from.
Duncan Logan: Here now.
Alejandro Cremades: Ah, journey that doesn’t have the desired outcome. You know what’s what was the takeaway for you.
Duncan Logan: Um, yeah, it’s I think as an entrepreneur you have to decide what you know? what? what drives your passion and um, you could you could definitely There’s. Loss of entrepreneurs who avoid venture capital avoid taking in external vet investors. You know, build incredibly successful businesses with no external. Um you know shackles if you like and it tends to be a slower ride it. It? um. You know I’ve always just been driven to want to build big fast companies because that’s that’s just what kind of motivates me um and the the China thing I think there’s a million ways for a startup to die and we always see this It’s that you know some company would be doing phenomenally well and then you know there’s some macro change which is way beyond their um you know beyond their control and it just kills the company and you know for a company actually to make it to an exit. What you know is they have managed to get around get over work through just so many different challenges that um, you know it’s a marathon and it’s grueling but they they make it to the ad make it to the end zone and and very few companies. You know.
Duncan Logan: Percentage-wise very few companies actually make it. Um, So I think that the learning was I actually really enjoyed the journey of building Rocket space and it it. It didn’t give you know the outcome and it felt terrible that you know on paper I think everyone staff and investors thought this is this is going to be a great outcome and then. Just you know, find ourself in this predicament that um it wasn’t um and you know that that was a shame but I still enjoyed the journey I Still think I learned a lot and I think it sets me up well for what I’m building now and hopefully we can navigate. You know the choppy waters that I’m sure will be in front of us to get to a better outcome this time for sure.
Alejandro Cremades: Well, there’s always choppy waters you know without a doubt always choppy waters when you’re in startup land. But now for you, You know it sounds like climate change. You know why say you know what keep knocking next so you know in this case, you know you you thought it but it made sense to to jump in. So.
Duncan Logan: Now l. And.
Alejandro Cremades: Walk us through the thought process you know to really you know, bring the company to life here.
Duncan Logan: Yeah, so I think I think there’s 2 core things if I’m you know and I I want to be really honest about this and the first one is absolutely I have 2 little children. You know, 9 and 6 and that’s their ages, not their names. Um, and um, you know they are little climate warriors going through the California school system which is great. Um, and I live in Santa Barbara in a fire zone. You know Santa Barbara’s being playedgu with landslides and forest fires and stuff and you just see climate change. Effects of it all around us. But the starting point was was that indefinitely my kids and then I started to look at climate as a marketplace and then the most incredible thing happened. Um this I realized what the size of the climate problem is and from an um entrepreneur. You look at when you find a big problem. The thing that excites you is. It’s going to need a big solution and I think most people fail to understand that the climate revolution is going to dewarf the digital revolution if we think the digital revolution which we’ve all lived through. You know with the production of mega companies like Microsoft or Amazon or Google or Apple. Um, you know the climate revolution is going to de dwarf you know digital revolution produced 4 mega companies climate needs to produce 80 to a hundred companies of that size. It is.
Duncan Logan: It is incredible. Ah, the size of what we have to solve for in climate and and I genuinely think it’s not ah, a common view but I generally think if we can make it a capitalistic solution. We will get a lot more people a lot more investors. Excited about solving climate change which we we’re going to be forced to do either you know over the next Decade Twenty years we’re going to spend trillions of dollars on climate change either trying to defend against the effects of climate change or um, putting in solutions to. Reverse climate change. The truth is. We’re probably going to do a lot of both but it’s been forced upon us, we’re not going to have a choice this is going to be a multi multitrillion Dollar marketplace. And part of my job is to encourage more entrepreneurs more investors to get involved so that was the the starting point and I think capitalism as much as it. It kind of feels bad to be saying we should make money out of climate change I think it’s the best tool the best. Way we’re going to solve climate change. It can’t be We’re never going to solve climate change through scarcity. We can never say to people stop flying stop driving stop eating meat what we have to do is innovate to come up with with cleaner methods of mobility or cleaner food. Um.
Duncan Logan: You know, cleaner processes and that is going to happen and um I have no doubt the human race is not going to disappear off the face of this Earth We will solve this problem but the longer we leave leave it the more It’s going to cost so that was that that was the draw just the size of this. Problem and therefore this opportunity was really a big drove for me to come into the Climate Market. So.
Alejandro Cremades: So then for the people that are listening to get it. What ended up being the business model of nine zero how do you guys make money.
Duncan Logan: Yeah, so nine Zero is an ecosystem play. We are trying to build the ecosystem to make it. You know this is from my background of rocket space. But what we’re trying to do philosophically. We’re solving for serendipity and critical masks where others are solving for linear progressions. Nine Zero is more likely to drive an exponentiation of the entire market versus a 1 in 100 exponential outcome for a single innovation and what that really gets to is. We’re trying to work out. How can we make the marketplace for entrepreneurs who are trying to build solutions for climate. How do we make that marketplace far faster. Um, you know far easier to drive success and and a starting point for this is. You know for an industry of this size which is just getting started. There is no silicon valley for climate. There’s no hollywood for climate or or wall street for climate. So that’s our starting point. We’re going to start by going to 8 cities in the us and build a climate district in each of these cities. Um, so we’re starting in San Francisco on California street and you know in a decade we want to see California street as the climate alley for San Francisco then we’ll look at Seattle and l a and then Boston New York and other cities across the us across the Us.
Duncan Logan: And in each one of those cities we want to build this community and this kind of comes back to my background. You know my first career in banking the city of London was that banking ecosystem where everything sort of happened and and sure. In the evening we we might head to the west end of London which was more the media publishing area but these ecosystems were really powerful and if you wanted to get into banking or you were passionate about banking just being in the city of London or wall street here in the the us. Would have been a great start. It’s where you can build your connections your your network and and away you go and you’re likely to work for several different companies in that space and so I think post covid there’s a real opportunity to build those ecosystems again and and that’s what we’re. Purposely trying to do so we have started with some event space. Some co-working space some club space for for drop-in memberships and we’re pulling together private equity companies venture capital companies sustainability teams of corporations. Obviously a lot of.
Duncan Logan: Startups and we’re pulling these these companies into an ecosystem where they can quickly make both digital and physical networks to pull this together and and you know we’ll do ah a geofocus ecosystem for. Bay Area so bring everyone working on climate in San Francisco and the bay area together into nine zero there and then we’ll do other cities and then once we have that that network across the us we can start moving from the geofocus into. Ah, like the niche focus. So now we can start pulling together all the people working on energy or energy storage or sustainable aviation fuel or whatever so we move from the geofocus to a ah niche focus as we bring that community together. So that’s um, yeah.
Alejandro Cremades: Um, so and and then also how have you guys going about capitalizing the operation.
Duncan Logan: That’s the that’s the business.
Duncan Logan: So um, we have various investors we’re raising capital at the moment. You know we’re still very early nine zero we put nine zero together we registered the company in October last year we got our first building in ah, a partnership. With Sks and swgg in San Francisco at 53 California street which is a three hundred Thousand Square foot building mostly empty like a lot of buildings in San Francisco which we’re now attracting as many climate companies into that building as possible. Um, and yeah, we’re raising our friends and family round. Of capital into the business at the moment and then we will go on to raise a seed and an a round and and so forth from you know, probably more from family office high net worth maybe corporate moving forward. So yeah, it’s another fund. Funded business and we think there’s a big outcome to be generated by this. You know we we are building a sort of Linkedin for climate throughout our membership and that is something we’re really excited about and is already showing you know, great traction. So we’re really excited for that. Yeah.
Alejandro Cremades: So I’m going to put you into a time machine right now. Duncan imagine if I was to bring you back in time and I bring you back to the late 90 s you know, maybe to 97 where you were starting to think about a world where you would bring something of your own a company of your own. And let’s say you were able to you stop that younger self on you’re way out from you know corporate the corporate world. Let’s say you just gave your notice and you’re now venturing into the world of being an entrepreneur and let’s say you’re able to stop that younger self and give that younger Duncan.
Duncan Logan: Yeah, yeah.
Alejandro Cremades: 1 piece of advice before launching a business. What would that be and why given what you know now.
Duncan Logan: Um, I think oh there’s so many things I so many things I would I would go on there I think the first thing is um I think it would be really worthwhile as a young person. To kind of think more about what your entire career should entail. What’s the what’s the common thread through your entire career and then compound on that experience. Um, so you know I’ve managed to do that in small parts. But not not holistically as much as I I probably should have and what I mean there is if you want to be an entrepreneur you know if I said well the security business was one I obviously did with message labs. And so I’m going to build one company in the security business and then another company in the security business and then another company in the security business and so forth and you end up building 6 or 7 companies in that vertical I think you can compound on your knowledge your network your people the team and everything. And it just gets stronger and stronger I think when you flip from 1 industry to another. Um you you bring a certain amount of knowledge. But you also discard a lot of value in in you know, pushing that forward. So I think that would be something you know back.
Duncan Logan: Saying hey this is the this is the swim lane I’m going to stick to and I want to build my network I want to build my reputation I Want to build the trust and team and everything in that vertical and stick there I think that’s that’s probably an easier way. To get to significant outcome or multiple significant outcomes. Yeah.
Alejandro Cremades: So for the people that are listening Don’tcan I would like to reach out and say hi. What is the best way for them to do so. So.
Duncan Logan: Email Duncan at 9 the number 9 zed e r o dot com you can check out our website at ninezero.com but yet just Duncan at nine zero dot com but love to hear from people if you’re passionate about climate passionate about entrepreneurship. Um. Capital any of these errors. It’d be great. So.
Alejandro Cremades: Amazing. Well don’t come. Thank you so much for being on the deal maker show today. It has been an on earth to have you with us.
Duncan Logan: Thank you very much.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Duncan Logan On Raising $336 Million To Support Unicorns And Now Building A Capitalism-Driven Climate Change Ecosystem appeared first on Alejandro Cremades.
In the field of culinary innovation, few stories are as captivating as that of Eshchar Ben-Shitrit, the co-founder and CEO of Redefine Meat. His journey from a childhood in an Israeli kibbutz to spearheading one of the most groundbreaking companies in the meat industry is as inspiring as it is insightful.
Eshchar’s company, Redefine Meat, has attracted funding from top-tier investors like Hanaco Ventures, Happiness Capital, Synthesis Capital, and CPT Capital.
In this episode, you will learn:
- Eshchar’s upbringing in a kibbutz fostered independence from a young age, laying the foundation for his entrepreneurial journey.
- Eshchar’s early passion for cooking, especially meat, fueled his desire to push culinary boundaries and elevate meat cuisine to new heights.
- From law to finance to product management, Eshchar’s diverse career experiences contributed to his adaptability and resilience as an entrepreneur.
- Chance encounters at Hewlett Packard led to the formation of Redefine Meat, highlighting the importance of seizing unexpected opportunities.
- Eshchar’s willingness to embrace risk and navigate challenges has been essential to Redefine Meat’s success in disrupting the meat industry.
- Eshchar’s unwavering commitment to building the world’s largest meat company drives him forward, even in the face of uncertainty and adversity.
- For Eshchar, success isn’t just about reaching a destination—it’s about embracing the journey, embracing risk, and continuing to innovate and evolve.
Alejandro Cremades · EP 887 Eshchar Ben-Shitrit On Raising $190 Million To 3D-Print Plant-Based Meat ProductsSUBSCRIBE ON:
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Your email address is 100% safe from spam!**About Eshchar Ben-Shitrit:**Eshchar Ben-Shitrit is the Co-Founder and CEO of Redefine Meat, a leading startup in the alt-meat industry using proprietary 3D printing technology to produce animal-free meat with the same appearance, texture, and flavor as animal meat.
Following his military service, Esh received his Bachelor of Laws and an MBA from the Hebrew University in Jerusalem after which he served as a law clerk on the Israeli Supreme Court.
After his time on the Israeli Supreme Court, Esh joined HP Indigo, where he spent 4 years as a Product Manager focusing on the Industrial Digital Printing segment.
Prior to starting his own company, he joined Highcon, an industrial digital printing startup, as a VP of marketing. In 2018,
Esh founded Redefine Meat, and ever since, he and his team have grown the company to over 20 people and raised over $6M in venture funding
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Connect with Eshchar Ben-Shitrit:* LinkedIn * Crunchbase * RocketReach * F6S
Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the dealmakerr show. So do today we have a really exciting founder a founder that has been building scaling you know and and doing everything that you can think of with he is very innovative business. You know a real rocket ship. You know they are. Doing something extremely unique and then we’re gonna be walking through this story in detail. So I don’t want to wait make anyone wait any longer because I think we have a very inspiring conversation ahead. So without further ado. Let’s welcome our guest today as car ben streetrit welcome to the show. Thanks.
Eshchar Ben-Shitrit: I Kind of very happy to be here.
Alejandro Cremades: So originally born there in Israel and you grew up in a kibbutz. So how was life growing up, give us how and walk through memory lane.
Eshchar Ben-Shitrit: Kibbut for a kid is is paradise you live in a country club. You have complete independence you do at the age of 4 things that the kids in a city. Don’t do until they’re 16 you have your own bike and you can ride around. You eat with the kibbutz so you don’t eat with your family you spend time with friends and and you become very independent you you become very very confident in your ability to do whatever you want from a very young age and you’re surrounded with natures with nature animals. All the fun thing. That that you want as a kid as as a grown up. It’s more difficult because you don’t have a lot of freedom. You don’t have the assets. It’s a it’s a modern version of communism so you might get trapped. But as a kid. It’s paradise.
Alejandro Cremades: So I guess say you know for you, you know like you also experience at ah at a young age. You know the whole thing you know the whole food you know industry. You know you got into restaurants. So how how was that for you.
Eshchar Ben-Shitrit: So that that was my my passion and even before that my mother worked in the dairy farm and my father worked in the turkey farm. So I really saw this side of this industry but I enjoyed cooking from a very young age and especially meat from the age of 9 I started reading cooking book especially about meat. And try to cook fancy meals to my family and then by chance my uncle had a restaurant in Tel Aviv and I decided to go work there in the weekend basically volunteer I wasn’t get paid I did it for for fun for excitement and to learn how to cook and it was focused on meat. The the area that I was really interested is how you elevate cooking meat to this fancy level of of high-end culinary like art.
Alejandro Cremades: So Then in your case you know it was very interesting The blend that I saw on the way that you guys or that in your case you know, actually at ah at a personal level the way that you have combined finance and then also a law. You know what? an interesting combination. You know like. It sounds like you were already into the whole restaurant and meet you know, but it took you a tiny bit. You know to get back into it. So Why finance a law Why that combination.
Eshchar Ben-Shitrit: You know when when I interviewed to an internship as a lawyer I had to write an essay and my essay was that I was supposed to be a chef and actually I’m going to become a lawyer and it’s really really doesn’t make a lot of sense but it’s very israeli you you search yourself. You don’t choose 1 thing you choose like. Experiences and for me studying law and studying finance was an experience I never thought I would be a lawyer or a banker with a suit but I thought let’s do it. Maybe I can choose my path later on and the real story behind law I was very bad at math as a as a high school student. Very bad I thought I had a problem so I chose where I can study without doing any math law is the only place that you can study in Israel without doing statistics and maths and I was actually quite good in in the law studies I had good grades and I was accepted to Mba directly during. Law studies I also did my and Mba.
Alejandro Cremades: So then so then let’s talk about you know what happened after this because you know like essentially you know for you, You know you did a little bit of law clerk and you know and other stuff you know in in the in in in parallel. But.
Eshchar Ben-Shitrit: She says.
Alejandro Cremades: You know it sounds like it was very pivotal when you ended up joining Hewlett Packard because actually that’s also where you made your co-founder so Helett Packer you know it’s quite a different you know thing from what you’re doing today.
Eshchar Ben-Shitrit: It sounds all over the place right? A lawyer then Hb then three d printed the meat and and it’s true. I’m not a person that that wants to commit to something I want to to do a lot of things and my my thought process and my way of work is very very scattered. And actually it’s by chance everything that I am doing in life even redefine me, it’s it’s by chance. But I think the chance has some destiny or faith behind it as you said I I came to hp by chance. But I met my cofounder there actually a very close relative of mine told me that I need to be a product manager. Because a product manager is a potential ceo and he told me I think you should become a Ceo but but the journey will start from being a product manager and then by luck there was this a advertisement in the newspaper. We’re looking for a product managers without experience because you need experience. For a digital printing presses and when I was a kid in the kibbutz I never thought I never imagined that my career will be becoming a product manager of printing presses industrial printing presses but I went to an interview and I met some really smart people and and I wanted to be those people. They were very smart. Very sharp, very analytic, very clear about what they need to do and how much they have passion to developing this technology for industrial printing presses. So I just did it I finished my internship.
Eshchar Ben-Shitrit: And a day later I started working in Hb I didn’t take one day one day off and the best thing a lot of things happened I met both my cofounder and the chairman of redeffined me there but but the best thing that happened is that Adam my cofounder taught me how to to work in excel. And we we got bonded because I didn’t know how to work in excel before that.
Alejandro Cremades: So then what were they sequence of events that needed to happen for you to um you know take the take the jump. You know the Leappo faith with redifying meat. You know what? what? what needed to happen.
Eshchar Ben-Shitrit: I’ll tell you the real story. It’s it’s the first time I’m telling that because I’m hoping founders are listening to this story I quit hb because I wanted to be a founder and I said I’m thirty years old I’m in Israel I can’t be in a corporate I need to be a founder in a company. But I didn’t have any idea and any any passion I didn’t put like a a purpose behind that. So the first job offer that I got I took and then I spent four more years in a great company but I wasn’t a founder of a company so it was am I going to miss this destination and I went to a startup. And I saw that you can become a founder and you can raise money and you can work with investors and boards and customers all over the world and it’s not something that you need to be Superman to do an average person a mediocre person like myself. You know I’m not I’m not outstanding in anything can change the world. Why because it’s just a matter of courage. It’s just a matter of understanding that everything in life is tough. Everything is a risk every venture that anybody ever started had a huge amount of uncertainties and even the most successful entrepreneurs in the world. They had the guts to start and they were extremely lucky. This is what I studied in this company hicon with an amazing resilient spiritual person that is the founder there and that impacted me to to take a jump and then when I knew what is my crusade. What is my destination or or.
Eshchar Ben-Shitrit: What is the thing I’m willing to take the chance on I quit that job and I started really fun meat.
Alejandro Cremades: So tell us about you know what was saying that moment where he became clear that you know it was it was time for you to get going.
Eshchar Ben-Shitrit: I started to develop an obsession and and you really need an obsession an obsession that you feel slowly takes over all of your personality. What happened in my first job in Hp I became a father and I stopped eating meat. So after 30 years of being a carnivore and passionate about meat. I stopped eating in meat and I thought this is my my life-ch changinging thing. But then I became obsessed of meat alternatives this desire of of people that stopped eating meat or steal it in meat to eat something that looks like meat and taste like meat. It was my my hobby son was my hobby. And I was very disappointed with with what I was able to achieve and I became fascinated with the possibility first that that there will be a company that will solve this issue I said probably it would be amazing. Some really smart people probably from the Usa they will they will solve this and then I thought maybe maybe maybe. I can be a part of this and I started sending I sent an email to to impossible foods telling them that they should work on 3 d printed meat and if they want to have a conversation I would be willing to have this conversation. They never replied so I started a company instead but but the the thing in this kind of journey. Suddenly you think about it all of the time you really say how would this company look like how would the first pr look like how would they raise money all of the thing is ah as somebody who’s looking from from the side and then you need to develop this courage to say I will be that person.
Eshchar Ben-Shitrit: If anybody can make it. It’s me or if anybody is willing to try and maybe fail. It’s me because it’s going to be very interesting and then I chose a deadline a deadline of myself instead having this obsession hobby reading in the night talking with people. What is the deadline that I will give it a chance myself and that was the day of the birth of my second son I told my boss I told him I’m going to quit this great job and this great relationship. We have to start my own thing when my second son will be born. And then then I send him a text message I have a son and bye bye and he was very very kind about that and and he told me that this is what I should do I have some nice quotes from from him and other people that told me go and make your dream come true. Not other people dream come true and if anybody can do it. It’s you. Or if anybody can be a lawyer with an Mba that is working on 3 d printed meat. It has to be you. It wasn’t easy I had one one very tough year. Emotionally that that you feel your failure because when you have a career you want to be quite good right? You want to succeed you want to to have a feeling. That on you’re track when you’re an entrepreneur. You’re constantly failding constantly and it’s it’s brutal. It’s personal and it’s quite painful and the first year was really a year of of not succeeding at all.
Alejandro Cremades: So then at what point do you realize you know that you guys are turninging a corner and I guess before you and get there. Why don’t you just share with the audience. What you guys are exactly doing at ready find meet so that they get it. What’s the business model.
Eshchar Ben-Shitrit: So we are a meat company today. We’re a meat company. We’re developing producing and setting new meat products in 10 different countries. New meat is the the next generation of meat because it has the same texture flavor. Nutritional composition is animal meat but it’s made using technology and that technology is the technology that we developed it didn’t exist before reddefined meat that allows us to basically recreate the massive structure of an animal when you eat meat today. It doesn’t matter what meat you eat you eat the the structure. Of the tissue of an animal the muscle of an animal and we develop plant-based tissue engineering so we engineered the tissue from plants to recreate steaks pool. The meat burgers. We developed those products and technology few years ago about two years ago we launched them into the market. Now we are producing new meat in Israel in the Netherlands and sending it to restaurants to food service operators and to retailers across many many countries some of them are vegans and vegetarians. But most of them are flexitarians people that that still eat meat but want to reduce. That usually never participated in what is called plant-based meat for example, steaks were the first company in history that launched a steak a to food service that is made from plants and not from animals and we’re continuing every three months to introduce new better products to more and more consumers and more and more.
Eshchar Ben-Shitrit: Dying in occasions based on technology based on an in in incredible brand that addresses what meat eaters want which is a lot of fun and a lot of challenges as well.
Alejandro Cremades: So well, you’re talking about challenges you were saying that the first year was not easy. So at what point do you guys realize that you’re turning a corner around that ah you, you’re into something here.
Eshchar Ben-Shitrit: To be honest, it’s when you raise money because when when you don’t raise money you feel first that you’re a failure. You’re constantly getting rejected but you’re also you’re not progressing so you have a vision. You have an idea you have a story you even have a team with a small team of people. That they either work for free like my co-founder and I or we pay them ourselves when we started meeting with angels in Israel and we got the initial $200000 and we went into an accelerator and we won we had recognition. We had some external people that said. You’re not idiots and you’re not going to waste time and then go back to your day job. But we also had money to get a lead for example instead of working from my parents’ garage we had an ability to pay advisors that knows a little bit more than us on food technology. So it took 1 year so so it’s imagine spending 1 year with no money with no external proof that what you’re doing is going to work beside your own belief that you have to do it and then suddenly you come to a lab and you have 10 people and we’re building machines and we have investors that are bringing their friends and. People are writing about us in in the news I think the second shift happened when we tasted something and then I didn’t sleep the whole night I tasted something that said. Okay, one day it will be amazing. It wasn’t amazing. But I understood how this can become meat.
Eshchar Ben-Shitrit: And before that you didn’t have any way for me emotionally physically to taste the future literally to understand it will all be okay and today we have a lot of these moments that things are tough and you’re quite in the plans change or the reality in the face. And then we taste something and we say okay, if we have that if it’s really in our mouth today. The rest would be easy. The rest will figure it out.
Alejandro Cremades: So you were talking about raising money How much capital have you guys raised to date and how has it been the experience of raising the money.
Eshchar Ben-Shitrit: We raise one hundred and ninety million dollars which is an amazing amazing number. It’s incredible. A lot of responsibility a lot of money a lot of responsibility and a lot of people that are brilliant that are smart that had a lot of options and put their faith and their money. In our hands because they think they can trust us. So it’s really really critical to respect that for me raising money is is not something I like to celebrate. It’s not a milestone It’s not an achievement but it’s critical. You cannot do what we’re doing deep technology. And we have a lot of patents a lot of smart people building factories building a brand without money but our experience and and this industry experience of raising money is very very different in the timeline we started raising money where it was extremely difficult. The industry that we are in was not sexy, not trendy, not in Hype. People told me you quit your job to do fake meat for vegans somebody even told me once you quit your job to make a falafel and and I told her we’re making meat we’re going to change the world. And there was no benchmark. No other company in this space raised money. It wasn’t clear if it’s going to be a big market and in that period of time we raised $6000000 that was the most difficult money we ever raised as a company based on an idea based on smart people.
Eshchar Ben-Shitrit: That believe in in a mission that are working like crazy without industry experience without a ph d without technology that I think was was the most difficult and it took us the longest time. So the amount of time that it took us to raise a third $ $6000000 and by the way they’re the most transformational for a company. What we achieved from zero to the $6000000 is incredible and and I think a lot of time I reflect back and and I I said I say it’s amazing what you can do at this stage of a company but but most most people give up before they raise the first 6000000 and then. We. We had some nice things to show and we raised additional $29000000 always always always the investors that invested in 1 round participate in the next round including the angels including the small investors including the family offices. It’s really important for us that they continue to do and then when we were ready to have a business. We started to raise more serious capital. So. It’s very different because when you have a business we’re setting products we have customers and we have customers that really like us we have numbers to show. We have. Actual proof that what we’re doing is not just a dream then it’s easier to raise money. It’s easier, but it’s a completely different experience. Your skill set is not my storytelling and the vision. It’s what you’re actually doing in terms of execution.
Eshchar Ben-Shitrit: And and it’s a completely different way of approaching and on top of that now we have a business by the way we have a great business. We’re growing in in massive pace like a software company but we’re a foot company. We have amazing customers. But the industry is is less trendy now. So the discussion is not with investors that are interested in an industry and fell in love with the notion of saving the planet. It’s with people that are looking for a great business and they can look for a software great business and ah and a foodtech great business. But I think. Today where it’s more more difficult to raise money for all investors but especially for food tech investors I have this memory of of the first $6000000 that were in a completely different age than the twenty twenty one years of of invest of raising money.
Alejandro Cremades: So when it comes to vision then with with racing money because that’s something that they’re really betting on you know and vision. Obviously you know it’s applied to to customers to employees all across the board if you were to let’s say go to sleep tonight and you wake up in a world. Where ultimately you know the vision for the company you know is fully realized what does that world look like.
Eshchar Ben-Shitrit: Wow first, it’s a very very nice question because I wish that I could never answer this question. A lot of people they look at their startup or or the business as ah as a destination that they want to achieve. For me, it’s a journey and and imagine in a world where where I completed my journey and redefine meat as a person as a company as a mission is is very depressing. So basically I want to die working for reddefined meat I won’t I know it won’t happen and I hope it will. It will be a very very long time from now. but but the story that we have. That is guiding me from day one is building the world’s largest meat company and it’s very good because it helps me with the challenges that I talked about just now bidding the world’s largest meat company is a journey of the next twenty years so we put it roughly 2040 and that day we did what we intended to do. And we thought is impossible in every element of making it impossible developing the technology developing the products building the culture that will enable it to scale to 10 countries then making it profitable in 10 countries then expanding to every place around the planet developing more technologies reaching more consumers. Impacting more the planet and it will never end because the world’s biggest meat companies today are fifty sixty some of them one hundred years old so maybe my kids will work in really fine meat but this is this is more the romantic view I think.
Eshchar Ben-Shitrit: If you look six years back what we thought we can achieve we achieved much more. So so we achieved more than what we actually thought we’re going to achieve but it was a lot of things that we didn’t even consider that were were random and 1 thing led to another and we were naive and and. Things that we thought will be really tough turn out to be easy and things that we thought would be easy turn out to be really tough. We thought we’ll have a 3 d printer in a butcher shop. We we didn’t do it so we don’t have a 3 d printer in the butcher shop but we’re selling to hundreds of butcher shops. That we never thought would be realistic to sell to hundreds of buter shops. But but for me seeing our products in households as an everyday brand you’re in New York right that we we walk around the streets of of New York with a t-shirt of redfined meat and people stop me and say wow.
Alejandro Cremades: That’s right.
Eshchar Ben-Shitrit: Really like your product that’s for us a symbol of of we’ve arrived we have it in Tel Aviv in Tel Aviv you walk in the street of Tel Aviv with a t-shirt of redefine meat. You will have somebody come into you and say redefine meat. You really made them impact on my life. But we need to do it in New York and in Sao Paulo and in Tokyo and in basically everywhere around the world. So it would take a long time.
Alejandro Cremades: So I I know that you know there’s obviously a lot of risk you know building a company like this on building any startup. No so I think especially for the people that are listening. How do you think about risk levels and how to deal with it. You know in business and in life.
Eshchar Ben-Shitrit: I think I’m addicted to risk I think I’m a person I don’t do extreme sport but I like to be in so a status of risk of being very afraid of a result a lot of people. They want this confidence that I’m making the right decision. I’m not doing the risky thing and I believe for some reason they’re always delusional There’s always a chance that what you think is the right decision will blow up in your face. You know I’m also in israeli so we have this reflection of tomorrow might be the best day in my life. And tomorrow I might die so it’s extreme and and the reality is somewhere in between so I choose to put myself and the company at the status of risk a lot because I think incredible things can come out of it and we have this way of of living with this fact because people in in our supply chain in production. They can’t live in this in the level of risk that I can but I try to take on myself all of the risk all of the risk of the company as much as I can to enable the company to do things that seem impossible while allowing a lot of failures. So. It’s not 1 thing that is very risky that might fail or might succeed and then it will kill the company. It’s a lot of things. It’s a lot of risk that we take but because all the companies that I know I don’t know a lot of companies you interviewed more companies than I then I know.
Eshchar Ben-Shitrit: sometimes they succeed and sometimes they fail and I don’t think there is a system I don’t think there is an algorithm I think that if you do an interview about a company that is successful and I follow what I hear in this in this interview. It’s like me following the footstep of somebody that won the lottery. They wo a red t-shirt the day that they won the lottery I won red wear a red t-shirt but they took a lot of risk and some of the amazing things they tried to achieve manifested in reality because we we have a stakee that is served in restaurants I never thought it’s possible. And we had to take a risk. We had to take a risk. We had to hire a person and give him a chance to develop something we had to launch a steak in a restaurant before the steak was ready. We had to give people samples of a product that wasn’t good. We had to commit to deadlines and then figure out out how we we’re going to meet them. And every time we did it when things didn’t work. We said. Okay, it’s a part of life when they worked there was this moment. Okay, we are. We are jumping ahead 10 years in a day and only risk can get you that but you know entrepreneurs israelis first and Israel entrepreneurs There are people that decided to take risk in life and and to live with risk to live with a high level of risk in in my last jobs I never had the risk of of failure or or making a huge mistake or being afraid of something and today I have it.
Eshchar Ben-Shitrit: Today not every day in the beginning it was every day but once a week I’m doing something that I I’m afraid of doing.
Alejandro Cremades: So then imagine now that I put you to a time machine and I bring you back in time and I put you you know next to that they you know is sure that they was thinking about taking a leap of faith in and doing something of your own and let’s say.
Eshchar Ben-Shitrit: Okay.
Alejandro Cremades: You were able to give that younger self one piece of advice for launching a business. What would that be and why given what you know now.
Eshchar Ben-Shitrit: I would say don’t be hard with yourself because this is the problem the problem we as entrepreneurs we we beat ourselves a lot and and we don’t have anybody telling us it’s going to be okay, we’re the people that is is telling everybody imagine people that are founders ceos. They’re telling their employees their wife they’re bored. They invested. It’s going to be okay, but but then you you don’t know if it’s going to be okay and then you really you lose a lot of years of your life. You lose a lot you lose a lot of hair as you can see you’re under huge amount of stress you you become. Not yourself in many other aspects of life like with your kids with your family with your friends with your with your parents but but it’s going to be okay, it’s going to be okay, the second thing I would do much more so had I known where we are today I would just do much more because. You you need in the beginning to have much more faith. A lot of people told me that that you cannot as a founder have any doubt of your success. You cannot have any even even speak in a way that implies that in your mind you think you’re not going to succeed and it’s so true because. We’re not I’m not trying to cure cancer I’m trying to build the world’s largest meat company. It’s tough but it can be done. It definitely can be done somebody can do it I can do it. There is no doubt about that. It might be hard. It might take longer than what we thought there might be a lot of of even years that are seemingly.
Eshchar Ben-Shitrit: Things are going to the wrong direction but it can be done So Why not wake up in the morning and just say I got this why say I’m doubting myself am my good boss am a good co-founder is my board happy with me is my employees are do my employees feel the energy that I bring to them yes because. It’s going to Happen. It’s going to be amazing and everybody around along the way is going to have a journey that they’re going to tell their grandkids about and books will be written about that and and that’s that’s the life that you need to to bring to to the job every day This is your job and you cannot. I Didn’t do it in the beginning.
Alejandro Cremades: Reminds me of the quote of Nelson Mandela it always seems impossible until it’s done so that’s in so for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Eshchar Ben-Shitrit: Yeah, yeah, exactly.
Eshchar Ben-Shitrit: So in email. My email is very simple. It’s esh at reddefined me dot com es h a Linkedin facebook I’m very accessible I love to hear ideas opinion and the most interesting thing that I like people reach out to me about. Is what thing in meat they want redefine meat to develop because we we can do we can do basically anything we just need to decide what it is that makes sense and some people brought up some nice ideas along the way only in meat. We don’t do fish and we don’t do cheese but meat from across the world. I don’t know a like handda what is your favorite meet. Okay, and this we already have in in progress and and ready to launch but I’ll get 1 to you soon.
Alejandro Cremades: I Love phillaminion.
Alejandro Cremades: Amazing! Well hey, ashar, it’s been an absolute pleasure and an honor to have you with us and thank you. Thank you so much for being on the dealmakerr show with us today.
Eshchar Ben-Shitrit: Um, thank youjado.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
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In the fast-paced world of entrepreneurship, there are few stories as captivating as that of Andrew Blackmon, the co-founder and CEO of The Black Tux. From humble beginnings in LA to navigating the challenges of building a successful startup, Andrew’s journey is one of resilience, innovation, and unwavering determination.
Andrew’s company. The Black Tux, has attracted funding from top-tier investors like the TZP Group, Stripes Group, Menlo Ventures, and Raine Ventures.
In this episode, you will learn:
- Andrew Blackmon’s journey highlights the importance of trusting your gut and staying true to your vision, even in the face of uncertainty.
- The Black Tux’s commitment to innovation and customer experience has been central to its rapid growth and industry disruption.
- From navigating fundraising challenges to weathering the COVID-19 pandemic, Andrew emphasizes the importance of adaptability in overcoming obstacles.
- Surround yourself with talented individuals who share your vision and can execute the goals of your business: Andrew’s view.
- The emotional connection with customers is crucial; investing in branding and customer experience can set your business apart from the competition.
- Setbacks are inevitable in entrepreneurship, but they can also serve as valuable learning experiences on the path to success.
- Despite the ups and downs of entrepreneurship, maintaining a focus on the long-term vision is essential for sustained growth and success.
Alejandro Cremades · EP 886 This Entrepreneur Raised Over $67 Million To Disrupt The Tux And Suit Rental IndustrySUBSCRIBE ON:
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Your email address is 100% safe from spam!**About Andrew Blackmon:**Andrew Blackmon is the co-founder and CEO of The Black Tux. Founded in 2013, The Black Tux was created to offer a suit and tux rental that doesn’t feel like one, offering a higher quality product, an exceptional fit, a seamless experience, and a better price.
Prior to founding The Black Tux, Andrew built his foundation in tech startups. He received his MBA at HEC Paris and graduated from Pepperdine University with a degree in English.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the dealmaker show. So today we have ah another inspiring founder that is joining us. You know a founder that they you know he’s going to teach us a thing or 2 about dealing with the apps. The downs you know in this case, you know like they started. You know why. Knocking on doors of vcs. You know, eventually they had the backs turned on them then they got some traction then they came back to them and then other stuff like dealing with Kobe then partnering with bigger players you know and now everything starts with maybe like a cease and desist you know stuff like that like so of like really adrenaline. Filled you know type of experiences again building scaling financing all of that good stuff that we like to um here in those stories so without further ado. Let’s welcome our guest today Andrew Black one welcome to the show.
Andrew Blackmon: Um, all right Thanks for having me Ajandra great to meet you.
Alejandro Cremades: So originally born and raised in L A so give us a walk through memory lane. How was life over there.
Andrew Blackmon: Yeah, one of the one of the proud few born and raised in l a and I’m transplant I grew up in the valley which is about 20 minutes from the city or city center. It’s a great place. Sunny couldn’t leave I left for a little while but for most of my life I’ve been been here.
Alejandro Cremades: And it’s not like you went too far because I mean you went to paper line. You know they’re in Malibu but you didn’t study the typical you know stuff that founders would study maybe business economics computer science maybe law you went into english literature. I mean out of all things. Why.
Andrew Blackmon: It’s It’s actually funny looking back on it. But at the time all I knew was that I Really loved to read and I loved philosophy and sort of classic literature and I thought this is what I’m going to Study. This is what interests me I need to kind of follow my heart and follow my interests and so. Did it towards the end of school I started to realize this is very impractical. The only jobs people are hiring for are like teachers or then maybe somebody going to grad school. But honestly at the end of the day I really enjoyed it and I like to hire people who have a kind of humanities background often because they’re very well-rounded in my opinion.
Alejandro Cremades: I mean 1 thing in your career too is like the ° I mean you go from literature which is like super interesting then all of a sudden you find yourself doing law I mean I p law I mean what’s going on with I p low.
Andrew Blackmon: Yeah, so my first job out of college was very fortuitous. It was basically a guy who had a connection to Pepperdine. We got along really well he offered me a job doing kind of like marketing and just any assistant stuff. He had a big intellectual property law firm in Santa Monica so I owe this guy so much gratitude because it was my first gig and I really got to see actually all the inventors and the entrepreneurs coming through because they needed protection for their ideas. Their copyrights trademarks patents, etc and to me what I found up or found out that it was very inspiring to me was. Entrepreneurial side. Not the law side. So I you know I toyed with going to law school took the lsad and thankfully I didn’t get a very good score so I didn’t end up going and that kind of catapulted me into going to business school instead which was great.
Alejandro Cremades: Well, you know, eventually you know something something really interesting happened here because you find yourself in Paris all of a sudden you know what point do you realize that is time to hit the reset boton and and maybe you know, go back to school.
Andrew Blackmon: Um, exactly I.
Andrew Blackmon: You know I think I was so interested in business and in entrepreneurship. But and in venture capital frankly that I just didn’t have the background of kind of knowledge to understand that world like if you would have told me a trillion dollars of this is this. I would have no concept of what that really meant and I had no concept of a p and l anything like that. So I decided okay I need to go to business school. This is a good path for me. Um I thought about going in l a or California but I’ve been here my entire life. So I ended up going to Paris. Which had a really interesting experience for me because I was surrounded by people from all different countries all over the world and I really I was probably the most green student given I didn’t have a business background or didn’t study economics or anything like you said in school. So for me, it was actually pretty hard. The coursework was challenging. This wasn’t a walk in the park. Um, but I really enjoyed it and really enjoyed the international experience. Especially.
Alejandro Cremades: What do you think opened up for you. You know the being outside of California for a little bit.
Andrew Blackmon: I mean so at first it was kind of challenging if I’m honest I felt homesick I’ve been in California by the beach surfing my whole life and then I’m in the middle of Paris kind of living in the city center which is you know so populated. There’s not a lot of nature and I’m very used to like going hiking and things like that. But after it was hard. It was really interesting like I met a ton of fascinating people I think it really broadened my horizons in many ways, not just business. But personally there was a lot of personal growth to live in a city that is so foreign to me I didn’t even really speak french when I first went there and I went to a school that. Is primarily a french school although their Nba programs in english so it was like just kind of widening my aperture of what the world is in a major way which is great.
Alejandro Cremades: And obviously it helped with a shaping up a little bit more the way that you were thinking about business. So I guess you know like what were the sequence of events that needed to happen for you to you know, bring the black talks to life.
Andrew Blackmon: Um, yep.
Andrew Blackmon: Yeah, so my co-founder and I at the time he was at and Nyu business school Stern and I was finishing up business school in Paris and these 2 schools were actually kind of sister schools and so we threw around a bunch of ideas and we were basically like. You know we have complementary skill sets. Let’s start something together and we had ideas of like in the food space. You know we’re pretty young at the time I think we were 24 and then we had both rented suits and tuxedos a bunch of times for prom weddings things like that and we thought this is a really interesting. Interesting industry and so we did a bunch of research into the market and we realized that the leading player in the space was a multibillion dollar company the rental part of their business was really profitable and rentals and generally to me are a really good model because you can buy the inventory and rent it repeatedly over time. And you end up generating a lot of cash on the inventory that you originally purchased and the more we dug into this the more we became convinced hey if we start something that really kind of overhauls the entire student tuxedo rental industry. We’ll be able to take some market share. So it really just kind of came from an idea. We were a little different than I think most entrepreneurs or at least most that I see now because now I like to invest in some businesses. You know I get like a 10 to 20 page slide deck which is all I want when we myself and Patrick first started the business. We wrote like a 50 page business plan.
Andrew Blackmon: And we thought through like every little detail and if you read this thing now which we have It’s like pretty hilarious because you know some of it ended up coming true. Some of it didn’t but we were like very diligent with the idea and I think to me that was like the right way for me to start it or for us to start it.
Alejandro Cremades: So why ended up being the business model. How are you guys say making money.
Andrew Blackmon: So business model is pretty simple. It started all online. But now we have a lot of stores we have about 35 locations but the concept is if you need to rent or buy a suit or tuxedo for an event. Usually it’s like prom wedding. Keats and ya New Year’s events things like that. We’ve now branched out past events but that was like the original concept. Um, you go online look at our site choose what style you want and or you go in store and do the same thing and then we have this fit algorithm that tells you what size you are. We send the suit or tuxedo to you ten days before your event you have enough time to try it on. Make sure everything fits looks good and then you send it back a couple days after the event and so it’s pretty simple. We make money basically on the rentals and our business is like a heavy kind of um.
Andrew Blackmon: Supply chain business because we design and manufacture the suits ourselves and then it’s a heavy logistics business because we have big dry cleaning in both of our facilities on the east and West Coast because we have to make sure that these things kind of look and fit nicely for the customer.
Alejandro Cremades: So how much capital have you guys raised to date Andrew.
Andrew Blackmon: We’ve raised about 75000000 in equity. It’s ah it’s a pretty um capital intensive business.
Alejandro Cremades: So I know that the early days you know before you guys even launched you were already knocking on vcs doors that were not opening and eventually when you had some traction. They not only open but they were coming after you because they wanted to Invest. So. What happened there I mean walk us through how has it been. You know the experienced tool of raisingcing all that money as well. Yeah.
Andrew Blackmon: Yeah, so when we launched a business. It was twenty thirteen and right before we launched we were part of this accelerator in l a called mucker labs and what they do is they invest a small amount of money in the business like you know, very small amount but then they help you grow the business and these guys were fantastic and before we launch. A lot of people would come by this office and they you know talk to all the companies and entrepreneurs and there were some interest in us and so we thought why don’t we try to raise money before we launch and so we put together pitch deck etc. We went out to all these mostly Silicon Valley in New York vcs some in la as well. Um, but everyone was kind of like. No interesting concept. You guys are really young. This is a pretty operationally intense business like let’s see what happens you know I know it’s not really like a fully closed door in the Vc world at the early stage. It’s like a hey, let’s keep in contact. Um. But it it wasn’t no, we weren’t able to raise that round and so we had some like friends and family money and some of the money from mucker. We launched a business and we got so much traction we were covered in gq and the wall street journal and all these places were saying like this is the new way it to run a throughter site. Tuxedo gone are the old days where it doesn’t fit. It’s baggy. You know you’re in a strip mall and things that like the customer doesn’t really like and so basically we had a long waitlist we have way more demand than supply and so we went back to a lot of these investors and then we had more. Um.
Andrew Blackmon: More investors than money we wanted to take in that round so that was super exciting. It was very early stage and the business was still unproven but we did a financing with layer ventures first round Capital Menlo ventures crosscut rain like a whole bunch of like you know at the time really good kind of seed stage vcs. And so that that was like like I said a really nice moment coming from a situation that made us want to cry to a situation that made us like you know, extremely excited to have the capital to keep running business.
Alejandro Cremades: And then what about like the subsequent financing cycles. You know how did they look like.
Andrew Blackmon: Yeah, so they were a little more step function than that. So you know we would grow the business and for the first couple years we grew without marketing. We just I think it was really right timing like we were very fortuitous and lucky in some ways in the timing at which we launched the business and so. You know one of our insiders led a series a and then we got another group called stripes in New York to lead a series b and then we got another group called Tcp in New York to lead a series c and so it was just like these subsequent rounds of investment and that really we’re tracking with the growth of the company.
Alejandro Cremades: So you were mentioning that you guys started. You know, really doing direct to consumer and and now you have all these different stores you know on the way as Coast East Coast how did the strategy look like you know when when thinking that through.
Andrew Blackmon: Yeah, so when we launched we were sort of like maybe a little naive thinking everyone wants. Everyone’s going to be okay, renting a suit or tuxedo online and buying one because right now we actually sell our suits and tuxedos as well and we have a lot of traction there. Um. Anyways, so we opened a little like showroom in our Santa Monica location because we started finding like some people are kind of skeptical of doing this online. They don’t know if it’s going to fit think if it’s like a young guy in his twenty s and it’s just one of his first suits, you might not even know what size he is and so we open this little showroom in the back office. Um. And this thing was just getting booked like crazy. We put a little like you know book in our Santa Monica location on our website and so many people were coming in and then we were like hey this makes a lot of sense. We should scale this and so we opened 5 more of our own and then to really scale it like we’ll continue opening more of our own over time. Um, potentially aggressively but to really scale that opportunity we partnered with Nordstrom and there’s a funny story there. So originally when we launched business when we were pure online and no offline we put on our website like go to Nordstrom to get measured because Nordstrom would do free measurements and we put the Nordstrom logo on there. And a lot of our customers were going in so many that Nordstrom sent us a cease and desist and basically said like you can’t put our logo on your website. It looks like you’re affiliated with us and you know we understood so we took it down which was a little bit of a bummer to us. But then about a year and a half later I got an introduction to someone on the corporate development team at Nordstrom.
Andrew Blackmon: And I was telling them this story like look we were driving a lot of people into your store for measurements and we got to cease and desist. We can’t do it anymore. But it would be great to partner and this person was you know, really supportive of that idea and then so we got to meet you know people in the nords from family and all this and. The idea became let’s open black tux showrooms in the Nords from locations. So it’s not like they’re selling our stuff like we actually staff it. We have the employees. It’s all appointments and so that’s really how we’ve scaled the offline experience we have over 30 over 30 Nords from locations and we’re opening a few more of this year
Alejandro Cremades: That’s really amazing now. Obviously you know like as part of the journey to you know you guys had to go through Covid you know and I know that that was not an easy an easy you know type of experience. Especially for for this company that you guys are running. So. How was that for you. All.
Andrew Blackmon: Miserable, really challenging. Um, give me a lot of gray hair I think at the end of the day. It’s an I think important for entrepreneurs to understand that very very seldom is a business up and to the right for the entire history of the business. It’s like a squiggly line that hopefully moves up into the right. And you know that was very much our story we’re in a great place now. But for the first 6 to 7 years The business grew really nicely and then we hit covid and I remember sitting around the table with the board and people discussing hey you know. We’re reading this in the paper and this was like early Twenty Twenty is this a concern for the black tucks and we were all like oh we’re not sure we don’t know and then fast forward like maybe not even a month and it was so bad that you know we decided we need to furlough. Many of our employees we need a temporary but temporarily close all of our stores we need to do literally everything humanly possible to preserve capital in this environment because what we were looking at and projecting was like we were probably going to do 20 to 30% of the revenue that we thought in that year and that is just such a massive operational challenge. Um, and we were lucky I think in some ways like we saw quickly acted very fast and I give a lot of credit to my team for that and because we acted fast. We were really able to get to the other side of it and our idea was if we get to the other side. We don’t want to raise capital during this environment of course because we’re just going to get hosed. But if we get to the other side.
Andrew Blackmon: It’ll be like a snow globe and the industry was shaken and there’s going to be a lot of opportunities and probably a lot of market share to take and that’s what ended up happening and so we got to the other side and in 2021 we had way more demand than we could fulfill and so that was also a really challenging year. But then 202045, we’ve been um. In a much better place. So it kind of took I would say 2 3 years out of our business trajectory which in hindsight is really disappointing but I really feel like for the team that stayed with me. It was a huge challenge we got through it together. We were fighting in the trenches. Um. And so it was like kind of a very motivating and rewarding experience to have made it through and now be in a position where we can continue growing the brand.
Alejandro Cremades: What was that moment where you were able to take a deep breath and we’re like we’re gonna make it.
Andrew Blackmon: Oh man, that’s a good I don’t know that there was like a single moment because it was so chaotic that even if there was a moment when I took a deep breath honestly in the back of my mind I was so like shell-shocked thinking like what’s going to happen Next. What’s the next shoe to drop. Because there was so much if you remember there was so much back and forth of like restrictions vaccine. All these different things and because our business is so event focused like people are using this for social gatherings. Um, we were probably like 1 of the most affected businesses by the constant back and forth and so for us it was like. I mean I was looking at the news and looking at the reports of cases like every single day multiple times trying to figure out what is the future going to hold and it was impossible to predict so it was probably honestly like after a couple months of good news then we were like okay we can settle down and we can start planning. A little bit more for the future with like you know more confidence.
Alejandro Cremades: So talking about planning and talking about the future. Let’s say you were to go to sleep tonight and you wake up in a world where the vision of the black talks is fully realized what does that world look like.
Andrew Blackmon: Yeah, so we would like to have a lot more stores. So so basically the formalware industry has been controlled by like a couple major retailer retail players for a very long time and from our perspective these brands did a great job in the past. But. Don’t do as good of a job now meeting the customer needs and really speaking to the customer in a way that they understand and it’s hard to turn that ship when you have like thirty plus years of brand equity so our perspective is that’s what we want to do we want to have a large rental business I think with probably 3 to 5 times as many stores that we have now. But. A rental business that also feeds into a sales business. So lately, we’ve started selling a lot of suits and tuxedos and had some success there and so we’ll continue to expand that part of our business because we have these young guys who come to us. It’s like the first time they’ve worn a suit or a tuxedo or even a shirt or a pair of shoes slacks. And they’re like hey I really like what you have to offer because we have very high quality garments surprisingly high quality for the price that we offer and they’re like can I keep this or can I buy a new one etc and so it’s like a really nice way for them to try out what we have to offer and then buy something later so you know in like 10 years We’d love to have. Over a hundred locations and a big business in both rent and buy.
Alejandro Cremades: So I think that there’s 1 1 aspect, you know that thing that you were alluding to earlier you know which is the the logistics you know of of a company like this you know they’re not easy. Um. As you as you guys are thinking about I mean you have quite a sizeable amount of of people how many how many employees do you guys have today I mean that’s a lot of employees I guess in that regard. You know as you’re thinking about execution as you’re thinking about making sure that.
Andrew Blackmon: Um, we have about 400 employees
Alejandro Cremades: Everyone is rowing towards you know the same goal you know with the same vision with a full alignment there and to make sure that people are capable. You know of executing in a business like this. How do you guys think about systems and processes.
Andrew Blackmon: Yeah, So I think for me, it starts at the top. It starts with hiring people who know how to do the things that I need them to do because for me I can set the vision I can bring the capital bring the motivation. But then the team really has to be experienced enough to know how to do all the things that we need to do get from point a to point B So I. Really want to give a lot of credit to my team. We have a fantastic, very experienced team right now in terms of processes I think it’s for us. It’s important to like set the vision and then set kind of quarterly goals that are tracking along toward that vision that are very clear with clear deliverables about what needs to happen within that Quarter. And that’s been kind of hard during Covid because like I said it was so chaotic. That’s like any quarterly goal just goes out the window. So This is the first year that we’re kind of back operating that way because there’s less chaos and it’s a little more Stable. It’s still somewhat unstable, but um.
Andrew Blackmon: So I really think it starts at the top then has the right people and then just has kind of like management processes for goal setting and making sure that you know we’re moving towards and meeting those goals.
Alejandro Cremades: And and talking about you know people there I mean having 400 plus how do you go to about culture so that it doesn’t break when you’re scaling you know and you’re adding so many hits you know into into this thing.
Andrew Blackmon: Yeah, so I think it just has to be very intentional like to me I think of one of the biggest responsibilities I have as the co-founder and Ceo is to create a culture that motivates people and is a place they want to be you know when I first started the job or even before I started this business with Patrick I was like. That would be so fun and so interesting to create a culture that’s a reflection of my values and of the things that I kind of really want to see and it’s evolved over time like I think in the early days. The business was like a family It’s like everyone was close friends. But then as the business matures parts of that are unhealthy and you need it to be like very professional. And very kind of goal and results oriented and so you know as the business has changed the culture has changed but I think the one thing we’ve done is just been very intentional about what the culture is and if it’s changing communicating how we want it to change and just. Kind of spending a lot of time nurturing and cultivating people and relationships.
Alejandro Cremades: So you been at it now for about you know, almost eleven years I mean it’s a I mean you put that into the corporate world. That’s like 100 years I mean it’s unbelievable. So I mean I’m sure a ton of stuff now that you’ve learned along the way I guess if I was to put you into a time machine.
Andrew Blackmon: It’s crazy.
Alejandro Cremades: And I bring you back in time I bring you back in time to maybe that moment where you were thinking about doing something of your own and maybe you were brainstorming with Patrick what’s possible and let’s say you were able to show up right there in front of that younger Andrew and you’re able to give that younger Andrew. 1 piece of advice before launching a business. What would that be ny. you know what you know now
Andrew Blackmon: I think it would be trust your gut. So for me, um I felt like when I first started the business a little bit of an imposter like I didn’t study business undergrad I was way more interested in humanities I still am like I’m more interested in like philosophy and science fiction and things like this in my regular everyday life. So. I kind of doubted myself and doubted my intuitions even as they related to business but over time as I’ve looked at some of the intuitions I had in the past I realized oh those were like really good and then we’re coming from a place of logic in a place of strength but I just didn’t trust myself because I didn’t have the experience. So. Looking back I would just say trust yourself. Um and be willing to make decisions kind of from from your gut.
Alejandro Cremades: Has there been like a moment looking back where you really you know, trusted your gut and then things ended up working the way that you were hoping for them to work and what was that.
Andrew Blackmon: Yeah, so probably around the brand and sort of like I really enjoy working with our creative teams on like how we speak to the customer. How the images are the videos all those type of things early days in the company we had and still have but like a very very talented team. Working with us on the brand and so my gut told me that brand was one of the most important things in this space like a lot of people said you should just launch an Mvp like just get something out there and see how customers responded to it but my gut was like that doesn’t make sense like we have to be something that looks excellent. This is somebody’s wedding or somebody’s prom. It’s important. They have to really like feel a lot when they’re interacting with our company and so we spend a lot of time and a lot of money that people encourage us not to spend on doing that. Um, and so that was a moment where I realized hey I think a lot of our traction and a lot of our kind of ah. Customers using us is coming because they feel a certain way when they come to the business and because if at the end of the day like you can buy a t-shirt from a hundred different companies or a dress shirt from 500 different companies. Why are you choosing the one that you choose. It’s not because of the quality or this and that because they’re. Most things are like largely similar I really think it’s because of the emotional connection that the company tries to create with you and whether or not it resonates with you and so that was a moment or kind of like a whole area of the business where I really trusted my gut that it was important and then hired the right team to execute on.
Alejandro Cremades: So Andrew for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Andrew Blackmon: They can email me I don’t I’m not super active on social. Um, they can email me at Andrew at the black tux.com I’m happy to chat with anybody.
Alejandro Cremades: You see you see enough. Well thank you so much for being on the deal maker show today. It has been an absolute honor to have you with us.
Andrew Blackmon: All right? The pleasure is mine. Thank you so much for having me.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Andrew Blackmon On Raising Over $67 Million To Disrupt The Tux And Suit Rental Industry And Now Scaling Over $100 Million in Revenues appeared first on Alejandro Cremades.
In the labyrinth of entrepreneurial ventures, where dreams take flight and innovation shapes destinies, few individuals stand as examples of relentless pursuit and unwavering commitment. Goutham (Gou) Rao is one such visionary whose journey from the bustling streets of Brooklyn to the innovation hub of Silicon Valley is a story of resilience, passion, and audacity.
Gou’s latest venture, NeuBird, has raised funding from top-tier investor, Mayfield.
In this episode, you will learn:
- Gou’s journey from Brooklyn to India exemplifies how diversity fuels ambition and fosters resilience.
- Gou’s passion for technology ignited during his formative years, catalyzed by his father’s visionary gift of a computer.
- Gou’s pursuit of academic excellence at the University of Pennsylvania laid the foundation for his professional ascent.
- Gou’s entry into Silicon Valley marked the beginning of his entrepreneurial journey, where innovation thrived.
- Gou’s ventures, from Linux contributions to secure remote access initiatives, exemplify entrepreneurial resilience and innovation.
- Gou’s series of successful acquisitions underscore his acumen and vision in shaping the technology landscape.
- With NeuBird, Gou embarks on a new frontier, leveraging AI to redefine the future of technology entrepreneurship.
Alejandro Cremades · EP 885 Goutham (Gou) Rao On Selling Companies To Citrix, Dell, And PureSUBSCRIBE ON:
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Your email address is 100% safe from spam!**About Goutham (Gou) Rao:**Goutham Rao is the Co-Founder and CTO of Portworx. He is a graduate of the University of Pennsylvania.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show so that we have an amazing guest. You know we have a guest that they has done it multiple times you know he’s gone through several acquisitions. He is right now launching you know he’s a latest baby which is a rocket ship but then. Again, we’re going to be talking about. You know all the good stuff that we like to hear like the building the scaling the financing the exiting in this case too. We’re going to be diving deep into how to think like an end customer how to really think about problems and how those problems could be applied to really starting. What could be a company a successful company. So again, you know, very inspiring you know conversation in front of us so without further ado. Let’s welcome. Our guest today. Go rao welcome to the show.
Goutham (Gou) Rao: Thank you very much all a hundredra excited to be here. Thanks for having me.
Alejandro Cremades: So originally born in Brooklyn New York but you ended up moving back to India so and it coming back to the Us. But let’s let’s let’s do a little of a walkthrough memory lane. How was life growing up for yougo.
Goutham (Gou) Rao: Ah, life was interesting. Um, growing up in Brooklyn was certainly interesting. Um, both my parents. Um you know immigrants. Ah their doctors. There was a large community of like I guess indians that in the 70 s settle down in the Brooklyn area. So. Um, you know we had ah ah our ah our own social circles and um you know um I ah base my share of being bullied and things like that. So ah, you know when you take me back Memory Lane there are certain some things that I probably wouldn’t want to remember. Life was interesting. Um and certainly going back to India to um, you know when I had you know spent most of my schooling over here. It was a little difficult for me to make that transition and adjust um to India but I think I um, you know after a year or so I kind of um was able to get in the saddle and get ah. Going with a gro of things and yeah, um I did my engineering in India in in Banglore and bangla university ah and then I came back here.
Alejandro Cremades: By the by by the way what you just mentioned is a big deal because you know you ultimately the first years you were in the in New York and then all of a sudden you’re in India new place new friends new everything. So how do you think that shaped you up to.
Goutham (Gou) Rao: You know, actually I think that was probably 1 of the most defining things for me I would have been certainly a very different person if I had just lived in New York or in the us most of my life I think being taken out of my comfort zone out of my element. And being thrown into India and so and by the way when we went back there I had 2 young brothers and my parents were busy at work. So I kind of had to take care of them and and and their transition and adjust adjustment to India too. Um, so I grew up very quickly. Um, when I went to India um. There were times where I’m not kidding I would go to the bathroom and and start crying because I couldn’t take the pressure. Um, this um, you know I think it it definitely really shaped who I am today.
Alejandro Cremades: So in your case, you know, really going into the whole engineering thing. What really got you into um into computers to begin with.
Goutham (Gou) Rao: You know my um, that’s a really good question and I want to thank my dad for this. Um and and you know India was behind the us when it when it comes to computers and things like that I had a commodore when I was here in the us which I had to give up because it. It kind of wouldn’t work in India. Um, so there were a couple of years where I was without a computer but my dad went out of his way to buy me. Um you know a um, um I guess it was a eighty six back then um, you know, um, a computer and it kind of. Assembled the computer altogether myself because I’ve always been interested in electronics and and um this was when I was in um, you know, um before I got into college I started picking up books we didn’t have the internet or anything back then on on how to write? ah. Ah, basic code, basic basic the programming code. Um and I ran into somebody that was sort of a little bit senior to me but teaching if students in India how to write? ah basic programs and I kind of really got interested in it hung out with him a lot. Um, that’s really that was the. Birth for my um journey into computer science.
Alejandro Cremades: So eventually, you know you ended up getting into computer science. You did your degree there in India and you also developed an interest for Ai. You know it’s funny because probably at that point you know, Ai. Was not that big of a deal but now Ai is everywhere everyone is talking about Ai this ai that chat gpd. So I mean what? why Ai you know? what what? What really got you excited about artificial intelligence.
Goutham (Gou) Rao: Yeah.
Goutham (Gou) Rao: Okay, um, now this is ah um, this is ah a fun true story for me. Um I was um, you know just when I had just gotten into um programming and this is after a couple but maybe two or three years after I picked up basic and and things like that. And I think I was in my first year of ah engineering so we really hadn’t gotten into hardcore computer science and and ai subjects and things like that. So um, before I had even picked up my first ai book which I think was by night. Was the name of the ah author and this is a couple of years after the story I’m going to tell you I was um, ah ah you know, hanging out with a ah couple of friends who are big into chess and um, you know I really didn’t know chess that well but these guys did and you know I it would always ah it. You know I got thinking like is is chess really about doing repetitive moves or is it really about intelligence can can a can computer beat a person. Um and I kind of told them hey I think I can write a program where the program can beat you even though I can’t and they started you know obviously laughing at me and so. I started thinking about how would one write that program. How can a program actually beat a human being and so I thought really hard and then I thought about okay well you have to do the following first let the person make a move.
Goutham (Gou) Rao: Then you have to let the computer think as if it were the person and say if I were playing this person. What would my move be and the computer would flip back and forth between playing roles. Um, meaning one layer you’re playing for the user the next layer you’re playing for the computer and the next layer you’re paying playing for the user again. Ah, your audience who know computer science would know that this algorithm is called mini-max which is an algorithm that sort of falls in the ai bucket and gives a computer a way to ah prune through decision-making trees and actually play games I came up with this without having read the book. And um I wrote the program turns out that um you know I wasn’t back then smart enough to understand combinatorial explosion and so the program would eventually get very slow and people would beat it because people think cognitively differently. We prune out areas that we shouldn’t focus on where my program couldn’t anyway. Um, short of that long story is um I realized that I really enjoy Um Algorithms and building programs that can do things that people cannot do or do things that people do but do it better.
Alejandro Cremades: So for you. Obviously you know the us was you know there for you I mean obviously is all you knew until you know you went to middle school. Ah and I’m sure it was in your heart you know because he was just like the first culture that you were able to experience. No so. Eventually you come back to the us you know to do your master’s degree and you did your masters there in the University Of Pennsylvania Computer Science ah and essentially not only you know you got your master’s but then you also you were able to meet the most important person in your life. Your wife. So. Eventually once you got the um the degree there you decided to move to California out of all places. You know the place that you know was the East Coast what attracted you from the west coast.
Goutham (Gou) Rao: Now.
Goutham (Gou) Rao: You know this look I I have fond memories of both the the East Coast um so any opportunity I get I will visit the East Coast um continentally my parents and my brother they still live out on the East Coast they now live in the dc area and I love dc. But for me, um, you know, growing um, growing up when I was in New York we would all you know frequently. My parents would bring me out to California whether it’s Disneyland or or just even the San Francisco area and I just kind of liked the weather. The mountains. Um I um. Um, growing up in India I had a motorcycle I love riding motorcycles and so quite honestly California is a awesome place to ride motorcycles so you know the the ah for me California is kind of the. You know the the quintessential place to um, the combination of that Mediterranean landscape the the mountains riding a motorcycle and um, you know you can write it pretty much. Um, all twelve months of the year there’s no bad weather other than a couple of months when it rains. Um. That really that that kind of environment was very appealing to me and also let’s not discount that Silicon Valley and that’s kind of my you know computers and computer sciences my passion and this is where a lot of the innovation happens I’m sure it happens throughout the world too. But at least in 99 this was the hub.
Goutham (Gou) Rao: Of where things were moving so fast I Just could not be ah, not part of that action.
Alejandro Cremades: So let’s talk about that action because I mean that action you know, got you interested in linux you were also doing your own you know contributions there and that eventually got you into Intel which was your first in rodeo.
Goutham (Gou) Rao: Yeah.
Alejandro Cremades: But that was a really nice seway into the venture world for you. You know which would end up you know, becoming your first company with nit six. So what would you say were the sequence of events that needed to happen for you to be okay with venturing into the unknown.
Goutham (Gou) Rao: Ah, well couple of things. Um I was young back then and so young people can take risks. Maybe there. It’s a it’s a sometimes out of stupidity too. Um. So every venture is risky. Your first venture is always the most riskiest. But for me, you know I didn’t have children. Um I was always a person that um you know um I like to define what I’m working on. Ah. Mostly because I know that I do the best job when I’m really passionate about what I’m doing and passion can’t be handed down to you somebody can’t tell you hey go be passionate about this. It doesn’t work that way and I’m always uneasy if um, if I’m working on something that. You know it’s kind of a chore and I have to do it as a means to an end in anything. Um I enjoy cooking for instance and so I don’t think I’ll ever make a meal that I don’t really want to eat you know, but um, you know sometimes um, you know people do that. It’s just ah for for them. You know. Putting a sandwich together is just so that they can get the calories. But for me, it has to be like um I’m I’m going to enjoy every bite of this? Um, so when netsi um, you know I was working at Intel I like my job but it’s not like a product that.
Goutham (Gou) Rao: I would say that hey I’m using this day in day out I really enjoy it. Um, the you know the linux kernel is a necessity. It’s not something you get obsessed about so I wanted to work on something that I thought was a pain point back then and it was secure remote application access. Um, started putting a prototype together and look I think um, most entrepreneurs will know this it all starts with the first line of code you write or if you’re building something the first um you know bolt you put into to the product. It all starts with that and 1 thing leads to another and and your um first line of code. Um, turns to 10 and it starts looking awesome and turns to a hundred lines of code and you’re like wow this is really cool and you then you get obsessed with it and that’s kind of how I started net six and I want to if you want to really do something good. You got to do it full time. So I said hey I’m going to quit my job I’m going to focus on this full time.
Alejandro Cremades: So then so then what happened next.
Goutham (Gou) Rao: Well, um, next is um, an interesting story I was fortunate enough to meet. Um, um, my first co-founder his name was is Murley um, he was the Ceo of netsix. Um and he um you know he knew people that had money. So um, you know I think if you’re starting your first gig. That’s usually the hardest part which is to find somebody that will trust you and say um, you know I’ll kind of invest in you because there’s no track record and um, you know everybody has ah their own story in how they cracked. Um, um, that their first um you know the time that they raise money. It’s it’s everybody’s journey is different sometimes people um, put their own money in and get things off the ground. Um, that’s something certainly I did but we needed a lot more capital finding somebody that will trust you is an important thing. And um I think that’s probably the hardest part for an um, um, entrepreneurs that was a hard part for me too I did get lucky in meeting Merley um, we were able to find people that um well they knew him and then they um after talking to me for whatever reason they believed in me or even though I had no track record. Other than um, my engineering accomplishments. Um, they really had no um way of validating that um I’m a good product guy or or I could I’m a good cto or I’m a good person to build a business with but they um you know, um I guess um.
Goutham (Gou) Rao: After talking to me a few me a few times they got the confidence and said let’s let’s go do this I’ll give you some money? Um, yeah, and then you know, Um, then when when when when somebody gives you money they are actually giving you more than money they’re giving you ah their belief their faith in you. And so things then really get real and that dollar that you get is the most precious dollar and so you want to Maximize. Um, you want to really make them proud for believing in you and so once that sets in um, at least for me. It became a tireless obsession I went on a mission saying you know, not only do I Enjoy building this product I’m going to prove it to everybody around me that um I can knock things out of the ballpark And yeah, yeah.
Alejandro Cremades: Well hey you you? you definitely did. You definitely did because I mean with nets six I mean where you guys were doing secure and application access. Ultimately, the company was acquired by seatrix for ah, reported 50000000 you know cash. So talk about you know. First hit you know first exit I mean really remarkable walk us through how was that journey to of really understanding the full cycles of a company because I mean in this case, you were able to reach the finish line on your first day a company so what do you think that opened up for you.
Goutham (Gou) Rao: The most important thing for me there. Ah andro was um, it was a learning experience every time you realize that look um I know this that um my smartest days are ahead of me. What I mean is um. Every day I realized that um you know you know the the tomorrow I’m going to be a little bit smarter than I am today because I’m going to learn something from my mistakes and so um, you know, um, and first time in nets six. Well we did knock it out of the ballpark. Um, but there are lessons that we learned along the way um mistakes that I didn’t repeat at at Oak Areina but then there were mistakes done at ocarina which we learned from and we didn’t repeat at poor orcs and so on and so forth. Um, what your question was what did I learn at at 6 um, what I’d learned at netsix is um ah you have to be very picky in the team that you build a company with as well. Um, um, you know the the my cofounders back at netsix they shared the same passion. Um, that I have which is that relentless customer focus um work ethic. And yeah, you got to find people like that and I was again fortunate enough to um, start oak areina with another person that had that same work ethic. This was a person that we had um, hired at net 6.
Goutham (Gou) Rao: And so his name is Eric Brugerman and and so we started that company with him and and again same um, that focus on customers. The focus on work ethic and so um, what I learned at netsix is that ultimately the team that you build and the team that you surround yourself with um. Is is the most important thing because you can’t be a 1 man army you need to find ways in which you can impart your vision and passion into um other people and and you have to replicate yourself.
Alejandro Cremades: So I guess in that in that direction too because I mean the company got acquired by citrix then you spent a couple of years at Citrix. You know there as a cit on their the on one of their divisions but but I want to ask you you know once an entrepreneur entrepreneur always an entrepreneur and. Right? after this, you know you you left a citrix and you started another company called ocarina which also got acquired and eventually you know you got acquired by them in this case, you know the terms were not disclosed but you know I I think it was a good exit from what I’ve been told but I want to ask you there. What was what was the lesson there. For you with Okorina and what were you guys doing too.
Goutham (Gou) Rao: So Oariina focused. Ah so this was just a small um segue here. But this is now in around the 2006 timeframe when um, you know, social media and and you know. Companies like Facebook were taking off and ultimately this was causing a lot of storage consumption and you know, um, so what we did at Okarina was focusing on data management and data management using. Um. Um, you know in a unique way using algorithms using compression technologies using dedu deduplication There were a lot of technologies around back then that were doing data management by doing things like archival solutions or moving data around we focused on saying hey you know there’s only so much of this moving around. You can do. Ah, there has to be a better way to manage this kind of data and it has to be tackled at an algorithmic level and maybe there’s a lot of redundancy in the data and and so we focused on the problem that way. Um, you know the the lessons learned there were ah to for me. The harder the the the more um important the problem is for the person like the pain. Um, the bigger is going to be there if you can solve that the the it’s a better return on your own time and investment. Um.
Goutham (Gou) Rao: That certainly was the case at Oakarina we had a lot more customers than we had at net 6 paying a lot more money for the product that we were building because the problem was so big for them and ultimately um, turned into a much bigger exit for us too and so you know I think what? ah we had learned is. Ah, ah, maybe even ah lessons that I’d taken from netsi we built a really good product but there were probably a few other ways to solve that pain point and when we got to oak arena there were fewer ways of solving the data management problem and and it was a bigger problem. And um, the elegance with which we did it? Um, you know that also ultimately became really important that people could adopt the oakarina solution. Um, you know without too much disruption compared to other technologies out there. Um, so that you know was something that we ah that I always had a belief in the back of my mind. Um, but it kind of um you know it proved the point that and with the real world result.
Alejandro Cremades: So 1 thing that I want to ask you here because again, you know you kept going and the next one that you started was poor work port works. But right before you know that and I guess as you were thinking about the next one because I’m sure that now you’re being very intentional at this point you know, starting companies. How do you think entrepreneurs should think about ah starting companies. You know when it comes to really looking into problems and then perhaps from there into a solution that could eventually become a company.
Goutham (Gou) Rao: So I you know I have this theory that um, every couple of years um and and maybe the the years could be decades given the industry you’re in but every so often. Let’s just say it that way. That any product or any solution or that people use needs to be rethought. You need to rethink how we’re doing things and can it be done better and why why is that the case for me my belief is that because people evolve our tastes of all, um, our needs evolve. Our appetite evolves and so this is certainly I mean you can look at the I the phone I mean the phone’s been around forever. But ah, why is the iphone better than its predate. Ah a blackberry for instance and so you have to um, um, always say you know. Um, you just look around and if there’s something that is a piece of technology that you that you use all the time but the last time it was updated was a few years ago um then probably there is good chance that if you do a refresh on that and re implement it with modern technologies modern usability techniques and and um. Um, you know best practices and to meet a modern appetite of the new new generation chances are you’re going to build a really good product. Um, so this um, you know was true for us at portworks because storage has been around forever. But the way in which people build applications certainly had changed.
Goutham (Gou) Rao: Um, your audience and and yourself probably know this but you know, um, we live in the cloud native era and cloud native architectures look very different from applications twenty years ago right um you know it’s not the case that an entire application fits on one computer. It’s distributed and so on. So.
Goutham (Gou) Rao: We said what needs to change and again our background is around enterprise enterprise data and so storage needs to change it needs to be redone and rethought of in the cloud native era and um, again, we I think we did a really good job. The report works the elegance of the solution. The the usability of it. Um, the manner in which people interact with storage completely changed and I think it was brought up to um, modern era where the the way in which the newer age devops audience and um, the younger. Um um, new generation. Um ah system administrators want to use storage. It resonated with them and so um, wildly successful product. It’s still the number one data management platform for Kubernetes and cloud native architectures.
Alejandro Cremades: And obviously you know good acquisition to you know pure storage. You know, bought it for 370000000 my god you know on a roll one after the other and and and it’s incredible. How you’re able to like spot those problems and really build something that they and that they want I guess. At this point you know now you know obviously this is one is your last name transaction you know before now what you’re doing a new birth and we’re going to be talking about that in just um, a tiny bit here tell us about how an entrepreneur should think about sell versus continuing to build. Think about timings here. How do they look like when you’re thinking about an m and a transaction selling your business.
Goutham (Gou) Rao: You know it? Um, that’s a good question look um it. There’s a cup. There’s no single formula for this and I’ve seen companies without naming names. Um, that have refused to sell. Even though they’ve had a really good offer in front of them some spectacular companies. Um, and and I’m talking about very large acquisition numbers too and the billions of dollars um and they’ve turned it down only to see that um you know down the line. Um, that probably would have been a better option if they had taken it and. Um, and then I’ve seen companies that have sold too early. Um, um, you know I would like to think or at least would like to sleep at night knowing that every time we’ve sold our companies whether it’s netsi oakre in our portworks. We did it at the right time because you know you can’t um. Um, what can you do? You can’t change the past and and look in all cases. Our aquis were fantastic organizations for us. So as a good home for all of our products of pure is was an excellent fit for poorworks. Um, our team there is is is still loving it. The product is doing very well pure is doing a great job for the product. Um, but I don’t want to not answer your question look you have to ask ask yourself? Um, a couple of things does this make sense for my investors right? if I sell now are they going to be happy and and so you always have to make sure that you have that? um.
Goutham (Gou) Rao: Um, financial responsibility to people that invested in you. Um, the second thing you have to ask is if I sell now is this going to be financially beneficial for my employees can I do this transaction in such a way that the employees are really going to make it feel like it was worth their while. And that there are a number of different um ah parameters to it because 1 the investors will get their money during the acquisition but the employees will have to stay back and um, the way that these things work and I’m sure you know this. But um, you have to maybe stay stay another two 3 4 years and earn earn it out and maybe there’s some extra incentives that acquiring company may put in into the deal so you have to weigh all that in and say okay, yeah I think this makes sense for my employees. Each employee is going to make you know a lot um be very comfortable. Um. And the third thing I have to say is this good home for my product because ultimately that is your baby too. You built that over the past how many every years and you want to make sure that the product is going to thrive. So um, there’s no simple answer for me at least these are 3 variables that we weighed each time very carefully. And um, in all cases the answer was like yeah makes sense. Um, you know, um, also you know when um, there are other factors that you look at too which are you know? ah long term can we keep doing this ourselves is this going to be better if we keep doing it ourselves.
Goutham (Gou) Rao: Um, when we sold portworks. There was also covid around the corner. So there were some um you know, uncertainty into what is going to happen over the next four or five years so you take all of that into account and you try and optimize for the best possible outcome.
Alejandro Cremades: So then let’s talk about Newbert you know what are you guys doing at Newbert White Newbert you know after all these companies in after all those super successful exits I mean it sounds like anyone would think about. Maybe you know taking it easy for a little bit but not in your case.
Goutham (Gou) Rao: Hey, a hundred I’ll tell you this um look I don’t um, ah Jenny I um, you know if if if somebody out there tolds you hey I kind of saw this coming I am gonna maybe call. Ah. A little bit of Bs on that it really did take the people by surprise and what I’m going where I’m going with this is and I’ll answer your question just give me one second here for a slight segue back in like in in 90 s when our 95 are kind of time frameme when I I you know did a project with neural networks and back then I built a three- layer back propagation neural network which would take 20 minutes to train and so we used to think that a neural network was an approximation of a brain but I don’t think we had the compute power to actually see it in action. Fast forward to today thanks to companies like Nvidia and Gpus and all of that we have you know 70000000000 parameter models which believe it or not maybe is an approximation of a kind. Um um of a brain and so where I’m going with this is there is no way in and in the world. Um, Viot who’s my co-founder myself, we’re going to sit back and and and not write this too much going on no matter how how you look at it. You know it’s easy to say ai is around the corner is going to change the future those are obvious statements.
Goutham (Gou) Rao: But I think that it’s going to happen a lot sooner than people think I think you know sometimes people will say you know hey Twenty plus years the world will look different I’m thinking in in like within 5 plus or that kind of that kind of timeframe every ah industry is going to say wow what hit us. This is so transformative and so is so revolutionary gen ai that um you know I I was reading an article the other day like in in the pharmaceutical industry which I have no I I you know no background in this and I’m just going by an article I read and um, you know it. Gen ai can come up with um, you know, um, recipes to make new. Um, ah, ah drugs because it can go through and analyze um you know case studies and and reports and ah, um, analyze data that human beings simply can’t and so.
Goutham (Gou) Rao: Um, you know for us. Um, we ah me personally coming from a technology space I would hate to be in a in ah in a world where I’m surrounded by technology that I don’t know how it even works or how it was invented. I have to be at the forefront of of that innovation cycle on how things are being done what I’m where I’m going with this is I don’t know how to build a car but I kind of know how a car works like a high level of the mechanic. So I’m not kind of stupid of of the things that are in the planet today. I kind of know how a plane flies like I get the concept of ah you know aerodynamics and things like that I kind of know how computers work and televisions work even though I don’t know how to if you give me the parts I won’t be able to build it but I know generally how things work so I’m aware of my surroundings Jenny I if we sleep and not. Ah, keep an eye on how things are evolving I think very soon we’ll be in a world where people are wondering like how does this work even today people cannot tell you exactly how Gpt produces an answer. It’s it’s ah it’s it. It works. It’s it’s not possible to actually say exactly why it’s doing what it’s doing and um I guess what I’m trying to say is um, um, for the um, look what what What have been my passions in life algorithms data.
Goutham (Gou) Rao: And so we want to see how to apply gen ai to Enterprise Data it data um, somebody is going to solve this because it’s a problem that is getting worse and worse and people will not be able to cope with the amount of data that’s out there. Um, and I don’t want to live in a world where ah, somebody solves it and I’m like I don’t know how it works I don’t know how that’s been solved and I’m just kind of living.
Alejandro Cremades: So then so then I guess for the people that are listening new Birth What is the business model. How do you guys make your money.
Goutham (Gou) Rao: Um, we are so we just got um, started right? We just announced our funding a couple of weeks ago and we’re starting to engage with customers meaning we’re starting to deploy. Ah, the newbird product which is actually called Hawkeye which so let me just tell you a little bit about what newbird does and then I’ll talk talk about the business itself. Um, newbird. Um, um, is ah creating a digital agent a digital workforce a digital it ops engineer. Called Hawkeye whose job is to work alongside human engineers to address any kind of it related issue. So there’s this concept obviously called it ops which is managing um the operations of an it infrastructure whether it’s cloud or on-prem. And um, you know, typically it’s um, human-driven so human beings ah respond to primarily 3 types of issues either performance or there’s a product outage something is crashing or breaking or you’re trying to optimize things and so this takes skilled talent. Which is getting harder and harder to find there are fewer computer science graduates. Um and um, quite honestly, it’s kind of hard to do because you have to look at all of these complex. Telemetry Data Metrics Alerts Logs um and in real-time very quickly because if there’s a problem then um, you’re under the gun.
Goutham (Gou) Rao: You have to very on the spot. Try and come up with a solution and to do that you have to try and figure out what is happening in the first place. What’s breaking what is what is the problem. So. What we’re doing is hawkeye is going to do that job. It will do the hard work of analyzing all of these logs metrics alerts traces again because it uses a large language model actually a sequence of large language models that have been trained on this kind of data and it can do the job that human beings um are. Are better focused on doing more creative things. Um, and so like hawkeye is going to do the grunt work. Um, and so the human engineers can again focus on more important tasks and now your question is. How are we selling this what we’re doing is we’re um, initially starting to insert this with what we call code development customers. This is a concept that we’ve I’ve used in all of my previous companies where you ah work with um you know select partners that you think are ah willing to. Code develop the product with you work alongside you give you feedback. They’re willing to um, you know because the pain point is so high that they are willing to say hey I want to see you succeed I’m going to help you succeed here’s my problem. Let’s make this work together.
Goutham (Gou) Rao: And you pick these ah customers. Um, we’ve been fortunate enough that over my career. We were some of these customers I worked with in my previous companies. That’s where we are um so the first step is to figure out. How is the product going to work in their environment. Then the next step is to understand what is the value that it’s providing to you The customer. Okay, you you can’t build a pricing model or put a dollar value to it until you figure all of this out you have to figure out. Um, Ah how important is it are they.
Goutham (Gou) Rao: Um, um, ah grabbing the product and deploying it everywhere. Um, when they do deploy it. How are you measuring success. So for us and newbi. How do we measure success when a problem happens in our industry. It’s called the time to incident response or time to resolution. So when you have a problem an it problem how long. Did it take for you to fix the problem. How many engineers did it take for you to fix the problem. Those are two variables. We’re being measured on now with Hawkeye um with hawkeye. Um, what we want to measure is how long before hawkeye and after hawkeye were. Typically a problem could take many hours and sometimes days our goal is for a customer to say with Hawkeye I can solve a problem in minutes and I can solve a problem with fewer people. So my people can work on other things. That’s where we are once we do that we’ll figure out. Um, how to monetize it? What is it worth to the customer. What is it worth to us and so on.
Alejandro Cremades: So I guess a now with all these startups in you know, all this success. All this success I mean for this one. For example, you guys have already raised like over 20000000 you know from someone like Mayfield you know which is one of the top top Bcs I guess if I was to put you into a time machine. And I bring you back in time. Go and I bring you back to that moment where you were thinking about. Perhaps you know like taking a leap of faith and going into the unknown. Maybe when you were at Intel and you’re able to give that younger go 1 piece of advice for launching a business. What would that be and why giving all you know now.
Goutham (Gou) Rao: Yeah, you know, um, again, you know every every every company that we did There were um, lessons learned not mistakes but lessons learned. Um, if I had to um if I had to give. The younger version of myself. Um, ah the feedback it would be um that you know believe in your convictions more and stand for it and so a lot of times I would and again this goes with I guess age and lack of experience and hence your question. Um, there would be times where in my heart I would feel like hey it doesn’t feel right I think I need to do it this way. But um, there are enough people around me that would have their opinions and and say no, let’s do it this way. But um, they were really not the people working on solving the problem they would just have an opinion because that was their role. And so to put all of that aside and say you know I hear you but my gut and tells me I need to do it this way because if you started the company and and you’re the and and talking to the entrepreneurs out there then. I Hope you believe in exactly what you’re doing and a belief in what you’re doing is not just a single belief. It’s actually you probably believe in many things about the product that you’re building an example I would think that I had a belief in.
Goutham (Gou) Rao: Um, how to solve a technical aspect and whether it’s the um, ah, remote access product or or D do I had an opinion actually on how to sell it to or how to price it but I would maybe take a backseat on some of those things and only focus on building it. But no, the reality is as an entrepreneur I do. Have an opinion on those elements to how should it be consumed. How should it be sold. Um, how should it be marketed. How should it be messaged. Um, and as time went on I got more and more assertive in those things I wish I’d have done that a lot um earlier upfront and so. That would be something that I give as an advice to myself hope hope that makes sense.
Alejandro Cremades: I Love it. So go for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Goutham (Gou) Rao: Oh um, yeah, you know, um, we you can follow us on Twitter I’m not a big social media person. Um, but we do have a social media account. Um, and I know people do manage that and and respond on it so feel free to reach out to us over there. Um, if there are people that are interested in um, following what newber does um, you know we have newsletters that we um and blogs that we write on our site too. So you can certainly follow our story over there. Um there’s somebody interested in playing with hawkeye. Um, we have a form. Um, on our website that they can sign up for early access. Ah, those are really the best ways to get in touch.
Alejandro Cremades: Amazing. What Google thank you so much for being on the deal maker show today. It has been an absolute honor to have you with us.
Goutham (Gou) Rao: Thank you so much Alandra I Really appreciate the opportunity and and to your audience. Thanks for listening.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Goutham (Gou) Rao On Selling Companies To Citrix, Dell, And Pure For A Few Hundred Million Dollars And Now Building A GenAI Co-Worker To Spot And Solve IT Issues Quickly appeared first on Alejandro Cremades.
In the world of scientific innovation and entrepreneurship, few names shine as brightly as David Schaffer’s. With a track record of launching and nurturing successful companies in the biomedical field, David’s journey is not just a story of academic achievement.
David talks about building eight companies within a short time frame of just over a decade, one of which he took public. His latest venture, Axent Biosciences, has raised $100K in funding from SkyDeck Berkeley.
In this episode, you will learn:
- David Schaffer’s journey underscores the seamless transition from academia to entrepreneurship, blending research rigor with real-world impact.
- Through initiatives like Bakar Labs, David has cultivated a fertile ground for scientific startups, fostering collaboration and driving tangible solutions in biotechnology.
- David’s portfolio of eight companies reflects a commitment to diverse applications of biomedical research, from gene therapy pioneers to groundbreaking genome editing ventures.
- The choice between staying private or pursuing acquisition hinges on each company’s unique trajectory and strategic partnerships, showcasing David’s keen understanding of the entrepreneurial landscape.
- David’s companies are at the forefront of biomedical advancement, pioneering breakthroughs in targeted gene delivery, regenerative therapies, and beyond.
- Networking and learning from others are paramount, as David advises aspiring entrepreneurs to surround themselves with those who challenge and inspire, fueling a relentless pursuit of innovation.
- With a legacy rooted in excellence and a vision for a better tomorrow, David’s impact on the world of scientific innovation is profound, shaping the future of biotechnology for generations to come.
Alejandro Cremades · EP 884 David Schaffer On Taking An Over $1.2B Company PublicSUBSCRIBE ON:
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Your email address is 100% safe from spam!**About David Schaffer:**David Schaffer is a Professor of Chemical and Biomolecular Engineering, Bioengineering, and Molecular and Cell Biology at the Helen Wills Neuroscience Institute at U.C. Berkeley.
David has served as the Director of the Berkeley Stem Cell Center since 2011. In addition, he is a co-founder and, since 2013, has served as Chief Scientific Advisor and a member of the board of directors of 4D Molecular Therapeutics. He has also co-founded five other companies.
David has served on the board of directors of the NASDAQ-listed company uniQure NV since January 2014. He received a B.S. in Chemical Engineering from Stanford University in 1993 and his Ph.D. in Chemical Engineering from the Massachusetts Institute of Technology in 1998.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So our guest today I got to tell you he’s quite the rock star I mean he’s done a day multiple times you know we’re talking about 8 times and 8 times in a very small timeframe. You know we’re talking about like maybe like a little bit over a Decade. Ah. 1 of them. Actually you know he took public. You know right now is trading at about one point two billion plus ah market cup ah about the incredible journey. You know we’re gonna be talking about how you know he went you know about clinical trials with one of his companies. The first one also thinking about. Acquisition versus staying private. Also the incubator you know program that he is pushing. You know which has saying had remarkable success with the company is collectively raising over 300000000 and then also a new company that is launching so. Again, building scaling financing and exiting all the above that we like to hear so without farther ado let’s welcome our guest today Davidchafer welcome to the show.
David Schaffer: Thank you so much Alejandro thrilled to be here.
Alejandro Cremades: So originally born in Latin America you know out of you know a meetup you know that your parents had in grad school so give us a walk through memory lane. How was life growing up for you.
David Schaffer: Sure I actually don’t remember unfortunately being in latin America I lived there all of six months before my parents decided to move back up to the Us. But yeah, my my father was an academic. My mother did drug development for her career worked in a ah couple of different pharmaceutical companies. But you know, grew up. Pretty much like any other kid. Um all the way through high school and then went to to college. Ah at at Stanford University which you know ironically is is Berkeley’s rival these days so ah, um, but after finishing up at Stanford moved to mit for graduate school salk institute for a postdoc. And came up to Uc Berkeley in 9099 to start up my academic career and have been here ever since. Ah for 25 years so most definitely my home.
Alejandro Cremades: So what got you into engineering out of all things why engineering.
David Schaffer: It was ah you know motivated in part by my parents. My father was a very very basic biologist with an academia a professor so extremely basic, not application oriented and my mother was on the kind of the opposite end of the spectrum. She was ah an Md a physician who did drug development and ran everything from phase one to phase four clinical trials in our role at at Nevartis and then at Sanofi I wanted to be somewhere in between I wanted to be more applied than my father was I like making things. But I also you know, enjoyed this idea of ah being able to pursue things of interest to me, you know academic freedom so that ah made me an engineer and in academia. So I I figured out pretty early on that That’s what I wanted to do for my career and thankfully it worked out.
Alejandro Cremades: So out of all things you know like you said you know academia. So I mean Academia you know it’s a really interesting route that you decided to pursue especially you know, given the fact that you’re also a serl entrepreneur. So how do you think you know that balance you know between the two you know have ah shipping up for you.
David Schaffer: 1 of the reasons I really like academia is that it’s design your own career ah in some cases people decide to really focus on the research programs. They’re building within their labs which I’ve done for you know much of my career. People can decide to focus on teaching they can decide to become a chair a dean a provost a chancellor which I’d never you know that was not my my interest ah people can play a role in translating their technologies from their academic labs into industry and at different times of my career I’ve had different interests in that spectrum. But really, ah you know, roughly for the first half of my career I was really focused on building up my academic program and and our research and working on solving what I found to be some interesting problems and the second half of my career so far I’ve been focused on taking the the results of that work and translating it ah from the. Public sector into the private sector and getting it into companies that can then advance it to human clinical development but academic freedom affords you the ability to do all of the above. So I very much enjoyed it.
Alejandro Cremades: So so.
Alejandro Cremades: No kidding now. Obviously for you, you ended up kind of like establishing your own incubator you know or or or I would say like system to really just like span out. You know, companies out of it. So. How did this come about because I mean out of out of this.. Obviously you know like your biggest success today you know came out which is for the molecular seraptics which you ended up taking public but how did the whole concept and structure for this. You know, come together.
David Schaffer: It was ah you know as I mentioned I developed a really strong interest in getting our technology from an academic lab into a company and that was motivated you know and by and large by my my experiences with you know learning from how my mother worked that companies are the entities that take basic research. And advance them into clinical development and eventually into products that can be scaled to really help society. So I always knew I wanted to play a role in forming companies and started doing that you know as you mentioned about a decade ago ten eleven years ago or so and learned through each one of those of those companies that I’ve co-founded i. A lot a huge amount. Um, we did some things right? You know I made some mistakes and you know once you learn ah a few mistakes you know fortunately, none of them are fatal all of 8 of my companies. Ah while the 2 have been acquired, no longer exist the other six do. But you know I felt that yeah I wanted to. You know in addition to doing research be an educator because that’s the the heart of academia education and research and so I had the opportunity starting around three years ago or so to take the leadership role of an organization. Ah a multi-usec campus organization called q b three. Which is focused on scientific innovation and and entrepreneurship. Ah Q b three you know back in around 2006 formed the very first incubator in the University Of California system at Ucsf ah, 2008 formed the very first University Affiliated Venture Capital Fund anywhere in the country.
David Schaffer: So the organization has had a longstanding history of being innovative at that interface between Academia and companies. So I became the overall director around three years ago ah we um, opened up. What’s now the largest university owned and operated by a technology incubator in the country. Ah, called baker labs which is ah a partnership between Q B Three University California Berkeley and a ah terrifically generous donor foundation and baker labs is ninety Five Thousand Square feet we’re home to 31 companies as you mentioned those companies have collectively raised. Ah, three hundred and ninety million dollars have created 350 jobs in the state of California and you know fortunately for me as well. I’ve been a terrific home to 2 of my own companies as we fund spun them out of the university and then enable them to grow and in 1 case move on and and outgrow the incubator.
Alejandro Cremades: So obviously you know in total you’ve launched a 8 companies you know and you even have your own you know umbrella you know where you would you just like spin out ah companies yourself. So what? what ended up being that framework you know from the way that you think about. An idea to the way that you think about bringing it to life to the way that you for perhaps you know like plug in the right team and then finance it and and let it grow and and fly.
David Schaffer: Sure it always started of course with the idea and I wasn’t necessarily looking for ideas to build companies around you know during the first ten fifteen years in my career I was looking for big problems. You know things that I yeah my engineering. You know side of my brain ah felt was a big problem that really deserved a solution deserved a technology to solve the problem So I started working on problems in Gene and cell therapy began to publish on each of them, patent them, etc and at at some point. A solution to a problem reached a critical mass where it could be the basis of a company you know, even though I didn’t really and intend to start spinning companies out of my lab I was just interested in solving problems. But if you put together a you know a compelling technological solution to an important biomedical problem. Ah, that has publications and patents around it that becomes a great package for for starting a company so started doing that around 2012 or so and you know, kind of caught the bug. It’s something that I found to be fascinating each one of those companies is is very different from each other and had a different kind of. Organic growth ah path but you know roughly we’ve started companies when we hit that critical mass of of having you know Ip and and technology that addresses an important biomedical need then? um I’ve I’ve typically started it by.
David Schaffer: You know, onboarding or or bringing on board a graduate student or postdoc who was involved in creating the technology. These folks are really smart I’ve known them for you know 4 or five or six years meaning I have a lot of trust and a lot of confidence in them and there are folks who will move mountains to to make the technology work. You know they. If they originally played a role in inventing it? Um, but I’ve also typically paired them together with more experienced leadership. Um, as time has gone on ah to to mentor and enable those people to grow and then of course the you know the ah traditional process of pitching vcs raising funds. Um. In many cases. We’ve actually also done it done it non-dilluively through bd partnerships with larger companies and you know that’s ah each one of those companies is has ah launched with in some cases a huge amount of my time invested in other cases I’m a more of a consultant and board member. But I like to continue to stay involved with each one of them and and you know have the joy of watching them grow.
Alejandro Cremades: That’s amazing. So then let’s talk about the first one and your first baby and and an amazing success which was for the molecular therapeltic. So obviously you know you guys got started with this and that was back in 2012 so what? What was really the concept. You know what what? What ended up becoming the company and really the the business.
David Schaffer: Sure it was ah technically for you was my second company. My first company I started in 2012 I wasn’t as actively involved in that it was ah myself and another professor and he ended up playing a ah bigger role within that company. Ah, four d was based on technology that I started inventing in my lab back in 9099 and my doing that work was really taking on 3 leaps of faith that all did end up working out. The first is that gene therapy was going to work and was going to be an important therapeutic modality.
David Schaffer: And gene therapy of course is the idea that you can use Dna as a medicine that if somebody has a broken gene such such as cystic fibrosis or Hemophilia you could deliver the correct version of that of that gene and as a result potentially treat the disease. That’s an oversimplification and there are other ways that gene therapy can be used but you know to ah to a to a good extent. It’s about delivering correct copies of broken genes. Um, so in addition. It’s really hard to deliver Dna. You know most of the time the body thinks that Dna is a bad thing. You know we associate it with viruses and and bacteria foreign dna but you can use viruses and um take away their ability to replicate. And trick them into delivering a piece of medicinal dna rather than their own Dna and there was one particular virus I’ve been working with for almost thirty years called adnoassocid virus and my second leap of faith was that was going to be the one that was going to be a a virus that the field was Goingnna was going to succeed in using. And the third was that natural versions of this virus weren’t going to be good enough and we we felt that we needed to engineer much more efficient targeted versions of this virus. It’s ah it’s a respiratory virus. Not a very good one and when you start showing it cells outside of the lung show it a neuron or ah, a heart cell or a muscle cell.
David Schaffer: Virus says what is this you know evolution has not prepared me throughout tens of millions of years to be able to infect and deliver dnas to the cells successfully so we invented a technology that enabled us to reprogram these viruses and make them much better at carrying that Dna to a variety of cells and tissues throughout the body. Yeah, basically adapted a ah protein engineering approach called directed evolution that was emerging in the field at the time and actually went on to win the nobel prize in 2018 and we were the first to use that with aav and with gene therapy.
Alejandro Cremades: So.
David Schaffer: Ah, so that’s fast forward to 2013 um the technology was ripe gene therapy was starting to work and the capital markets were in good shape so that was ah that was the time to to spin out that that technology into 4 d.
Alejandro Cremades: So let’s talk about then for the 2 I mean the the way that you guys were able to take it all the way to ipo I mean what was that like I mean sounds like a wild you know journey.
David Schaffer: In 2013? Um gene therapy was starting to work a man as you well know 2008 was a huge disruption to the world into the capital markets and a lot of capital was sitting on the sidelines for a few years and then right around 2012 or 2013 the capital market started recovering people were looking for things to invest in and biotech became a ah big one and there were 3 real major areas where where investors started coming into biotech was in cancer immunotherapy.
David Schaffer: Genome editing and gene therapy so gene therapy which was really a backwater of medicine for for a couple of decades. All of a sudden came to the fore and there was a huge amount of interest in it. So um, at that time people were coming to me because we have been publishing for 10 years about this. New technology to be able to engineer versions of this virus a at will and optimize them for delivery in the eye or in the lung or in the brain or to muscle so we had this this strong track record and people were coming to me. Ah, which was again kind of ah a change from what I was used to ah so. They were both investors as well as as larger companies that were trying to launch their own gene therapy programs and needed to delivery vehicles. So we spun our company out four d I co-founded it with a a berkeley alum by the name of David Kern who’s currently the Ceo. So David and I spun out four d along with a. Ah, graduate student from my lab. Melissa Cotterman is her name. She’s been terrifically successful and we decided to finance the company not through the traditional Vc route initially but through business development partnerships because there were companies coming to me asking for you know, can we get access to your to your. Novel viruses. So we we made a couple of deals. Um use that capital initially to grow the company and then started doing. You know we did a series a and series b series c um, we had a couple of offers for acquisition during that time as well. But I felt.
David Schaffer: Really that you know at that stage gene therapy was relatively new within industry and there weren’t a lot of large partner companies that really know how to do it so you know part of the reason or part of the rationale for being acquired by a larger company is to achieve synergies that they know things that you. You don’t and they have capabilities that you don’t and we we kind of felt that since gene therapy was so new within industry that we you know potentially could become the big company that was doing that kind of work and so we decided to stay private throughout. Um and then in Twenty Twenty December of 2020 ah, ultimately, you know took the plunge and and decided to go public so it was myself the Ceo and the chairman of the board who did the ah all the ttw meetings in the ipo roadshow I probably wouldn’t have you know because the ah the old way of doing ipos of course was through trains. You know, planes trains and automobiles. Ah, packing a week or more with tons of meetings with investors and hopping on the plane and and you know nonstop this was of course in the middle of covid so people had the luxury of being able to do Ipos from the comfort of their own bedrooms which is exactly what I did back then. And so I had you know 75 investor meetings over the course of a couple of months and it ended up being a pretty successful ipo. Ah 21 x subscribed Goldman Sachs is our lead bank b of a the second bank and you know the the important part of going public. Of course is that.
David Schaffer: The company then had the capital to be able to do what we were all enthusiastic about which is get the technology further into clinical development where we can start helping patients.
Alejandro Cremades: So I guess you know in this case I mean incredible right? You know like being able to build a company that you know is worth more than one point two billion. No I think that this was just like part of you know, continuing to push also more companies I mean in total eight you know that you’ve done. Ah, the second one you know we chain which also you know went through our liquidity event you know was basically rewrite now in rewrite. You know it was. It was pretty much like 3 years in when you guys decided to go through an eman a transaction I guess you know the the question here you know is what were you guys doing there and. Why did you decide to get the company acquire versus staying private and private and growing. It.
David Schaffer: Yeah, it was ah every company of course is its own unique thing and ah the right? you know quote unquote right? Decision is different for for each one. So I’ll I’ll give you a little bit of background about rewrite. So it was a genome editing company. Was really the brainchild of a brilliant graduate student of mine named Shaette Halperin ah where he and I and another investigator published a paper in in nature back in 2018 and the company was based on that technology and it was a way to very efficiently do genome editing. And change a stretch of Dna inside of a cell ah and overcome a couple of hurdles ah to to really improve the efficiency of that process and so you yeah, the field as a whole is is pretty familiar with this word crispr now right? So crispr was a technology that was originally um, ah. Published in 2012 by Jennifer Doudna who’s a professor as well. University of California at Berkeley where I work and so Jennifer and I have our colleagues. We’ve published together and and shaqued you know, published this this ah terrific paper that ended up being the basis for for rewrite. Um, which was spun out of Berkeley with Chica as the Ceo. Ah so we were developing this genome editing technology and were in a discussion about a partnership a bd deal and as sometimes happens that bd deal ended up morphing into an m and a discussion.
David Schaffer: And this was with ah with intellia intelia is a is a larger public genome editing company and it it made sense for rewrite to talk to and tell you about m and a in that we had a ah the core of ah what I thought was fantastic technology for genome editing. But there are a couple of other pieces you need in order to to grow independently as a company we needed delivery because we had a genetic cargo to be able to fix a broken gene. We hadn’t worked on the delivery for it. Ah, and there’s this other. Delivery technology lipid nanoparticles which intalia had working very well especially for for 1 target organ the liver and in addition, you know at 4 d we built the clinical infrastructure. You know the regulatory gmp manufacturing and and clinops capability. That was going to be a big build that we had ahead of us at rewrite and tallia already had that because they they were already in the clinic. Um, at the time so they were interested though in early stage technologies to be able to improve their genome editing capability. So this ended up being really strong complementarity. Ah, between between their large company and our at that time you know 2 to 3 year spinout company and we’re able to come to to terms that everybody was happy with and so it really made sense to get acquired in that case and I’m thrilled that as intelia has mentioned in a couple of public communications.
David Schaffer: They’ve continued to diligently advance the technology forward and I’m looking forward to the day where they take it into the clinic.
Alejandro Cremades: And this is just one of a you know, many that you’ve done because I mean another one that you also started and and that ended up being getting acquired that was say ignite a immunotherapies and that was acquired by Pfizer so I guess what were you guys doing there. At ignite and and I mean now here we’re talking about the Pfizer and by the way for the people that are listening. You know just to close the gap on on rewrite you know it was acquired for 45000000 up front and then 155000000 in milestones but now moving to ignite you know. What were you guys doing there and and obviously Pfizer you know a massive company I mean how is perhaps different. You know the m and a process with a company like that.
David Schaffer: Yeah, that one is very different in the sense that Pfizer made the initial investment and there was you know the possibility that they would and ultimately be the acquirer of the company. Ah so you know we had ah you know it was fully an option to keep the company independent and continue to grow. Ah, but we were almost hoping that that Pfizer might become a long-term partner or potentially an acquirer. It was a cancer therapy company and cancer therapeutics take you know takes large amounts of time. Lots of clinical expertise and enormous amounts of capital. Ah, to be able to advance into the clinic and ultimately to get a regulatory approval. So in that case, you know having a a partner with tons of expertise and deep pockets like Pfizer was really an asset to to ignite immunotherapies. So the the technology behind the company is that I mentioned to you that we had been working with avgenetherapy and that became the basis for four d and we invented this new way of engineering viruses. Ah maybe I’ll I’ll take a second or 2 to talk about the technology. Ah so we all know from covid right? that viruses evolve in nature. And we had to keep taking you know vaccines say 1 step ahead of viral evolution. Usually that’s ah, that’s a bad process. You know enables viruses to continuously adapt. So can they can escape our immune systems etc we began to turn that on its head and actually use viral evolution as a good thing.
David Schaffer: So specifically, you know we’re using these viruses as delivery vehicles to carry dna medicine inside of a cell but they haven’t been prepared by evolution to be able to infect some really important cell types like a v I mentioned is a respiratory virus. You know it’s it’s not really great at infecting the brain or or the heart or the retina. So what we began to do is evolve aav but in the laboratory and artificially so we created a billion different versions of a with changes within ah the the structural proteins of the virus that mediate the delivery and then we perform a highthroughput selection. So that we can identify the 1 variant that excels at the brain or at the heart or at the liver etc and then this variant this new engineered variant often ends up being 10 or one hundred or a thousandfold better than the natural version of the virus at getting into that tissue and that then becomes our clinical candidate. We would advance into into a phase one trial so we did that for 4 d using this harmless virus called aab most of us have been infected with it. Never even noticed it because it’s it’s harmless. It’s very quiet doesn’t cause human disease. So with it igniterminunotherapies. We wanted to do the same thing. And engineer a virus but in this case, it was a very different virus. It was vaccinia and vaccinia is a virus that replicates and typically kills a cell. So why would you want to do that. Well if you could engineer a version of Vaccinia that replicated and selectively killed a cell inside of a tumor.
David Schaffer: This could be ah, an immunotherapy the basis of a therapeutic for ah for cancer. So we implemented for the first time the idea of evolving vaccinia or creating new versions of Vaccinia that would excel at being able to replicate within a tumor that became the basis of ah the. Lead technology and ah Pfizer acquired that so they could further develop it for for clinical application.
Alejandro Cremades: So then so then for this I mean obviously incredible Exit tool Now it sounds like you know you have a bunch of companies. You know that you’re operating in parallel ah you know spanning from C to like series a B and it sounds like you’re also. In the process of rolling out something New. So what? But can you tell us about this new company that they they’re probably going to be hearing about soon. But.
David Schaffer: Sure. Ah, so we have I have 5 companies right now that like you mentioned the the youngest is a pre-seed company and the the most senior is ah is a series b company series b was led by by morningside ah a company right now that we’re. Raising for is ah is a stem cell company. So the majority of companies that I’ve worked on have been gene delivery companies and this is ah a cell therapy company.
David Schaffer: And the idea or the difference between those 2 is that in the case of gene therapy you’re typically delivering a piece of Dna to be able to improve or rescue the function of a cell if it’s a situation where a disease is killed off a lot of a tissue killed off a lot of cells. then gene delivery isn’t going to do it. You actually need to rebuild the tissue. You need to deliver cells ah to repopulate and rebuild the tissue. So a stem cell is an incredibly valuable source of cells because a stem cell can divide in an immature state for a long time. And then he can coax it into differentiating or specializing into a particular cell type and then he can implant that cell into the body into a place where the tissue has been depleted due to a disease. So as an example by the time that somebody ends up with Parkinson’s disease they’ve typically lost somewhere around fifty to eighty percent of the cells within that region of the brain called the striatum so we need to rebuild that tissue and so we’ve been differentiating stem cells into the type of neuron that’s lost in parkinson’s disease and then you can implant. Cells into the brain and be able to repair the brain from the effects of parkinson’s so we’ve been working on a couple of disease targets like that such as ah, um, Parkinson’s disease epilepsy as well as type one diabetes and growing.
David Schaffer: Company building the team around this technology and at the same time pursuing both you know equity financing as well as ah, potentially Bd relationships to enable the company to further grow.
Alejandro Cremades: So obviously you know incredible um you know journey incredible experience that you’ve had over the past twelve years you know building scaling financing exiting companies. If I was to put you into a time machine and I bring you back in time and bring you back in time to that point where maybe in 2012 you were thinking about you know, starting the journey of being a founder and let’s say you have the opportunity of having a chat with that younger David and you’re able to give that younger David one piece of advice. Before launching a company. What will that be and why given what you know now.
David Schaffer: Yeah I’ll say first off that younger David was pretty clueless at the time about starting companies in that you know was a very very different world from what I was used to ah probably the advice I would give is you know it’s the same advice I would give to young professor David back in 9099 which is to spend more time talking with people and meeting with people and networking with people in that. Ah you know well I’m a fan of Warren Buffett and Warren Buffett has this saying that he likes to surround himself with people who are better than he is and then he naturally drifts in their direction. So I probably didn’t spend. As much time as I should talking to smart successful people out there and learning from them learning what their secrets are I you know, granted that as a ah professor in Berkeley I didn’t have access to the kind of network that I have now. Um, but I I would have been more proactive in reaching out and talking with people and and getting on their calendar and taking them out for coffee or a beer and learning from them because I think that you know as I mentioned ah none of my mistakes have been fatal. You know all 8 companies that I started ah are still well. The 2 that are acquired. Don’t exist but the other six do. But I think I could have saved myself or spared myself the fate of making a couple of key mistakes if I’d I’ve learned from other people and that’s really you know to come full circle what I’ve been trying to do with our incubator.
David Schaffer: Ah, it’s to spare my colleagues the fate of making some of the same mistakes that I did.
Alejandro Cremades: So David for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
David Schaffer: Sure I’m I’m easy to find on the internet. You know David Shaaffer Berkeley ah email address is schafferat berkeley.edu I am I respond to emails nonstop and love talking to new people and learning from them and. Hopefully sharing or thing or 2 that I may have learned that they that you know could benefit their future so more than happy to talk. Especially if you have a newco and would love to become part of a thriving ecosystem that we’ve been building here in our incubator called baker labs.
Alejandro Cremades: Amazing. Well hey David thank you so much for being on the deal maker show today. It has been an absolute honor to have you with us. Thanks.
David Schaffer: It’s been an honor to be here. You thank you so much. Alejandra.
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In the bustling landscape of entrepreneurship, where dreams collide with reality, and visionaries transform industries, few narratives resonate as profoundly as that of Armon Petrossian.
From his humble beginnings in Portland, Oregon, to the pulsating heart of Silicon Valley, Armon’s journey is not just a tale of success but a testament to the power of perseverance, innovation, and the pursuit of a bold vision.
His company, Coalesce, has attracted funding from top-tier investors like Emergence Capital, 11.2 Capital, GreatPoint Ventures, and Industry Ventures.
In this episode, you will learn:
- Armon’s journey from Portland to Silicon Valley showcases the power of determination and resilience.
- Armon’s immersion in China and Europe broadened his horizons and fueled his entrepreneurial drive.
- Armon’s side hustle in short-term rentals provided the foundation for pursuing his entrepreneurial dreams.
- Armon’s deep understanding of data analytics paved the way for Coalesce’s revolutionary approach to data transformation.
- Armon’s journey from angel investments to series B funding underscores the importance of unwavering determination and clear vision.
- Armon emphasizes the importance of building habits and systems to sustain a healthy and sustainable entrepreneurial journey.
- Armon’s mission with Coalesce is a testament to the transformative power of perseverance, innovation, and unwavering belief in a bold vision.
Alejandro Cremades · EP 883 Armon Petrossian On Raising $81M To Make Data Transformation Efficient And AccessibleSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Armon Petrossian:As Co-Founder and CEO, Armon created Coalesce, the only data transformation tool built for scale. Prior, Armon was part of the founding team at WhereScape US, a leading provider of data automation software. At WhereScape, Armon served as national sales manager for almost a decade.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmaker show. So today. We have a very exciting founder with a really inspiring story. You know it’s going to be a very inspiring episode so brace yourself for it. You know we’re gonna be talking about capital raising. You know he’s done it all the way through the series b you know what has happened you know every step of the way. Especially. On the series. A also what how he was able to put himself in the position to be able to start this rocket ship that he’s on. But again all the good stuff that we like to hear when it comes down to building scaling financing and beyond so without further ado. Let’s welcome our guest today arm on petrosian welcome to the show.
Armon Petrossian: Love it. What an intro. Thanks Alejandro absolute pleasure to be here. Looking forward to this.
Alejandro Cremades: So born and raised team Portland Oregon give us a walk through memory lane. How was life growing up arm on.
Armon Petrossian: Um, life was grown up great I you know I was a first generation american both my parents are armenian and I grew up in Portland Oregon and it was a lovely upbringing to be honest I mean it was ah pretty standard.
Armon Petrossian: Ah, bringing I would say you know I went to public schools through elementary middle school high school and I loved I loved being from Portland I loved being from that area. It was a really great place to grow up.
Alejandro Cremades: I Mean it sounds like the entrepreneurial you know bug You know it kind of like was in you I mean what? where’s this coming from is there like anyone in the family that is ah an entrepreneur like what where’s this coming from right.
Armon Petrossian: Yeah, it’s interesting I would say my family lineage is pretty crazy. That being said is riddled with entrepreneurial spirit and growing up. My father was a real estate broker and so he was the hardest working person that I’ve ever seen and was his own kind of solopreneur I would call it. He never had a team but he was an incredibly effective realtor and so I think even at a young age. Observing him and how he went about his day-to-day and how serious he took his job was something that was instilled in me and I always was passionate about entrepreneurship even as a little kid I was selling candy in the treehouse in my backyard and so. At least to the neighborhood and so there was always different things that I was trying to do to continue to enhance my entrepreneurial spirit and by a large part of that I think does come from your family and the people that you’re surrounded by so I was fortunate I was very fortunate and grateful for that.
Alejandro Cremades: So you ended up going to the University Of Oregon and out of all things you studied their business mandarin chinese and you know finance you know so how do you find yourself all of a southern in China in Shanghai.
Armon Petrossian: Um, what an insane story. How I even ended up there in the first place is kind of ridiculous I was in college I was very interested in business as you can imagine. And so I would do these informational interviews with anybody that was in my network that I thought was very successful in their career which was usually my friend’s parents I thought I think that might be a little strange I was in high school and I would try to interview my friends’ parents and understand what led to their success. And so one of the people I respected the most suggested that I learn a foreign language and so I was like okay yeah, that sounds like a pretty good idea that that would separate myself as I go into the business world I should learn a foreign language and at the time and yeah I think still to this day. China is a very quickly emerging market. And so he suggested Mandarin would be a good option and I went back to college or while I was in college later on I pretty quickly made the decision that I’m going to go study abroad in China and so I go to the the. Like the study abroad office at University Of Oregon I walk in there with a ton of confidence I go straight to the person at the front desk and I say hey I’m going to sign up to go to live in China for a year and study abroad there and the person was like okay I’m looking at your curriculum of your history with classes.
Armon Petrossian: And looks like you’ve never taken a mandarin class. So are you sure you want to sign up for a year there and I was like yeah yeah, no I’m I’m sure and they’re like have have you done your research. Do. You know what? you’re walking into I said I mean ah’ve I’ve done some and the lady suggests why don’t you go back and do a little bit more research and come back here once you’ve made up your mind. So a little bit frustrated I go back to my place I’m like all right fine I’ll go do some research and I looked up I pulled up my web browser went to Google images and I typed in Shanghai china and I see these amazing pictures of the bund in China if you Google them now. You’d see it this amazing skyline. Super modern, high-tech looking skyline was in the James Bond movie and I’m like thinking back to itm like yeah okay I think I did my research close the laptop next day I walked back in like did extensive research I’m ready to go and so the lady’s like all right? Well if you do this, you do have to sign up for summer courses learning Mandarin before you go so committed to it. And I do the three months intensive courses in Eugene Oregon where the u of o is and I get on a plane um I ended up going to Europe in between for a couple months and then I finally land in Shanghai and my god it was not what I saw in those Google images. Pictures coming out of the airport and I realized like at that moment the term culture shock started to sink in and I knew I was in for a ride for that next year as I saw just things that I did not expect to see whether it was smog whether it was the infrastructure whether it was the vehicles.
Armon Petrossian: You know the energy the just sheer of population of people and I and I like I said I knew I was in for a ride I was a little nervous going into it I was a little scared but it ended up becoming probably the best lesson for me as an individual and one of the fastest or most. Growth experiences that I’ve shared with myself and throughout my entire life being there for a year so
Alejandro Cremades: Well well during during your university years too. I mean you did quite some travel I mean not only China you also were in Europe you know and you were bouncing from Amsterdam to Spain to italy so I guess. All these troubles. How do you think they opened up your worldview and the way that you you know the lens that you look at things from.
Armon Petrossian: Yeah, yeah, so so this was really the first time so I was I was 20 turning 21 years old and this is really the first time I had ever left the country or did any significant travel on my own as an individual and I think. Growing up in Portland Oregon and going to college in Oregon you’re generally speaking going to know people you’re going to have mutual relationships with people anywhere you go. It’s not It’s it’s not uncommon to know people and have familiarity and have some level of identity with who you are. And it wasn’t until I left where being in a foreign country with nobody that you know no relationships. No pre-existing relationships. Are you really forced to realize who you are as a person in the first place and start to understand and comprehend. Your own identity and so going through that experience was one of the most illuminating things that brought brought me seems weird to say this but brought me closer to myself and who I am and also just exposed me to have to learn how to create relationships out of thin air. And connect with people who I didn’t have any preexisting context with and so that was very much emphasized living in China where I knew nobody or I guess not only did I not know anybody I also had no idea what the culture was like I had no idea how operations were run. There wasn’t any familiarity so it was a complete.
Armon Petrossian: Flip your world upside down moment and I was obligated to kind of proceed and learn how to live my life in general and make friends and I just manage all the other things that come with with your life in a foreign country. So.
Alejandro Cremades: So eventually for you. You come back to the Us and you become an intern to where escape and it sounds like that experience was quite a life changing.
Armon Petrossian: Um, it was yeah so so basically 1 thing that I felt really strongly about while I was in college and about to come out of college. Was I didn’t really care what company I was going to go work for I had a general idea that I was interested in software or tech and real estate. But I I didn’t really care as much what company I worked for specifically. I was so much more passionate about finding somebody who I could model my career after based on their skill sets and in some degree a ah ah, mentor type figure and so that was my focus and there was a very specific person who. Happened to be at the company where escape that I really wanted to work for because my thinking was if I could obtain just half of their charisma energy thinking communication skills fill in the blank then I’d be very successful. My career career regardless of where I go and so. That just so happened to be in the etl space or in the data analytics industry and so I basically pitched him on bringing me on as an intern and ah pretty quickly that became a thing.
Armon Petrossian: And as I worked there and was exposed to the analytics industry as a whole and as the business continued to grow I was fortunate to have a lot of experiences around touching every part of the business at at warescape and. Was given a lot more responsibilities than I would say I was fully qualified for which allowed me to step up and rise to certain occasions which which ultimately led to me falling in love with the analytics industry and the general space. And building so many relationships which are what led to us starting coalesce and so that unconventional path to founding a software company I would say was all driven purely based on the fact that I wanted to work for a specific person. Not that I had ever intended to get into data Warehousing Data Analytics data engineering into anything in that space and I looking back on it was one of the best decisions that could have ever made.
Alejandro Cremades: So Then let’s talk about him. You know to starting the company but but but obviously just before you did have something on the side. You know that was like a nice kickstart into the whole entrepreneurial thing before you actually win full Force. No so. What happened there with the airbnb you know style you know site Gig. So.
Armon Petrossian: Um, yeah, yeah, good question. So basically as I mentioned earlier I’ve always been passionate bit on about entrepreneurship and when I was at warescape there was. Kind of 2 paths I saw the business unfolding. There was either 1 path where the existing organization organization stays the same it ends up taking on some investment and starts to move into the direction of building a next generation product um or something else would happen and there would be a different. Structure it would get acquired or something would something would shift to gears where that wouldn’t happen and so my thinking was I should build the financial freedom for myself. So that way at some point if the opportunity presented itself I could pursue my own. Software company and so the entire time I was there I effectively found a unique code path to circumventing the regulations associated with short-term rentals in the city of Portland where I was living where I would buy. Homes and convert them into legal bed and breakfasts and advertise them on Airbnb and so that became a really awesome side hustle for me. It also helped me operate a business as a solopreneur. Um, and so that.
Armon Petrossian: That that kind of self-awareness for me at least allowed me to be in the position where I had the financial freedom to not let the opportunity cost of starting a business and not being able to pay a salary to myself. Ah, allow me to go and pursue what became coalesce later and there’s some people in this world who can go and you know pursue a company and you know, kind of like live in a shoebox or or maybe they have a different ah setup where money isn’t in a problem and they can. Start a company and not be stressed out whereas for me I felt very strongly that if I didn’t have a standard of living that allowed me to think clearly and make decisions the way that I wanted to then I wouldn’t be in the right position to pursue a company or at least I wouldn’t make the right. Right? decisions. So It’s really critical that I set up some type of foundation that would allow me to maintain the standard of living that I wanted while while I would pursue something that would initially be more risky quote. Unquote.
Alejandro Cremades: So then let’s talk about a pursuing The more risky quote unquote with calles. So so talk to us about how was that incubation process you know from the moment that one day you got the idea to win the moment that you were like Okay, let’s go. Let’s do it. Okay.
Armon Petrossian: So.
Armon Petrossian: Yeah, so my cofounder and I we were incredibly fortunate because we worked together. At this point we’ve worked together for almost a decade and we were exposed to such a large volume. Of massive scale data warehouse implementations at our previous company warescape and there we were. We were we learned about the core concept of what could actually solve these very common breaking points that. You only see as you pass the threshold of being literally the world like some of the world’s largest most complex data warehouse or data engineering projects and so we were staring these problems in the face and ah solution in the face over and over and over again all day and. As that was happening the core team there always fantasized at being about being able to take take a concept take all the learnings we had of dealing with these massive scale implementations and start from scratch and build. Ah, cloud native solution focused on solving the problem which is the biggest bottleneck in analytics today and where coalesce serves which is the data transformation component and so as that company whereski was gaining more momentum. We ended up getting acquired.
Armon Petrossian: And it became clear that what we wanted to accomplish was not going to happen at that company and that exact same night I got a phone call from satish and he was like dude this is our chance we’ve got all the relationships in the industry. We’ve got a crystal clear vision of what we need to build. We’ve got relationships with partners customers. A go-to-market team. All we need to do is put pen to paper and so pretty quickly we left and we went straight into stealth and got working and we were so lucky because we were able to. Gip the ideation phase and the typical startup and the whole find product market fit phase largely because we had so much exposure to the exact space that we wanted to build a product in and so many relationships in that space and so when I hear about founders who. I have so much great respect for founders who go through the process of finding product market fit and that can oftentime takes many years whereas for us. We were able to shave off several years of our company journey because we had so much clarity on what we wanted to accomplish and so that was the genesis. For us building. What is coalesce today and what’s led us to have such quick growth and what’s typically a very competitive industry.
Alejandro Cremades: So talk to us about the you know the business model. How do you guys make money. Yeah.
Armon Petrossian: Yeah, So we’re a software product and we we effectively help Data Engineers be exponentially more productive compared to any other alternative in the industry and so customers buy our product as a developer solution and we’ll pay an annual. Subscription or a multi-year subscription to license our product and use it every day when it comes to delivering their snowflake data projects.
Alejandro Cremades: So then also what was that the journey like of raising money because I know that you guys have raised quite a bit of money. How much capital have you guys raised today? yes.
Armon Petrossian: 81000000 I think is the exact number. It’s probably close to that. Yeah.
Alejandro Cremades: And you guys have done a couple of rounds. So how how has it been to going from 1 financing cycle to the next with a company.
Armon Petrossian: Um, every every cycle has been crazy I would say they’ve they’ve all been very different and so the first round we ever raised was a angels round and like angel investors or family and friends round. Whatever you want to call it. And this was one of the biggest challenges for me because you know again I I grew up I was born and raised in Portland Oregon I had no connections to the venture capital industry or financial institutions or any type of investors that were focused on high-growth startups and so. Ah, for me, it was all about figuring out those relationships and fortunately because there was a lot of people that both my cofounder and I were close with that knew the problem area that we were going after solving we were able to raise roughly a million dollars from close connections and people who. Believed in what we were going to build because they had seen the problem firsthand and so that gave us a little bit of fuel to build our minimum viable product that we could then go and kind of shop to potential customers. But it wasn’t until I moved to San Francisco ah just over three years ago to actually start the fundraising process of going venture capital backed and me walking into that I mean I moved here knowing pretty much nobody having 0 relationships in the venture capital industry and had to start from scratch and figure it out and that whole journey has been.
Armon Petrossian: It’s been a crazy one. It’s been a super fun one and it’s obviously been a successful one so far. So so that that was ah that was a big move for me was actually uprooting myself and moving out here with that vision in mind I just had a feeling that this would be the right place to be to do it.
Alejandro Cremades: You were talking about figuring out the venture capital world. What have you figured out you know, ah see having be having a serious b in already and having raised you know the 80000000 but but boxs plus what have you figured out so far that has impressed you the most. So.
Armon Petrossian: Thing.
Armon Petrossian: Yeah, so I would say that it’s been going through several rounds now so we did our seed our series a and our series B There was a lot of learnings in in every round and I would say I don’t know if there’s anything. That’s. Necessarily impressed me the most but but from the learnings it was incredibly eye-opening to go through the fundraising process and meet so many different venture Capital firms and understand what the process looks like. And how different it was from my expectations and so I had a completely misrepresented idea of what fundraising should be and how it goes and there were so many learnings going through the past 3 rounds that I would say. I would have never known unless I actually did it or at least spoke to somebody who had been there and done that but I would say the biggest things I’ve learned at the at the end of the day is there are a ton of investors out there. There are firms that have really flashy sexy brands to them that you’re we’re all familiar with and then there’s other firms that don’t have as well-known brands and for whatever reason we seem to think that because there’s a strong brand associated with the venture capital firm that they must have the sharpest most knowledgeable.
Armon Petrossian: Ah, strongest people at those businesses and me going through the process of talking to every single one of them in this area I’ve learned is completely false my initial perception of it was completely false. There are so many firms that disappointed me. That I spoke to that I came into Starry eyeed thinking they were going to be the most knowledgeable best investors I could have ever found and then there’s been so many firms that have just absolutely impressed me that I would have never expected to be what they were and so it’s ah that that whole. Process was eliminating as a founder and as an entrepreneur.
Alejandro Cremades: So In this case, you know for you I mean obviously the when you raise money it needs to come with a vision right? because they’re they’re betting on a vision these investors and you have like great Investors. So I Guess as you’re thinking about that Vision. You know that got excited. You know into the future that you’re living into the investors. The employees if I was to ask you? you know? let’s say you were to go to sleep tonight and you wake up in a world where the vision of call is is fully realized what does that world look like.
Armon Petrossian: Um, yeah, so so pretty much since the history of analytics was even started. There has been so many flaws in the process I would say a ah lot of them are being solved. But the the biggest issue in the analytics industry today is that is the process of taking data once it’s landed in its raw format and getting it to the point that it’s consumable in a way that has proper governance. Has proper documentation has minimal technical debt and has traceability or lineage as a common term in the industry and there is a fractured approach There’s a fractured architecture of different different technologies. For people of varying technical skillsets and as a result there isn’t any clarity. There isn’t any holistic view of what goes on in the manufacturing or assembly line of taking the parts if you will the the data and getting it to the final product. And so assuming this vision. Our vision has been fully realized at coalesce what you would see is organizations that can actually produce data at a rate that is faster than the consumers of data.
Armon Petrossian: Could ever possibly imagine and that there is visibility into how things were built what was built with a level of modularity and standardization that allows for them to make changes quickly in a world where analytics projects then flourish and insights. Are available at the snap of the finger for any decision that anybody would want to make when driving their companies. Forward.
Alejandro Cremades: So We’re talking about the future here but I want to talk about the past and do so with all legs of reflection because I mean you guys have been pushing this for now you know close to 4 years. So if I was to put you to a time machine Armon And. Bring you back in time to maybe that moment where you guys were like screw. It. Let’s do it. You know, kind of thing and you’re able to stop that younger you know self and and give that younger self one piece of advice before launching a business. What would that be and why given what you know now.
Armon Petrossian: Sister.
Armon Petrossian: Yeah,, That’s a great question. So if I were to be able to go back in time and give myself some advice right before any of this I Think the. Most important thing that I would share with my younger self would be to build habits build like seriously be disciplined about building habits that allow you to manage all levels of your. Life in a way that’s healthy and sustainable whether whether that’s exercise whether that’s your mental health whether that’s physical recovery whether that’s your diet food whether that’s fun and things that you want to enjoy experiences you want to enjoy figure out. Those habits figure out those systems and focus on them like it’s do or die because those habits that foundation is what allows you to go through the absolute roller coaster journey of starting a company and without them. You’re going to be.. You’re going to be in a much much more difficult situation and you may not. You may not wake up every morning and and love what you’re doing and be excited. There is a lot of work that goes into this and the most important piece is building the right foundation The right systems for you to be successful.
Alejandro Cremades: I Love it Armon for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Armon Petrossian: I’m super active on Linkedin we do Linkedin lives Webinars I’m I’m pretty easy to reach just find me on Linkedin if you want to touch base. It’s it’s pretty simple to find me and connect with me or shoot me a follow and if there’s ever anything that people want. Or any questions they have about the interview I’m happy to answer so yeah, feel free to reach out.
Alejandro Cremades: Amazing! Well hey armon thank you so much for being on the deal maker show today. It has been an absolute honor to have you with us. So.
Armon Petrossian: Thanks ah, Alejandro the the honor is mine. The pleasure is mine man this was great. Had a lot of fun.
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The post Armon Petrossian On Raising $81 Million To Make The Data Transformation Process Efficient And Accessible appeared first on Alejandro Cremades.
In the bustling landscape of entrepreneurship, where dreams are forged amid the crucible of challenges, one man’s odyssey stands out—a tale of resilience, vision, and unwavering commitment to change the way we eat.
Meet Luke Saunders, the founder of Farmer’s Fridge, whose journey from humble beginnings to transforming the food industry is nothing short of inspiring. In this exclusive interview, Luke talks about scaling his company and the challenges he faced during the COVID to get the company back on track.
Farmer’s Fridge attracted funding from top-tier investors like Innovation Endeavors, THRIVE, Gigi Pritzker, and GreatPoint Ventures.
In this episode, you will learn:
- Luke Saunders’ journey with Farmer’s Fridge underscores the importance of resilience in navigating challenges and setbacks.
- From retrofitting vending machines to launching home delivery during COVID-19, Farmer’s Fridge epitomizes the power of innovation in revolutionizing the food industry.
- Luke’s leadership shines through as he transforms a simple idea into a thriving business, driven by a vision of making healthy food as accessible as a candy bar.
- Farmer’s Fridge’s success hinges on strategic capital raises and partnerships, emphasizing the importance of financial planning and resource allocation in entrepreneurship.
- The COVID-19 pandemic posed unprecedented challenges, yet Farmer’s Fridge’s swift pivot to home delivery and catering showcased the importance of adaptability in times of crisis.
- Building a strong organizational culture grounded in shared values and behaviors is pivotal for Farmer’s Fridge’s success, fostering unity and dedication among employees.
- Luke Saunders’ entrepreneurial journey serves as an enduring source of inspiration, highlighting the transformative power of perseverance, innovation, and unwavering commitment to a vision.
Alejandro Cremades · EP 882 Luke Saunders On Raising ~$120M To Revolutionize Access To Fresh, Healthy MealsSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Luke Saunders:An entrepreneur at heart, Luke started Farmer’s Fridge while working as a traveling salesman after struggling to find fresh, healthy, and accessible food options on the road.
Since 2013, the rapidly expanding business has grown to more than 400 fridge locations across multiple regions of the country. It has also launched a home delivery service, serving chef-curated, restaurant-quality meals.
Based on their pioneering approach, the company was included as a TIME Top 100 Invention in 2019 and has been featured in The New York Times, Wall Street Journal, CNN, Good Morning America, Washington Post, The Atlantic, Entrepreneur, Fast Company, Inc., Chicago Tribune, Crain’s, USA Today, NBC Nightly News, Women’s Health, CBS, O! Magazine and many more.
As a leader on the rise, Luke was honored as a Forbes “30 under 30” in 2016, a Crain’s Chicago Business “40 under 40” in 2018, and one of Fast Company’s “100 Most Creative People in Business” in 2019. Luke graduated from Washington University in St. Louis.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So today. We have a very exciting story. We have an amazing founder. You know that he’s riding this rocket ship that we’re gonna be talking about in just a little bit I mean between obviously he contractors and full timers. You know there are about five hundred employees a hundred million plus raised. Incredible journey you know from ah dealing with covid stuff and losing 85% of the business to getting it back. You know all types of um ups and downs. But again part of that building scaling financing that we like to hear so without further. Do let’s welcome our guest today look sanders. Welcome to the show. So originally from New Jersey 1 of 7 siblings. My god a household full of action. How was life growing up, give us a walk through memory lane.
Luke Saunders: Um, thank you so much for having me today.
Luke Saunders: It was great I Actually um I I can’t really fall asleep unless there’s like lots of things happening around me. So I I Love that chaos and I think it’s a big part of being an entrepreneur and sort of embracing ambiguity and um. All the adventures and so some days you were hanging out with the older siblings and they were taking you places and doing crazy stuff and other times you were the older sibling and that was just it. It was a really special experience and and we had a pretty entrepreneurial family. So. We were always doing stuff like lemonade stands or um, trying to start businesses on the side.
Alejandro Cremades: So I guess say in your in your case, you ended up going to St Louis out of all places you know for university but it was like it took a little bit of time there you know because you ended up being kind of like. Getting a gap year then getting back I mean then getting into the whole thing of entrepreneurship with a bike rental I mean quite the ah ups and downs there in university too.
Luke Saunders: Yeah I mean university was was great I wanted to get out of the northeast and St Louis seemed like a good place to um to be the universities right in the city. So that’s really what I wanted. Um. And yeah I was I was interested in studying chinese and international studies and I thought when I moved to China and I did end up living there for about six to nine months during during college but ultimately had a bike rental company on the side and that was really where I was spending most of my time and and was my passion so I decided. To skip the job market after school and go to work with my dad in in a small grease luerant manufacturing business.
Alejandro Cremades: So then let’s talk about a you know that real quick because when you joined you know it was kind of like ah you know a different type of operation. I mean there was like no real monitoring on the numbers and you found quite the um. The scary you know part you know with only a couple of months of runway when you know the truth came to tell so how was that for you.
Luke Saunders: Um, ah it was it was an interesting experience on a lot of levels so it was ah a company that my dad had been running for about 30 years it was small like you know half a million in revenue. Ah, you know, maybe 2 people like 1 and 2 part time people working there. Um, and so. Really ended up in a difficult situation because of the um financial crisis at the time and some of their cost structure gotten out of hands but it was a classic example where you’re running the business based on how much cash is in the bank at the end of the month and not based on a detailed p and l um, so when I got there. Cash was going out of the bank pretty quickly and getting pretty low and I didn’t really understand where it was all going but I I had been under the impression that the business was profitable and um I had them redo the books and and take the chart of accounts and we rebuilt the whole p and l and what did we learn? we learned we were losing about 30% so and we had about two months of runway so I mean we were doing everything we could to cut costs we we changed the phones from you know this really expensive at and t thing to a voiceover ip system we got rid of the fax machine like we were down into the pennies. Um, we even we had like a postage mailer that somebody had signed up for that was like a thousand dollars a month and I just sent it back to the company and said you know call send it to collections I can’t afford this. Um and I was literally mixing the grease and answering the phone and putting the orders through so it was a great experience after getting through that period.
Luke Saunders: Um, but it was it was really challenging and it was surprisingly like a startup considering that it was like a 30 year old business with pretty long term customers.
Alejandro Cremades: So what was the yeah, what was that conversation like where all of a sudden you know you realize that there’s just a couple of months of runway and and kind of like people have been under a different impression. You know what? what was that conversation like.
Luke Saunders: Um, um, well I was having it with my dad which was a kind of an awkward experience because you know like hey dad I think this is going to be out of business in like two or three months and he’s like what do you mean? That’s not even possible because he’s been sort of operating it for 30 years without any issues and what had happened is a lot of their costs had gone up and then the revenue went down and so he hadn’t been in the same position before and but it was tough I mean it was really tough because I said we have to make some really big changes. We basically have we only have 2 employees. We can’t afford either of them. We need to move our manufacturing operations from New York to New Jersey and save a ton of money through that. Um, and then we have to like hold our breath and hope that our working capital doesn’t get so low that we can’t buy new inventory. Um, and let’s see how it goes. So but I think you know I just I remember him saying you know? are you sure and you know what happens if you’re wrong, all that surface and well the only thing I know for sure is this is not going to go in the right direction so we got to try something.
Alejandro Cremades: That’s amazing. So obviously you know working on a turnaround like that you know gave you you know some really nice jobs on really understanding. You know how to make a business profitable and in your case your wife ended up a pursuing law school went to Michigan you went with her and that was a really nice. A. You know switch you know of gears for you because then you went into sales. Ah, but obviously not the not the best you know type of fun. You know job that you had hoped for but it gave you some really nice time to listen to Stanford Classes so how was that for you.
Luke Saunders: Um.
Luke Saunders: So I mean I think Sales. It’s probably the best experience I got ah to be prepared to to be an entrepreneur if you can’t articulate the value proposition that your business has and you don’t get comfortable getting lots of nose. And you know having to do cold outreach and try to make relationships and and solve problems with people. You don’t know just learned so much through that job. Um, and that’s why I took it Ultimately I was like okay I can help out at the business on the side for the grease lubricat manufacturing. But I’m going to get somebody else to invest in me and learning this really valuable skill um and then you know I got to it but the downside was yeah I was driving a thousand miles a week. So I had a lot of time to listen to Podcasts. Um. Take courses online I listen to you know all the game of Thrones books and things like that that I would never have time to do in in my life today. Um, so it was really a silver lining was I I got to learn that skill I got to learn a lot of other things along the way and ultimately I was doing that I came up with the idea for Farmer’s fridge.
Alejandro Cremades: So then tell us about this. You know how did the idea of Farmer’s fridge a come knocking. What was that incuation process like and at what point you’re like okay, let’s go.
Luke Saunders: Yeah, um, so the first first part of it is if you’ve ever driven a thousand miles a week across the country. So I covered Michigan Ohio indian and Kentucky what you find is a lot of places that you’re visiting the only options for lunch are a fast food restaurant. And sometimes it’s like 1 fast food restaurant and a gas station and there’s a lot of conversation about you know should do people want to eat healthy food. Maybe they don’t even like it. Why are we talking so much about this and my reality was I like eating healthy food when it tastes good I don’t. Know where I can get it right now. It’s not even an option so there’s got to be a better way to do this and a lot of my clients were actually big cpg manufacturing companies making granola bars and cereal and cookies. So I was seeing inside these factories and how they do that and it was so interesting to see. You know you’d actually see like the whole grains or the whole chocolate chips coming in 1 end and leaving the other end in a box but you know employees were walking out the front with the box of granola bars under their arm. But the ones that were going on the truck weren’t going to get to the gas station down the street for like two months because it goes through this really long supply chain. That’s optimized around products that are shelf-stable. So and then on the other end you have restaurants and it’s really like there were restaurant models one of the only.
Luke Saunders: Oldest businesses in the world. There’s examples of restaurants from two thousand plus years ago it’s the same idea you walk in, you talk to the sales team in the front then the manufacturing team makes it to order in the back accounting shows up and. Takes your check and it’s just it’s it’s like everything a business does under 1 roof at every location. It’s very inefficient and so the idea was like if you could make restaurant quality food in a cpg manufacturing setting. It would be much cheaper and more consistent. The issue is just getting it to people quickly. So how do you do that and it kind of backed into the idea for the vending machine because the vending machine can go places restaurants can’t go It’s actually the number one form of food service. So 100000000 people today are going to go to a vending machine to buy something um and it would help us control inventory and understand customer relationships. So it just. It was it was sort of all those insights converging and me genuinely not knowing any better about how hard it would be to actually scale this up um to where we are today.
Alejandro Cremades: So what was that moment where you were like Wow I think it’s I gotta do this.
Luke Saunders: um um I I kind of came home one weekend I was talking to my wife about it and I’d always had these ideas wanted to be an entrepreneur so she’d always say okay that you know that 1 sometimes you like that sucks don’t work on that. That’s a waste of your time and okay and maybe I’d rethink it come back and but the next step was always to throw it into a financial model like just think through what would the economics look like how would the scale. Um I did that and I showed it your shit. This is not the worst idea I’ve ever seen you come up with. And so then I wrote a business plan. It’s probably only 7 or 8 pages but it was like this is why this should exist and how I’m going to execute and um, you know she was like oh that’s you know I started sharing with people. They’re like you’re going to never sleep. You’re going to work 24 hours a day seven days a week because we’re gonna make food overnight and drop it off in the morning it was. Crazy town. Um, but I had enough traction with people to to take the jump and what I started doing is like working it I actually went to a local cafe and I offered the woman because I liked their food a lot. They had some good grab and go options I offered her $15 an hour to let me work there. And ask a lot of questions I was like I’ll work but I want to be asking you a ton of questions. So for the inconvenience I’ll actually pay you and and I’m only I’m going to come when I feel like it because I have another job so it’s a pretty interesting experience and I’ll never forget her.
Luke Saunders: Her and her husband worked there and she was like I think this will work and he’s like I think it’s a terrible idea and um, you know here we are ten years later so
Alejandro Cremades: So then what happened next you know after you’re like going through these same initial stages your wife you know gives you the okay you know you’re like taking some insights you know from from other folks, you know, like what happened next.
Luke Saunders: Um, so the biggest challenge we had was what what does the vending machine look like like how does it actually work and because we knew I knew at the early stages. Um, it couldn’t just be like throw food in a vending machine for starters like most refrigerative ending machines are for. You know Coke and Pepsi products and don’t work well for what we do? Um, but it didn’t it. It would just didn’t seem like it would create the right impression with a consumer to spend because the premise is you’re going to spend. 8 or nine or ten dollars so it’ll be you know, cheaper than going to a fast casual restaurant where a salad might cost fifteen or twenty dollars but it’s going to be a lot more expensive than a dollar candy bar. So the machine has to feel different. It has to feel more like a restaurant than like a vending machine so I was I looked into building a machine I got a quote from an industrial designer for a half a million dollars to do prototype development. It wasn’t even a finished product. And I was like I don’t have that kind of money I think I had twenty five or $50000 in savings and credit card. So I went to the vending show in Las Vegas I found a machine um kind of retrofitted it in our garage.
Luke Saunders: And got that up and running and and then we found one location I thought everyone would be lining up to get you know fresh meals right in their lobby. Well it turns out most places wanted nothing to do with us like this is not I don’t know what this is I don’t need it so we got we were in the crappiest food court in Chicago. Um, but we got a location and it was really everything for those next six months it was like getting that machine ready getting the menu ready getting it I rented a shared kitchen so I was I could only afford to rent like 1 table for an hour kind of thing. Um. And that was it. We got the first fridge open in October of 2013 and everything changed from that moment forward because we actually had customers who were coming and liking our product and all that.
Alejandro Cremades: So then for the people that are listening. You know to really get to to to really get it. What ended up being the business model farmers fridge. How do you guys make money.
Luke Saunders: So um, we make money by selling you lunch or breakfast or you know a salad for dinner. Basically we put the fridge in and then the food that we sell from that fridge is our revenue. Um, so everything before that we we make the food in a centralized kitchen in Chicago then we do the last mile delivery to the individual locations and um, you show up and buy stuff but the the core model is like we’re an integrated manufacturing distribution and retail. So. It’s very expensive upfront. You’re basically 3 businesses in one with a high fixed cost but the variable cost on a salad is very low. So like if you go to the grocery store and you look at the price of lettuce per pound. It’s not high. This is one of the things that didn’t make any sense to me when I was looking at why there’s no healthy food. Fruits and vegetables are the cheapest things in the grocery store you know and so but you have to centralize the production to keep it safe to make it consistent to do all that um, but that’s really the key to making money in our businesses. Scale. So like at one fridge. We had a ah good unit economic model at the fridge level and we had really good traction with customers. But you need like 2000 locations to actually make money and so is everything between location number one and now we’re around 2000 just over 2000 between fridges and the retail business that we do.
Luke Saunders: Um, was a slog because you have to essentially add overhead and and and infrastructure to be able to support the future growth and you’re not. You don’t have enough pending machines online. So 1 of our board members I’ll never forget he said. You know it’s ah you have a blessing and a curse The blessing is the unit economics of a any machine are great. The curses you’re going to need like thousand of them to make this work. So.
Alejandro Cremades: So so as you’re supporting the growth and you know talking about being capital intensive. How did you guys go about the capital raise and and making sure that you were able to capitalize every lifecycle of the business because I know that you guys have raised you know about 121000000? ah today. So what were those cycles. You know that you guys went through and how were those expectations to that you were encountering from investors. Yes.
Luke Saunders: um yeah um I would say this is one of the biggest learning curves for me as an entrepreneur over the last ten years every time I meet as someone who’s just getting started I say to them listen you got to sit down and think through like what are those key milestones. What’s the exit look like kind of work backwards and plan your your capital needs and what that means for you in terms of dilution and returns and and just really make sure you understand that. Um. Because that’s ultimately in in a startup. It’s going to be a huge component of your success and how much money you make so but but I say that because I didn’t have that experience going in I was a small business entrepreneur as how I describe it so you know you had money in your bank account. You’re profitable or you didn’t if you went negative. You had a runway. And if you didn’t get positive again by the end of that runway you were dead like nobody would would have invested um venture capital into my grease business. So when I got started I thought this would be a great small business where I would kind of have the first location and. Use the money from the first location to buy the second location and and the vending machine is kind of bite size right? You could for 10 grand you could do the next one and the next one and the next one. The the issue is that um the infrastructure you need to support that is actually more than a restaurant up front.
Luke Saunders: So like our commissary kitchen is something that you have to cover. So once I realized that I was like oh shoot I’m gonna have to raise money and I read um the venture deals book and the you know number 1 bests sellingling book on Amazon for how to raise money. And somebody actually recommended it to me because they came and said I want to invest in your company but you have no idea what you’re doing about raising money. So read this book and then come back to me when you’re ready and I did and they actually gave me my first term sheet um and then from there kind of moving forward. It was very much. Um, you know. Each stage. How much capital do we need to get to the next big milestone and then we would go out and find partners to do that and the mix changed it went from venture to strategic over time just because you know the bigger. We got the more important it was to have people helping us.
Alejandro Cremades: That’s Amazing. So Obviously for investors too. I mean when they give you the money they’re expecting you know and they’re betting on a vision right? Just like you know your employees would do now I guess when it comes to the vision if you were to go to sleep tonight look and you wake up in a world. Where the vision for farmers fridge is fully realized what does that world look like.
Luke Saunders: Um, ah I think so we so you know we say it as we make fresh healthy food as accessible as a candy bar. So that means you’re operating in a scale equivalent to the biggest cpg products or qsr restaurants so something like. 40 or 50000000 people today in the us are going to go to a Mcdonald’s Restaurant and buy something and I would say if we can get to that kind of scale. It. It might take us another eighty years but that would to me would be success I mean it’s having something that is. Fresh and healthy and at the same scale as the biggest food products you know I think that’s what should happen I think that’s what will happen. The question is just how long is it going to take.
Alejandro Cremades: Now for you. Also you know you guys have been scaling as well. The employees I mean right now between contractors and fulltimers you have about 500 how has it to scaling that and then also making sure that culture doesn’t break.
Luke Saunders: Yeah, um, so first when I started one of the premises of the business was actually I’m going to have way less people because restaurants they need all these people but a vending machine. It just spits out food right. So you don’t need a lot of people. It’s going to be like all robots and very quickly you realize um, people are still really good at making food. Um I think there’ll be robotics and we we do a lot of automation now at scale but things like um. You know mix like cutting certain vegetables and assembling certain you know you’re not going to see a Michelin Star Restaurant go to a robot anytime soon. So we ended up in a position where that was very clear after the first couple weeks because I legitimately tried to do every job. Myself and I got talked out of it so we hired a couple people. Um, now as far as the culture you know. So once we knew we had to scale up with people. We started doing that. It’s mostly hourly so the culture of farmers fridge is very unique in that sense. We’re not a software company where it’s all engineers. We have a company where we have salespeople and engineering people and hourly employees and people that were hourly employees that are now salaried supervisors making over $100000 a year so the 2 things I’ve tried to do one is.
Luke Saunders: We did we we wrote down all the values at 1 point and what we thought the culture should be and after about six months everybody was pointing to that stuff and talking about it but not actually behaving in the ways that we wanted so I kind of ripped it up and threw it in the trash and said look culture is going to be how we behave we’re going to behave in a way that. Signals the right culture and that’s what we do. We just kind of like from me and my team like do the behavior that you accept and that you encourage is going to be the culture that you have and it doesn’t matter what you write down or yeah, what you put on the wall. That’s what’s going to happen. So that’s what we try really hard to do and. We go out of our way to blend the culture by making people do things like go on ride a logs work in the kitchen. You know if something’s running short at the facility we take volunteers from corporate to go down there and pack jars. Um, but trying to make sure people don’t lose sight of the fact that this is a business that. Despite my best efforts is very dependent on people and really high quality committed people that come in every day make the food and deliver the food and so that’s what makes our business work.
Alejandro Cremades: So Obviously you know the the way that you guys have been able to go through the ups and downs. You know is is really remarkable I mean in Covid you guys literally lost 85% you know of the revenue I mean that’s pretty amazing and and and the fact that you guys were able to push through that and and keep fighting and. And get back on Top. So How was that you know for you all and and I guess who do you think you needed to be as the leader of the company.
Luke Saunders: Samuel.
Luke Saunders: Um, yeah, um, the leadership changes and evolves quite a bit depending on what kind of situation you’re in at a company at the given time. So sometimes you’re trying to be hands off to give the team some room to grow and learn and make mistakes and other times you’re. Micromanaging because if you don’t you make 1 mistake, you’re dead. So I think trying to find that balance over the years is one of the biggest challenges of this job or any any entrepreneur’s journey but it does change and I think that’s really important to keep in mind as far as what. Changing covid that was one of those times where um, it’s sort of like all hands on deck like you just we were doing daily standups and doing all kinds of crazy things that normally we’d we’d spend a lot of time doing analysis or asking questions. And it’s actually one of the things I love about being a startup is you kind of live every day like it’s your last day when you’re a big mature company and you have a lot of money you get really comfortable in a startup you have to change your behavior. You have to question every assumption so we almost just went into super startup mode. Everything was like. Look we’re dead tomorrow if we don’t figure this out so we’re going to launch a home delivery program and I want it up and running by Monday and people were like what like how do you do that and I said well have you ever heard of shopify because like they you can set up a website like this afternoon and start selling stuff and.
Luke Saunders: The team was kind of skeptical at first and they got on there and they did it and by Monday we were in the delivery business. Um, and then the other thing you you want to? um, take a step back and look at like what are your actual assets like so in our case, we’re really good at making food. Really good at distributing food. The vending machine is cool, but it’s not actually like the thing that is you’re buying a salad right? so we’re the logistics company um so I said to the sales team like hey why don’t you guys call up the hospitals. Don’t try to sell them anything just ask if they need help. Like is there anything we can help you guys with and they did they called them and and they were like we need we need grava go we need fresh food but we also don’t want it. We don’t want it all in the cafeteria because we don’t want people to get sick. So if you can get a figure out a way to to set us up with. Food going into all you know 35 locations at some of these hospitals ah will start buying it tomorrow. So our sales team called me. They’re like we need to go buy 100 mini fridges and and we think we can get you know x millions of dollars in revenue if we do this and it’ll be guaranteed. And it’s kind of stuff for like you know, maybe you’d sit around and think about it for a little while you’re like okay tell them yes and get those bridges on a truck to New York like yesterday and that that’s what got us through it is that kind of decisiveness and creativity. That’s really, it’s in the startups Dna.
Alejandro Cremades: That’s amazing now you’ve been at it for quite a while with farmers fridge. You know about a decade you know that like in corporate world is like hundred years it’s amazing now. Let’s say I was to put you into a time machine. And I bring you back. You know perhaps to 2013 when you are you know, still doing sales. You know at the grease company and then you’re able to have a sit down without younger soul that younger self that maybe just got the approval from your wife you know to look farther into into this. And you’re able to have a sit down with with that younger look and give that younger look one piece of advice before launching a business. What would that be and why given what you know now. So.
Luke Saunders: Who I think that it would be the advice I give now like okay think through the capital structure and the key milestones and how are you really going to fund this capital intensive business because that was the one piece I didn’t really understand on first day and su. To be clear as soon as I started. Ah it was clear but it was it was something that you know was very dependent on well. How much salad are you really going to sell and how much space do you need a lot unknowns in that equation. Um, but I think it it would have been I would be able to give them all that information. I would say hey like because I’m assuming it’s me I’d be able to say you know here’s what the revenue is going to be per location here’s how much the box is going to cost here’s how much the routes are going to need to do to hit this cost target. So I’d be more helpful but that that’s the thing I would like try to lay this out as a 10 year plan and it would have saved me a lot of time and energy and I think the the company ultimately got there and it’s it’s been a lot of fun but that that would accelerate the most.
Alejandro Cremades: So for the people that are listening look I will love to reach out and say hi. What is the best way for them to do so.
Luke Saunders: Um, I’m very easy to find you can just email me. It’s my name at farmersfridge.com as pretty pretty easy. Um, and Linkedin I probably won’t see it. So don’t try to get in touch with me that way and please. If you’re trying to sell something don’t be offended if I don’t get back to you might just forward it to someone on my team who is more relevant but happy to to reply or give advice and pay it forward because yeah I can’t help my past self. Unfortunately I’m a time machine. But I do consider it part of my job to sort of pay it forward and and help other people think through their future.
Alejandro Cremades: Amazing! Well hey look thank you so much for being when the deal maker show to it has been an absolute honor to have you with us.
Luke Saunders: Um, thank you so much for having me. It’s been great.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Luke Saunders On Raising ~$120 Million To Revolutionize Access To Fresh, Healthy Meals Through A Network Of 1,200+ Smart Fridges appeared first on Alejandro Cremades.
In the bustling landscape of entrepreneurship, where every success story seems like a triumph against all odds, Lieza Danan’s journey stands out as a beacon of resilience, vision, and unwavering determination.
From her humble beginnings in the Philippines to scaling the heights of the biotech industry in the United States, Lieza’s story is a testament to the power of perseverance and the importance of staying true to one’s vision.
In this interview, she talks about the importance of vision in building businesses and how the startup ecosystem in the Philippines works. Leiza’s latest startup, LiVeritas Biosciences, has attracted funding from top-tier investors like EXPERT DOJO and several angel investors who are pioneers in the biopharma and mass spectrometry industries.
In this episode, you will learn:
- Lieza Danan’s journey exemplifies the transformative power of resilience and unwavering determination to overcome life’s challenges.
- From her childhood in Manila to her groundbreaking work in the biotech industry, Lieza’s story underscores the importance of staying true to one’s passion and vision.
- Pursuing excellence in academia and navigating the complexities of the biotech landscape, Lieza’s journey is a testament to the power of perseverance.
- Stemcentrx ignited Lieza’s entrepreneurial spirit and inspired her to revolutionize drug discovery through glycobiology.
- Co-founding LiVeritas, Lieza embarked on a mission to streamline drug development processes and pave the way for innovative solutions in the biotech industry.
- Despite facing the formidable challenge of cancer, Lieza’s resilience and the support of her community propelled her through adversity, reinforcing the importance of love, support, and passion.
- Lieza’s journey offers valuable lessons on resilience, vision, and the alignment of heart, mind, and body, inspiring aspiring entrepreneurs to pursue their dreams with unwavering determination.
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Your email address is 100% safe from spam!About Lieza Danan:Lieza Danan, PhD is a San Francisco Bay Area-based serial biotech entrepreneur who has experience with Zero to One (Intervention) and Unicorn (Stemcentrx) biotech startups.
As Co-Founder & CEO/COO/CSO at Intervenn, she raised $9.4M for Seed to Series A. Subsequently, Genoa Ventures recruited Dr. Danan to reposition its portfolio company,Intabio, for a Series B raise of $18M.
Additionally, Dr. Danan has in-house operations expertise as Head of Mass Spectrometry at Stemcentrx. From a technical standpoint, she has 20+ years in the field of mass spectrometry.
From the biopharma industry perspective, she applied her mass spec expertise for 10 years working for 6 biopharma, biotech and startup companies with different business models:
- Outsourcing of cGMP analytical tests at Eurofins Lancaster Labs Inc (ELLI) catering to the needs of over 20 biopharma clients;
- In-sourcing solutions initiation and expansion of Eurofins LLI scientific talent on-site at client Genentech South San Francisco (4 departments in early- and late-stage drug development);
- Early-stage drug development at Sutro Biopharma (IPO, 2018);
- End-to-end drug development at Stemcentrx ($5.6Bn Acquisition, 2016, Abbvie);
- Co-founded glycoproteomics-focused biomarker discovery for Rx target discovery at CDx companion diagnostics at Intervenn Biosciences (Series C, $201M);
- Strategic advisor and technical consultant to device/instrumentation-focused Intabio (Series B, $18M; Acquisition, Jan 2021, Sciex).
She received her Bachelors in Science degree in Chemistry at the Ateneo De Manila University in the Philippines, and her Doctorate in Philosophy in Biological Chemistry at the University of California Davis.
Prior to attending graduate school at UC Davis, Dr. Danan created and managed her first high-throughput analytical operations laboratory with a team of three analysts at the National Chemistry Instrumentation Center, Philippines, following US EPA regulatory guidelines for trace analysis of environmental pollutants.
The round-the-clock operations supported the needs of a local environmental toxicology project in collaboration with and funded by the Harvard T.H. Chan School of Public Health (Boston, MA).
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Connect with Lieza Danan:* LinkedIn * Crunchbase * ResearchGate * TheOrg
Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal makers show. So today we have a very exciting founder. You know we’re gonna be talking about building scaling. We’re gonna talk about the importance of vision you know and how she goes about really developing the vision for the companies that she is say founded.
Lieza Danan: Um.
Alejandro Cremades: Especially the last one you know, ah the vision that ji had you know has really been the foundation for a company that has been able to raise 250000000 we’re going to be talking about also the filipino you know ecosystem you know when it comes to startups and other good stuff. You know that we like to hear typically I mean. We’re talking about a cancer survivor. You know that not only you know was dealing you know with that they fight but then also with the fight of building a company all in parallel so brace yourself for a very inspiring episode and without farther ado let’s welcome our guest today. Li ah Danan welcome to the show. So originally born and raised in the philippines Lisa so give us a walk through memory lane. How is life growing up over there.
Lieza Danan: Ilejandro.
Lieza Danan: Oh life in the Philippines was hot and full of traffic. Um I was born and raised in Manila um I was blessed to be. You know, have parents who are very loving and caring and truly supported my growth. Um, from when I was a child I went to a science high school and ah and received a full scholarship and that became my launch pad so to speak to receive a full scholarship as well in at 10 area in the manila university where I joined in an honors program. Um, that was a bachelor and where I receive a bachelor’s degree in chemistry. Um, that was a great that was great time that was really great time I was supported by loving parents loving extended family and a loving community both in school and also in in my. In our neighborhood. There was a lot of love and support growing up.
Alejandro Cremades: So how do you get into the whole sciences and chemistry because I mean you see obviously you you ended up doing pretty well in this domain and and you ended up getting a full scholarship within University There In Manila but.
Lieza Danan: Something. You know.
Alejandro Cremades: How do you started getting into this how how did the law start to Spark for this.
Lieza Danan: I fell in love with the sciences when I was in college the Atoneo De Manila University Chemistry Department gave me the opportunity to work with the only mass spec or mass spectrometer instrument in the entire country and it felt. Like I was working with legos which is my favorite toy growing up. You know there were like toys. There were like puzzles that I need to piece together to figure out the structure of a molecule I fell in love with that. And yeah, the naop gave me the opportunity. All the way to my post bachelor’s degree where I work in the national chemistry instrumentation center and that was the that was the beginning they meant my professors in that university mentored me. To become a better scientist to aspire for more advanced degree outside the Philippines and then eventually hoping that you know I’ll be able to give back to our department and of course to our country.
Alejandro Cremades: So then talk to us about after university too because I mean you do your master I mean you do your your degree there full scholarship there in Manila like incredible. You know the the way that things were shaping up you know and.
Lieza Danan: Me.
Alejandro Cremades: And then you know after this you you become a professor you know, associated there with the with with with the University Ah, but but essentially you know like what happened is that you were encouraged to come to the us and you were encouraged to come to the us to do a Ph d.
Lieza Danan: M.
Lieza Danan: And.
Alejandro Cremades: And it’s amazing. How the choices that we make you know end up putting us into different paths. But in this case, it put you into a path of tremendous growth. So tell us how did you take advantage of this opportunity and how was it like coming to the Us.
Lieza Danan: Um, yeah, right.
Lieza Danan: Oh my that was a big challenge coming to the us because I pretty much flip my life upside down but pretty much but very focused in achieving my dream right? to be a hardcore mass spectrometrist. And learn the world of biochemistry and biological and biomolecules. Um, so what did I do I really focused I remained focused with the vision to get my ph d and learn as much as I can. Luckily at that time there was growing um innovative technology already happening in the space. So I keep learning I followed my passion and that brought me into the world of drug development. Um, that interest became together with my experience in the Philippines became my leverage to get into the drug development industry.
Alejandro Cremades: So obviously there you know you were for for you know, whatever amount of time that took to really get your um you know Ph D But then right after that it’s like you you get into the whole world as you were saying of.
Lieza Danan: Um, ah right.
Alejandro Cremades: Drug development. You know the whole corporate you know and and and business side of things. So how did the things you know, like really develop because I mean there were like certain you know stages and cycles that you needed to go through on the business side of things you know, like first with lancaster then with je ning that we we soon Suntro. You know all the way towards a very pivotal moment for you which was the amount you know of time that you spent as stem centrics but then also the crazy outcome. You know where where that company got acquired for six billion so what were that sequence of events that leaded you.
Lieza Danan: Yes.
Alejandro Cremades: You know all the way to stem track stemre centrics and then you know which would eventually allow you to become a founder.
Lieza Danan: Yeah, yeah, you know like when when you’re an immigrant you stay focused to the dream right? like you remain focused in the passion you you stay you try to as much as spot I was surrounded by love growing up. So I channeled all of that love to my passions in what I was doing um, you know that was been my that has always been ah ah in my heart even when you know you’re operating like a robot so you go through the motions of. Whatever the universe was presenting to you in the silver platter the job opportunity at lancaster laboratories as principal scientists. Um and then being ah moved from europeans lancaster laboratories I was brought. To ah geninte as my primary client. Um still interacting. Ah still doing mass spectrometry but interacting with many very talented scientists at genintech as my clients and then from there I was recruited by. Sutro Biopharma again serving the silver platter still doing the same work mass spectro in um, bringing in mass spectrometry to develop novel drugs that was a great experience and I loved the culture of Sutro biopharma. It really opened my eyes.
Lieza Danan: But house biotech startups are my niche I love working for small companies I love working with small companies. There’s so much innovation. There’s so much learning. Um there’s so much opportunity to grow. Um, and I gravitated towards that. And then eventually from that experience at Sutro Biopharma I was recruited again by another biotech startups and this time stem centrics gave me my dream job as head of mass spectrometry and I no matter how you know Sutro. Um, try to convince me to stay asking for like the 3 things I want in order to stay more stocks more salary. A brand new instrument and in jokingly a a luxury car I said no to them because stems edges gave you my dream. Job and um I had to gently say no to my boss at Sutro because I knew that there’s something really groundbreaking that was presented to me again but in a silver platter like I realized. At that time alejandro that if I apply for a job I don’t get it but I have to listen to the jobs that were presented in front of me. Ah by the people around me ah previous colleagues. Um previews. Um.
Lieza Danan: But but by friends in the industry. Um, and and yeah timing is just it’s just amazing and and with stem centrics right? like this stuff when alvi acquired stem centrics that was a real eyeopening experience. Felt like I was starting to wake up stem centris was a catalyst in my life. Um, it helped me wake up from being from operating like a robot um and it elevated. You know it elevated. My awareness in so many different levels in just those three and a half years I spent at stem centrics. Yeah, that was a truly inspirational experience. Yeah yes.
Alejandro Cremades: And obviously it really got your awareness about the venture world because this was the most immediate step to you becoming an entrepreneur. So so tell us what was how was that transition like at what point how did you incubated you know the idea you know for the company.
Lieza Danan: Yeah.
Alejandro Cremades: Ah, in day for interve and then how all of a sudden and you find yourself being an entrepreneur and and and founding a business.
Lieza Danan: Sure right? So you know that experience and exposure at stem centrics help me understand at the molecular level the entire drug development process right from target discovery to. Ah, developing drugs um scaling up the drug development process the drug manufacturing process from research grade to like midsize scale all the way to ah hundreds of leaders for supporting clinical trials. Um. And mass spec is involved in every step of the way. Um, and so you know that was that was um, that was that was that was quite an experience. This was quite um, eye-opening experience. Um. The important aspect of going through that motion right? while going through the sciences was the behavior the mindset and of my colleagues and our bosses the the mentors our mentors while we became. Employees of the company were actually helping us open our eyes into entrepreneurship as early as that Peter Thiel was an inspirational speaker Jimmy Chin was an inspirational speaker. Um, the team lead that who successfully caught and.
Lieza Danan: Who successfully killed Bin Laden Osama Bin Laden was our inspirational speaker in one of our quarterly meetings. So our former Ceo our former cso and the you know management team of stem centrics help us wake up. To become entrepreneurs and a did bit of information. They were very successful in doing it because out of hundred and fifty employees 15 startups already came out of the stem centrics community. Um, and in the past two weeks 2 became unicorns 2 were acquired as unicorns. Um, so that unicorn are producing more unicorns because we were all exposed to the unicorn mindset so it was a great experience and really so grateful to Brian Slingerland Scott Dila and Dan right? Dan Reiner these are the ceos cs os and president of the company.
Alejandro Cremades: And obviously for Intervene the vision you know in which you guys you know build you know the whole thing was Pivotal. You know for the company to be able to get to where it has say you know Gotten. So What were they fundamental. You know pillars of that vision.
Lieza Danan: Yeah, the vision was we at stamp centrics. There was an acknowledgement that we’re running out of drug candidates of drug sorry drug targets right? We were running out of drug drug targets. So. In my mind based on my interaction with multiple professors in graduate school I know that glycobiology is an under that has a is in an tap field. The glycoproteome is in then tap field. For where targets can be identified and you know it just dawned on me like why? Why are drug development companies not looking into the world of the glycoprodium for identifying drug targets. Why is. Glycobiology not more experimented at the industry level like in academia you know glycobiology is very well studied but not in industry not in not a gen I well ah in my exposuregenec at that time. Not a genin tech not at Sutro not at stem centrics based on my knowledge glycobiology was untapped so it daunted me that I should be reaching out to my former professors at Ucdavis and former collaborators at ucdavis.
Lieza Danan: So I brought in professor Carlito Librilia and then also professor Carolyn Bertoi um to start a new company and um, we had a fourth co-found co-founder um Aldo Carrascoso who is um is a startup entrepreneur entrepreneur a serial startup entrepreneur and in the tech industry so together the 4 of us started interve the visioning was again the realization that um gco biology is adapt for Target Discovery for clinical diagnostics. So this needs to be explored at the industry level so that there’ll be more successful drugs out there.
Alejandro Cremades: So so eventually you know the company intervene ended up becoming a really big success. You know over 250000000 and and doing incredible stuff now on your end you know once an entrepreneur always an entrepreneur so you ended up a turning page.
Lieza Danan: Is another.
Alejandro Cremades: And in order to you know, open up the next page which become live it does So what are you guys up to what live it does. You know? what’s the ah business model there.
Lieza Danan: Oh we are quite liberus is quite something. It’s a combination of all the experiences I had in drug development and also starting an aiaiglycoproteomics company at inter interend. Um. What we’re doing is we’re streamlining one of the most tious aspects of drug development which is analytical testing for quality for safety and toxic and and for efficacy um usually um, an instrument called mass spectrometer is used for this purpose. Um, but massspec does not have Mas Speck is not streamlined mass spec analysis is not streamlined the tools. The software tools available right now are fragmented and what we do. Li vertas is to connect all of these fragmented tools through an integration platform called Lily and we spice it up with different Ai tools to speed up the entire testing process. So we it’s pretty much an automation plague. Um, it’s pretty much an operation efficiency play and so we have multiple business models. We have the service business model which I call my trojan horse for 4 years we cover you know while we are developing our technology we present to the world. Our service business model.
Lieza Danan: We call it loosely mass spec as a service straightforward. We cater to um, all aspects of drug development ah for drug quality safety and efficacy testing and ah this year ah fine we are able to present more about our platform. Our Ai platform we call lily um lily stands for laboratory integration and intelligence and it has multiple functions for digital transformation. Workflow testing workflow integration for predictive analytics and also automation and you know it’s it’s’s it’s a brainchild of multiple biopharma advisers team members consultants. My friends from the industry. Um the face of the company is me but since liverass is the ika guy is an ikiga expression of who I am as a scientist and as a human being I bring in a lot of my friends from the Philippines. From the United States from attheeo from the science high school from the mass spec community and from the bioarma community to create the ai brain of Lily um, and so the goal is to automate.
Lieza Danan: And streamline the entire process so that drug developers. The biopharma scientists can be equipped with mass spec data un ambiguous high quality mass spec data in a timely manner instead of waiting for two weeks one month three months. We will turn around data within days and the goal is to make it less than two days from the time they submit their samples. So that’s what Lily is all about that’s what livertus is all about.
Alejandro Cremades: Now 1 thing that is incredible. Is you know with livertas at the same time that you were pushing and and building the business. You were also you know dealing with cancer. You know how were you able to to really you know push through through both you know. Fights you know at the same time in the way that you’ve done.
Lieza Danan: Oh my gosh First again, you’re growing up surrounded by love and care and support. That’s pretty much what I did as well I surrounded myself with the best co-founders and founding team members who are willing to step up. Um. And take take on the reins while I was dealing with when I was dealing with my cancer diagnosis and chemotherapy. Um, personally so I’m very grateful for I’m very grateful for all of them. Um. My my even my investors um, also from the biopharma industry and the mass spec industry who’ve known me for a while they were so caring and supportive. Um, so it’s truly grateful for them. So but personally um.
Lieza Danan: Yeah I had to do some kind of like a mindset mind trick ninja right? Yeah like ah you have to be prepared for the worst. Um, what I did was after I found out that I had cancer. Um. Had to switch to project management mode. Um, maybe I I freaked out for about an hour and then realized nope this is just going to be another project. So what am I going to do when I’m managing a project I surround myself with experts. So I went ahead and started reaching out to my personal friends where my personal friends are also my biopharma friends and my friends from the science high school and from the Bay Area so I was surrounded by um, cancer survivors. I surrounded myself with cancer survivors um with hematologist oncologists experts from my science high school and one of and and also my family friend who is a professor at at Stanford ah, university. And he was the president as well of the american society of hematology. So I was literally you know one phone call away all the time um to connect with experts and answer Michael and and and ask my questions. Um.
Lieza Danan: So that’s step 1 for project management rights surround myself with experts find the right people who will guide me through the process and they help me identify the best treatment for my illness so I was I was diagnosed with classical Hudgkin’s lymphoma and luckily. Um, one of the drugs that you know one of the novel drugs that’s been out there helping cure disease um called um, antibody drug conjugates. That’s my expertise I help develop antibody drug conjugates.
Lieza Danan: There was already an antibody drug conjugate developed for my cancer and surprisingly um, well not surprisingly but this is like again serving a Silver Plater one of the investors of leverritas was a developer of ah of. Of the drug that was given to me so you know my doctors my friend doctors and also my oncologist provided me with the guidance on the clinical trials that was basis for the treatment and then so I talked to my investor and he said yes. That’s the drug that I helped develop and check out more of this information about its efficacy. Its safety. The side effects are very important to understand but the side effects are minor. So go ahead and talk to your oncologist and make sure you will get this drug. Instead of what was being offered back then so you know I guess the lesson learned from that experience was when you surround yourself with love when you surround yourself with with when you operate in love in. And you operate in passion right? Love for learning your passion for mass spec your passion for biologics your passion for helping ah patients through developing to help through developing antibody drug conjugates this type of drug will also help you cure get cured. Um.
Lieza Danan: So that was that was a great moment in my life and in realizing why I have so many friends. Um, and why ah I you know I I surrounded myself with many friends and I made a lot of friends along the way. Um in the Philippines and also here in the United States um yeah community nothing like it. Yes.
Alejandro Cremades: So community nothing like it and so I guess a nothing like it. So let’s say I’m able to um, you know, put you into a time machine and I bring you back in time to let’s say. A world you know where you’re like now thinking about starting your first company. Let’s say you know back in I don’t know like when you were like about to give the notice they’re in 2017 from stem centrics. Okay and let’s say you’re able to stop that younger leaha and give that younger les ah 1 piece of advice before launching a business.
Lieza Danan: Root.
Lieza Danan: Then.
Alejandro Cremades: What would that be what would that 1 piece of advice be and why.
Lieza Danan: Make sure your heart mind and body are aligned 1 piece advice. That’s it.
Alejandro Cremades: That’s it I love it. So so Lisa for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Lieza Danan: You can find me in Facebook and you can find me in Linkedin message me I’ll definitely respond I’m happy to share with you. All of my lessons learned um cancer became my catalyst as well. It is what I called my most obnoxious teacher happy to. Share with you. What I learned um, you know there’s so much eye opening experience I’ve experienced in the past seven years of my life. Um, happy to share with you this things you don’t need to have cancer in order for them for in order for you to realize them.
Alejandro Cremades: Amazing there you go so is um, thank you so much for being on the deal maker show today. It has been an absolute honor to have you with us.
Lieza Danan: Just ask a question.
Lieza Danan: Thank you so much Ali Handra for this opportunity. This is a great platform.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Lieza Danan On Raising Millions For Diagnostics And Building An AI Software Company To Streamline Drug Testing For Quality, Efficacy And Safety appeared first on Alejandro Cremades.
Welcome to the captivating narrative of Jorge Myszne, an entrepreneur whose journey traverses continents, technological frontiers, and entrepreneurial landscapes. Buckle up as we embark on an exhilarating ride through the highs, lows, and pivotal moments that shaped his entrepreneurial voyage. Jorge’s latest venture, Kameleon, attracted funding from top-tier investor, Xilinx.
In this episode, you will learn:
- Jorge’s journey reminds us to embrace opportunities and take the plunge, even into uncharted waters.
- Through funding challenges and market competition, Jorge’s resilience paved the way for success.
- Jorge’s story from Uruguay to Silicon Valley underscores the global reach of entrepreneurial vision.
- Wilocity’s focus on solving real-world problems propelled them to the forefront of technological innovation.
- Jorge exemplifies the importance of flexibility in entrepreneurship by navigating mergers, acquisitions, and market shifts.
- Jorge’s ability to lead diverse teams across continents highlights the universal language of vision and collaboration.
- Jorge’s unwavering resolve to pursue his entrepreneurial dreams shines as a beacon of inspiration through every setback and triumph.
Alejandro Cremades · EP 880 Jorge Myszne On Selling A Company For $400M And Building Solutions To Manage Critical DataSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Jorge Myszne:Jorge Myszne is an experienced professional with a diverse background in various roles and companies. Jorge currently holds the position of Chief Product Officer at Niobium Microsystems since March 2023.
Prior to that, they served as an Advisor at Silicon Catalyst starting in December 2022. Jorge also worked as a Mentor at Founder Institute Uruguay from August 2022.
In addition, Jorge has been involved in the investment field, working as an LP at J-Ventures Fund since October 2019 and at J-Angels since March 2018. Jorge has been an Advisor and Consultant for various companies from September 2017 until July 2018.
Jorge has significant experience in the technology industry, particularly in product management and sales. Jorge held the position of Head of Product Management at Qualcomm from July 2014 to May 2017, where they managed product definition and roadmap for 802.11ad products.
Prior to that, Jorge was a co-founder and held various leadership roles at Wilocity. Jorge served as Vice President of Products and Sales and GM of Wilocity US from August 2010 to July 2014, where they opened and led the US office, managed the product team, and oversaw sales and business relations with customers.
Before that, from April 2007 to July 2010, they worked as the Co-Founder and Head of Systems Engineering at Wilocity, where they built the system engineering team and led the development of the first 60GHz wireless PCIe system.
Overall, Jorge Myszne’s work experience reflects a strong background in technology, product management, and entrepreneurship.
Jorge Myszne obtained a Bachelor’s and Master’s degree in Electrical, Electronics, and Communications Engineering from Universidad de la República from 1992 to 1998.
Jorge also earned an Associate’s degree in Computer Engineering from the same university between 1994 and 1997. In addition, they earned a Private Pilot certification from the Federal Aviation Administration in 2017.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So today. We have another founder you know, joining us another founder with incredible with an incredible story I mean he’s done it a bunch of times you know the first time you know was smashing hit. You know with a ah rumored transaction of 400000000 you know which was the exit and now he’s on his latest you know a journey you know with a rocket ship that he’s building. You know that they actually he joined and that he’s helping to build and that we’re going to be talking about. So again, we’re going to be talking about the building the scaling the financing. We’re gonna be talking about being first to market a competing with the big guys raising money and also being able to land top drvcs as well as you know going about building a new team and and all of the above so without further ado. Let’s welcome our guests today hor hey. Misnay welcome up to the show. So originally born and raised in Uruguay so give us a walk through memory lane. How was life growing up over there.
Jorge Myszne: Thank you Thanks for having him me here.
Jorge Myszne: It was really great. So I I was born in Montevideo that is the capital about one and a half million people very friendly place close to the beach. Nice weather actually similar to California. the the silicon valley where and I am now here. So it was really really great.
Alejandro Cremades: That’s amazing. That’s amazing now now in your case you know it sounds like you know you got into the whole idea of ah computers and engineering you know quite early. So what? What really got you into into computers to begin.
Jorge Myszne: So I I always knew I wanted to be an engineer from a young age I remember myself playing with the sinclair for those who are old enough to know that the Zx and the commodore 64 and having going ta computer course I remember the first ah mexico 1986 the the world. The the soccer world and championship doing a program. To basically keep the scores out of that. So since then I knew that I wanted to go into engineering and specifically into electrical engineering and that’s what I did.
Alejandro Cremades: So then so then you know right? after getting your your actually your degrees. You know it sounds like you didn’t take much time for you to pack the bags and and get going to Israel so why Israel out of all places.
Jorge Myszne: So I like the cheap design and all the anything that has to do with that in uruguay at that time there was not a lot of cheap research. The only place you could do anything like that was at the university so I joined the university for some time and then ah get an opportunity to go to Israel and got recruited into Intel in Israel so that’s when I decided I i. Move to Israel and start working at Intel.
Alejandro Cremades: So for you I mean it sounds like when you joined there was not a lot of people and then by the time you decided to pack the box it was. It was quite a big team. You know how was that growth.
Jorge Myszne: So I joined there actually I I got the option to join the processor scene or a new group that was doing wi-fi this was 1999 and so this was a very small team about 30 people when I got to his drop and that then became um centrino that everybody probably remembers so we did like.
Jorge Myszne: 4 generations of chipssets on the wifi side until 2000 and and 7 that together with other three coworkers. We decided to pack our bags and start a new thing and that was basically velocity.
Alejandro Cremades: That’s amazing. So I get say you know let’s talk about that you know packing the backs and getting on with willow City I mean what? what really fueled that idea what was that incuation process all the way to getting you know going with the with the company.
Jorge Myszne: So I I remember you know I I was very comfortable Intel at that time you know a good a good job. A good salary doing things that I liked so one day decided okay, let’s do something else. Let’s leave all this. Let’s jump into the water and or into the pool and we don’t even know if there is water so we started to think about there was a new technology starting so we started to think oh we should. We can do something about this and at some point I always wanted to do something by myself and not just work for somebody and at that time I was twenty when I think 29 if I remember correctly and it was. Okay, if I want to do it. This is the time to do it and these are the people that I believe if anybody can do it. These are the people that can do it so I remember talking to my wife at that time saying okay, let’s jump. And we jumped.
Alejandro Cremades: So what ended up being the business model of velocity. How are you guys making money there.
Jorge Myszne: So velocity um, develop Sixty Gigahertz well as chipsets. So what we today know as 5 g so this was a ah precursor of five g that it’s called millimeter wave. So these high frequencies is where basically there is space available and you can go very very fast so it was challenging 2007 ah, this was before Ai so pretty much nobody was. Investing in silicon so getting the first round was very challenging. It took us about six months until we got the the seed money but we ended up getting benchmark and sequoia There are two very known.
Jorge Myszne: Vcs and that’s how how we started now on the technological side ah up until that time and all the chip sets that were designed were only up to five six gigahertz so any fab that manufactures the chips will give you models up to 10 gigahertz and that’s what you use to model your design and simulate simulate your design we needed Sixty Gigahertz so there were no models. So the favs didn’t have models. So. We had to basically build our own models. So we we’ll just fabricate a chip that was lines and very basic structures that then we had to measure and build the models so there was a lot of. I would say r and d in order to to get there.
Alejandro Cremades: So what? What do you? think you know needed to happen because I mean if you’re for six months raising money you know anyone would typically like throw the towel you know and be like oh my god this is just not working out but it’s just amazing that after six months you’re able to land you know some heavy. Hitters like sekoia or benchmark. So. What do you think was that turning point for them to come onboard.
Jorge Myszne: So I think it was kind of a validation of the market since the beginning they showed interest they liked the team. The team the the 4 founders we were very experienced coming from the field. Knowing exactly what it will take to do it. Ah they they needed to get some more validation from Companies. So We had to work with a lot of the big name companies trying to explain what the product will be. And try to get feedback from them that they were Interested. So once we were able to do that and get people around the idea of what we were trying to do that’s where the vcs said. Okay, this makes sense. Let’s let’s go.
Alejandro Cremades: So in total for the company you know prior to the acquisition. How much capital was raised.
Jorge Myszne: We raise about a $100000000
Alejandro Cremades: And what was that the process like of of raising that money because I mean it was also during the crazy times of O Eight and you know and really going through all of that financial you know craziness in the world. You know I mean it was probably shaky.
Jorge Myszne: Yeah, so so we started in 2007 the first round was 2007 and then we of course have had everything planned now we were lucky that we raised the a round.
Alejandro Cremades: And bumpy.
Jorge Myszne: A little bit before the crisis. So in 2008 before everything went South So when we got into the crisis. Ah we had money in the bank that helped us to go through the the storm while we had money we had to change. Some of the plans we had to slow Down. We even had to let go some of the people because it was completely ah unclear where things will go So I would Say. 2009 was very very challenging and then going into 2010 is when things became more clear and then we started to accelerate.
Alejandro Cremades: So I guess say you know for something like this like what you guys were doing I mean 1 thing that that was probably frightening. You know was to all of a sudden see that you’re first to market and and and then you see yourself that Intel is rolling out something that is competing against you I’m sure that was not fun.
Jorge Myszne: Ah, it’s not fun, but actually it’s a validation you are on the right path right? If you have a company like into running after you then you did something bright at the same time. I would say that ah small companies while they can be the first markets they have the first mover advantage they cannot make the market in order to make the market. You need one of the big companies and Intel is known for. Making markets and big markets. So actually we we tried to run as fast as we could we tried to ah build the best product that that we could do but we knew that when we were talking with the potential customers. We didn’t need to explain too much why these technology is going to happen because if Intel is also offering a product later that means that this market is going to happen.
Alejandro Cremades: So then. So then how was that acquisition process because I mean the company ended up getting acquired by Qualcom and I’m sure he was a I mean it was a smashing outcome. You know, according you know to the world of the tree was about 400000000 but What was that process like.
Jorge Myszne: So the process was have to say that ah prior to qualcom. There was a company called Atheros that was a wi-fi seneconductor company that was later acquired by by qualcom so athero.
Jorge Myszne: Invested in velocity very early. There was a second and the second round they invested and then when they were acquired by qualcon Qualcomm continued to invest in all the rounds so we were working very closely with Qualcom. And at some point we were started. We started the company working on pc products. This was 2007 so it’s even before the Iphone right? at some point of 20102011. We started to move into more of a ah. Mobile ecentric solution and we started to work with some of the big names Samsung apple etc. So the moment that these companies started to seriously look at our product that was when qualcom and others. Started to look and say okay this is interesting and well from there. They they made an offer and ended up closing with quaco.
Alejandro Cremades: So what was that process like where all of a sudden you know this acquisition is done and you know here you are you know, an immigrant in the Us you know and then all of a sudden you you hit the American dream. You know how did that feel for you.
Jorge Myszne: And see it’s ah it was very interesting because for a short period of time you said oh wow I did but then you forget kind of forget. Right? And you run you know we moved into Qualcomm and we you know you have people that move with you so you are responsible for them and you try to integrate them into the new company. You try to make sure that they they are good in the new in the new company. So. There is a lot of responsibility and while you know financially there might be a good, a good outcome. Ah you still have a lot of work to do and you need to make sure that you know everything continues and you continue to deliver right? So it’s. Incredible. How fast you forget about that right? and you enter into the day to day and you say okay I need to make sure that my people are okay and you keep growing once we move to qualcon. We almost double the team and so. It’s it’s a lot of responsibility.
Alejandro Cremades: And no kidding. So at Qualcomm you were there for a couple of years and then basically you know as they say once an entrepreneur always an entrepreneur you know it became time you know to really get going with your next company. You know we’d ended up being becoming chameleon. So. What were you doing there because I think that that was a very interesting transition where you are now taking the reins as the Ceo for the first time going from the technical side to the business side. So how was that transition for you as well.
Jorge Myszne: Yeah, so um, when I moved to the us I kind of started the transition that slow transition between the technical wall and more of the customer engagement and product world. Ah, and definitely with Chameleon I took on the role of the Ceo. So also here I have ah 3 3 more partners so we were 4 co-founders and it’s it was a.
Jorge Myszne: And was really interesting as a technical person that sometimes you need to take a step back. Let the technical people do their things even though you might know something but at the same time you understand enough to ask. The rest the right questions and understand where the challenges are where the problems are and try to facilitate how you go over those things.
Alejandro Cremades: So with Chameleon What were you guys doing there.
Jorge Myszne: So with Camemilia we we did ah basically ah, ah, hardware security solution for servers mainly protecting servers at the time that they boot right? So what it’s called secure boot. Making sure that nothing was changed and when you turn on a server all the software that is loaded before the operating system is loaded is the authentic hasn’t been touch and so. All those kind of things cannot be done in software because this happens before this software. What we call software right at the ah application or operating system level loads. So all that was where where we were doing there.
Alejandro Cremades: So with Chameleon How did you guys go about for example, like capitalizing the operation. What did that thing. What did that look like.
Jorge Myszne: So we we leverage a lot of the contacts that we had before right? So so basically the product. The product was tailored for cloud providers and server oems so those were some of the people that we were. Working before in velocity and in in qualcom. So basically we were able to tap into those relationships and at the same time. Ah, when we started the team. So ah, most of the engineering team was in Israel I was. Living in the us some of my partners were were in Israel and we were also tapping into some of the people that we have been working before right? So the core team of Chameleon have been working before together in. But lossityity and quan.
Alejandro Cremades: So then so then for this I mean you guys send it up basically going through a merger. So um I know also that this was the first time that you would venture into the security world. So I guess what was that the experience and and like and and then also like. Why did you guys ended up going through a merger.
Jorge Myszne: So ah, at that time this was ah so we went through Covid and we we ended we ended up with some pre Covid then Post. Covid effects right? especially in the Cloud world I would say the pre Covid effects as were Covid or inside Covid I would say when Covid hit. Right? Everybody moved to remote and everybody moved to the Cloud So the and the need for Cloud just when bananas right? So internally we were working with some of the Cloud providers and. They had to cancel the next generation projects because they didn’t have enough servers to support the demand that they had now at the same time if you remember we had all the the parts the supply shortage. So They couldn’t get parts to build more servers to be able to support that demand so they had to redesign the servers with whatever parts were available in order to be able to as.
Jorge Myszne: And work and support that demand that means that all the projects that were kind of next generation project. They just got delay now at the same time. It was very clear that after that spike in Demand. There will be a drop right? and it was very clear that that spike was not real right? So after that it will just be too too much supply and not enough demand so that’s where we started to see Okay, what do we do. What? Ah, What is the right approach for for the company and we were working with another company and we say okay it makes sense to join forces and ah basically merge.
Alejandro Cremades: So then what happened after that merger because it didn’t take long for you to pack the backs.
Jorge Myszne: Yeah, so after that merger I personally decided to to live I was flying to Israel once ah, a month. Ah so long flight so to long distance and and then I i.
Jorge Myszne: Work as an advisor and silicon accelerator here in the bay area and as and one of their events I met company called naobium doing basically compute on encrypted data. So it’s a new type of encryption that allows you to basically compute on data that is encrypted without needing to decrypt the data so ended up talking to them and this this was something that at Chameleon we were. Looking as ah as something that was starting and it was very interesting to me so ended up deploying the the team again a very small team. We were about 18 people when I when I joined ah this company got a. Ah, grant from Darpa to build ah an accelerator for f fullomo morphic encryption. That’s the name of his technology and basically I lead all the the product and go to market activities ah may help you.
Alejandro Cremades: So I guess I mean you’re an entrepreneur you have it in you. You’ve started a bunch a couple of companies Now Why not starting another one. Why why joining someone else wondering.
Jorge Myszne: So I this company came from the it. It was ah Naopium was so spin off from ah another company called gala.
Jorge Myszne: That is an R and D company working for the Us government mainly D O D partner of of the fan. Ah and it started as a project for darpa not as a. Product company and I like the challenge for me was kind of starting from scratch understanding where to take that product how to um work the go to market how to build. The company and steer it into the the the right direction. Ah so that’s it.
Alejandro Cremades: So then I guess say for you now I mean incredible entrepreneur or journey now as well. Um I guess if you had the opportunity of going back in time you know I’d say I give I give you a time machine and you’re able to go back in time to. Maybe that moment where you were working at Intel in back in Israel and you were thinking about joining you know these other guys you know to start wheelosity and let’s say you’re able you know on the way out the door after giving your notice at Intel you’re able to stop that younger self and give that younger self one piece of advice before starting a business. What would that be and why given what you know now. Jorge.
Jorge Myszne: So I I still have friends from that time at Intel there are still at Intel right? And it’s also well known what it’s called the the golden cuffs right? when you’re getting one of these big companies. Ah that you know. It’s very difficult to to leave. So I think that the piece of advice is and I that’s what I took to myself is I prefer to fail rather than not trying but I prefer not to regret. Not trying right because you know you asked me now if I had a time machine I thought you were going to ask me if I would change anything and the answer is no I wouldn’t change that I will take exactly the same the same ah path even if. It wasn’t successful and there was no exit with clothes or whatever right? But I think that if you have that entrepreneur in in you don’t wait right? if you have that go take the risk jump into the pool. Hopefully there is water.
Alejandro Cremades: There you go so joge for people that are listening that will love to reach out and say hi. What is the best way for them to to do so.
Jorge Myszne: So Linkedin I think it’s the best way. Ah, Missionnet there’s only one I think or very few so hoka mishna m y s z and e happy to help and talk to.
Alejandro Cremades: Amazing. Well hey Jorge thank you so much for being on the deal maker show today. It has been an absolute honor to have you with us.
Jorge Myszne: People.
Jorge Myszne: Thank you A likeandro was an honor for me pleasure.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Jorge Myszne On Selling A Company For $400 Million And Building Solutions To Manage Critical Data Securely appeared first on Alejandro Cremades.
In the bustling world of entrepreneurship, stories of resilience, determination, and innovation often emerge as guiding lights for aspiring founders. One such narrative is that of Ricardo Pero, a Brazilian-born entrepreneur who embarked on a transformative journey from the corporate world to building a multimillion-dollar empire in the heart of the United States.
Ricardo’s company, SellersFi, has attracted funding from MUFG Innovation Partners, 111 Investment Partners, Bossanova Investimentos, Endeavor Catalyst, and Fasanara Capital
In this episode, you will learn:
- Ricardo Pero’s journey from Brazil to the U.S. exemplifies the transformative power of determination in overcoming adversity.
- Ricardo’s transition from a successful corporate career to founding SellersFi underscores the boundless possibilities of pursuing one’s passion.
- Ricardo’s vision for revolutionizing e-commerce lending led to the creation of SellersFi, a pioneering platform shaping the future of online commerce.
- Amidst global upheavals like the pandemic, SellersFi’s resilience and adaptability propelled it toward unprecedented growth and success.
- SellersFi’s expansion beyond borders reflects Ricardo’s vision of empowering e-commerce sellers worldwide, transcending geographical constraints.
- Ricardo emphasizes the importance of fostering a diverse and inclusive team culture, recognizing it as a cornerstone of SellersFi’s success.
- Ricardo’s journey offers valuable lessons in perseverance, strategic planning, and unwavering commitment to realizing one’s entrepreneurial vision.
Alejandro Cremades · EP 879 Ricardo Pero On Raising $400M To Provide Working Capital To E-Commerce MerchantsSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Ricardo Pero:Ricardo Pero has extensive work experience in the financial industry. Ricardo is currently the CEO of Sellers Funding, a role they have held since 2017.
Prior to that, they served as the Chief Executive Officer at Sellers Funding starting in March 2017. Before joining Sellers Funding, they were a Founding Partner at OneLink Capital Partners LLC. from September 2016 to March 2017.
From 2010 to 2016, Ricardo worked at J.P. Morgan as an Executive Director. Ricardo began their career in the financial industry at Merrill Lynch in 2007, where they worked as a Financial Advisor until 2009.
Ricardo then moved on to Morgan Stanley Smith Barney, where they served as a Producing Sales Manager from 2006 to 2007 and as a Financial Advisor from 2000 to 2004.
Ricardo also had a role as a Relationship Manager at Citi from 1999 to 2000. Prior to that, they worked as an Investment Advisor at Gerdau S.A. from 1992 to 1999.
Ricardo Pero obtained an MBA degree in Finance from Columbia Business School, having attended from 2001 to 2002.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So today. We have a founder that is doing some really exciting stuff. You know I mean they they are growing. You know, really nicely. They’ve raised you know between equity and debt you know close to 500000000 which is really impressive. Ah, you know in the. Basically on the show Today. We’re gonna be discussing how you know he came to the us you know that the motivation that was behind it. You know the the immigrant story I mean obviously as an immigrant myself I love those stories because I really see myself in them. I love them. We’re gonna be talking about why in the case of our. Guess the competitive slight is always changing and many more things you know when it comes to building scaling and all of the above so without further ado. Let’s welcome our guests today riardo perro welcome to the show.
Ricardo Pero: Um, hi Alejandro nice to meet you nice to be here.
Alejandro Cremades: So originally born in Brazil give us a walk through memory lane. How was life growing up over there.
Ricardo Pero: Well um I spent it my first twenty something years in in Brazil I grew up pretty much in a in a farm in the south of Brazil my family had that. As a tradition and and decided to take a different path in my career I study economics and then when I was you know 1920 years old my my dad passed. Decided to to make a shift I changed my my classes to the night shift start studying at night working full time became a treasurer international treasurer of a. Ah, brazilian multinational company when it was like 21 22 years old built my career out of that and and then 2 3 years later I got an ah a job offer from from city and someone from their trading desk in New York resign they told me why don’t you start in sao paulo go to New York for on a temporary basis and I stayed in New York on a temporary basis for over twenty years and.
Alejandro Cremades: And 1 thing that there that you were alluding to mean when you were 19 You know you’re that passed and and that kind of changed everything for you. You know how? how did that impacted you and also the way that you were thinking and and and the lens through you know you were seeing life around you. Yeah.
Ricardo Pero: Ah, it’s interesting because I think people react in different ways when they face problems like this in life. My immediate reaction was okay I need to take ownership of. My life I cannot wait for someone to you know in Latin America we have that that you know relationship with our parents where there is a strong support and emotionally financially support throughout. Years and into your like mid 20 s and I I realized that I I wouldn’t have the luxury to have that so that was just like this I mean I didn’t wait for anybody to tell me what I wanted need to do. I just went there and and did it.
Alejandro Cremades: So motivation for the Us you know out of all places. You know why? why come into the us. So.
Ricardo Pero: I came here for the first time in 1994 I went I went to New York I was working already for for this company and um I was meant to to spend like two months work in a trainee program working in various departments of the bank. Ah like cityn chase back then the company had strong ties with both banks and for me it was a a life changing experience because I I knew. Okay. I belong here. It was crystal clear to me that I needed to make that that move I I was able to interact with a lot of people that thought like me and this was. Very inspirational because you see animation immigrants and you see all this foreign college kids studying and building their careers and I was working already out of college working in Brazil and I said that’s that’s what I want to do so. I was ah I was going to be the first executive to be fully sponsored to have an Mba sponsored by the but the brazilian company and I decided to to decline that offer and take an offer from Citibank.
Ricardo Pero: Who offer me a job here in New York and together with my Mba and I did my Mba the same way I did my college studying at night and during the weekends and working full time during the day.
Alejandro Cremades: How was the experience of the and Nba because Colombia is really great. How was the ah the community you know and how have you been? Let’s say able to leverage that. So.
Ricardo Pero: It was an amazing experience. Not working experience for me. My health wasn’t that but because I was always tired I was out I think I I gained like £30 during my my Mba because it was. Drinking coffee and eating ice cream to keep to keep ah awake ah during those long long nights studying but it was an amazing experience. I mean it helped me.
Ricardo Pero: Create some concepts and rethink the way I saw businesses because when you are an immigrant you have this view of the world and my experience is studying the Us help me think in a different way. It helped me see the world. With different plans and made me understand better some business dynamics and and things that happen in in the companies that award and made a tremendous impact in the business that I’m building.
Alejandro Cremades: So then so then in this regard. You know, let’s talk about the corporate years because obviously now you know you’re writing this rocket ship that we’re going to be talking you know about it in a while you know in in just a little bit but. But you have you know you you did experience corporate in different shapes and forms I mean you were talking about a city you did Morgan Stanley then Mary Lynch and then finally Jp Morgan which was your immediate step. You know before really getting started. You know with the company. So I guess.
Ricardo Pero: Um.
Ricardo Pero: But the purpose is now.
Alejandro Cremades: How was that transition you know from 1 institution to the other and and and and what were you doing.
Ricardo Pero: So I started in sales and trading I started trading effects did effects and rates then multi asset classes. We built. Ah um I was managing a jv between Solomon. Smith Barney and city covering midmark institutions in Latin and we we did an amazing job. It was really fun and then 2007 I start noticing that a lot of my peers were leaving. And I decided to to take a chance I got an offer from mero back then and I mean I think that I did a good reading about city because 2008 came I think I probably. Wasn’t my best choice going to Mary Lynch and I went through that that acquisition of b a and it was a you know, weird experience because I’ve stayed there for probably like 2 years maybe less than 2 years and then jp Morgan came extend me an offer and moving from one organization that is changing going through an acquisition to an organization that was well-established.
Ricardo Pero: Gaining a lot of momentum post 2008 crisis. It was a very interesting change for me. Um, with city you think about city pre 2008 crisis. It was a very global. Organization with businesses. You know, strong business in latintan strong ties to Latintan went to merow to build a similar business and then everything fell apart and then you go to Gp Morgan and ijpmorgan I had and a different challenge but because I wasn’t only managing the relationship with some latin clients and and especially Brazil but I was also bringing investment opportunities from latinam to our. Us or my us european and asian counter and it it was a different environment and that helped me also gain extra experience extra exposure to to foreign markets and and and working with. Ah, more international you know network of of colleagues and went to trips to to Europe to to Asia and so on so it was an amazing experience back then but at some point after you do that for like 15.
Ricardo Pero: Over fifteen almost twenty years I was starting to to get a little tired of the the corporate world and and doing the same thing over and over again.
Alejandro Cremades: So let’s talk about that because that was the time where you were at Jpmorgan and and that’s the time where you decide that maybe you know there is something else that you should be doing you know, maybe starting something of your own What was that incubation process that you know got you to finally be like okay I’m giving my notice and. And this is kind of like what I’m thinking about doing.
Ricardo Pero: I I knew for a fact that I wanted to leave because I saw a lot of opportunities to grow broke both ah personally and professionally I wanted to to so to. Search for something that would challenge me in a way and and for six months or so The only thing I did was research I talked to a lot of my former clients. I promised myself that I would avoid to go back to to work for a big bank doing the same thing that I I did at Jp Morgan um and I kept that promise and and one day I receive a phone call from from a friend of mine that was selling in ecommerce. Had a wholesale business move his business to Amazon and that call changed my life in a way because that’s probably why we I my attention. Ah the opportunity that I saw there. Call my attention and I build an entire company based on on that.
Alejandro Cremades: So then so then let’s talk about like that day that process how was that the.
Ricardo Pero: Um, yeah, we.
Ricardo Pero: Let me see. Yeah.
Alejandro Cremades: So let’s so let’s talk about that process. So let’s talk about that process then so how was how was you know then because I know that it was like a 2 2 phase approach. You know the way that you went about this you know first you know you started with essentially going at it. Ah, with um, you know a different blend or a different structure right? where you got started with kind of like some friends and family. You know money around a vehicle that you created and then that ended up becoming. Ah you know what? you guys are doing now. So. What was that journey like you know what what? How did you go from one end to the other one where now you know is finally becoming tangible.
Ricardo Pero: Yeah, the the business is a capital intensive business. So once I I figure out. Okay, this is what I’m gonna build I need to secure resources beyond what I have already saved and put aside to start my own business. And the first thing that I thought was how I can make this scalable and have an edge over it. So my two first hires were data scientists. And it was a big change for me because I was applying a lot of my knowledge on areas that I had no expertise whatsoever like data science machine learning models now called Ai and. This is this was so new to me I was coming from a trading dask environment very open very fast space and that demanded a lot of my brain power attention and long hours. To work with those guys to build our first credit model and it wasn’t a welcome change in a way.
Alejandro Cremades: So so I guess a then for the people that are listening to really get it. What ended up being being the business model of sellers’ funding. How are you guys making money. Okay.
Ricardo Pero: So we started as a ah lending platform to Amazon sellers I soon realized that staying with Amazon alone would probably offer little to no differentiating differentiation to to our. Customers and and no value added to our shareholders. So I started ah integrating with other platforms nowadays we have connectivity with almost 10 platforms all ecommerce platforms and. Ah, the second wave of evolution was ah building a banking infrastructure to mitigate operational risk and start ah creating another layer of of incentive for customers to stay with us for longer. So how we make business. It’s a node banking model you you borrow money? Ah as cheap as you can and you maximize your allocat location of capital so we make money providing working capital solutions to our clients we make money offering. A banking platform where they could pay their vendors either in dollars Euros pounds they can do crossborder payments and so on the way I think about our platform ecommerce is a global industry and we need to have a global mindset to to cover our.
Ricardo Pero: Target industry and our clients.
Alejandro Cremades: Okay, so then it so then in that case you know I guess for you guys? what were the um I guess what were the early days like at what point do you realize hey I think that we’re into something here.
Ricardo Pero: Um, a lot of people I mean when you read about entrepreneurship you you look at milestones like there is always that oh the first million dollars in revenue first $10000000 in revenue and.
Ricardo Pero: We got into a million dollars in revenue in like year one or maybe less than that and we saw a great traction before being called sellers why we call the company was called sellers funding so it was a very. High ah organic ah search engine for us or you like when people went to Google and saw amazon sellers funding alternatives. We were like one of the first ones to be there. So there was a lot of demand for our product and then and and in my my mind we were positioned ourselves in an industry that had a secular trend very positive coming our way and then the pandemic hit. Right? And then all the growth that we expected to achieve in like 10 years happen in 1 year or 2 and we had to to be prepared for that. So I think the first time we ah we surpassed $10000000 in revenue was twenty twenty
Ricardo Pero: And and that was a big jump like over a hundred percent a hundred and fifty percent growth in that year and we’ve been growing consistently over a hundred percent year for year with the exception of last year where we grew about 50% forty fifty percent
Alejandro Cremades: Now now in this case for you guys you know too I mean you’ve you’ve raised quite some money how much money have you guys raised today? yeah.
Ricardo Pero: Over over a half a billion dollars and we are expanding that this year even for yeah.
Alejandro Cremades: I know that 70000000 has been inequity and then the rest has been in depth. So how does it typically work. You know when you raise money for equity and what is the difference with raising money for debt for a business like this for.
Ricardo Pero: Um, I think the um the the approach is a little bit different and thankfully we we being proving that our technology and our credit and the writing models they work. We. With this worth over a billion dollars. We wrote off less than two and a half percent over that period of time. So from a that point of view. It. The performance itself tells the story from in equity. Point of view. We need to highlight not only the milestones and the growth trajectory that we face but also the plans that we have for the future and and and when I see the company moving forward. There is a big shift happening right now. And it started with our rebranding from sellers funding to sellers spy the idea to change the mindset of our team here starting with the team and and going to to our customers that think of us as. Ah, working capital provider now the the idea is and the challenge that we face is to change that mindset and having our customer think of us as a financial platform that has a strong working capital solution. But it’s not only that we are offering cardts we are offering.
Ricardo Pero: Bank Accounts fdasured bank accounts and this is just the beginning of ah a much more robust financial platform.
Alejandro Cremades: So I guess say as you’re raising money here I mean especially as ah as an immigrant too know and how is that how is that journey like of building the network and you know a making sure that you’re able to.
Ricardo Pero: That matter.
Alejandro Cremades: To go through the next day cycles to going from run around to the next how how was it like for you.
Ricardo Pero: It’s interesting I remember the first trade show that I I went with my my business partner. We were questioned how come 2 brazilians are decided to to build an ecommerce ah lending platform for ecommerce sellers. As. Why not I’ve been working for but you know us financial institutions for for over 20 years or over fifteen years so it was a lot of skepticism from the get goal and then there was I was looking at. Our old presentations and there is always that slide right? that talks about the competitive landscape and and for us was always like oh you, you have an amazing track record but you haven’t scaled yet. That’s wait for you to reach $100000000 in origination and then you reach $100000000 in origination and then for lenders or credit folks. It was always like oh okay, you reach $100000000 in origination. But you haven’t faced. Ah, negative credit cycle and here we are like 6 over 6 year six years down the road. We’ve been through a lot I mean the last two years have been very challenging for lenders specialty finance in general.
Ricardo Pero: And we we remain here and when I look at that slide that competitive landscape site a lot of our competitors that companies that I admire and I I consider benchmarks when when we start the business got acquired changed their business models. We saw that happening the past two three years again on a post pandemic world and we we kept our discipline and and and I think that we are doing something that is meaningful. For a lot of of our clients and you know a lot of our ah partners and to the point that we were able to secure this relationship with Amazon this year
Alejandro Cremades: So I guess for the um for the people that that are listening. You know to get a good understanding because obviously you know here you’ve raised quite a bit of money you know and and I think that vision is a big one for the investors. Also for the people that you’re onboarding you know on the customer side on the employee side. If you were to go to sleep tonight and you wake up in a world where the vision for settlers’ funding was fully realized what does that world look like.
Ricardo Pero: Um, we are but when I when I think about ourselves I think as a neobank for ecommerce sellers with strong embedded solutions for for marketplaces. So. I see us probably not in that long near future but probably in in the near future in the next couple of years probably a multibillion dollar company if I had to choose. Um, I’ll say probably going public and in 2 3 years having surpassed we we are now approaching 5000 clients sms.
Ricardo Pero: Predominantly in the us I would love to to expand that as an immigrant like like you said I’d love to to expand that to to other places I think that we are covering an underserved industry and I don’t know if you know but over 50% of Sms. Selling the us our foreign companies. So if my goal to expand beyond the us market supporting foreign companies selling the us but also expanding internationally I think that the team of underbanked. Is applicable to to consumers to to small businesses and we are in an industry that is extremely under served and and not properly understood by most traditional financial institutions.
Alejandro Cremades: So I guess a we’re talking about the future here but I want to talk about the past and do so with a len of reflection if I was to bring you back in time you know, maybe back in time to let’s say 2016 where you are Jp Morgan and envisioning a world where.
Ricardo Pero: You.
Alejandro Cremades: You were to become an entrepreneur and bring something of your own to life if you could have a sit down next to that younger self I’m being able to give that younger Ricardo one piece of advice for launching a business. What would that be and why given what you know now.
Ricardo Pero: 2
Ricardo Pero: Um, That’s a great question I think something that I I learned I’ve learned throughout my career I learned a lot about you know. Ah, learn more about bad examples and not to to fall into the same traps that I see people falling. Um and I look at our team Today. We have a very low voluntary churn.
Ricardo Pero: And when I start the business I’ll say I pay um attention to the team. But probably I should have.
Ricardo Pero: Being a little bit more generous on the on the stock option of for the early like the first 5 10 employees not that we don’t have now I think that I I correct that that. Throughout time we have over 70% of our employees have stuff options in the company that creates a sense of ownership. It took me a couple of of years or maybe less than 2 years to understand that how that was how important that was for me. And I think we have an amazing team and we have an amazing culture here. Very diverse diversified team with different backgrounds and and that is probably the most important aspect of. And the strongest white foundation that I have in the business today. How? how amazing it is our team here and probably I would have spend more time forming that from the early months or a couple of years in the into the business. Probably I would be. In a better position not to feel so overwhelmed and and responsible for all the things that I I did at the at the beginning not that it is an easy I don’t I never expect an easy transition from being an employee to an entrepreneur.
Ricardo Pero: But having a team that supports you from the get go is is important.
Alejandro Cremades: So I guess for the people that are listening Ricardo I would love to reach out and say hi. What is the best way for them to do so. So.
Ricardo Pero: You can reach me on Linkedin by Email Ricardo at salisfi.com
Alejandro Cremades: Amazing, well easy enough. Well Ricar it has been an absolute honor to have you with us today. So thank you so much for being on the dealmakerr show with us.
Ricardo Pero: Thank you very much. It was amazing experience. Thank you a lot.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Ricardo Pero On Raising$400 Million To Provide Working Capital To E-Commerce Merchants To Help Them Grow appeared first on Alejandro Cremades.
In the realm of entrepreneurship, there are tales of resilience, innovation, and the relentless pursuit of turning dreams into reality. Jemuel Joseph’s journey embodies all these elements and more, from his humble beginnings in Ethiopia to co-founding Cover, a revolutionary company reshaping the future of housing.
In an exclusive interview, Jemuel shared insights into his upbringing, the challenges he faced, and the remarkable evolution of Cover. He also talks about the challenges he faced with acquiring funding for his company and the rejections he faced. Cover has attracted funding from top-tier investors like General Catalyst, Khosla Venture, Bill Peck, and Bruce Richards.
In this episode, you will learn:
- From Ethiopia to Silicon Valley, Jemuel Joseph’s journey embodies resilience and innovation in pursuit of the American Dream.
- Cover’s inception stemmed from a shared vision to revolutionize home construction through mass production, customization, and streamlined operations.
- Overcoming obstacles in the venture capital landscape, Cover attracted visionary investors who recognized its transformative potential.
- Strategic problem-solving guided Cover through unexpected challenges, emphasizing understanding root causes and collaboration for effective solutions.
- Cover’s future vision extends beyond home construction, aiming to build communities and cities by empowering individuals worldwide.
- Dynamic relationships with investors fuel Cover’s growth, leveraging expertise and networks to drive innovation and scalability.
- Jemuel Joseph’s story inspires aspiring entrepreneurs, highlighting the importance of perseverance, creativity, and unwavering commitment to making a difference.
Alejandro Cremades · EP 878 Jemuel Joseph On Raising $70M To Automate Home Building For Maximum Cost Efficiency And ValueSUBSCRIBE ON:
iTunesGoogle PlayStitcherTuneInRSSSoundCloudSpotify For a winning deck, see the commentary on a pitch deck from an Uber competitor that has raised over $400M (see it here).
FREE DOWNLOADThe Ultimate Guide To Pitch Decks Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
Access The Pitch Deck TemplateUnlock the pitch deck template used by founders to raise millions. Just enter your email below.
Your email address is 100% safe from spam!About Jemuel Joseph:Jemuel Joseph, based in Los Angeles, CA, US, is currently a co-founder and president of Cover Technologies Inc. He holds a Bachelor of Architecture (B.Arch) from Pratt Institute.
With a robust skill set that includes Python, Digital Fabrication, CSS, Git, Rhino 3d, and more, Jemuel Joseph contributes valuable insights to the industry.
See How I Can Help You With Your Fundraising Or Acquisition Efforts
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Read the Full Transcription of the Interview:Alejandro Cremades: All right? Hello everyone and welcome to the deal maker show. So today today we have an amazing guest that is going to be joining us. We’re gonna be talking about a a bunch of stuff. You know we’re gonna be talking about. Financings you know getting a ton of rejections. You know, really coming out on top. You know on several financings that our guest has done you know building a rocket ship that he’s in but really remarkable journey you know coming to to the Us. Obviously as an immigrant you know, incredible story I mean I’m also on immigrant. So I love those stories. But again all the good stuff like building scaling financing that we like to hear so without fartherdo. Let’s welcome our guests today Jim well Joseph welcome to the show. So originally born and raised in Ethiopia how was life growing up, give us some I walk through memory lane.
Jemuel Joseph: Um, yeah, thanks for having me.
Jemuel Joseph: Yeah, it was. It was really different than than I think the childhood experience that that one would have here. Um, you know spent a lot of time outside ah sort of just being creative and in nature. Um, and. You know there was a moment in time where I started ah realizing that technology was taking off that was sort of at the two thousand s and ah, what I would say is it felt like um technology was coming to Ethiopia slower I remember ah you know being as a kid wondering why dial up. Ah, was so slow and internet bandwidth ah wasn’t really what I thought it should be but at the same time it gave me enough exposure to be curious about what was going on in the rest of the world especially through things like Tv and reading books and such like that. Um, and so. It was sort of a mixed balance of of of both. You know, having just just that that great childhood experience not having to to be too exposed to technology but at the same time having an awareness of what was going on.
Alejandro Cremades: So Your parents ended up a deciding to come here to the us and you know you came here to the Us you did your high school college. All of the studies but coming here to the Us I mean I’m sure that for you was a quite a shift now I mean new friends New life. How was that How how do you think that shape you yeah.
Jemuel Joseph: Yeah, you know? Fortunately, for me, um, there wasn’t a language barrier coming ah coming to the us I had spoken english and had gone to british school in Ethiopia and so that part was much easier, but what was striking was I was exposed. Ah, to to a much broader ah sort of set of of things particularly the internet. Um as I mentioned earlier you know the internet speeds weren’t particularly great in ethiopian so when I moved here that was the most fascinating thing for me to have all of this knowledge. And all of this opportunity sort of at my fingertips. Um, and you know in high school I think I was I was struck by ah, just the differences in in kind of the the high school experience. Um, definitely kind of what I saw in movies. Was was was ah was was sort of real here. Ah, but but really the thing that that struck me the most as being different was just how much access I had to knowledge and information and and and the internet.
Alejandro Cremades: So then so then for these two I mean how was it like to like see your parents you know going after like like the American dream. You know obviously coming here to a new country to like seeing them working hard for a better future for you guys I’m sure that was also very inspiring for you. Okay.
Jemuel Joseph: Yeah, it was it was you know my parents worked for the un in Ethiopia which which was the african headquarters and so they relocated to to work at the New York at the New York Headquarters and it was very inspiring because. Ah, they sort of took a leap of faith thought that there’d be a better education and a better path for me to continue growing. You know my life ultimately and I think they were they were absolutely right in that but you know at the time it wasn’t so certain they didn’t know you know. How great the the public education system would be um how I would assimilate whether I would transition and and and start a new life life here. Um, and so there there there were a couple unknowns. But fortunately I think it it worked out. Well.
Alejandro Cremades: So then in your case you ended up going into architecture. So how that that creativeness in you sparked up, you know why architecture out of all things.
Jemuel Joseph: Yeah I think I think ah for me, it actually was a pretty last-minute decision towards the end of high school. Um, you know from a very young young age I’ve been interested in technology and was building websites. Even even when I was in Ethiopia and so when I started to think about. What I wanted to do professionally at the time software engineering sort of in the zero six zero seven um wasn’t really as present or I wasn’t as exposed to it and so I picked a career that would in some sense give me maximum optionality something that involved design something that had. Technical aspects to it. But most importantly, ah, you know was a professional industry ah with with sort of a clear path and so that’s how I ended up in architecture but to my surprise there was a lot of interesting work happening and overlap between my core interests. Ah, which were you know building things in computers virtually and and what was happening ah in in in sort of my professional career path architecture.
Alejandro Cremades: So You met your cofounder during this time you know so it was a pibodal going into into studying architecture. So So how was that you know that journey for you guys to meet up. To start to discuss and to brainstorm about a future a future where you could bring something of your own you know to a problem that you were encountering you know which ended up becoming cover but but how did it get there to really see cover in a tangible way like hey you know it’s time to to launch this thing.
Jemuel Joseph: Yeah, the way the way you know we sort of got to cover is actually very natural. Um, you know as we went through ah school I started to realize that the pace of architecture wasn’t. Ah, even close to the pace of technology and and what I mean by that is you know as a 20 year old thinking about what I wanted to do ah in the next ten years I noticed that there were engineers pushing code ah to millions of people and ah raising all of this capital to make ah their vision a reality and. What I saw in architecture was was a stark contrast where I saw people graduating and and spending you know the next two decades ah working through the corporate ladder and not really having the agency and autonomy and so I had the sense that that wasn’t really what I wanted to do. And was paying a lot of attention to what was going on in venture particularly at the time y combinator and and these companies like stripe and airbnb and dropbox taking off he at the time was sort of exploring a similar thing but in a different dimension. Ah, he was wondering why there wasn’t high quality housing. Still abundant. Ah, and ah he actually had went and worked for you know these really high-end architecture firms ah realized that the material costs weren’t ah necessarily the limiting factor ah in in in these projects.
Jemuel Joseph: Ah, and he noticed that there was a lot of coordination that is like all of these consultants working to build these 1 ne-off you know Ah very very expensive homes and had this you know question which was well if if you just you know had a product you designed and built over and over again. You could eliminate a lot of those coordination costs and and probably make housing much cheaper and and and in fact, he went and worked for prefap company over the summer and so we were really sharing our observations. Ah me ah, really about the pace of of. Of progress and and technology and him around sort of these core issues that he was identifying. There were limiting architecture and construction to progress and in those conversations we came to a conclusion that there were ah probably 3 things that hadn’t been tried before together. That if they were tried together would have the best chance at at at ah you know, ah offering high quality housing at at scale and so those those ah those 3 things became the basis of cover and we realized that nobody was doing it and nobody would do it unless. Ah, we gave it a shot and and that’s how we started the business.
Alejandro Cremades: So then for the people that are listening to get it. What ended up being the business model of cover. How do you guys make money.
Jemuel Joseph: Yeah, so um, ultimately we we build homes for people. Um, and so instead of going to a general contractor. Ah that builds homes conventionally. Ah, you’d come to us and and and receive effectively the equivalent thing which is a home but we do it very differently in that. Underlying how? ah we get you a home. There are three basic ideas. The first is that we want to build homes like cars and and what that means is we want to redesign and Reengineer the product. Ah for mass production at scale. And so in the future. Our factories will look very much like car factories where you know there’s ah you know potentially automation and assembly line and what comes out are these ah panels and components that can be rapidly assembled into various layouts. Which is a second idea which is that we actually let homeowners customize the layouts and so even though you’re getting your home built in a factory There’s still the ability to configure. Ah the layouts and the finishes and the options that come in your home which historically hasn’t been the case. Ah, you know if you think about Sears home ah or other prefab ah companies in the past they what they do is they’d offer you a catalog of options and you’d have to pick one of 16 layouts and so we actually changed that. Ah, the final thing is ah we.
Jemuel Joseph: Are vertically integrated and we streamline the entire process and so ah, you know in a typical kind of architecture firm what you’d have is you’d have people. Ah you know managing every element of the process such as drawing. You know the plans and permitting them and then. Managing you know, ah the construction drawings and there’s all of this documentation. Um and sort of operational processes that drive up the cost of building a home and to solve that we build ah software internally and so you know for example today. For any project we have even though it’s a custom layout project. We’re able to automatically generate permit sets instantaneously do the structural calculations instantaneously and we believe that that ah not only ah you know lowers the costs ah to to to our customers. Ah, because they don’t have to pay for for that overhead. But it also just improves their experience because of ah how how much shorter the timelines get um, so yeah, you know build homes like cars ah custom homes ah by using panels that can be reconfigured and then software to streamline. Ah, sort of the backend processes that traditionally you’d you’d need to hire many many people for.
Alejandro Cremades: So then I know that in this case, you guys had the Y C fellowship you know, white Communator fellowship. How is this different from let’s say like doing the accelerator program.
Jemuel Joseph: Yeah, so ah, you know when we ah were leaving college. We applied to to Yc core which is a program most people are aware of and they interviewed us for that but we weren’t quite a fit because well we we hadn’t built a home or proven anything. And at the time they’re running the smaller program which was meant to resemble what they originally ran when they were you know running the program out of Massachusetts which is that they’d give entrepreneurs $20000 instead of I think at the time one hundred Twenty thousand dollars for 7% and they’d let you build over the summer ah they’d have you meet with partners and then they’d give you access of course to the network and a demo day and so ah, you know we we had. We didn’t we didn’t get into core but we did get $20000 to move to the West Coast ah it was 4 of us at the time and and we used that money to live in a house and and build our first kind of cover concept in the parking lot.
Alejandro Cremades: So for for for these guys. I mean you you actually went through the ringer when it comes to raising money. You know as a whole obviously that was the starting point you know with the ycfellowship you know to to get outside money. Ah, but it has been a journey. I mean all in all how much capital have you guys raised today for cover so it has been quite the trip to raise that and obviously you did your seed and then you did the series a and and and so forth, but it hasn’t been easy. So.
Jemuel Joseph: We’ve raised about $70000000
Alejandro Cremades: Walk us through how has that journey been of raising money.
Jemuel Joseph: Yeah, so we had actually tried to raise money when we were still in New York City in college and um, what we noticed pretty quickly is that the the venture community at the time on the East Coast wasn’t really investing in in hardware or hard tech. Um, rather they’re investing in software or consumer or things like that and so you know we had a sense that well if we’re going to raise capital it’s going to be ah in the bay area and and sure enough it was we raised the $20000 ah, but even then. Um, there weren’t a lot of venture capital ah firms. You know, investing in in housing startups or hardware. It was perceived as ah, you know, really risky because of how capital intensive these businesses were and and so. What ended up happening for us just over time is that we you know had to convince a small set of investors that really got the opportunity and the potential of of solving this important problem but we had to prove things at a much smaller kind of scale. Um, and so you know with the $20000 we built our first prototype and so people could actually touch the product and understand what it would look like and feel like and from there. Ah we were able to raise our seed round from a couple of really amazing investors Niko Bonazos a general catalyst.
Jemuel Joseph: And Vinote Kosla actually himself at Kosla ventures um and these were people that understood right? The ultimate potential of an importance of solving this problem but we didn’t you know, raise $10000000 and so we had to take that 1.6 and actually sell to our first customers and show that we could deliver it and show that this thing could be installed and that the quality was great. Ah, and ah, you know and from there it kept on going and so um, it’s been a sequential sort of pattern of. Finding investors that believe in ah, not necessarily the short-term kind of outlook. Ah, ah because this is hardware. It takes longer to scale but believed in the importance of solving this problem and would give us capital to get. To the next stage of proving the technology and and finding customers.
Alejandro Cremades: And I know there was quite a story there on the serious B as well. You know that involve weekends and stuff like that. So so what happened.
Jemuel Joseph: Yeah that’s right? and so you know even though we had proven things right? We had raised the series a from founders fund and ah laar who who’s the second largest at the time was the second largest home builder. Um, there was still a lot of hesitation about investing in our series. B. And so you know we had been pitching ah just constantly my cofounder was traveling to the bay and back. Ah and ah you know tar’s surprise on on one of those weekends that we hadn’t expected an investor said ah you know that they were in la on Sunday and so they texted us Sunday morning. Ah, saying you can you know? can you meet and you know coincidentally that was a week and both myself and my co-founder were taking to spend time you know with our partners and so you know there’s a decision point around. Well you know do we do? We kind of prioritize our existing plans or do we ah, just. Ah, you know run over to meet these investors and both him and I met those investors at our showroom in La and we spent 5 hours talking about the business ah with with these investors and. Ah, the week after we we had a lead term sheet.
Alejandro Cremades: That’s humble. You now is he you know with Investors vision is a really big one. So if you were to go to sleep tonight and you wake up in a world general where the vision of cover is fully realized what does that world look like.
Jemuel Joseph: Um, death.
Jemuel Joseph: Yeah, yeah, so the ultimate vision of cover is that we we want to build communities and and and even cities and our belief is at the core of that. Ah, we need a faster way to build and a simpler way to build and so in the future. Anybody ah, you know in the us and in the world should be able to come online. Ah and design a home ah or understand what’s buildable on their property and if they don’t have a property be able to find a property um and receive a few things which you still can’t today which is. Ah, fixed price for your home a timeline knowing when you’ll actually be able to to move in and certainty around the quality of what you’re going to get and ah once you know you like. The home and and and and you’re committed to building with us. We take care of everything um all the way from you know the the the manufacturing the permitting the installation. ah and ah you know in in four to eight months um anybody should be moving into their home and just simply bringing their furniture furniture in and so that’s that’s really the the ultimate vision and um, the 1 thing I also want to point out is you know we make we make panels that come together.
Jemuel Joseph: Ah, in in ah in in currently single family and and and a to use small backyard homes but that doesn’t mean that these panels can’t be assembled also into different types of homes some of which ah we know of like multifamily um, but also potentially. Types of living that haven’t even been invented before and so that’s something we’re really excited about diving into once once we once we solve the the the manufacturing problem is you know what? what kinds of living experiences. Can we can we begin to offer. Ah. At a larger scale at a community scale at a city scale and that’s something that that we’ll be able to tackle that.
Alejandro Cremades: So Obviously you know like you have amazing investors to that you’ve been able to rally so how do you go about? you know, like dynamics you know with investors you know you see you have like really big logos. Really big people there you know that are. Are part of the of the team Now. No and especially part of the Board. So How do you go about? really you know, making sure that there’s good dynamics at a board level and also making sure that you’re able to use and leverage as much as possible the network and the value that they’re bringing to the table.
Jemuel Joseph: Yeah, you know for us, we’ve been really fortunate to to to have investors that have seen this ah kind of problem be solved um, a lot of our investors were early investors in Tesla and spacex and have followed the journey from the very first institutional round to. Ah, even now some of our investors are actually currently on the board or were recently on the board of Tesla and spacex and what that means is that they get the challenges at the core and there’s that fundamental alignment about you know what we need to solve and how much time it takes. Ah, and the sort of support we’ll need from them along that journey and that’s made it really? um, a great working relationship is is what I’d say and we wouldn’t have been able to get that if we weren’t able to be selective. And able to reach ultimately these these group of investors and so yeah, the dynamics. Great.
Alejandro Cremades: So in your case I mean you know imagine now that they let’s say because we’re talking about the the future now but I want to talk about the you know earlier I want to talk about past but talk about past also with a lin of reflection. You know if I was to put you you know into a time machine. And I put you back in time you know maybe to that moment that you guys were thinking about perhaps bringing something of your own because I mean you guys have been for almost a decade you know, pushing cover which is like in in corporate years I mean it’s like it’s like 100 years right so so obviously if you could go back in time you know maybe to 2014 where you guys are about to launch cover. You know, right? right? before you were even thinking about it and let’s say you were able to have a sit down with your younger self and then also with your cofounder and you were able to give your younger selves one piece of advice before launching a business. What would that be and why given what you know now Jim walls.
Jemuel Joseph: yeah yeah I think the feedback we’d give ourselves is to always go and solve the real problem. Um, oftentimes it appears that they’re you know, maybe a dozen problems in front of you. But what we found is that for us progress has been ah, sort of most noticeable when we understand what is actually like constraining us what don’t we understand about the problem whether it is about you know building faster whether it is about making customers happier or finding customers. Ah, and ah, it’s really easy and and in in our past. Ah there have been moments where ah we’ve we’ve sort of sort of not focused in our our our entire company on just solving the a problems I guess ah as we call them internally. And so you know there are these a problems and b problems b problems being the simpler um sort of more superficial. Maybe more comforting problems to solve and then there are the a problems which are you know Ah hey well, how do we How do we? How do we? Ah you know. Wrangle our supply chain because that’s affecting you know our timelines and we want to build more and we need to go solve that we need to go talk to our vendors. We need to go rebuild aspects of the supply chain and so um I think.
Jemuel Joseph: As you have more capital it. It’s at the same time easier to solve a problems because you have resources but at the same time. Um, it can it can take you away from the a problems because now you can spend more across a variety of areas and so. I Think that’s been a big kind of learning process for us.
Alejandro Cremades: So then so then in this case too. I mean when you go about problem solving right? Let’s say like you have like ah let’s say like massive obstacle in front of you something like completely unexpected crazy event I mean what is that what is that thought process or that. Or that journey of really solving it. How do you go about it.
Jemuel Joseph: Yeah, the the media thing is is to to to not attempt to solve it like right away, you need to take a step back and get into the room with the right people and actually understand what’s going on a lot of these. Larger problems as you’d say are actually ah you know not caused by a single thing right? It’s often something that causes it but you need to actually go root cause what’s causing in multiple layers in and interestingly 99% of them. Ah. Have been fairly simple things to resolve meaning. Ah, it’s It’s a few things that cause ah larger sort of observable issues and we’ve gotten really good at ah, just just being able to root cause and and to take a step back and get into the with the right people. To to understand what’s happening.
Alejandro Cremades: So I guess for the people that are listening Jim well that they will love to reach out and say hi. You know that are really inspired by the conversation. What is the best way for them to to do so.
Jemuel Joseph: Yeah, shoot shoot shoot us an email. Ah actually read all of the inbound emails at hello at buildcover.com and also feel free to connect with me on ah on Linkedin.
Alejandro Cremades: Amazing. Well Jim well thank you so much for being on the deal maker show today. It has been an absolute honor to have you with us.
Jemuel Joseph: Thanks for having me.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Jemuel Joseph On Raising $70 Million To Automate Home Building For Maximum Cost Efficiency And Value appeared first on Alejandro Cremades.
In the annals of entrepreneurship, few stories rival the extraordinary journey of Payam Zamani. Born into adversity in Iran, Payam’s path to success was not paved with gold but with resilience, determination, and a relentless pursuit of excellence.
Payam’s latest company, One Planet Group, has invested in companies like Making Space, Predict Health, Gybe, and Photon Marine.
In this episode, you will learn:
- Embrace adversity as a catalyst for growth and resilience; every crisis holds the seeds of opportunity.
- Seek mentors who offer candid advice and guidance, steering you through the complexities of entrepreneurship and life.
- Lead with intention, focusing on creating value not just for oneself but for the betterment of humanity.
- Success is not a straight path; it’s a journey filled with triumphs and tribulations, each shaping us into who we are meant to become.
- Find solace in the midst of uncertainty, knowing that every challenge is a stepping stone towards a brighter future.
- Never underestimate the power of perseverance, for it is the fuel that propels us forward in the face of adversity.
- Leave a legacy of impact and significance, building businesses that not only thrive but also make the world a better place for generations to come.
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Your email address is 100% safe from spam!About Payam Zamani:Payam Zamani has extensive work experience as a company founder, chairman, and CEO.
Since 2015, he has been the Founder, Chairman, and CEO of One Planet Group, a company focused on developing, operating, and investing in various industries such as Ad Tech, Publishing, Automotive, Real Estate, and Marketing.
Payam also served as the Founder, Chairman, and CEO of Buyerlink (formerly known as Reply.com). In addition to leadership roles, he has been actively involved as an investor in companies such as Wrapbook, Ironclad Inc., Gro Intelligence, Serve Robotics, Formic, and Verneek.
In 2019, Payam became the Chairman of California.com. More recently, in 2022, he became Chairman and CEO of AutoWeb, Inc.
Payam Zamani earned a Bachelor of Science degree in Environmental Toxicology from the University of California, Davis, where he studied from 1991 to 1994.
In addition to his academic achievements, Zamani has obtained certifications in aviation, including an Instrument Rating from the Federal Aviation Administration in June 2022 and a Private Aircraft Pilot certification in April 2021.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today. We have a founder that has done it many times you know many times and successfully so he say experience different cycles with his business. You know a remarkable journey. You know escaping you know Iran as a refugee coming. To the us you know with just $75 in his pocket with his brother then you know doing ipos you know for over one billion I mean absolutely inspiring the conversation that we have in front of us and also yes a book coming out. You know, very soon. So again, brace yourself for the amazing. Conversation that we have today and without further ado. Let’s welcome our guest today payam sammani welcome to the show.
Payam Zamani: Um, thank you so much I Really appreciate the invitation.
Alejandro Cremades: So originally from Iran and I know that you know those were tough times there so one give us a walk through memory lane. How is life growing up.
Payam Zamani: Um, yes I was born in Iran and you know growing up was was not a walk in the park I was born into ah into a family of a heightis that’s my religion which is the largest religious minority group in Iran and.
Payam Zamani: Particularly after the revolution of irani 1979 the government made life very difficult for baha’is. They killed hundreds of baha’is and they turned baha’is into second -class citizens. So when I was only eleven years old I was expelled from school for being a baha’i. And even today forty five years later baha’is don’t have the right to attend universities in iran so it wasn’t easy and then the war with iraq happened a million people died from 1981 to 1988 so frankly I feel like I was fortunate that I was able to rebuild my life in the us and I’m forever grateful.
Alejandro Cremades: So walk me through you know what happened there you know because obviously you guys say you know ended up fleeing the country you know and then you ended up coming here to the Us but crossing the desert you know which also has to do with the book they are coming.
Payam Zamani: This country.
Payam Zamani: That’s right.
Alejandro Cremades: You know, with very soon this year. So what happened you know walker through that I’m sure I’m sure that that shaped you ah you know on who you are today.
Payam Zamani: Um, yeah, yeah, no absolutely you know I talked about that there there are experiences in life I call them life moments that shape your life and at the time we don’t know when you’re going through it. And but in 1987 my parents decided when I was 16 that you know it made a lot of sense for me to have a future to be sent out of Iran now you can imagine that for for parents who think that they may never see their son again. It is not an easy decision to make that call. And then for good citizens to try to find a smuggler that they smuggle drugs into a country and people out. That’s not an easy task by itself I’m then trusting that smuggler with your son hoping that people who are not supposed to be trusted smugglers. They’re going to take him you know safely to the other side. But that’s exactly what they did and I remember the moment that my mom dropped me off at this border town in Iran and that she was told instructed did not say goodbye to me because that by itself could raise concerns with Iran’s revolutionary guards. So. I got up the bus after being on that bus for twenty part hours got off the bus did now look behind me where my mom was walk to the road a car stopped by the driver had my picture and he asked me to get it I got in he sped away I just looked back and through the back window of the car I could see my mom.
Payam Zamani: Um, and I knew she’s crying out loud inside but she will not show any emotions and that was our goodbye just you know locking eyes for a moment. The car turned left and that was it and I didn’t know what happened to her I had no cell phones. It was not easy. To stay in touch and you know to to figure out What’s next.
Alejandro Cremades: Wow. So then what happened next.
Payam Zamani: I was taken to a height house and I was kept there and I arrived in that town at 8 a m and I was kept in that in that height house till about 10 pm and that’s when they took me and 4 jewish girls and another. High boy and they took us to a truck that inside the courtyard of that high house they had the girls lay flat on the back of this grandch cherokee truck and they covered them with a talk and I went inside the the cabin of the truck with this other boy. And then there was the driver and driver’s help so 4 of us sitting on a bench seat in the front of the truck and we ah drove out of the courtyard and we head out towards the desert and there was moonlight. Um. The guy was driving really fast on this highway. There was a place that the highway would make a right turn. All I remember is that I’m thinking this guy’s going so fast, not slowing down for the turn. He’s not going to make that turn. We’re gonna roll over right before the turn he shut down turned off his lights went straight off ro and. Truck was all over the place but that was the idea that he wanted to leave the highway as fast as possible and make it the middle of the desert without getting noticed. Um the truck went on for for a while and we knew that if you get caught. Well they will not catch you in that part of the world.
Payam Zamani: It’s a very rough part of the world. They simply use Rocket propelled grenades and they hit you but that that’s just how it is and there were times that we could see the border guards far off far away but we’re hoping that they cannot see us. We went on the truck for a long time then on Motorcycles that were waiting for us.
Alejandro Cremades: So.
Payam Zamani: Then we hiked. Um I was on that journey for one week before I made it to the other side.
Alejandro Cremades: So then what do you think you know for the people that day that are listening now with your book coming out. You know you’re going to be covering you know some of those topics. What what can they expect to see inside of your book crossing the desert that is coming out in in a couple of months
Payam Zamani: Um, yeah I mean in my book I really talk about 3 things 1 is growing Gavin Iran what was that like and I want to so embrace life’s difficulties because those make us better those prepare us for a future that we don’t even know what we should anticipate. So I talk about growing up in Iran then I talk about becoming stateless what is that like to imagine if you’re in Paris France tomorrow you lose your passport but you don’t have a country to go to its embassy. What do you do? so becoming stateless and then coming to the us what was it like to build a company and then I built a company I took it public for a billion too I did not feel that satisfaction and joy that I wanted to and frankly took me back all the way to the beginning that capitalism without faith without spirituality. Was leaving me empty. It wasn’t enough. So frankly I’ve spent a lot of my time in the last twenty years building great businesses but at the same time trying to figure out how we can build businesses that do make the world a better place while the core of the business may not be um, you know finding a solution for cancer. But whatever we do? How can we do it with the state of service to humanity and that can fundamentally change the trajectory of a business but also bring true joy to the professionals involving a business so that’s what I’m hoping to be able to accomplish with the businesses under 1 planet group.
Payam Zamani: And it’s been a fascinating journey.
Alejandro Cremades: And obviously you know we’re we’re gonna dive into into that you know in just a little bit so let’s just say a rewind a little bit here so you end up landing in the us you end up landing in San Francisco in 1988 with just $75 in your pocket how shocking of ah.
Payam Zamani: Sure.
Alejandro Cremades: How how much of a culture shock was it for you. The land of opportunity.
Payam Zamani: Yeah, so I had a cousin who picked us up my brother and I we made to the us together and I had a cousin who picked us up. He lived in Modedesta California if you don’t know where’s Modesto watched the movie american graffiti night. It’s in the middle of central valley. Picked us up and took us some mode desksto and the the first meal I had was an ultimate cheeseburger a jack in the box and I remember we had that meal and I’m thinking that oh my god this was just $14 we have a total of 75 I’m going to run out of money quickly. Um I got to tell you when I think about those days what I remember the most is how much more welcoming americans wear than I thought they would be to foreigner and people were just loving and the country hadn’t I felt like. It has an open arm for us. I mean I came to this country without speaking a language without having any money but there were opportunities for me and I feel like these days when I think about people who complain about this country I feel like they’re so focused of obstacles. They view as obstacles as roadblocks but they’re not. That the the name of the game is to find to look for the opportunities and not be so bogged down by the challenges of life. So when I think about those days I remember the opportunities that this country opened up to me the fact that I was able to go to high school and not worry about getting beatten up for being a bahai.
Payam Zamani: That’s what I was focused on not the fact that I had to find a way to buy the books well of course I have to buy the books I need a job to pay for those books but I was looking at what is it that’s offered to me that was not opportunity before then I graduated I was able to go to a junior college paying so little to attend. Know we want education to be free in this country and I want it too. But we have a junior college system in this country that cost almost nothing as is and that was available to me. They did not deny me access because I was of a high and to me it is the idea of in a sense looking at the good things that are offered. And taking most advantage of those. Um, but anyhow I had to get the job I had to work my brother and I we got jobs within 48 hours and we saved my cousin for twenty days after twenty days we had our own apartment. We paid for it and we went to school at the same time and that was our life.
Alejandro Cremades: And were you able to connect back and I’m sure that there’s people listening that are wonder I mean were you able to connect back with your parents.
Payam Zamani: Um, yes I was able to and ultimately two years later my parents also based on ah me and my brother and my sister who had just come to the Us. Also we encourage them to leave and and they did finally leave. Ah, they they felt that staying in Iran was a silent form of in a sense standing up to the government but then they ultimately decided to leave because you know they were getting old and they wanted to spend time with their kids. Um, but you know I you know. Feel like we live in a society that we tend to look back in time look back in history and use today’s scales to judge people in the past one of the people that people love to judge these days is Ronald Reagan for potentially a lot of the wrong things that he did I for one I’m grateful for a few reasons to Ron Reagan 1 is that he saw the good that this country stood for and he saw human rights and standing up for human rights as part of the destiny of this country and if it wasn’t for him and if it wasn’t for the policies of the us at that time I would not have been able to be provided the second chance you know at this. Life.
Alejandro Cremades: So so in your case, you know you guys put yourselves through college you know you also end up, you know, getting the jobs your brother. You know, even got a job at Microsoft but they eventually you know you ah got started with your first company. So so how did that whole thing you know happen of um. Of you guys. You know, like really being like okay you know like maybe now is the time to to get going and that was the birth of autowep.
Payam Zamani: Um, that’s right so in a summer of 9094 so my brother is six years older than me but we both came to the us at the same time we both went to college at the same time and so on so he called me up and said.
Payam Zamani: As you know I just got a job at Microsoft I want to buy new honda finally I’ve got money for new car and I tried to go to hoda.comhonda does not have a website. Can you believe that I’m like sounds like something I should be surprised about but I’ve never been online so tell me more so he set me up. Everybody who’s listening is probably way too young to remember this there. It was a service called compuser. He signed me up on compuser took me online I spent some time I was fascinated and I loved cars I was only 23 but I had owned 16 cars at that point cheap cars but I had own many different cars. So I love the idea of starting a website at about cars so him and I be partnered. He was a technology guy and by then I had a lot of experience in sales I become sales guy and we in November of 9094 we started auto web and it became the first online Carbine service. Basically I would go door to door to car dealers in the us and I will tell them that I want to put you on America’s electronic automa would you want to be on that and they’re like I don’t even know what’s the internet so I would sell them on the internet and I and I would listen to Wayne Dyer I would listen to Tony Robbins Zig zickler to motivate myself to get excited to be energetic to try to sell this thing and I remember I had gone to 150 dealerships I had their business card every one of them and my brother was like should we stop. This is not going anywhere I’m like no no I’m hundred fifty nos closer to a yes, we’re gonna keep going and you know.
Payam Zamani: Finally, we we were able to break that area and we got to a point that the first signed up made a second one easier the third one easier and you fast forward to 9099. We have 5000 car dealers one out of every every 4 in the us had signed up with us and it became a business that. We were able to take public in Ninety Ninety nine but I gotta tell you that along the way the people that we met. They made all the difference and again I always talked about the goodness of America and this is a destiny this country has listen when I was a child in Iran and I thought that I need someone to worry about my human rights. Did not think Russia is going to do that I did not think China is going to do that. But I thought us would and then the goodness of America has repeated itself has proven itself to me over and over again. So there’s no question that when I think about the people I met along the way that the goodness they show towards us. They help us build that business. Without them because I’ve never done. It.
Alejandro Cremades: So so what was going through your mind where all of a sudden you’re ringing the bell you know for this company you know after coming to the country with $75 you know you’re like ringing the bell for one point, 2000000000 plus you know I mean that that’s probably like very special moment for you.
Payam Zamani: Um, yeah, Absolutely I mean you think about you know this is that Shiny Hill a shiny. Ah you know, ah City on the Hill This country is truly is that there are sick. Despite all the challenges despite racism and and materialism and all kinds of issues that this country has to reckon with this country is still the best that the world has offered so far and the opportunities have been incredible. And yeah, so I was really grateful. And that moment. Ah.
Alejandro Cremades: Yeah, So ah, so yeah, so so then so then basically you know like after the the ipo you know, Obviously you have like all these incredible you know things happening to you you know and and and obviously as an entrepreneur you know, always an entrepreneur I mean in your case you know like do you know after. This transac did this this real incredible chapter. You know, with with a company with Auto Webbb You started another company but the thing is that on this one you know which was say a purple timee. You know it didn’t go as you had hope for right I mean it’s either you succeed or you learn you know that’s the way that it goes So I guess.
Payam Zamani: Are yeah.
Alejandro Cremades: For you. You know with purple tie you got caught up on the whole bubble burst. So I guess from ah experience like that where it didn’t unfold in a positive light. What did you take out of that like how was it to learning from the cycles of the market.
Payam Zamani: Are. Um, yeah, so I gotta tell you like before I move on to this subject I wanted to touch on 1 thing that taking all the web public was incredible and incredible experience. But it also opened my eyes to the problems with capitalism in the us. I’m a capitalist myself but the way that the stock market is often manipulated. You know we’ve heard the term that it’s rigged. It is rigged the way that the stock market often works the way that the bankers typically set up ipos in many cases they do. the rules as far as they can they feel that unethical is not illegal. So do what you have to do to manipulate the stock to maximum value keep in mind billionaires make their billions from stock and not cash flow. So they do everything they can to maximize that stock price for as long as they can. Until they sell their shares and that was disheartening to see that a lot of them were not into company building. They were into stock manipulation and that really bothered me so I left that ipo process filling disenfranchise that this is not the right way to build businesses. It’s all about greed now.
Payam Zamani: The fact is that I left the company I was no longer the Ceo ah left auto web ah post Ipo and I did start a company that did not survive the dot com bus and in fact I lost most of the $200000000 I had made as part of the Auto Web Ipo and I was 28 years old when that company went public and you know maybe mistakenly I thought that making money is easy I can do it all over again over and over again. But then you know when you have success like that early on you become like a child actor and you feel like. Did I just have that great experience and I may not be able to repeat it. But I was frankly on a different path a bit of a different path that money motivated me but more important than that I was raised by my family to think about impact at the life of impact at the end is a life worth living. So. I truly wanted to do all I could to put my experience to work and see how I could help build a business build businesses that mattered that did not leave a carnish behind just for sake of the greed of a few individuals and that’s what I got engaged doing after purple tie. I basically founded a company that over the years has evolved into what is called 1 planet group and it’s been a really incredible journey building this business.
Alejandro Cremades: So then so then let’s talk about 2 you know cycles. What did you learn about cycles you know with for example with purple type because I mean right now there’s a lot of founders that are listening to us that maybe they haven’t experienced any you know bubble bursting or anything like that. So how was that for you.
Payam Zamani: Um, a.
Payam Zamani: Um, yeah.
Payam Zamani: Um, yeah, listen Um, if you have been a founder long enough if you’ve been living long enough. You’ll know that every victory is followed by crisis. Every crisis is followed by Victory That’s a fact of life. It’s going to repeat itself.
Alejandro Cremades: You know what? what did you take out of that experience.
Payam Zamani: If your business is going up to the right know that it is going to go down at some point so be prepared for that and don’t think that it won’t happen in my business because I’m smarter because I’m better because my business is a better business. It will happen and that’s okay because often those crisis are the periods. You are able to take advantage of and build a better foundation for the next stage of growth. There are not bad things they’re supposed to be this It’s a cycle of life. You have spring summer winter and so on it’s supposed to happen so you know in my case. Ah there’s no question that the crisis was. Severe on one hand I had taken a company public that had really not performed post ipo. The new Ceo had was a mistake and the company wasn’t doing well on the other hand I started a company that did not survive the dot com bust my investments were not doing well so is that. Perfect storm. However, you can imagine but that really set the foundation for what I’m enjoying now this new company that basically its beginnings were found in June of 2001 right? after dotcom bust and today it has become a business. Bringly bringing true joy to me and the way it’s built the way it’s contributing to what I think is ah building good businesses. But also the development of the world.
Alejandro Cremades: So we think with what you’re doing now is 1 planet group and there you guys you know, essentially what you have is is a bunch of companies that you either have invested in.
Payam Zamani: That’s right.
Alejandro Cremades: Or that you have owned I mean you’ve invested in about 50 you know, all in all, you know that’s why you guys have under the umbrella and about 4 that you own one of they may say buy your link and buyer link. You know that one you know it’s doing about 70000000 in revenue one that you took public in 99 and then also now you. But back again and taking it private I mean that sounds kind of crazy. You know what was what was that process like.
Payam Zamani: So yeah, um, auto the web as I mentioned we took that public in 9099 and about a year and a half ago I had the opportunity to buy the company and take a private not twenty four years later it’s not even the same company. Not even 1 employee from those days was still with the business. But there is like 1 of those things that you know is your baby and if you’re able to bring it back home. You bring it back home and I did and that the company wasn’t doing well. The company was still a publicly traded company. But since I had left had lost three hundred and fifty million dollars and the company was losing about a million bucks a month I bought the company the deal closed on September One twenty twenty two in October of that year a month later the company became profitable and the company has been growing since then. So I love that business. It’s been a great business but the businesses that I own primarily are focused on. Ah, performance-based marketing basically technology-oriented advertising that is done on the internet and a lot of our clients include blue chip businesses like card makers that are on our platforms. But I also would love that impact beyond that. So. You know I recently took and took a controlling position in a company called west wind ah pictures which makes movies Tv shows and I love that because I’m able to tell stories that I’d like to think that will bring light to the world that will make the world a better place.
Payam Zamani: Storytelling can be a big part of that but I look at one planet group as this beautiful brand that makes sense out of my chaotic world I love to be an entrepreneur build businesses I love to work with entrepreneurs help them. But I love to see that everything we do somehow in a small way. Contributes to betterment of the world So years from now I’m dead I’m gone I like people to be able to look back and say that it was good that that business existed.
Alejandro Cremades: Well let’s double click on that. Let’s say you were to go to sleep tonight payam and you wake up in a world where the vision of 1 planet group is fully realized what does that world look like.
Payam Zamani: Um, yes.
Payam Zamani: Yeah, it will be a world that the amazons of the world will not think that bigger is better at at any cost we have to keep growing because $200000000000 in personal worth is not enough I want to be worth $300000000000 the question is why every decision you make has a consequence. Intention of why you’re doing that is important so check your intention am I taking actions because I want to take my net worth from 200000000000 to 300000000000 or am I doing that because I really think it’s good for humanity if my goal is to make another hundred billion why 5 goal make another 10000000 why and I think that we will get to a point maybe during our lifetime that we will think if we will change hearts. We will get to a point that people truly consider their well-being a connection to everyone else’s well-being. That I’m not this independent entity put on this planet to maximize the amount I can consume and the amount of waste I can create as a human being as a noble individual my job is to take care of myself but also to contribute to everyone else’s well-being. If I’m truly thinking about it with that kind of the lens in that manner. Do I even want to build a company that’s for $ 200000000000 or trillion dollars because I’m going to consider the small businesses on the main street are getting affected I’m going to consider the consumers who will not have a choice anymore and I’m going to think about.
Payam Zamani: How much wealth is truly necessary to be accumulated and at what point should you just give it away. Um.
Alejandro Cremades: That’s some below. So obviously we’re talking about the future here but I want to talk about the past and I want to talk about the past with a len of reflection. So let’s say I bring you back in time you know I bring you back in time to perhaps.
Payam Zamani: 1
Alejandro Cremades: Their 90 s mid 90 s where you were thinking about maybe starting something of your own and and venturing into the world of entrepreneurship and let’s say that you’re able to see that younger Payam and you’re able to stop that younger payamon on the tracks there and. And have a sit down and being able to give that younger Payam one piece of advice before launching a business. What would that be ny given what you know now.
Payam Zamani: Um, go find yourself couple up amazing mentors. That’s it.
Payam Zamani: Um, yeah.
Alejandro Cremades: That’s incredible and when you when you’re thinking about mentors maybe like for the people that are listening to how do you go about finding them and how do you leverage you know their expertise to help you your journey. Okay.
Payam Zamani: Um, yeah, it’s not easy to find good mentors but you want a mentor cannot be a family member. It should be someone who’s able to tell you that your idea sucks and also a mentor should be somebody who. Truly is willing to spend some time with you and that is not easy to find people who accomplish big things often. They’re not going to give you their time. So so you want to be able to go through your contacts go through people who are willing to introduce you to somebody else. But even if you’re able to spend 1 hour a month with somebody who really gets it. Um, you know I’ll I’ll give you 1 example? Ah when you raise money from vcs often. They say that just to make it simple I get a board c you get a board c and together. We’ll get to choose a third independent board member now you go like oh my god that sounds amazing together. We get to choose someone. Yes, they invest the next month they introduce you to the Ceo of some big company as a potential candidate for an inventor board member. The founder thinks that oh my god this guy is interested in me and my company I’m all over it. Well guess what. That person was not your mentor was a Vc’s mentor that person’s going to get on the board. Guess what? you just gave 1 more vote to the Vc that person is never independent. They will always vote with money. Not the loan we founder if you have your own mentor if you have your own person.
Payam Zamani: You will introduce the independent Board Map The point I’m trying to make is that getting finding yourself good mentors can really pay off in many different ways you make money How do I spend the money. How do I invest the money you are raising money. What’s the best way for me to structure this deal. And I would even give up this 10% of my company to find that kind of a mentor and like I said this is cannot be your mentor and family members cannot be so you got to find people who truly won your they they won your best and they enjoy giving you that kind of advice.
Alejandro Cremades: So so crossing the desert for you was a life changing no in every single front that you can think of so let’s say now you know we’re able to you know shift from a business advice to a life you know advice a life lesson a life.
Payam Zamani: You.
Alejandro Cremades: You know type of approach that. So if I was to rewind back in time and being able to have you enter that car that you were being left in. You know as a kid you know that journey that you had in front of you and you were able to sit down. You know in that car with that younger kid. You know what would that tell what would you tell about life 1 thing about life to that younger payam.
Payam Zamani: Um.
Payam Zamani: Um, yeah I mean I wish that that kid at that moment knew that’s gonna be all right? Um, but you know at that point as sixteen year old I think all I saw were unknowns I was leaving a familiar environment. Was going into this desert and I was going to a land I’d never been before I was hoping I would survive the journey but there was a good chance I would not survive the journey I mean I would say that there was probably at least 10 to 20% chance I would die during that journey and but reassurance. Ah, would would that been the biggest thing it’s going to turn out. Okay and I think you know the the biggest thing that I want my book to offer people and you know they asked me who did you write this for I say I voted for that teenager who’s right now today in Iran or Afghanistan or somewhere else on the planet are quoted for.
Payam Zamani: That first time entrepreneur who’s building this first company here in the us I grew it for somebody who second come to public but has not found joy and voted for all of them knowing that basically embracing these big challenges on life is a good thing is going to prepare us for greatness for doing something really amazing with our lives. Run away from it. Embrace it.
Alejandro Cremades: Payam for the people that are listening that will love to reach out and they say hi What is the best way for them to do so.
Payam Zamani: Instagram Linkedin Hiam Zamani no hyen no space easy to find and my book crossing the desert will come out on June eighteenth and I hope I I put so much time I definitely write this book I hope a few people will read it. So.
Alejandro Cremades: Amazing. Well.
Alejandro Cremades: I’m haing. Well hey I am thank you so much for being on the deal maker show today. It has been an absolute honor to have you with us.
Payam Zamani: Um, thank you so much I Really really appreciate it.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Payam Zamani On Taking A $1.2 Billion Company Public And Now Supporting Startups To Impact The World Positively appeared first on Alejandro Cremades.
In the world of business, there are individuals whose journeys exemplify resilience, innovation, and an unwavering commitment to turning ideas into reality. Simon Litsyn, a seasoned entrepreneur with a background rooted in academia, is one such individual whose story is as inspiring as it is insightful.
In this interview, Simon talks about the relationship between business and academic activities and the transition between the two fields. He also reveals his experiences making deals worth $1B and raising funding for his company XtraLit. This venture has attracted funding from a top-tier investor like Halliburton Labs.
In this episode, you will learn:
- Simon Litsyn’s journey from academia to entrepreneurship highlights the power of bridging theoretical knowledge with practical innovation.
- His pivotal role in companies like M-Systems and StoreDot underscores the transformative impact of technological advancements in flash memory storage and battery technology.
- Simon’s ability to secure significant financing for StoreDot reflects his strategic acumen and leadership in navigating the complexities of the startup landscape.
- Through ventures like StoreDot and now XtraLit, Simon continues to push the boundaries of innovation, particularly in the fields of battery technology and lithium extraction.
- His transition from technical specialist to CEO exemplifies the importance of adaptability and visionary leadership in driving entrepreneurial success.
- Simon’s journey serves as a testament to the power of perseverance and resilience in overcoming challenges and achieving breakthroughs.
- As he continues to chart new territory with XtraLit, Simon’s entrepreneurial spirit and commitment to innovation inspire aspiring entrepreneurs worldwide.
Alejandro Cremades · EP 876 Simon Litsyn On Building A $1B Company To Innovate Fast-Charging Batteries For EVsSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Simon Litsyn:Simon Litsyn is an educator, researcher, engineer, entrepreneur, and recipient of the IEEE Reynold B. Johnson Information Storage Systems Award and Medal for pioneering contributions to storage systems based on flash memory (together with Dov Moran and Amir Ban).
Since 1991, he is a Full Professor in the Department of Electrical Engineering (Tel-Aviv University).
He also was a Visiting Researcher and held Professorship positions at many leading labs and universities, including Los Alamos National Laboratories, AT&T Shannon Laboratories, Bell Laboratories, Rutgers University, Ecole Nationale Superieure des Telecommunications (ENST), Eindhoven Technological University, etc.
For 13 years, Simon was the Chief Scientist and the Engineering Fellow (the company’s highest technical position) at SanDisk (till 06’ M-systems, acquired by SanDisk).
In recent years, he has served as Co-founder, CSO (Chief Strategy Officer), and Director at StoreDot. In 2010, Simon was awarded the Special Prize for Exceptional Achievements in Science by the State of Israel.
He holds M.Sc. in Electrical Engineering (summa cum laude) and Ph.D in Engineering. He wrote two monographs and more than 200 papers in leading profile journals and holds more than 60 patents.
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Read the Full Transcription of the Interview:Simon Litsyn: Okay.
Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So do today we have a founder that has that it multiple times you know he’s been involved in some really serious transactions and now he’s really writing you know he’s led this baby. You know, yeah rocket ship and we’re going to be talking about it in detail. So we’re going to be talking about. The relationship. You know that he has you know when it comes to business and academic activities how he sees both and the transition between one another also moving from one topic to another you know, obviously the different industries that he has been able to tackle. Um, we’re gonna be talking about to the deal making side of it. You know he’s been involved in 1000000000 plus type of um, you know deals and then also you know when it comes to the stuff that we like to hear which is building scaling financing exiting. And so forth. So brace yourself for a very inspiring conversation today and without farther ado let’s welcome our guests today Simon Let’s in welcome to the show I so originally born in the former Soviet Union so how was life growing up Simon.
Simon Litsyn: Thank Alicandra for having me.
Simon Litsyn: Ah, okay, it was pretty pretty long ago actually pretty long ago when I I was born but as well pretty long ago when I have left yet Soviet Union I was born in Ukraine. Ah, but most of my life I was I spent in Russia having got my education from Leningrad San Peterbook now and then in 9090 one I moved to Israel. Where I was for modern city years holding a position or for professor of the telviv university but in parallel I started to be quite active in the in industrial activities first as a. Consultant and then as entrepreneur and founder of companies and holding some execution execute.
Alejandro Cremades: I mean 1 one of the first one of the first companies there Simon that you were involved with which was really impressive. Journey was with m systems. You know m systems there you were ah one of the technical guys. You know that were senior. You know you were there. The chief scientist. The the chief scientist actually and and essentially the company ended up selling to senddi for one point five billion I mean that’s really remarkable. You know how was it like for you to be part of something like that where you could see a company being developed then a massive transaction happening you know to Sandisk. And then obviously you start you stayed at Sunday this for 6 years which is a remarkable amount amount of time too. You know so what did you learn from that too and then also you know as part of being you know in in in within a successful integration of that nature.
Simon Litsyn: It’s ah an interesting experience. I mean I was a purely academic guy and I had some experience in writing papers. But I had so almost zero experience in having. The results of my papers being implemented and I had an idea that eventually became very productive namely the idea how in the. And them systems was the company that was doing your flesh memories actually m systems was the first company that introduced the Usb stick and I was working on the. Ideas that are related to increasing the density of the memories in the beginning. The flesh memories were much more expensive than I am not sure that you still remember the kind of plastic Dis kits that we had had that time. And but to be competitive. It was necessary to increase the density of the memories and I have come up with an idea that was even difficult to grasp for to my colleagues in m systems.
Simon Litsyn: And I had to overcome a lot of ah lot of ah, let’s say people were not convinced that such a technology could work. They were not convinced that a small. Small startup company could compete with such dinosaurs like Toshiba sanddis samsunk and so on but eventually we made it and we by. We were the first to increase. To use increase in the number of ah of voltage levels in their memories to drastically increase the density ah of the memory and that was what made flesh memories. Much cheaper and affordable, affordable storage and that’s where the usb stick started to be the common and the ah main way to store. Ah, to store data for many people in the world. Ah, this was a very let’s say very difficult trip for me because I had 0 experience of putting my.
Simon Litsyn: Scientific ideas making them working in electronics and I had to really to present a lot of things to understand the rules that are quite different. From the rules of the game I was used to but so that was quite successful. This technology became and became ubiquitous. And we are seeing it now in all the devices that are using Flash memories.
Alejandro Cremades: So then so then obviously after the 6 years you know that you did you know as part of the integration with a sundisk. You know that’s the moment where you started to realize that perhaps there’s a world out there where you could you know actually start something of your own and go at it as ah as an entrepreneur. So. That ended up being your first company. Your first company being store dot so that was back in 2012 so how did the whole idea of store that they you know come together and and at what point do you realize? it’s time to take a stop at. This venture world.
Simon Litsyn: Ah, ah for many people who were working in M Systems thatcquiitioned by somedik was really a lucky event as well as it was pastured and lucky for me. But very soon I Yeah, realized that being in being the leading person at least in the field in a relatively small company is very different of being one of the. And let’s say so eleggiian. But so also in a very big corporation. Be organization so implementation of and ah testing and the ideas in a small company is something that is pretty easier that you go. Directly to people who are responsible for testing for responsible brain limitations and this process is quite ah, becomes quite so bureaucratic and difficult and big corporation. Actually some disk was very. A very good place for innovation. But at the same time being a huge carbonation. It. It made very very difficult to implement and to to take risks on the ideas which is much easy and small companies.
Simon Litsyn: And so well after a while I decided decided that my mentality is not so a good fit for such big population as sun riskk and I decided to return to the style I liked most. Of a small company in the beginning of the way and while thinking about about what should be should be the best thing to to look what will be the best area for. Applied my ideas I suddenly realized that such looking faraway fields as electronic memories and batteries. Really really closely related in the sense so that so you may look at the memory non-volatile memory. You may look as a collection of very small batteries. So each battery being charged based may store one and mean discharge may store 0 or you may have some intermediate value of the voltage. It’s a very simple idea. But so when.
Simon Litsyn: You realize it. It seems that these ah ah fields of knowledge that are pretty far away from each other and people before me didn’t think of this and that’s why I decided that there could be. That could be a possibility of further development ideas that I was working on in the field of storage and to extend them to the field of Buttons. So one of the bottlenecks of flesh memories is the speed of writing and as I have explained before the writing is just charging writing in the in the flesh memories. And since there were some ideas about the fast child fast writing on flesh memories. Ah I with my colleagues started to develop ideas of of how to fast charge the batteries.
Simon Litsyn: And with my Co-founders. We started a company that was called store dot that was dealing with their batteries that can be charged faster than the existing batteries. Actually this field is also a big bottleneck for the electric vehicles and they’re one of the main factors that are considered um before acquisition of electric vehicle. Is So the availability of fast charging Currently, the charger is really takes a lot of time and what’s caused range and anxiety in electric vehicles is a big. Issue people are afraid to find themselves without juice in the car and the possibility of having and chardging similar to gas feeding into a car. Would be a fantastic feature that will make the elex vehicles much more appreciated. The.
Alejandro Cremades: And I mean you guys were you guys were literally like a visionaries because that was a 2012 you know we’re not a lot of you know the whole charging and and the electric you know side of things you know was like a like what we see right now everywhere. Um, but I know it was quite the right I mean it was say eight years you know over 8 years that you guys were pushing this that you were really at the at the Helm there. You know as one of the co-founders and the company went through different rounds of financings I think that the company. Raised over 200000000 at evaluation of 1000000000 plus so how was it like to on the financing to be able to capitalize the business capitalize the growth because obviously it was intensive too on the capital side of things. So how is that journey as well to go in parallel with the business.
Simon Litsyn: Ah, it’s not a simple task. It’s the thing you should reallyly work on and it’s not only the technology you should you should develop. You should really ah, look for your place. The.
Simon Litsyn: So a full system you should clearly put your message and state your message. Ah I must say that to.
Simon Litsyn: Finds financing. It’s pretty easy for such ideas when you give us say such ideas in the beginning but of the implementation of such ideas by definition are not so not. Simple and they are very knowledge intensive and they are also require a big effort and a lot of time and the question is that after several years you have. Clear proves that your technology works but still, it’s not sufficient for making it working especially if you’re in the field of electric vehicles. You know that design of a new vehicle takes like 5 years maybe and to see your product in the next generation you have to be accepted long time before the car goes to the road on the road. So. It’s a pretty complicated complicated financial financial intensive field eventually it worked and we managed to raise a significant sum of money.
Simon Litsyn: Still still. The company is struggling for making it to the final products and I believe that very soon you will have this feature in essentially every. Electric vehicle and the company store dot will not be the last and hopefully will be really the first one to promote and to propose such a solution of fast changing of.
Alejandro Cremades: So then so then after 9 years there I mean you decide that it’s time to really turn page and you know recently you actually in in 2021 you got started with extra lit which is your your recent company but I guess. Why I mean you were now a co-founder of like such an amazing company raised tons of money. Incredible valuation like what what got you to think that hey maybe it’s time for me to turn page and and do another one.
Simon Litsyn: Um, ah, that’s ah, that’s a propm of my mentality I have explained my reasons to move from Sundays to to the next adventure. And it seems that eventually I understood that my value as as executive and as technical specialist is in. Much much higher in the beginning of the way of the company. Ah rather than in the already big company when a lot of things are being done that require different features of the character. Than the ones I possess I like very much to face the problems that others consider to be difficult or impossible to resolve I want to see challenges. And I’m probably less less good in the day-to-day work when it is necessary to apply some. Let’s say some more traditional.
Simon Litsyn: Traditional Yeah capacities. Ah well the better people than I that can do it and when the company becomes real real big, really big and that was happened to store dot. I Decided that there is much more driven that I can find in startingting a new company. Moreover there was an idea of an idea it was.
Simon Litsyn: Contemplated for long time while being in the store dot and that’s the idea I moved forward with just put him behind me the store dot Story. And this was the idea of medium extraction that I found out fascinated while working on the batteries and somehow it was related to them. Material studies that I was involved into a while being in the store but and the question I was asking quite often many people this so that. Why Litome that is so one of the main main and critical materials that are involved in the in the battery production while how how it is it produced how it’s. Manufactured and why just sort of battery cannot be used for the extraction indeed the idea of catching vi is the extraction medium is quite natural. Yeah, the battery by itself.
Simon Litsyn: Is sort of iron catcher the cutats that are one of the types of the herixtrols that are used in butteries are just intended for accepting for absorbing absorbing mediums so the question is. Can cathos be used or cutho materials. Can they be used in just Putin. So can you put a butter in in a brian that contains liiumines and just. Of suck in their lead minds and the answer was so partially partially yes, it can be done but in general, what’s happening that the butteries so they’re not. Many other souls by litium and the natural brides. There are many salts many salts that are much more dominated have much more dominated presence in the brides and the next question I have asked. What should be corrected. In the catholic materials for it to be accepting only litium minds and ignoring all the rest of the ions and that’s how we have started to discuss with I’m lucky to meet very.
Simon Litsyn: Ah, clever people I like to discuss new ideas. Ah, with scientists I may speak very deep science with I have an extensive knowledge in different fields of science. And that’s how we arrived that some ideas that far later were implemented in what extra it is doing namely in the material that is able to absorb litium. And actually I started. It’s the first time in my life I have started as Ceo of the company chip.
Alejandro Cremades: And how was that because you’re a very technical guy. So how was that transition from bit from technical to business.
Simon Litsyn: Um, it’s ah I still cannot believe myself that I decided to go for this experience since for the last at least 25 years if not thirty years I was next to these business guys and ceos. And I was really watching them and sort of quite often I was becoming nervous about their decisions and I had so my ideas about in most of the cases they were wrong. But in a while I have arrived at the state of minding so that I am ready to test myself at their life challenges and I want to change myself if the possibility of. Taken care of other fields. Not only the technology and I must say that I somehow overestimated myself but with hard work and belief I’m now in the position that i. Can say that I manageed.
Alejandro Cremades: So oh you see extra it now is say you guys have raised about thirty million bucks so I’m sure that raising money now you know after all these rodeos that you’ve done. You know it was. It was not that hard. So what were you looking for the investors that they that you ended up bringing to help you guys here.
Simon Litsyn: 1 of the things. It’s difficult to explain or essenceus is exactly the question you have asked me before because I’m traditionally technological guide and to come convince them that I’ll be able to. To organize the business of the company. Ah, and I believe I managed to do it with many investors. Also we were ah. So the company is only 2 years we managed to arrive at rare working solution that is now being tested on the upscaed pilot level in many in several locations in the world. So when you have a working solution. You may you have proofs you being tenders in different ah different locations then it’s simpler to to raise money.
Simon Litsyn: As you know the situation now is not so simple for manation. There is significant decrease in the investments especially at the ls stages. Ah, but so we have managed to conveence. Also the litium source owners and these these are for example, oil and gas companies. These are ah owners of the companies that are working on extractive minerals. From Salt Salt lakes like the dead sea and great Salt Lake at the United States um salt lakes in in South america ah in these cases I managed to.
Simon Litsyn: Talk for these guys into into our business and presumably my previous career was also instrumental in convincing that the technologies we have developed um may be believed and trusted.
Simon Litsyn: For For example, we managed to have an agreement with head Aboutton well and gas service company which is a huge ah huge monster storm in the oil and gas. Industry and I’m happy that halibbarton lops halibbarton is working with us on the introducing our our technology into. Yeah. Several in several places and we are moving forward with haribat. Also we reckon that big companies in the United States in Canada in Europe. And our in South America but our fast and our ah our favorite project is at that and that sea that is next to you see now in our backyard. And we hope to start production of freedom from the dead sea in the near near speech.
Alejandro Cremades: So then I guess obviously you know you’ve been at it for a while now seeing all types of stuff. You know all types of companies. You know some that you’ve started you know like that they are rocket ships you know others that. For example, you had tons of lessons learned like so fun or. Air show I guess say if I was to put you into a time machine and maybe I was to bring you back to let’s say 2012 where you were thinking about maybe starting something of your own and. Let’s say you were able to have a sit down with that younger self and being able to give that younger Simon Litsyn: 1 piece of advice before launching a business. What would that be and why given what you know now.
Simon Litsyn: Um, ah of of try of the this piece is rather never give up I gave up on several projects I. In the ah current perspective I see as having had good chances to succeed would ah wouldn’t I have given given up on on it.
Simon Litsyn: I Believe that would I be more persistent in these projects they would be they would be successful by now and of course would I come in the time machine I will definitely Convey. Of the days ofset projects I didn’t continue with.
Alejandro Cremades: So then Simon for the people are listening that are inspired and that will love to reach out and say hi. What is the best way for them to do so.
Simon Litsyn: Um, ah I hear I fear um would really advice on the being more brave with the idea so that. Ah. That seemed the most crazy to you So Do not give do not ah give ah those filter too much your ideas. Ah free Your brain. From the restrictions that are posed by ah by the Auto Wealth belief that you can bring the ideas that are not.
Simon Litsyn: Believed by others to Work. You can do it anyway. Even if everybody says to you that it will not work and be more yeah hope. Persistent with making your ideas come to life.
Alejandro Cremades: And are you also assignon on Linkedin or anything like that where people could they you know reach out.
Simon Litsyn: Yes, please I’m not very active in social networks but only kidding I can be easily reached. It’s Simon ah lis an l I t s white had.
Alejandro Cremades: Amazing! Well hey, well thank you so much Simon for being on the deal maker show today. It has been an honor to have you with us.
Simon Litsyn: Thank you Aleandra! Thank you for the very interesting conversation.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
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In the heart of every great entrepreneur lies a melody of resilience, innovation, and unwavering determination. Paul Wiltshire, a visionary hailing from the land down under, has orchestrated an awe-inspiring journey that harmonizes the fields of business and creativity.
In a captivating interview, Paul walks through the corridors of his past, unveiling the symphony of experiences that have shaped his remarkable career. He talks about his multiple acquisitions and how humility and confidence have been key to success. Paul’s company, Songtradr, has attracted funding from top-tier investors like Richard White, Regal, Aware Super, and Perennial Partners.
In this episode, you will learn:
- Paul Wiltshire’s journey from musician to mogul epitomizes the fusion of creativity and entrepreneurship.
- Songtradr’s success underscores the transformative power of visionary leadership and strategic acumen.
- Acquisitions and integrations orchestrated by Paul exemplify the delicate balance between humility and confidence in business.
- Cultural alignment across distributed offices fosters a global ensemble where creativity thrives, and innovation flourishes.
- The visionary vision of Songtradr heralds a future where transparency and efficiency harmonize the music industry.
- Paul’s emphasis on feedback, self-belief, and healthy routines underscores the importance of mental and physical well-being in entrepreneurship.
- Lessons learned in hiring underscore the necessity of patience, rigorous processes, and cultural fit in building a successful team.
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Your email address is 100% safe from spam!About Paul Wiltshire:Paul Wiltshire is a lifelong technologist and musician who began his professional career as a record producer, audio engineer, and songwriter.
He achieved global recognition, producing and/or writing music that achieved 12x #1 chart-topping albums/singles and 28× top 20 albums/singles, including over 20 multi-platinum, platinum, and gold awards.
During the early 2000s, Paul developed an Australian entertainment company “PLW Entertainment,” specializing in artist and rights management
and producing music for major record labels (e.g., Sony Music, BMG, and Universal).
PLW Entertainment was eventually sold to the Australian Stock Exchange-listed media company Goconnect Limited in 2010.
Paul Wiltshire and his family relocated from Australia to the United States in 2013 to develop a global B2B tech-enabled music licensing marketplace that solved the inefficiencies, rights fragmentation, and poor data issues in the music industry.
Songtradr, Inc. was launched and incorporated in 2014. Today, Songtradr is a globally recognized leading B2B music technology company.
Paul Wiltshire has stewarded Songtradr from its inception, guiding the company’s vision, business development, financial, marketing, and M&A strategy, product development, and customer acquisition.
Paul Wiltshire has extensive investor relations experience leading multiple capital raising rounds of over US$120,000,000, securing major institutional investors and key HNW individuals.
He has executed a highly successful M&A strategy, including Songtradr’s acquisition of 8 companies between 2019 and 2022.
Paul Wiltshire is a US, Australian, and British citizen, and he considers himself a citizen of the world.
He is passionate about the human condition and is an avid reader and student of history, economic and political evolution, social science, technological advancement, and living a fulfilling life.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So today we have a really exciting founder with us you know founder that has a been there done it. You know, really amazing. You know the rocket ship that they’re in.
Paul Wiltshire: Are.
Alejandro Cremades: They’ve raised now a lot of money I mean 180000000, they’ve done like 9 acquisitions going from a to e ah you name it I find that thinking about you know how to go about those acquisitions thinking about attitude. Also the routine that he goes through. We’re going to talk about that. Not following others you know and having that combination of. Humility and confidence you know, being key. But again you know I find that the um, the conversation today is going to be quite inspiring so without farther. Do let’s welcome our guest today Paul Wilshire welcome to the show.
Paul Wiltshire: It’s great to be here. Thanks for having me today.
Alejandro Cremades: So originally from Australia give us a walk through memory lane. How is life growing up over there.
Paul Wiltshire: Well, it was very different to living here in America I was born in New York but my family were from england and we moved back to Australia when I was very young, growing up in Australia. It was a small town and I went to ah a humble high school. Ah. It was a little rough at times you know I had to get a little street smart at school and yeah, there was the eighty s so things were different. Um, but yeah I I yeah love and respect every part of my history because it it teaches you lessons that you need to learn.
Alejandro Cremades: So in your case, How do you get into music because obviously music has been pibotal. You know in your life and how did you started to develop the love for music.
Paul Wiltshire: You know I discovered music very early I think I just found a piano in someone’s house and immediately it was it was an affair you know I couldn’t couldn’t keep myself away from instruments I learned Trumpet. Ah when I was think in seventh grade right through to Twelfth Grade and I discovered synthesis. You know synthesizers when I was 16 and I got my first synthesize when I was 16 and that really changed my life. You know, being able to really use electronics to create sound was really the the genesis of ah of ah ah a great. To music production career that ensued after that.
Alejandro Cremades: I mean and quite a quite a success there too I mean you were producing for the likes of the backstreet boys. So how is that you know being a producer and and how was that journey like.
Paul Wiltshire: It was. It was a wonderful journey. It was it was about 20 years in total. So my producing and songwriting career began in the mid 90 s and I spent many years just in a studio working with you know, the. The platform is is called today logic audio and mixing consoles and equipment and working with musicians recording music playing music I was very hands-on I’d like doing everything from creating the sounds to playing in the music to recording every piece and then mixing. And it it was ah it was a time where you constantly had the um benefit of completion. You know, creating a product finishing it seeing it released and enjoying that it’s something that. I think as an entrepreneur. It’s very hard to feel because it feels like when you’re growing a business It’s never ending. There’s never that sort of finishing point I guess when you exit finally, but um, but that I missed the euphoria of finishing projects that music production gave me.
Alejandro Cremades: So Obviously on the music production I mean you were there for for quite a long time I mean we’re talking like we you were talking about two decades. You know there. So. It’s Incredible. How all of a sudden you decided to shift gears and in how in 2014. For example, you know is When. You took a different route when it came to your path to your career to everything that you knew So What caused that shift and and you know it’s interesting because they say that ideas you know they’re like dormant you know they take time to Incubate. So. Your case, What was that incuation like and what was that triggering point where you said Wow I think I’m gonna I’m gonna go and do this thing that I have no idea what it’s going to look like but I’ll take a step at it.
Paul Wiltshire: Well I think it was gradual I was always interested in business and although I very much wore a creative hat day-to-day and ah as a record producer and songwriter I was always thinking about the business I very much studied the music business. And I really got to understand music writes and music writes are fascinating because of just how fragmented the music industry is it really started out as ah, an industry that sold Cds or vinyl cassettes and was very regionalized and. When the digital age came it became very global instantly and the the ecosystem just wasn’t ready for it. So I think what was really eating away at me while I was in the studio creating was there’s a really big problem to solve in the music industry and I could see how quickly. Ah. Transition to the current reality I guess we’re in today was happening digitally everything was moving very quickly. There was more and more musicians getting access to tools to be able to create music on the supply side and on the demand side. There was more and more use of music and so I think what really happened it was a gradual realization something. Thinking about ah day in and day out and where I think I needed to develop enough confidence to go I can solve this I’m I’m going to make a big move and and you know move away from what was a quiet town of Melbourne in Australia to sort of.
Paul Wiltshire: Somewhat naively move over to Los Angeles with the belief that we could do it and um, but I knew that there was the the problem to solve that I was clear about and I I guess that journey into being commercial as well as creative was one that was gradual over. Over the many years I was in there and you had to be quite commercial to be successful as a record producer. Yeah, it’s not just about the creativity. There’s is a lot of hustle involved.
Alejandro Cremades: So I guess say then for the company for a song Trader Why ended up being the business model. You know how do you guys make money.
Paul Wiltshire: So we license music we license technology and ah as a result of our recent acquisition. We also sell music to consumers. Ah the the premise of the business model is that we ah. Take a share of the money that ultimately goes to artists labels publishers. So the supply side of the industry the demand side of the industry is b two b and b to c for us. So b 2 b being advertisers film tv games apps platforms anyone who uses music in a commercial or digital business environment and we have an enormous consumer audience on the platform platform Bandcamp. We recently acquired is about 50000000 people that use that platform that use it to discover new artists and by. Music from them by products merchandise. Vinyl t-shirts as well as digital music.
Alejandro Cremades: Do you remember that moment where you felt Wow I think we’re into something here.
Paul Wiltshire: Yes, ah it it was actually quite early on when we first launched song trader we and this was the early days I think too for sort of online social media advertising using Facebook and and platforms like that to advertise and we we hit. This point where someone was signing up an artist was signing up to our platform every couple of minutes and we really felt like oh this is this is actually working like we’re we’re getting real traction building a 2 side sided marketplace is quite challenging because um, the dynamics of you know of. You need supply in order to haven’t you know, be able to serve demand. We discovered was not exactly how our ah I guess flywheel worked and it was really more about growing demand that stimulated more supply and but that was a very difficult. Balance to to achieve in the early days but yeah answering the question in brief it was it was around 2016 when we saw thousands tens of thousands of artists signing up to our platform.
Alejandro Cremades: So how did you go about to the um, the financing of the business because I mean you guys have a raised quite a bit you know 180000000 so how has it been to the journey of capitalizing the business and making sure that you were able to support the the growth.
Paul Wiltshire: So we’ve always had a philosophy of only raise what you need I think the mistake sometimes that that can be made. Is you go out and raise too much. You make big mistakes and we found that we we only ah in the early days we raised just enough. To get us through to that sort of next milestone that next point of proof and ah we are fortunate enough to to have traction along the way which helped us gain a very supportive investor base many of our investors have invested in multiple times 3 and 4 times. And we also expanded our strategy to include m and a ah not for any kind of rollup reason but it was really talking to the fragmentation that exists in the music business in that there were a number of mature but isolated businesses. That when combined with our core platform and business model. Ah really created a a very valuable accreative effect and we we approached the the following years accordingly. It’s like we we felt that. The the industry is moving faster and faster which means we have to move faster faster than organic ah growth without the stimulus of extra capital and using m and a to to really expand the business. Ah, we’ve done you know since 2019 about 9 transactions.
Paul Wiltshire: Ah, we’ve we’ve acquired very key pieces of what we really see as ah as a broader puzzle ah to to to be where we are today and we’re not done yet. We still see so much opportunity ahead of us and yeah, bigger chunkier challenges ahead of us. Um, but the momentum is there now to support that growth and we feel like we’re on ah on the right path after yeah, plenty of times where you you think you’ve got something nailed you think you’ve got the right product idea but you have to face up that you didn’t get that 1 right? and you need to.
Alejandro Cremades: Well as they say 90% of acquisitions fail because of the integration right? The integration is really tough and in your guys’ case I mean you’ve done quite a bit you know of acquisitions you know I’m sure that you’ve learned a lot. You know some of them to accelerate the technology or the a customer acquisition.
Paul Wiltshire: Correct course.
Alejandro Cremades: Grow in organically so I guess now that you’ve done all these acquisitions. What have you learned from being able to do a successful ah acquisition like meaning that you’re able to identify the right target for the right reasons you know at that point for the business. And then also going about doing a successful integration tool.
Paul Wiltshire: So there’s a number of factors that lead to to a successful acquisition and into and subsequent integration and ah that depends on size too. So I think one one factor is it is it a small tuck in or is it quite a large integration. Another key factor is.
Paul Wiltshire: Is the is the target still founder- led versus has it matured to a point where there’s been an excerpt. There’s been another subsequent investor as a p owned or some other framework that’s gone on to own the companies beyond the founder. There is always the challenge of um. Merging cultures and one of the most important lenses that we look through is is there a culture fit are we going to be able to transition this team to be part of our broader culture without too much friction. That’s one very key key piece because there are times where it’s just It’s chalk and cheeses and it’s not going to work. It’s going to be too costly. It’s going to be too hard and we’ve walked away from opportunities in that regard and then I think the last point is integrate fast. Don’t do it slowly. Don’t bring in a company and sit on it for a year or 2 integrate quickly. have 1 team one system this is what we do we have 1 product team 1 technology team 1 marketing team one finance team and and 1 people, team, etc. And so we integrate very quickly and we find that that is far more beneficial for a smoother integration than. Postponing what inevitably has to happen.
Alejandro Cremades: What do you mean with cultural fit. What does it look like when there is a fit or when there’s not a fit.
Paul Wiltshire: So It can mean ah it can mean many things I think ah you know you get different cultures depending on the type of Business. We’ve bought very creative businesses and we’ve bought pure play technology businesses. But I think the best way to describe a fit is where there’s a match. Or a nearmatch of core values and our core values are ah very clear where we really value humility a confident humility for want of a better term and transparency honesty being able to speak out being able to have a voice being able to Talk. Talk freely about issues and so if if we’re if we find that there’s a structure where or or a team that that is um, overconfident overselling themselves. Yeah, really presenting something that is Fictional. We. It’s an alarm Bell as an example so there are many sort of aspects to culture fit but generally speaking we look for we look for people we would like to work with people that feel like we can be a team together that we can be honest with each other.
Alejandro Cremades: So I guess say on this note as we’re talking about people. You also have distributed offices. You have people in the us you have people in Uk and and I guess the yeah how have you gone about to embracing culture when you have distributed offices because obviously. You know you’ll have the the h q where you know you’re infusing their the culture but all these different offices. They’re also going to have their own culture. So how do you go about making sure that there’s that alignment that consistency.
Paul Wiltshire: I think you can overdo like overcontrol and we don’t try to overcon control. You know the Uk team has its own nuances that we have a big team in Amsterdam we have a team in Australia. And it’s we’re we’re not all practicing exactly the same sort of daily routines and ah and ah, but we are all using the same technology the same communications the same way working the same reporting. So I think it’s really about. Bringing the team together so that they understand that the mission and the focus of the company. They understand what we represent. Um, but 1 of the biggest issues one of the biggest ah important factors is integrate the teams so we don’t have and this was actually a recent change for us. We don’t have isolated reporting structures in each country the reporting structures across country so that the teams are actually across border so we don’t have like for example, just the Amsterdam team with ah with its own reporting structure. Or the england english team with its own reporting structure the the structure crosses borders and that we find that is has been far healthier far more productive and ah far more efficient.
Alejandro Cremades: Now in your guys’s case you know when we’re thinking about to culture. We’re talking about investment I want to I want to talk about vision because that’s something that is going to get people excited and get them rallied and and fired up so when we’re thinking about the vision here of song trader imagine. If you were to go to sleep tonight and you wake up in a world where the vision is fully realized what does that world look like Paul.
Paul Wiltshire: That world for for through our eyes looks like a music industry that has no data problems that is paid efficiently transparently every dollar that is due for every piece of music that is played and. The current reality is far from that and so we ah we are essentially building music industry infrastructure to streamline and improve that reality so we do see and a future where that’s possible because it’s. All online and or the majority of the industries online and it’s certainly becoming more. So.
Alejandro Cremades: Now in your case I know that the humility and confidence is a good combo. Why is that the case.
Paul Wiltshire: Well so I think you know arrogance and Insecurity is the enemy right? So that can lead to all kinds of negative effects. Um why?? why? we why I So Why we say you know confident. Humble, humbly confident which is that one of our core values is that anyone in the team has to be humble enough to know when they have maybe could could have room for improvement and you know we believe in feedback between manager and and an employee where. The employee gets to provide feedback on the manager and vice versa. So It’s part of our culture to to have that embedded in the relationship. Um, but I think it’s also much more valuable because everyone feels confident enough to speak up. Ah if they’ve got the. Ah, good idea in the room not and be afraid to be talked down because there’s you know someone dominating the space. Um, so we find that you know that combination of confidence and humility creates a much better. Um, creative. And productive atmosphere and you’re more likely to build a better product as a result.
Alejandro Cremades: And you know just to double click on this for the founders that are right now tuning in why self confidencedence I believe you know it so important there could be so important in their own journeys.
Paul Wiltshire: I I spend I spend time a lot of time my week on Health and I I think healthy mind and the exercise meditation are crucial for. Clear thinking and I think for founders one of the things that can really um, Destroy a business is doom loops and fear. It’s when this is not working we need to quickly change Core. So This is not working Oh I’m going to run out of money I’m not if you walk in with that type of energy into a investor meeting the investor going to intuitively pick up that there’s a problem here. There’s There’s ah, there’s a lack of belief. Um, you know there are times where you know things aren’t going to work out and know and it might be that you have a product that’s just not Ah, it’s not going to work and it’s not going to be a right fit. But I think it’s very important for founders and entrepreneurs who are really big risk takers to back that risk taking mentality. With us with a self-belief and a faith in themselves. But that doesn’t It’s not enough on its own. It needs to be accompanied with research and and self-criticism in a healthy Way. So.
Paul Wiltshire: What am I doing right? What am I doing wrong? What’s working What’s not working feedback from team members from leadership from employees not and this is where the arrogance becomes the enemy is like oh I built this product I need to be right I need to make sure that the world sees me successful. These these are useless thoughts like you really have to be thinking. What does the customer want what is working What’s not.. It’s not about you. It’s about Ah, it’s about the customers about the business and I think that’s where self-belief is important but it shouldn’t be projected as um. Overconfidence. Yeah, it’s that balance in my view in my view.
Alejandro Cremades: So you are talking there about you know how important the state of mind and and also Health is to you so walk us through what does the typical routine or or ritual you know for for a day you know look like for for you? yeah.
Paul Wiltshire: Summer I’m a five a m start I I will normally have a coffee in bed and read news stories. Check you know anything that’s coming overnight that’s urgent deal with that us from 6 till eight I’ll I’ll be working out. Um. If I can fit some meditation in there I will too and usually my day starts around eight thirty Eight fifteen ah I work through ah till quite late most nights I’m I’m probably working till around 7 or eight o’clock and but I also take a.
Paul Wiltshire: 45 minute to an hour break in the afternoon way I also exercise again I just find that gives me the fuel for sort of an an afternoon evening session and just ah recalibrates me after you know sometimes a bit a busy and fatiquing day.
Alejandro Cremades: So obviously now you’ve you’ve been at it for for quite a while with with song trader I mean we’re talking about you know over a decade here which is like insane you know in in imagine you know in compare to corporate that would be like 100 years right I mean it’s amazing. So. So obviously a ton of lessons learned you know tons of ups a tons of downs. You know, successes lessons learned you name it. So if I was to put you into a time machine and let’s say I was able to bring you back to 2014 to that moment where you are like screw. It. Let’s do it. But let’s say you were able to have a sit down with that younger Paul right there on the spot and you were able to give that younger poll 1 piece of advice before launching the business. Why would that be and why given what you know now.
Paul Wiltshire: That’s a very good question. The single piece the single piece of advice I think I would say is people are the most important part of the business and. Be decisive when you know someone’s not right? and um, focus on that right? culture fit the right person right? seat I think that.
Alejandro Cremades: So Let let’s double click on that if if you don’t mind I Guess what have you learned about people because you know, especially when it comes to to hypergrows startups. I mean there’s a lot of it. You know and and in in over a Decade. You’ve probably seen a lot. So. What have you learned about people.
Paul Wiltshire: There is there is so mean there’s so much I don’t know where to start. Ah I think that there are often when you’re growing a company. You get a lot of inbound you know. I can help you do this I can help you take it from here to here you know consultants to um to your people just looking for their next gig and and ah enthused by growth and enthused by where you’re heading and it’s It’s sometimes easy to be seduced by their resume and where you think that could take the business and sometimes it works out when it’s the right when it’s the right fit. But I think what I’ve really learned that it it really does come down to How do they approach each day. Um, ah a thick long resume doesn’t mean they’re going to be working harder. It can actually sometimes mean that they’re they’re kind of tired because They’ve’ve they’ve had their success. They’re they’re really looking for an easier easier life to benefit from their network whereas you know. When you’re building a startup you need to really dig in. You need people who are going to grind people are going to work all day and and going to do that. Go that to that extra level to to deliver and so I think um I mean that’s 1 aspect. There are other aspects where um, not having a rigorous enough.
Paul Wiltshire: Ah, process in terms of employment or having one interview is not enough you you need to you need to meet people 3 4 sometimes 5 times and we’ve got ah ah a global people function now where it’s very rigorous and and it’s ah it’s a process and we we find that we. We rarely get things wrong now but in the early days. You know it was just I think it was just me making a final decision on someone and I I think sometimes when um, yeah I think it’s easy to be sold to when you’re. When when you’re moving quickly and you you need to solve a problem and you think they’re the right solution you move too quickly. But ah my advice would be move slower when it comes to hiring. So yeah I know this is a common saying hi slow fire fast. But that. That would be I think the biggest lessons I’ve had along the way have been people related and and getting that right getting that early don’t be in a rush even though you’re you’re always in a rush as an entrepreneur but that’s the 1 thing you can’t rush.
Alejandro Cremades: I love it. So Paul for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Paul Wiltshire: They can hit me up on Linkedin um, my email is paul@songtrader.com that it’s ah it’s a pretty heavy inbox but I I try to I try to answer everything I can which which comes in but which I aside from.
Paul Wiltshire: The hundreds of businesses trying to sell businesses but every day but.
Alejandro Cremades: Amazing! Why hey Paul thank you so much for being on the show today. It has been an absolute honor to have you with us.
Paul Wiltshire: Ah, it’s been a pleasure and thank you for asking me on I It’s ah hope it’s for good for the tip good for the people.
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Sebastian Kreis has an inspiring story about his experiences building an incredible platform. While many people are talking about using machine learning and AI, Sebastian was one of the trendsetters in the field.
In his interview on the Dealmakers Podcast, Sebastian talks about winning a series B funding round for his company and what it meant to have large players come in to back his startup. His story centers around team building and customer support and truly delivers valuable lessons.
His venture, Xepelin, has attracted funding from top-tier investors like Amarena, Avenir Growth Capital, Battery Ventures, and Bossanova Investimentos.
In this episode, you will learn:
- Sebastian Kreis’s journey from Chilean roots to founding Safecard exemplifies innovation and perseverance in Latin America’s startup landscape.
- Engineering provided Sebastian with the tools to tackle large-scale challenges, laying the foundation for his entrepreneurial endeavors.
- Xepelin’s inception stemmed from Sebastian’s vision to democratize access to financial services and operational tools for businesses of all sizes.
- Strategic decision-making, including pursuing an MBA and incubating the idea of Xepelin, enabled Sebastian to lay the groundwork for success.
- Sebastian’s fundraising success, leveraging equity and debt strategies, underscores his commitment to long-term growth and sustainability.
- Xepelin stands as a testament to Sebastian’s vision, which is poised to redefine business operations in Latin America and beyond.
- Sebastian’s journey inspires aspiring entrepreneurs, emphasizing the importance of trust, perseverance, and a clear vision in navigating the startup ecosystem.
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Your email address is 100% safe from spam!About Sebastian Kreis:Sebastian is Co-Founder & Co-CEO at Xepelin, a Latin American fintech company that aims to be the leading SME digital bank in Latam.
Prior to Xepelin, he was a Consultant at BCG, where he led a multidisciplinary team to develop and execute several successful fintech products serving Fintech and Financial Services firms with a focus on digitization and technology.
Sebastian has dedicated his efforts to leading teams and helping organizations to bring new digital experiences.
His experience goes across digital functions: digital strategy, at-scale digital transformations, product development, omnichannel user experience strategy, and advanced analytics.
Prior to BCG, Sebastian co-founded and scaled Safecard from an idea to $2.0M in recurring revenue.
Before Safecard, he was an Investment Banking VP at IM Trust (acquired by Credicorp), where he led over 30 M&A, capital market, and private transactions totaling +$10Bn and the company’s international expansion into Peru.
Sebastian holds a Master’s in Business Administration from UC Berkeley Haas School of Business, where he was co-president of the Latin American and Hispanic Business Association and co-founded the Haas Fintech Club.
He is an Industrial Civil Engineer from Catholic University. He is a certified Scrum Master for software development.
Sebastian has also been involved in academia, serving from 2010-2013 as a part-time professor of Managerial Accounting & Corporate Finance in the School of Engineering at Catholic University.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today. We have a very exciting guest. You know we have a founder that has done it. You know a couple of times you know right now he’s a building rocket ship. You know in Latin America and I think that you’re all going to be very very inspired with his story. Going to be talking about building scaling financing and all of the above and also you know like why they thought about building the platform kind of like in a regional way. You know from the get go as well as using machine learning ai obviously there’s a lot of people talking about this nowadays but they thought about this early. How they win about their series b what kind of experience that was getting like really large players to come in and then also how you know he goes and they go with his team about customer support. He even uses what’s up with the early customers which is incredible. So again. Super inspiring conversation ahead of us or without farther ado let’s welcome our guests today sevastianraze welcome to the show hi.
Sebastian Kreis: Hey Aleandro great. Good to be here. Thanks for for the invite and and and excited to share about that The Selin story.
Alejandro Cremades: So you were born in Sania de chile and they you were born Tomi grandparents your parents went from Germany to Chile and how was how was life growing up for you. Give us a walk through memory lane.
Sebastian Kreis: Yeah, so imagine that that chile it’s a very developed country in in Latin America and has been ah advancing. But on the other side is a country that that’s surrounded by sea desert big mountains and um and. The south patagonia so a lot of things happen in Chile and stay in Chile. So for me, it was great to to to live in Chile but also have data points and experience of ah for german family because I could compare. Was living in Chile but also having mindset that was kind of international that could think out of the box and can can also think what other realities happen in other parts of the world and I grew up with that in in mind so was great and the second was that a lot of. And members of the family were entrepreneurs or or businessmen and and so I learned a lot of things about them. A lot of things about the experience but a few stand out one is that when they had problems they they thought and think about problems as as opportunities and and i. Grew up with that mindset and so when when I went out to study or work that was always my mindset so I actually share a lot that with with my team and and family members how your mindset actually defines a lot of what problems are you are you solving in life and what.
Sebastian Kreis: Gives you us opportunities moving forward in this world that that work is changing a lot all the time.
Alejandro Cremades: So then so that in your case you know for you, you ended up a studying engineering out of ah out of all things I Guess what got you into the whole problem solving you know mentality and thinking.
Sebastian Kreis: You know that’s that’s great and I think one of the most important things for me was that I Love Mathematics Ah Physics I Love to solve progress. But most importantly, when I when I went to to engineering school was that you realize. What kind of problems engineers solve in in the world and and and software and data can help you not only solve that ah us you think for a smaller scale but for a big big scale and I think that in.
Sebastian Kreis: Way of looking at the world that that engineering can help you think about big problems but also can help you kind of simplify these big problems into smaller chs and have the ability to solve each of the smaller chunks to have a big big impact. Was something that stood out of of me in that experience and and Chile as I mentioned before great great talent I mean in terms of engineers a lot of engineers that that work in in the big tech companies in the us a lot of of chilean work there and and make a great impact. Because not only it’s about engineering but it’s about how you can solve really efficient problems and can you be intuitive about solving something that has like a great impact and and and we’ll see right now from from from what’s happening in the and in the startup ecosystem in Chile. We’ll see more. Founders from Chile kind of rocking it in in the and the startup world because right now people is thinking bigger and and I think that’s what the engineering and a place where I started plus some of more change in mindset see some examples. You know you have corner of you have not go. Of course you have 7 but example of companies that entrepreneurs that motivated people can really go for it. It’s it’s what is the best mix and what I’ve seen in in in Chile and startinging from ah from engineering school.
Alejandro Cremades: So After engineering school you went into investment Banking. You know that’s kind of like a different the route. So Why investment banking I mean if you’re doing engineering I would have thought that you would have either gone added a startups or. Work as an engineer for another you know more Techie Company. So what? what happened there.
Sebastian Kreis: Yeah, that moment actually in Chile. There wasn’t an opportunity to work for startup. There was an opportunity to work for tech companies. It was like far away like if you ask a friend parents cousins. What are they doing. It’s like. No I work for banking consulting or or for a big company you know and that changed completely the last I would say five five years or so in which a lot of people is considering working for startups. Not only because of the impact they can do and and kind of. Make big progress in their career. But also they there’s too that they can have a great impact developing. Great great solutions for what is wrong in Latin America for what is broken. There are a lot of problems around access around things that are in America. At the beginning in banking. For example, we saw the products for the top zero one percent of companies and I I actually structured and and and kind of participate in deals for more than 10000000000 but helping the biggest companies in the region right now. It’s it’s different with that experience in mind having working in banking. I really wanted to to expand that and to go to the other kind of companies that don’t have access but not access only on financial services but access on everything. Everything is broken related to how companies relate to each other how companies make business. How companies can actually scale their business.
Sebastian Kreis: Of course there is ah a problem around access in financial service. But most importantly, it’s a problem around how these companies have tools to manage their business and imagine that when when a big company hire an investment bank. They pay high fees also get perfect advisor in what to do? What are the clear scenarios. For that company to to make progress and make the best decisions those small medium companies don’t have that and so how can we have a product and a service for companies to actually make better decisions have access tocurring financial services manage better their cash these other the questions I had. When I wasn’t banking being an engineer that a lot of people like couldn’t rely but there was no solution and and and that’s why I went to to to startupable engineering because and I’m building companies because you have that you have. You have to have that ability of seeing the future how would look like but also having the tools in order to build it. You know.
Alejandro Cremades: So Let’s talk about seeing the future I’m building it because eventually in 2014. It was the time the time that you decided to take matters of your own and take the reins of your own Future. So. What happened there you know at what point you know, do you come up with the idea of you know, joining in starting safeguard.
Sebastian Kreis: Yeah that’s ah, a good question I would say threefold. The first is that I went to the bay area and I saw uber early days for example, took took an uber and so that technology was available not for building social. Media or social platforms but to really help build and really help build people really help like solve the most important problems in in the region and I thought that it was really really inspiring for me to really use technology and to to solve the most important problems in the region. The second I would say is that. I was prepared because I already worked and helped the the most and the biggest companies in Chile and South America around solving the most important problem so that was really important for me. Not only because I wanted to to understand how the business work works. But also how how people made decisions. Based on on uncertainty and that was pretty clear for me that nobody had certainty making decisions but it was being bold and having some kind of information that make a decision but most importantly have a clear clear vision of what do you want to build if you have a clear vision but also you have. Execution capabilities both think combined combined are are kind of super powers then not only builders need but also teams need in order to develop those pattern recognition to build every day what what and have really clear what what you want to build and third I would I would say is just.
Sebastian Kreis: Not like meeting some people that already built and they were like like me, you know they were humans that make all decisions in their lives. They have great capabilities but also needed. You know to to share this vision with teams and build it with with teams. And actually the teams were the the super tripa a teams were the ones that were winning but because it was the costiveness and the collaboration of the team that actually make the impact and in the customers and the business. Not only one person I think that’s really really key and and for me has been always kind of a master. In how not only build companies but also how you actually share with your team and and buildworthy with your team. All you all the time.
Alejandro Cremades: So then so then with for example with Safeguard What was the business model there. What were you guys doing.
Sebastian Kreis: So there was an arbitrage because a lot of a lot of real estate managers were developing were developing condominiums and buildings and that there was no software for them. There was no like control and the access so there was a lack of like. Deal tools in order to manage that so we build that and we build a few few software tools a few entrance and kind of solutions for for entering condominiums and um buildings and it was key to things 1 is that to make it clear our customers. That we have a solution not only for them. But for the entire ecosystem that they work with what I mean with that is if if you manage ah a property of building you need to have ah a better relationship with the ecosystem you know, meaning all the people that use the building all the people that are tenants and rent. Everybody. And with safeguard you could have a better relationship with everybody giving services giving value to everybody and that was key and the second was that there was people early on that wanted to participate and invest in these companies you know second generation businessman second generation and. People that wanted to invest in this business. So what’s a great mix of 2 things 1 is of course and entrepreneurs wanted to build that a big opportunity in the market. But also people that want to wanted to support us. So so we we raised money to to start a business that has.
Sebastian Kreis: Ah, great. Great. Not only vision but also great impact in in the economy right now in the same building where is where is where is separately located in in sanel Actually the entrance entrance is is managed by Safeard So it’s it’s quite of interesting. How how how lives touches all all your.
Alejandro Cremades: That’s amazing now now for you. You know you were there for a couple of years but then the opportunity of doing an Mba in in the us came up I mean that’s a pretty big decision. You know, leaving your baby. So how did you go through that thought process and.
Sebastian Kreis: Your experiences.
Alejandro Cremades: And came to the conclusion. The the conclusion that it was the right time for you to pursue the and Nba.
Sebastian Kreis: For me the Nba more than ah, um, more than a masters was an opportunity for me to to have the time and the dedication to build a bigger business and I start start thinking about separating and the and the the opportunity. Because of 2 things 1 is that we had a lot of customers in safe car. We. We we signed like thirty six months all like contract sick and and I couldn’t have the experience. A good experience. Kind of to finance. The growth of safeguard with with with financial institutions and financial products in the market. That’s 1 thing that was really really important for me. Not only because I already saw the opportunity but to really take it with my hands and see what’s the real opportunity if I was a company that was growing signing contracts and and raised money and. Shareholders and the second was that when I was in banking we helped the 0.1% of companies. But then the other ninety eight or more companies were generating all the labor and all the gp in a lot of industries b two b industries mostly so. I saw that opportunity to really help those companies and bring the the financial technology and other things into what was kind of the the new banking experience. The new software experience. The new access experience for these b two b companies that were having.
Sebastian Kreis: Ah, great impact on labor on gp on each of Latin American countries and I got obsessed with that problem and I saw nobody solving it in in a real scalable way. A lot of like small solutions that were starting but nobody was tackling the problem from the guts.
Alejandro Cremades: So I mean obviously you go to the and Nba you have the idea they’re you know, starting to incubate seeline but instead of executing it right? I mean that’s typically on Mba Programs you know they would have you like the final paper or they. Final project that you do with like a bunch of people there in class you win at it with the Boston Consulting group you know doing detailed transformation for banks and you eventually did that for actually you know, almost almost two I mean one year and a half so it’s it’s pretty amazing. You know, like in your career the one eighty s you know you’ve done right? So you study engineering then you do investment banking then you do an Mba and what you would think is that is that you know you’re going to go at it and start this startup right away. But in this case, you went at it you know with consulting. But. Obviously you know it’s very strategic the way that you are always thinking about those decisions and and and those shifts so as you were already incubating the idea of sepling why not going straight at it with seing after the Nba versus what you ended up doing which was doing consulting.
Sebastian Kreis: Yeah, so so 2 things that were that was a shift there one is that in order to to build big companies and solve big big problems in the economy. You need to have a few things about pattern recognition that you can really work while you’re building 1 of the things was that I help a lot of companies that did I was in investment banking but it really have the experience about building a bank. You know I’m building financial service um from the ground up so it was a great experience and the second was that I understood that in a lot of companies were looking for deal transformation you know and I already build. 1 and kind of tech companies already knew what were the challenges so it was great to put that in place and and have a little bit of more practice of where the opportunity was in the future. 1 thing for example, when I was living in the bay area that machine learning and Ai was a great opportunity still then. A lot of companies right now Generative ai it’s it’s the thing but already in 202016 2017 already machine learning and ai was an important thing about how you can scale a business because not only brings you.
Sebastian Kreis: Ah, efficiency but actually gives you the opportunity to tackle a bigger time because you don’t need not only less people because with software you can do that but you can be smarter than your your competition and actually add value to your customer whenever they they’re looking for so that. Opportunity about understanding Ai and machine learning early early on also gave me the ah the opportunity to really think about think it big and and I had the opportunity to implement a lot of things for banks instead of building building slides and doing some strategy I went there to build stuff. For for other companies first because what a great opportunity for me, but most importantly was a great opportunity also for for for Bcg because I I already built a company I already knew a lot of things about how you manage developers how you manage product development process already did that. And and they needed that for for their customers. So what’s a perfect fit for that though those times before before starting 7.
Alejandro Cremades: So Obviously you were waiting for being ready So then ah obviously you know in 2017 you know that’s the moment where you realize that you know perhaps it’s the time to well actually a little bit later. You know around 2019 is the time where you actually realized that it was time to pull the trigger. You know I mean we’re talking quite a ah bit of time you know you you seem to be like the the kind of guy that like really you know strategizes and and and meticulously you know thinks about the Strategy. So as you were thinking about that at what point do you realize? it’s time.
Sebastian Kreis: 2 2 things happen one is I knew I was ready to build and to take the next challenge because when when you build companies you change your your entire life. It’s not It’s not another job. It’s is you you change your life. So I was ready. For a 10 twenty thirty year challenge and that was the time I was ready and second that already kind of vc market was evolving in in a way that not only you could you could actually talk about this idea but you could actually make. Relationship with vcs in a way that it’s very very successful for everybody that they were actually willing to help entrepreneurs build big big companies from Latin America from Chile from Mexico you know that was the tipping point I want to say here’s the opportunity because. Not only ah I’m ready. But also the market is ready to support an idea like separ and to disrupt the the access and and financial tools and and the opportunity of small companies to to be big. You know.
Alejandro Cremades: So then for the people listening What is the business model of seppeline. How do you guys make money.
Sebastian Kreis: Yeah, so what we do is we give a software ah entrance for free for companies to organize the information and there is where we embed 3 3 3 ways of of making money first is financial services. Their financial services related to a account receable managing with clients financial service accounts but related to accounts payable wild relationship with with with suppliers financial service related to to how you manage your cash the second it’s it’s about how you treat your information. And with that information how you make better decisions could be for your company again for your relationship with clients and suppliers and we search for ah, kind of a software for that and then also we make money through some other partnership with with platforms and finance institutions. Want to make business with us because we’re the best ones of what we do and so some people like deal platforms or finance institutions. Want to go into this segment and they choose to work with 7 and there is another revenue stream. So that’s it the 3 we have today and the future will have more but it’s great to see how not only we impact companies but 7 out of 10 companies because of of sely because of this business model actually have more cash at the end of the the month can grow faster pay less interest and have ah a better.
Sebastian Kreis: Kind of cash flow and and and team prepared to to to manage their challenges. So I think it’s not only about the business modelll but also about the impact and the and the opportunity you’re making for your customers that actually permit that that business mall. It’s predictable and and and grows over time.
Alejandro Cremades: Now for you guys talking about you know, growing over time and scaling things up I mean you’ve you’ve raised 150000000 on the equity side and then about 400000000 on the debt Side. So How has been the journey of raising all that money. And how is it different from the equity side to the Dev side for a company like this.
Sebastian Kreis: I think one of the most important things is that here. We’re not in in the the business of of raising money here in the business of making long-term relationships that any partner you you want to partner with in in the separate ambition. It’s where. To make long-term relationships on de equity side of course investors want to have ah want to have um, want to have a return as entrepreneurs one and everybody that invest in a company want to have returns that’s based on the performance of the business. But most importantly, it’s is the journey how you build trust. How you build a relationship in which you can complement each other because investors have ah pattern recognition investors have a specific experience that you’re looking for investors complement you in a way how how to look for that value today in the future. And on the debt side is is is pretty similar is how you build like long-term relationship with with people that normally want to have return on their money but also want to really understand how to give access to financial services to people that or don’t have access. Or have really bad experiences. So both both things need to be aligned in a way. Not only about the the financial success. But most importantly, the impact and the vision the purpose of of the business and the company. That’s really aligned and that makes the fly will going because not only they want to invest in the company but they want to help you.
Sebastian Kreis: They want to help you be successful. They want to make interest for you because they they are excited with the vision of the company. They’re excited of the progress you’re making and they want tos share that progress that excitement with our people. That’s the flywheel that that that we’re kind of building and working every day. And when it doesn’t work. Also, it’s because some people it’s looking out things and and I also respect that but here we’re for for building in the in the long term.
Alejandro Cremades: I know that this series b was pivotal because he also onboarded you know the likes of battery paypal like more of the international. Um, you know folks heavy hitters. So what do you think those say. International players saw to want to jump in in something in Latin America
Sebastian Kreis: Yeah, the the first thing I would say is have a clear vision on on the impact on the customer and the problem you want to solve that it’s pretty clear in in your head. But also you can design how the company will look like you know in terms of. 3 things 1 is when you think about the future and the vision of the company. You also know some route some journeys how you can build it because most importantly, it’s not only about how and and the motivation you want to build it but also. Have a team that goes with you in that journey. So. It’s very important to to see and imagine you are looking for a mountain and you want to scale you want to go to that top of the mountain you have a lot of routes to go to the top of the mountain. But also it’s good to to show people where you’re going and this is really really important. In the way how how you build businesses the second I would say is is is when you want to build a big business have a big impact. It’s on how we’re we’re building how you’re building the vision. In a way. It’s not only about the business that it’s today but also the business that you’re building today. What opportunities what capabilities will open up for you in the short term and in the middle term order to get to your vision. For example, if you develop for us financial services.
Sebastian Kreis: Actually our mode is not only the financial services but a lot of capabilities we build inside in order to to to go to market those financial services at scale to to be able to not only give that to hundred Thousand Ten Thousand hundred thousand but one million companies we’re building for those capabilities. You know. And the third it’s always there will be more we problems and successful companies and machines to solve problems and and and so to have the mindset of of you and your team to be prepared to solve problems. All the time you’ll have problems and and that machiner to to solve problems and to see opportunities in those problems is what what kind of Mark a team that ah that want to win in in in the marketplace.
Alejandro Cremades: And obviously when you’re raising money from players like this you know they and you were talking about the vision. You know they’re they’re betting on the vision. So let’s talk about the vision here of sepleing. Let’s say you were to go to sleep tonight. So Astian and you wake up in a world where the vision of Seelin is fully realized what does that world look like.
Sebastian Kreis: It’s a world where companies have not only access to to to real time information about the business. But so a lot of their manual functions and lot of manual processes are already automated and so. The time that finance teams and and sales and and operation teams are using inside companies within companies is because they want to serve better their customers. That’s a time were we’re setling. It’s it’s Successful. It’s where the time of our customers is. Use a big proportion in order to solve their clients problems because what we’re doing is actually solve all the back coffees. All the financial service. All the the processes in order to make that happen and and I would say 3 things. It’s not only it’s. Not only where we are growing and and making progress on that vision. But most importantly I see people in the company already speaking about the vision and speaking about how we can. Accelerate Some of the of of the parts of of this this vision today. So I’m really excited what’s happening Insideelin because people that see the future. Not only want to participate in this future are building it right now building those capital right now and that’s what excites me the most.
Alejandro Cremades: So We’re talking about the future here but I want to talk about the past and doing so with a lens of reflection because I mean we’re talking about 2 companies here that you have under your belt. So Let’s say I was to bring you into a time machine and I bring you back in time I bring you back in time to perhaps. That moment that you were thinking about starting something of your own. Let’s say I was to put you right there sitting next to that younger self you know sitting at the investment bank and you able to grab that ear of that younger Sebastianin. You’re able to give that younger self one piece of advice before launching a business. What would that be and why given what you know now.
Sebastian Kreis: I mean a ton but but the 1 piece of advice will be that trust in in your gu in your pattern recognitions that some decisions will be wrong, but that doesn’t matter the most important thing is is. How consistently you work every day in order to to be closer to to that vision and closer to to what you want to build and and most importantly, there is the level of energy that that you put in order to to build. Because as I mentioned before is is how you change your life. So those levels on the energy are there in order to build it and and and people also want to build it with you.
Alejandro Cremades: Amazing. Well so I stand for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Sebastian Kreis: The best way. It’s Sebastian at cebelin.com
Alejandro Cremades: Well easy enough very straightforward. Well Sebastian thank you so much for being on the deal maker show today. It has been an absolute honor to have you with us.
Sebastian Kreis: Thank you Alexandrara great to be here and continue with the success.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Sebastian Kreis On Raising $550 Million To Help SMEs Leverage AI Organize Their Financial Information In Real Time appeared first on Alejandro Cremades.
In the realm of startups, few narratives are as compelling and instructive as Kris Bliesner’s journey. With a career from early-stage ventures to navigating hypergrowth and transition periods, Kris offers a wealth of insights into the dynamics of building and scaling businesses.
In this captivating interview, Kris shares his experiences, challenges, and triumphs, offering a roadmap for aspiring entrepreneurs and seasoned professionals. He talks in detail about founding three companies and evolving six in all.
Kris’ latest venture, Vega Cloud, has attracted funding from top-tier investors like Album VC, Cowles Company, Aleka Capital, Rudeen Management Company, and Spokane Angel Alliance.
In this episode, you will learn:
- Prioritize customers and revenue realization to anchor your startup’s growth trajectory.
- Embrace diverse experiences to lead technology teams through innovation and adaptation effectively.
- Market timing and customer adoption are pivotal for startup success, highlighting the importance of readiness and receptiveness.
- Strategic partnerships and investments are essential for navigating hypergrowth and scaling ventures effectively.
- Bridge the gap between reporting and operations to optimize cloud management and drive efficiency in enterprise solutions.
- Stay true to the core mission while fostering a customer-centric approach to build trust and drive sustainable growth.
- Entrepreneurial resilience, adaptability, and unwavering commitment are the cornerstones of navigating the startup journey amidst challenges and triumphs.
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Your email address is 100% safe from spam!About Kris Bliesner:Kris is the CEO and Founder of Vega Cloud. He was the Chief Technology Officer (CTO) and Co-Founder of 2nd Watch before that where he oversaw strategic and technical development of 2nd Watch’s cloud-based products and solutions.
Prior to co-founding 2nd Watch in 2010, Kris held many top IT positions with companies including Microsoft andAmbassadors Group.
As the CIO for Ambassadors Group (EPAX), Kris spearheaded the replacement of the company’s legacy ERP platform and implemented a business-first CRM system as part of a strategic overhaul of Ambassador’s IT infrastructure.
As a member of the core executive team, he helped drive strategic partnerships and advised on M&A.
As Microsoft’s Director of Sales, Marketing and Services Infrastructure, Kris managed content and communications tools for the company’s 60,000+ global Sales, Marketing, and Services workforce.
During his tenure at Microsoft, Kris received several awards and accolades, including two divisional “Field Productivity” awards and a Circle of Excellence award (top 1% of Microsoft).
In addition, Kris owned his own consulting business specializing in system architecture, database design, and software development. His clients included Onyx Software, Ascent Partners, National Flood Services, and Microsoft Corporation.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today. We have a really exciting guest. You know I guess that they has been evolving 6 different startup. Obviously he’s founded 3 of them and he’s gone through the whole cycle building scaling financing and all of that stuff. We’re gonna be talking about how to manage. Hypergrowth especially in a market that is early versus let’s say a market that is not as early also the difference say you know when you’re when you’re thinking about like really building something before it is really time when it’s kind of like early and then also transitioning from a big corporation to perhaps you know venturing to the. Startup world. So very exciting conversation I had and without further ado. Let’s welcome our guests today Chris Blier welcome to the show. So originally born and raised in Washington state give us a walk through memory lane. How was life growing up.
Kris Bliesner: Thank you.
Kris Bliesner: Good. You know there’s not a whole lot of of net new technology businesses happening here on the eastern side of Washington State so after college I moved to the Seattle area I did a couple of startups over there and worked at Microsoft really wanted to scratch that technology itch I studied computer science in school and so. Um, but took more of a less of a a physics side of computer science and more of a business management side of computer science. So I was interested in business and accounting and those kinds of things but also technology and software development. So it was a great opportunity see’s a fantastic market for that stuff so surely after college moved over and and had a great start to my career. There.
Alejandro Cremades: So Obviously you know like your career you know has been really incredible I mean you’ve done startups you’ve done corporations. But in this case, you know for you, You know you got into the whole startup world Bia shop the Globe. So. How was that team you know experience of venturing into into the world of of smaller companies.
Kris Bliesner: Yeah I think when you’re young, you’re probably more open to to taking risks probably because you just don’t know any better. But I think for me startups always always are fun to work at but when I was at Microsoft as a consultant contractor. They offered me a full time job. It wasn’t what I was thinking it was in the. Sort of ah an it group that I wasn’t super fun of at the time and so I thought okay maybe there’s something better out here and I looked around and and I found this job at at shoptic globe. It was a company that was just being bought by theglobe.com out of New York during the the hype cycle of the late 90 s and so a lot was going on. There’s there’s a buzz in the office. A lot of lot of excitement. Um, lot of new tech being created on the fly and so it just felt like a much more interesting place as a young person who was doing working on software and voma to say wow I can break barriers here I can I can work on new things that nobody else is doing and um, there’s a lot of of great opportunity here and so I think that was a lot of the excitement of. Trying out the startups for the very first time at shop the glow was was an amazing experience and and I still have lifeline friends from there today and several of them are our ceos actually of other very successful startup businesses. So I think it. It’s sort of ignited up a passion inside of a bunch of us for sure.
Alejandro Cremades: And also what was that the journey like to go from like more like the business development or corporate development to like the Cto I mean you’ve transitioned quite a bit and I know that going from the business side to the technical side and vice Versa is not an easy. Transition. So How was that for you.
Kris Bliesner: Yeah, you know I I realized that in order to effectively manage technology. You’ve got to try different positions. So I think it’s it’s really hard if you’re not if you don’t try out an engineering position or a testing position or or a project management position because it’s hard to manage those folks, you don’t know what they if you haven’t walked a mile on their shoes as they say. Um, and so early on I I job hopped around a bit to get some of those experiences so I could see what I wanted to do and I realized I definitely wanted to manage technology and so that sort of grew into the technology management side and once I was there I realized wow a lot of the things that you do with a technology management career. You could do as a Ceo of a technology firm. Um, and so there was some nice overlap there you you manage a budget you manage a pnl um, you do all those kinds of things and so for me, it was just a natural sort of thing to say hey listen I ah I love and and love working with people love working with technology love building new things. There’s a great way to sort of combine all those things together. And the Ceo role of ah of a technology startup.
Alejandro Cremades: So then so then for you, you know like when when you ended up going into into the startup world and you did that actually the first time around was with parking I how was that how was that for you because you guys were a little bit ahead of time.
Kris Bliesner: Yes, yeah, it was. It was an interesting time again. Parking eye was a technology. We developed to automate parking lot attendant stuff so back in the day and I’ll I’ll probably date myself with the younger folks but back in the day you you shove Dollar bills in in a slot somewhere and somebody would. Come along and collect them at some point it was a cash-based business and before you know pay stations were thing before automated sort of a lot of tennis where thing and so we developed a technology that that had a camera associated with it integrated with the pay station and was really really helpful to sort of cut labor out of the system and and. Really cutting edge but the reality was that was an industry that was wrot with folks that had 0 interest in technology they were doing just fine by collecting cash and and doing the business that way and so they weren’t really motivated to go out and buy these pay stations and to buy the cameras and it was. It was great technology that that sort of. Didn’t have the market ready to buy it and so we ended up actually selling that tech to a firm in the Uk who went bananas with it that that business I think grew over 100000000 and in enterprise value and like a lot because the market there was was ready for it right? They were already doing license plate recognition technology. And so the the concept of having automated pace stations was was easy for them to to get their brain around whereas the market in the us was was still I think a decade too early.
Alejandro Cremades: And how is it like you know for you like I obviously this experience um going through the full cycle being able to do also a transaction I’m sure that that gave you more visibility into the whole thing you know going from first base all the way to to to to to hitting the home run.
Kris Bliesner: Yeah, it does and and I mean the the thing with parking eye is it never really became a ah huge business for us in the us. So it was kind of a a small deal for us. But I think what was interesting was just working through the the concept of going from an idea all the way through to production deployments and and. And bringing in revenue from customers all all the things that are critical to to building a business having seen that and and done it from a founder perspective was was really eye-opening because when you’re working at big businesses when you’re working at Microsoft or when you’re working at you know somewhere else you you don’t have that experience. You don’t realize how much goes into taking an idea from concept. All the way to reality and and and invoicing the customer and and getting that done and that there’s a lot There’s a lot there and that’s why a lot of businesses struggle to to get off the ground is because there there’s an art in terms of how you launch product. How do you How do you find customers? How do you get them to pay for what it is. You’re building. How do you partner with them all those kinds of things.
Alejandro Cremades: So then so then for you right? after this I mean you go into like a journey of having your own consulting. You know you also ended up working at Microsoft you know so how do you go from? you know, ultimately. Experiencing startups to going to like a larger corporation I mean that’s quite the shift.
Kris Bliesner: Yeah, it is you know? and and I would say it’s probably more driven by family and and personal needs at the time we had. We started to build a family have a couple of kids and so at that point you know you realize you want a little bit more stability in your life. Ah, because if startups can be off right? You don’t know where your next paycheck is coming and um, you know if you if you don’t hit something groundbreaking and things take off like a rocket chip which doesn’t always happen. Um, there’s a lot of ups and downs and that can be tough when you’re trying to put food on the table for your family and so for me having done that for a number of years I really wanted to to experience something a little more stable. Ah, for a little while and and and I knew I had a lot of capabilities that I could bring to the table for for a firm like Microsoft and so I really enjoyed my time there and and had some fantastic opportunities thanks to to the groups that I work with the teams I worked with and and my managers there. But I think at the end of the day it was another life. Ah, decision that sort of drove me to move back to Spokane take ah another job outside of Microsoft but for me, it was ah it was a great learning curve. Ah you know they they do their own things they’re they’re a factory in terms of developing software and so I was able to see software development from ah a large company perspective which was great so understanding how enterprises think about things and how that whole process works. And developed and and helped launch some really big products. There was part of the sharepoint 2007 chip cycle and and some other products there as well and so that that was a great experience for me to just go through and I think everybody who’s thinking about technology or thinking about software going through a ship cycle is important whether it’s at a startup whether it’s at a.
Kris Bliesner: Ah, big corporation and obviously the ship cycles at big corporations are longer so it takes a little while to get through but seeing it from end-to-end is something that’s super important because that that way you can understand you know what? what happens in the beginning what happens in the middle. What happens at the end and how it’s all related and that that certainly helped set the stage for. For me to to actually go out build software for a living.
Alejandro Cremades: So so at what point do you realize that they maybe it’s time to go out it again with second watch.
Kris Bliesner: Yeah, you know it was funny. We we we had built this interesting business with ambassadors. It was student travel educational student travel so you could get college credit for percent in your junior high and high school kids overseas and it was a great business. Doing really well and we started to play with the concept of cloud so this was probably 11008 Amazon had I think at the time 3 services e c two s 3 and I think simple queue service at the time or whatever it was and so we thought wow we we do these marketing campaigns once a year they’re three months long they’re they’re super intense. But. But then we’re done and and the the computing power is just sitting there like we had this huge data center we built and we had ah and ah secondary data center in Seattle for backup and it just felt odd that that we had to have this gear sitting there nine months of the year and not using it and so the cloud came out. We’re like oh wow you can pay by the hour and then you can give it back and you don’t have to pay for it anymore. There’s some There’s some interesting ideas here and so and then it leveraged Amazon’s global footprint and so we started experimenting with ambassadors around how we did that it worked so well for some of the workloads we did that I built a business plan for how could we get away with not having any infrastructure. Ah, running in in in a data center because as a small company if you’re not a a technology company running a data center is really really painful. You got to have a lot of specialty skillsets. You got to you’re working with 20 or 30 different vendors. Well all those vendors collapse into 1 or 2 vendors right? You’re getting all your stuff from Amazon now.
Kris Bliesner: Where you used to buy from hp emc dell cisco all these F5 all these other vendors you’re getting all that stuff now from one vendor it was like wow this is ah this is a shift in the technology landscape very akin to mainframe and client server this this cloud thing is is a really really big deal and so for me I wanted to experience more of that. But I realized um. That it was more than just one company I didn’t want to just do it once with ambassadors I wanted to do it all over the place and so we set out we looked in the market and said okay, what’s out there. Well Amazon said if you needed help you could go look at the forums send us an email and then maybe we get back to you. They really have a customer support desk or any of those kinds of things at the time and so. We thought wow what a great business we could set up to help companies figure this stuff out because we’ve done the math. You know it’s much much cheaper for non-technical technical businesses to have their data centers run in Amazon and all that gear running at Amazon because the rally is you don’t need to run at 24 7 nobody does right? All your stuff is is dynamic. But. The dynamic model doesn’t exist on-prem it exists only in public cloud and so that that business model changes. What spurred everyone to move stuff in so we formed second watchch and we quickly became Amazon Web Services goto partner and we did some of the largest data center migrations into public cloud that have ever been done. Um, for brands like Coca-cola Nike Starbucks Toyota Adobe Thompson Reuters you name the large brands we moved their data centers from on-prem into a to bs at the time and then eventually Microsoft and Google when they started to catch up but it was it was a really nice experience to sort of see this business idea of a market that was.
Kris Bliesner: you know super early so you know again we did some of the very first data center migrations we did the first worldwide data center migration where we had a data center in the us one in Sydney and one in Europe and we moved them all at the same time into into the cloud and so those kind of concepts didn’t exist before and so having gone through that that was a really unique experience.
Alejandro Cremades: So so in this case I mean you guys raised some money too I mean how much how much money did the company raise throughout. It’s a life and and what was that journey like to of of raising the money.
Kris Bliesner: Um, with it.
Kris Bliesner: Yeah, so I raised about $40000000 myself across 3 different firms. So we started with madrona you always start with friends and family. So we we certainly did that but but prior to this we really hadn’t had a big win yet. So the friends of family stuff wasn’t huge for us and so we moved quickly to ah. An institutional investor so that was madrono capital out of seattle they were great to work with and then we closed a growth round with Columbia capital out of Washington Dc and then then the the last round I closed was with top tier capital out of San Francisco um all great firms to work with did a great job supporting us. We sort of migrated the business from. Kind of a technology company in general to more of a professional services managed services business. That’s not my background I’m more of a software guy so we brought in a Ceo to run the business and he ended up raising probably another 20 or 30000000 I don’t know what the total was because I left in 2017 but but it was ah it was a great opportunity to see this market. Evolve right? So all this massive stuff back in 2008 there was. There’s very little run on Amazon um, the market for cloud computing didn’t even exist and I don’t even think gartner had a magic quadrant at that point um to where we are today where Amazon’s a $100000000000 run rate business from just the as portion alone. That’s a massive swing from where it was even you know a decade ago and so just to have been a part of that was was really awesome.
Alejandro Cremades: And what was it like to manage the growth you know, especially you know during the early days and what would that transition look like from early stage to to grow stage 2
Kris Bliesner: Yeah, it was it was hard in that it was. It was my first deal and I remember having that conversation with Columbia because they’d asked me specifically and had you been ah a Ceo of a growth firm before and I said no I you know I’ve been a Ceo before but not not of a growth firm and it’s something that had grown this fast and in a market like this and so. There was a lot of of learning and that can be painful. We definitely had our ups and downs being more focused on the migrations because that’s what the the customers were looking for it allowed us to have a lot of revenue come in the door quickly. But it was also a challenge to sort of staff because you had to have people to actually deliver the services and we had customers. Um, you know, big banks or other folks that were doing big moves that wanted to use every single person that we had on staff and we’re like okay that doesn’t feel good for me like we need other customers and so you know just trying to manage that ah that growth piece both on the customer side and the employee side was a bit tricky early on. But I think we finally figured it it out and. Um, it’s still a great business. They’re doing well I think they’ve rebranded themselves but that was that was a really fun experience and and I left that company so started with from an idea and and really just a couple of cofounders and then grew it to 20250 plus employees.
Alejandro Cremades: So what? what? what trigger there for you to ah want to make a move and and get going with vega because I mean obviously you see once say you’ve um, build a company like that and you’ve raised the all that money you know it turning pages is not that easy.
Kris Bliesner: No, it’s not and and and so a couple things needed to happen one. We wanted to do some secondary so we could get because we weren’t in the in the place where we want to sell the entire business yet still growing and so we did a couple of secondary transactions to get their early guys out. They did really well depending on what time you got out there. The guys got seven x or 11 x. On their return so that was nice and then they eventually sold the business to sttelemedia that was after I I left the business but I think for me, it sort of had shifted into this kind of consulting managed services environment which is all about billable hours and those kinds of things and I done a little bit of that my career but but wasn’t a huge fan of it because it’s. A really hard business to be a part of right? you you sort of have to go find your business every single year. It’s not recurring the managed services side can be but but that again those those contracts are tough to get and so it was just felt like it wasn’t the core. What I enjoyed doing which was really software development. We had done a little bit of software development early on with second watch. But when. We got big enough. We realized that the team of a dozen folks. We had working on it just wasn’t enough to compete with folks that were doing it for a living and so we we jettison that and bought a competitor cloud health technologies out of Boston we use their software to run our business on and I realized boy there’s still some huge gaps here. Um there’s huge gaps in the operational side of it just in the functional side of of optimization and so we thought wow what a market opportunity now that the market has matured and these guys have been in business for 10 years and they’re not addressing the gaps. Why don’t we create vega as a way to to address these market gaps that exist today.
Alejandro Cremades: So then vega give us a walk through there through how you guys ended up putting together the business model How you guys are making money.
Kris Bliesner: Yeah, so Vega was really designed around the idea that the market was stuck in this reporting bucket right? So cloud observability cloud health cloudability cloud checker were were built from the get go before multi-cloud was the thing before scale cloud was the thing really built as observability tool to help you understand your bill and. Where costs were going and maybe do a little bit of recommendations but they weren’t great and at the end of the day people were werent it was noise people weren’t doing what they needed to get done because there wasn’t automation to go get the work done so it was sort of like your cars broke. You take it to the mechanic and you say hey I need your help and the mechanic says well here’s the part you need. But I don’t have them and I can’t fix it for you. That’s a pretty frustrating conversation to have over and over with customers and that was sort of where the industry was prior to Vega and so we really wanted to bridge that gap between reporting and operations and so that was the real big aha moment for us was how do we bring our capabilities having run a managed service provider which is all about operations. How do we bring that capability from a decade of doing that and combine that with the reporting capabilities that we also had early on um and build out this platform designed from from the ground up as multi-cloud scale large enterprise um to be able to do these things right? So that I can not only tell you where you’re spending and how to fix it. But I can actually help you fix it right? I can bring that automation forward and today if you’re going to do what vega does you’re going to have to buy a half dozen or more tools and that’s frustrating as a cio right now I’m paying 6 different vendors. So my costs have gone up if a manager service provider my my margins have gone down because my cogs are are much bigger.
Kris Bliesner: Like it’s just it’s it’s a frustrating experience. It’s very much akin to the security landscape honestly and I think why you see Palo alto and a lot of those companies buying more and more and trying to become a platform because Cios and csos are are frustrated because they’re having to buy 20 different tools to protect their environment and do something that’s important for the organization. But now I got to integrate those tools and. Figure it all out. Um, they want to avoid that on the cloud optimization side. So Vega is a platform that they can purchase and they don’t have to go buy another 6 tools and so it’s a way for us to to retire a lot of that stuff and and be able to have a platform play that that felt like the right business model for us and it’s it’s shown itself in in our customer base.
Alejandro Cremades: And you guys have raised about a minute 11 eleven million bucks. So what did you do differently this time around when he came to getting external money.
Kris Bliesner: Yeah, you, you know for us friends and family this time around was a lot easier to get because and a lot broader because we’d done so well with S Secondwatch so this is ah a second business in the same market I think you know repeatability and and and people that have experience means a lot. Lots of investors means a lot to customers. It means that you’re not starting from scratch. You’re not going to run into the same robots you you know this market you know cloud we have a lot of expertise around the table I think over 100 years on the executive team alone of of cloud when you add it all up and so from our perspective you know, being able to bring that to the table meant we were starting from ah a place of power. Um, not a place of weakness and so for us that made it a lot easier to to raise dollars we we have raised more than half of that 11000000 has been friends and family so in in that sort of bucket right of of sort of angel which is great. So I think that’s a great ecosystem to raise from. We continue to do some of that when we have the opportunity to. Um, and then we brought in our our first institutional investor album venture capital in 2022 they did our seed round. They’ve been great to work with again, just focused in on b two b saas so the the other lesson I learned sort of going through this as an entrepreneur is that that the Vc community as a whole. Ah, is full of folks that are interested in in lots of different things so people will look at it from a broad market perspective and say hey listen we just invest in geographical areas like the bay area or Seattle or whatever it might be or we focus on a particular niche right? Software consumerhealthcaretech whatever it might be.
Kris Bliesner: And my experience. The folks that have a niche tend to provide more value because they they have pattern recognition right? So you look your portfolio companies look a lot alike. They can share so when you sit down and you meet with other ceos you’re meeting with other b two b sas ceos and not you know the Ceo of a dog walking service like that’s not going to help me. Right? And so I think that’s the difference when you look at sort of finding specialized investors versus non-spealized early stage because those those are the times when you actually need some advice. You don’t want those folks running it and I never build a board or a company for for the investors of the board to run it but they can provide advice and and really be helpful and and. Ability for for them to do that is much more focused because all their portfolio companies are b two b saas so it allows us to have some common oddity around it.
Alejandro Cremades: So then so then in this case for you guys you know vision is a big one to secure money, get everyone involved employees I and you guys have like about 50 employees now if you were to go to sleep tonight and you wake up in a world criz where the vision of vega is fully realized what does that world look like.
Kris Bliesner: You know I think this market so the market today is about four hundred a billion I think it’s going to a trillion that the market that we service infrastructure and platform as a service in the next seven years it’s it’s tremendous I think there’s a billion dollar opportunity here for us I think that we can grow this company. It’s as large as we we want to grow it. Um, either by ourselves or with a partner I think there’s a lot lot of opportunity. We’re seeing that across the board in our pipeline and in the customers we’re bringing in that the industry as a whole is frustrated. They’re overpaying right? There’s a lot of waste in the system. We save our customers 25% on average. That’s even when we displace competitors and so that means you’re. Getting the value out of the competitor and also you’re still wasting money and again when you’re when you’re spending millions of dollars a month on public cloud and we can save you 25% those are it’s it’s a real sticky environment right? And so I think there’s a lot of of opportunity here.
Alejandro Cremades: So so obviously you know here we’re talking about the um, the future but I want to talk about the past with a lens of reflection if I put you into a time machine Chris and I bring you to that moment where you were thinking about starting something of your own and then.
Kris Bliesner: Check.
Alejandro Cremades: Say you had in the early two thousand s and you had the opportunity of let’s say have a chat with your younger self. What would that they be that business. You know piece of advice that you would be sharing before launching a business. What would that be and why given why you know now.
Kris Bliesner: Yeah I think a couple things one um revenue is king and so customers and and paying revenue is a customers paying you is is King and so focusing more on that versus raising money I think a lot of folks jump to hey I can find an investor who’s interested in my idea and then we’ll we’ll figure out how to build a business after that. Um, that’s that’s a hard row to Hoe I think from my experience you want to have part of product market fit is finding customers that are willing to part with their their card earn dollars and pay for your solution that that does something for them right? And so that that that mathematical formula that has to happen. There. Is really tough to get right because you have to have ah a business need you you can’t just have an idea searching for for business for business need right? like you, you’ve got to solve a core problem and I think the businesses that do really well recognize that they’re customer focused. They partner early early on with their customers and they they bring them along in the journey. So because the the risk that you have is that you tend to focus on on something shiny, right? like you’re doing some cool tech and tech is is oh always always in this bucket right? of hey it looks awesome. This is really cool. Why aren’t people paying for it. Well maybe you’re too early. Maybe maybe there’s not a market for that. maybe maybe the solution that that exists is good enough. There’s a lot of reasons why businesses won’t work and I think from my experience I would love to just go back and say hey listen focus on customers of revenue solving those problems. You will always have a business and then then you can decide how big the business is right? So whether it’s a eventually scale business or whether it’s you know a lifestyle business Whatever.
Kris Bliesner: Um, but but you need to to start with the business problem and the customers first.
Alejandro Cremades: I love it so Chris for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Kris Bliesner: You can hit me out on Linkedin I’m on on Linkedin that’s a great way to connect that way. We can share on that way and and I I try to answer those messages once a week or once every couple weeks it’s I’m a little bit busy but that’s an easy way. Um, that’s probably the easiest way honestly to get all of me.
Alejandro Cremades: Well hey you see enough. Well Chris thank you so much for being on the deal maker show today. It has been an honor to have you with us today.
Kris Bliesner: Thanks alandra.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Kris Bliesner On Raising $11.5 Million To Help Companies Manage Their Public Cloud Infrastructure Securely And Efficiently appeared first on Alejandro Cremades.
In the pulsating world of entrepreneurship and innovation, every success story is woven with threads of resilience, creativity, and a relentless pursuit of one’s dreams. Joe Bayen, the visionary behind Grow Credit, sits down to share his remarkable journey from the bustling streets of Cameroon to the epicenter of technological advancement in Silicon Valley.
Grow Credit has attracted funding from top-tier investors like USAA, Blue Ridge Bank, PG Ventures, and Peter Kight.
In this episode, you will learn:
- Embrace challenges as opportunities for growth and innovation, turning setbacks into stepping stones toward success.
- Trust your instincts, as intuition often holds the key to navigating uncertain terrain in entrepreneurship.
- View stress as an ally, harnessing its energy to fuel creativity and resilience in the face of adversity.
- Build a strong network of mentors and advisors early on, as their guidance can accelerate the journey to success.
- Democratize access to financial resources and foster inclusivity, paving the way for a more equitable future in fintech.
- Pivot with purpose, recognizing when to adapt and evolve in response to market dynamics and consumer needs.
- Never underestimate the transformative power of perseverance and relentless determination in achieving one’s dreams.
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Your email address is 100% safe from spam!About Joe Bayen:Joe Bayen is the Founder and CEO of Grow Credit Inc. Over the past decade, he has specialized in underwriting, credit score improvement, user acquisition, and monetization.
In 2015, Joe founded Lenny Credit, a small-dollar loan and credit score improvement platform that received industry accolades from JP Morgan Chase, PayPal, and Discover.
Prior to launching Lenny Credit, Inc., Joe held an EIR position at VC fund Science-inc, assisting with mobile growth strategies as well as the development of Reframe, a Vine and Instagram influencer platform acquired by Famebit.
Joe was the CEO and founder of ICS Mobile Inc., the developer behind Free App A Day, a mobile application marketing platform with 12M users worldwide that was bootstrapped to $18.3M in total revenue. Notable clients included Disney, Electronic Arts, Groupon, and Kabam.
Prior to founding ICS, Joe held the position of COO at mobile game developer In-Fusio, the developer behind Microsoft’s Age of Empire II.
In 2004, Joe held the position of Managing Director at Allegorithmic, the developer behind Substance, the industry standard for texturing and material authoring, acquired by Adobe.
Joe received a track and field scholarship from the University of Miami, where he graduated from the Dean’s list with a B.A. in International Finance & Marketing.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So very excited about the guests that we have today you know I guess that they you know has been through the ringer but you know now they’re definitely doing incredible stuff I mean obviously there’s no such thing as a straight line you know the ups and downs and I think that today’s story is really. Remarkable, very inspiring and we’re going to be touching on rejections you know from the likes of ah Steve jobs also mark youban crazy pivots and also what they’re doing right now you know in the fintic world. But but again you know super super cool. Journey and story that we have in front of us with the building the scaling the financing and all of the above so without further ado. Let’s welcome our guest today Joe Bayen: Biden welcome to the show. So originally born in.
Joe Bayen: Hey hey how are you thanks for having me.
Alejandro Cremades: Cameroon in Africa but you moved to to Paris quite early on so give us a walkthrough memory lane. How was life growing up.
Joe Bayen: Yeah, ah well you know, borning Cameruna um, you know I my aunt you know I was living with my mom there but my aunt decided to ah that it would be better for me to have ah a european indication. So um, you know I moved to Paris to live with her so I was ah.
Joe Bayen: You know I was actually ah a pretty ah solo life. You know I you know I had to fend out for myself from a very young age and um, you know so growing up in France was was ah was a lot of fun was exciting and um, you know and a small story that. That’s going to end light a little bit that journey is the fact that you know I studied I was taught chess at age 7 in a camp and and I won a tournament you know and just just like that. So I became very ah excited about strategy games. You know I ended up playing a lot of ah. You know, not only ches but populous or seam cds or or whatnot and um, that really really got me into um, just ah, not only enjoying strategy strategy at all but understanding the power of focus because some of those games you know issue. For instance, put all the vitegers to do one single task. You know you would get win the game faster and I realized that in business it the exact same thing and if you focus on a single item at a time and if you focus to focus on multigolling instead of Multica multitasking. Actually you’re able to ah to progress faster. So yeah. So games actually helped me a lot in my business career. So I played a lot of games then I was able to I always wanted to come study here in the United States so um as a senior in high school I decided to run track and I was ah fortunate enough to be ah to be pretty fast and I ended up finishing fifth at the french gina nationals.
Joe Bayen: And to make a story short. That’s what booked me booked my ticket here to the United States you know I ended up with a.
Alejandro Cremades: But why why the us why the us like a out of all places like what what got you hooked into the idea of coming to the Us.
Joe Bayen: Ah, opportunities right? And and also um, you know to be ah to be frank. It’s actually better to be um, black you know in the United States that black in France you know in terms of opportunities. You know there’s a ceiling. Over there. You know you know it’s um, it’s a lot tougher to ah to have opportunities you know for instance, even my cousinzi was working at Microsoft in France he couldn’t go higher in the ranks out there and they recruited him in the United States from France you know to give him more opportunities. So. You know? Yeah, the main reason I came to United States is to ah to give myself my my creative mind you know an opportunity to really um expand as much as possible and that the us was the place for that.
Alejandro Cremades: So obviously you had the you were running. You know you were quite the fuss runner. You know as you were saying you you you ranked fifth in the nationals there I guess the the whole competitiveness and and that competitive spirit. How do you think that has shapen up who you are.
Joe Bayen: Ah, this has been ah, a critical aspect of ah, not only my personality but my relentlessness I just simply don’t give up you know Um, no is not an answer and um, you know I’m ah incredibly tenace tenacious and um. Also I’ve learned over the years you know to really embrace the downs. You know as ah learning opportunities and 1 thing that I’ve learned from ah from Kobe Bryant at 1 point he shared that you know you know losing is great. You know because ah, it’s an opportunity to to get better. So I didn’t understand what he meant. And a few years ago and when I really realized that if you really embrace those challenges as an opportunity to become the best version of yourself and that will lead to ah to better outcomes. So um, you know they um you know, essentially um, powering through not only powering through but um whenever ah life is challenging um um I have the tendency to become not only extremely resourceful but you know over the storie that I’m going to share later on today. You know when things are tough. You know what I do outside of work. In um, in terms of Phil concert exercise is much harder. You know, um, average nine ten miles a day you know I work out lift. You know four times. Ah a week. You know the effort the physical effort the strangeest effort that I put myself into.
Joe Bayen: On a weekly basis are much harder than work for instance. Ah, even the morning example, you know when we ended up closing our deal with mastercard I ended up doing a twenty seven mile hike and I did it to bring myself back down to earth. You know just to make through I remind myself that life is not easy. So pushing myself. Physically to the extreme. You know, enables me to really embrace challenges pretty seamlessly what I do is work at you know my personal life and much more harder than work in general so whenever life throw. Ah you know a lot of um, you know a lot of challenges at me after tendency to ah to sweat it and down. Pretty easily it outdays.
Alejandro Cremades: So then so then let’s talk about now coming to the us because you came to the university of Miami and there you were blending finance and marketing and obviously you were you were still running I mean you even run for Kamaro but right before the Olympics. You know in 2004 you get injured now during that time you know there was that train ride. You know that that you were in and I’m sure that everything was going through your mind but that train train right? Also not only the injury was life changing but also that train ride. Why was that the case.
Joe Bayen: Well, you know it’s um, yeah, you know as always when when when ah 1 door closes another one over apartment. It. It was very disappointing I worked so many years you know to ah to to go to make it to the lampics and I was pretty much devasated and I had no idea. What would be the next stage of my life. No idea you know I had a finance degree international and finance degree but I had no idea what job I would do where I would I was completely. Ah, you know, um, clueless about my future and and afraid to a certain extent and and something neuroraculous happened. You know I ah. Ah, had to change cardt trend card at least 4 times for variety for variety of reasons I was sitting someone else’s seat and then I would ended up with a cart with a bunch of kids on vacation making a lot of noise and I settled on a cart with just 1 person with long hair. You know I was working on this computer. And I was just very curious and I sat down fellow asleep for about an hour woke up and he was still in the same position working his computer and I ask him so very curious curiosity. Very important say hey what are you working on and you shared with me that you know theyve built they have a small startup in ah in a city called clamon feral. Which was my club team as well and which is also better way for an anecdotal as an anecdote It’s the the hometown of a mission entire. But so people to begin to know. But anyways so he told me that they built an amazing technology that was decades ahead of her time and that enables essentially? Ah um.
Joe Bayen: Artist to paint mathematics. You know if you want to move more details about it I behavior to share but I was completely fascinated and I asked him you know I’m a marketing and finance major because I was you know can do you have you know? Ah maybe I can help you out and he ended up telling me that his boss was picking up at the at the train station. And then I should just talk to him and see you know here’ here we are at the train station I meet Sebastian the ge the Ceo and founder of Ana Greatmmi and I told him hey you know can I come to your office and learn about new technology and not possibly help you see sure so I went there and spen the next full eight weeks learning everything about. Procedural textures about special effects for ah after after effects and photoshop and whatnot and that they liked. You know the fact that I was a quick learner and they gave me the job. So um I moved I flew back to Miami you know, put all my my luggages in my car. All my life. My car and drove from Miami. Ah, cross- country to Los Angeles to begin as a business developer for allegorriic which became my first job ever and um, allegor allegorriic is another fantastic story. You know, ah Sebastian ended up selling allegorrimic to Adobe in two thousand and nineteen one of the largest acquisition in France. And he also won the Oscar for technological achievement last year and he invited me as well and he’s also an investor in grow amazing story and ah all the technology from a greatnick is embedded in all the the current special movies from ah ah from ah ah you know.
Joe Bayen: Avengers I mean you name it is 9 and 99.9 percent of all games uses Allegoric algorithmormic texture in the world today. So amazing story and he inspired me a lot to also remain relentless because he yeah he had to go through ah a really tough time of the for the. Over 4 to 15 years before setting this company to Adobe.
Alejandro Cremades: Now obviously there you were exposed to you know and a remarkable journey. You know obviously crystallizing with the acquisition from Adobe. But in your case you know around that time of the acquisition happening. It was the time where you decided that it was. Time to shine and your time to take over you know, ah creating your own future with ics mobile now with ics mobile it was say quite a while right? So um, walk us through how was the process of you thinking through this and then being like okay let’s. Time to to do this thing. Let’s do it.
Joe Bayen: Ah, right? So in terms of timing you know, allegorrate me I left allegrate me in 2007 you know and ah and so let’s go back to 2002 2 2007 nodo even though ah Sebastian and I remain in contact I still good France as I mentioned is an investor in grow. So in 2007 you know I decided to ah to essentially um, you know I decided that it was time for me to become a founder so I launched ics mobile which initially was focusing on launching a a mobile ad network a video mobile ad network and. At that time we developed the first one of the first technologies which enables us to push video ads on mobile devices. It’s completely brand new you know at the time and one of the other company I forgot the name ah forgot the name of that company. But. Actually the founder is an investor and it ended up becoming an investor in grow as well. But it was a very nescent industry and um so we spent an entire year trying to raise money you know for that company and it was in 2007 2008 things were pretty hard to raise money time. It was video challenging time to raise money. And um, and I was forced to essentially pivot you know because the iphone you know, launched and became popular and this one I told ah one of my partner that hey let’s pivot you know have ah you know I ah um, you know have a gaming background because I was ah you know? ah.
Joe Bayen: I was Ceo at at a company called infisio games. You know right before launching ah ics more more that was really the pivot. So from you know we went from um from allegriic to um infusio games and then I left infusio games to launch ics more so that’s the. You know that’s a little bit of the the story here and then because of that experience you know I had a a gaming background and I decided to launch to essentially launch a video games for Iphone and that was in 2008 and um, you know from that point on. Ah, something. Ah pretty ah, you know not only video video games and apps and um in two thousand and Eight eight you know ah we were on the verge of launching 1 app called I bubblebble you know which was a bubble eds. Ah right? You know that were that was representing. No um, Palin ah Obama Mike Cain and whatnot and we’re playing on setting those bubble heads for a dollar or pop and we were rejected by Apple you know they? ah they said that you know they didn’t allow caricature back then and of course I was really upset. And I ended up by. You know my business partner told me that Steve Jobs usually rep replied to his email and I email directly Steve Jobs and explaining why we should be allowed and he replied to me with a a one lineer saying ah you should spend your time writing better apps boof. That’s it.
Joe Bayen: So we got rejected and we’re a little bit devastated from that. But that rejection led us to ah focus on ah you know first of all developing pure purely developing game and essentially led us to also pivot. Towards launching freeappaday.com. So if you had been successful with those bubble ads bubble heads would have never landed with free app aday dot com which became of one of the largest Ios app marketing platform in the world. You know we ended up with 12000000 users $80000000 in revenue in 3 years we worked with ea. Zinga. Ah Groupon you name it anyone who’s anyone you know was ah working with with us at at 1 point and we were leveraging push notification to promote apps in the app store. So you know developers came to us and we sent a push notification to our audiences and that the app lend. On top of the app store often number 1 within that 67 hours really great business. You know did really well for three and a half years until Apple decided to change the rules of the app store to prevent apps from using push notification to promote other apps so we went from. Ah. Generating half a million two million dollars a month to nothing pretty much instantly. So um, that was that that unfortunate, you know you know story. But again, that’s what ended up leading us to eventually grow credit. So.
Alejandro Cremades: So always see you know you guys were doing pretty well. But then all of a sudden like almost overnight you know you guys need to shut down the business I mean I’m sure that that was very difficult for you I mean how was that to process because I mean from.
Joe Bayen: Um, yeah.
Alejandro Cremades: Doing very well and then all of a sudden like you find yourself like oh my God you know like now we have nothing we’re shutting down What’s next. What am I going to do walk us through through how was that emotionally for you as well.
Joe Bayen: Ah, emotionally, that was ah, extremely tough. You know, keep be mind you know? Ah I’m a competitor I like to be number one and I went from being number 1 to 0 you know? So even though, what’s amazing is the fact that even though financially I was completely. Um. You know say financially you know, mentally it was devastating I couldn’t sleep for so for 6 for foring six months you know I had nightmares waking up you know thinking? no that didn’t happen. It was mentally one of the most challenging. Ah. You know in you know, keep in mind that also our platform was helping in the developers get their paid apps promoted that their apps wantedd for free, not for free or for gp we we had the rev share business model where we enabled ind the developers to really make a lot of money through us. And we also had enabling kids with no money to get paid apps for free. So it was a good mission. It was not only about me and the company doing well we were helping ah literally we helped over over 3000 developers you know promote their apps generate more income. And millions of the kids millions of kids around the world get paid up for free. So it was devastating the mission because the mission ended the mission that was doing a lot of good ended. That’s why it was also devastating. You know, but.
Alejandro Cremades: So Obviously you know, ah you either succeed or you learn So I’m sure that the and lessons that you took from you. You know were really valuable and especially for what you ended up doing with grow credit now grow credit which is your baby now What you’re pushing a Rocket ship. You know you guys say have gone through multiple. Iterations and multiple pivots to be able to to adjust to to to where the market or what the market was requesting from you. So How were those ah transitions you know for or those pivots for you to be like okay I think we got it now.
Joe Bayen: Um, yes.
Joe Bayen: Ah, that’s ah, that’s a great story. So um, so really quick right? You know grow credit started as a pivot of you know it was four pivot. We went from lenny credit to um. Ah, Len Bike to ah credit plus to draw credit and and it’s been a 10 year long journey 10 years of my life. You know in the entering the tenth year you know the way it it started was you know when.
Joe Bayen: Free appate ended I ended up but working as an eirr at Science Inc the Vc fund in Santa Monica famous frotic sidsf funded dollarship club and doing really well with liquidquor death. You know as of late you know and in 2014 I mean I was there because you know they did not. They did not have a lot of expertise with ah you know mobile ah mobile as or mobile like acquisition on mobile so I was helping them on that front. But while I was there I was just learning how the company was structured in the sense that they were really good at hiring a lot of great talent. And that’s the biggest lesson that I’ve learned from ah Science Inc is the importance of ah, really hiring the best of the best to be surrounded by the best of the best. So in 2015, you know something? ah 2014 fintech became very popular with acons venmo.
Joe Bayen: Robin Hood and whatnot and this when I thought about how can I leverage fintech to help my younger self you know because when I moved out here I had no idea about credit score credit card firecode nothing you know I was offered a card at Miami I used the card I was late here and there without understanding the consequences of being late. And when I had to buy my first car of course had terrible credit score very expensive and and it took me overall four or five years to build to reveal my credit so that left Bitterer taste in my mouth and only that I thought it was because I was a foreigner that I was in that predicament but that wasn’t the case. A lot of my american friends. Also had no clue. You know the you know banks give them you know credit cards like candy they used it. They were late and everybody had to start from from ground 0 and that had to work hard to revealil their credit and I thought we could do better so I launched Lenny credit in January of 2015 and and and and with the goal was to extend micro loans to students and millennials and to offer them credit score education and free fico score I was able to partner with Fico and again to offer a consumer s free Fico Score and free credit scorecation. And we were able to extend the microlines of 100 ah of a hundred dollars up to $500 you know to our consumers and we noticed that a small dollar loan was powerful enough. You know to boost credit score predicts pretty significantly.
Joe Bayen: For consumers who you know had no credit or thin files. So ah, you know the the platform did well you know the bank of Joe was financing the loans because I mean I was completely new I had no experience in the in ah in lending even though I was a finance major no experience in like in landing or banking I was a really clean state. Which was actually an advantage which really enabled me to create because I didn’t know what was good or what was wrong. So I was really going there in a complete with a complete blank slate. You know? Sadly, we were too early for the market and banks had no idea of what we’re doing. We were leveraging a plaid. To underwrite consumers. You know, leveraging their banking and account transaction history. We were very early with that that method of underwriting but by the time we needed to scale and raise debt financing. You know? Ah, we didn’t we didn’t have any takers. You know, really banks were. You know, wanted us to have a longer portfolio history before extending us. You know a line of credit or at that facility and a ran out of cash. This was ah one of the toughest you know, ah time of my life. You know in 2017 I just sleep completely right out of cash. Um. And it started with ah a you know when we worship super when we had the opportunity to both raise a um, a large seat round and ah and and and a large ah debt financing round disaster really happened. You know I met you know I connected with the mockcubin.
Joe Bayen: You know in um, in a January of February February of 2017 and he was we were talking for eight weeks he was on the verge of investing you know in Lenny credit and right before we were supposed to sign the deal on my birthday mind you. Which was april eighth by the way two days ago you know is you know he pulled out we had around I thought about $8000000 in a combination of um of equity and debt round and we ended up with nothing I mean 0 and the reason why pullout was is a good experience for. For our listeners here is the fact that I trusted experience over my instincts and that which was at the time I realized that you know you instincts are most of the time right? You know our Vp of finance wanted to change the terms of the deal at the last minute and I didn’t think it was a. A good idea for a variety of reason it was just like a really a change of thing for 1 point or 2 but something insignificant and um and when and I told I don’t think it’s right, but she had a decade more than a decade of experience. You know, making those deals so I basically um, you know I was scared fear. And that’s the case where I was feared to make mistakes. No. so so um and the learnings that fear is dangerous. You know if you um if you you know because I was scared to trust myself and I you know extended my trust to someone that had more experience and as a result you know when my Mark cuban heard.
Joe Bayen: That but that small change he decide to pull out you know, but the mystics was mine mine my own because at the end of the day I’m the Ceo I’m the founder you know at the end of that I’m responsible for this but the learnings from that experience is that you have to trust your instincts all the time you know? So um, but.
Alejandro Cremades: Um.
Alejandro Cremades: So I mean you guys ended up doing pretty well because I mean you fair raise day about 120000000 and that’s a combination of both equity and debt so walk us through how for a business like grow credit. You know how you go and how you think about.
Joe Bayen: Um, yeah.
Alejandro Cremades: Debt versus equity and how the process of raising money for both works.
Joe Bayen: Yeah, so um, yeah, we ended up raising. Ah you know, following that that story we ended up raising one hundred and twenty million dollars our last round was led by Usa where we raised $20000000 from them. You know our equity around was led by arena investors they’ve been fantastic with us and the way. We are businesss the you know the debt facility is mainly airmarked you know towards our lending operations. You know that’s really where we’re using the fundts to be able to scale up this seamlessly without having to raise an equity around and and the the equity is really leveraged. You know towards growth and um. And of course you know, ah business operation hiring and whatnot so that’s how that’s the the mix the debt you know to ah to equity makes you know 1 score really earmarked for grade the team marketing and the other one is to really scale the the lending operations.
Alejandro Cremades: So as obviously when it comes to investors. Um, vision is a big one. So if you were to go to sleep tonight Joe Bayen and you wake up in a world where the vision of grow credit is fully realized what does that world look like.
Joe Bayen: So the world looks like we are embedded in all fintech most fintech apps all fintech apps and within ah and within all banks and that vision is already materializing. You know, um, we completed a partnership with Wells Fargo it was in the you know it was ah featured it was ah in the news. Um about two months ago as I mentioned Usa that ah led our series a around. We have another massive insurance companies that we sign a marketing deal with. You know we um have another massive mortgage company the two the biggest mortgage companies that also signed a deall with us and the pivot that we did we grow. We went from being a b to c b two b b two c platform. Transforming into a b two b two c platform. You know we developed an api where our bank partners you know and finex can offer our loans. You know to you know their user base and help them establish and build credit at the same time again. What is unique about grow credit is the fact that. We have a free plan. We are enabling consumers to build and establish credit by leveraging the Netflix account hulu accounts and you know and and their cell phone plans and most importantly, we’re able to do it for free. You know if you have a Spotify account Two Nine nine
Joe Bayen: We are enabled. We are enabling consumers to establish and build credit which is massively important you know in the United States and we’ve been able to extend that capabilities to of to all our partners who are integrating you know the grow the grow api within their their platform and most importantly in terms of creativity. We launched pay. We’d grow which is essentially paypal for subscriptions that builds credit and is a completely novel ah system which enables subscription to become a dual um purpose to to basically have a dual purpose. Ah, service in a sense that now you know when users sign up for Netflix I mean soon for Netflix they will be able to instantly build credit with a Netflix account and that’s completely new. Never existed before and we have some ah major partners that we where where we work expected to launch you know over the coming months and now. Yeah so that’s the 2 novel way basically pay power for subscriptions and embedded ah credit building you know for for for for ah banks and fintech. So. That’s the the 2 areas that we’re expanding in and that’s and we’re already getting a lot traction and. And now. Yeah, we expect that you know we did ah and we did the next decade we should be pervasive everywhere.
Alejandro Cremades: So let’s say now you know I’m able to bring you back in time I put you to a time machine and I bring you back to the moment where you were thinking about the jumping ship and and starting your own you know company. You know, obviously what ended up becoming icsa mobile but let’s say you’re able to. Sit down with that younger Joe and you’re able to give that younger Joe one piece of advice for launching a business but will that be and why given what you know now.
Joe Bayen: Um, giving what I know now. Um you know the you know Network I mean ah the networking the network earlier you know, um, the idea that you cannot do it Alone. You know, having a strong ah environment a strong support. An amazing group advisors as early as possible will make a huge Difference. We were able to get there later on. But if I had had the net the network that I have now. You know things would have accelerated at at a much faster Pace. So having a strong network of smart you know individuals who already had the experience that you ah that you need you know to scale your business is massively important and it requires a lot of time and dedication to build that network. So. Focusing a lot of time into convincing you know, ah you know industry leaders in the industry that I’m trying to get involved with to join our journey so doing that sells jobs that sells job actually has a multiplier effect over time. So That’s really one. Thing that I would ah that I would tell myself and now also um ah what else I would you know?? Ah oh yes, Um, yeah, embrace it to not stressing as much.
Joe Bayen: To embracing the downs understanding that the lows are the greatest opportunity for growth. You know if I had known that you know it would have ah you know I would have lived ah past one hundred years or past a hundred probably but. Having that knowledge that the stress is an opportunity you know embracing there’s ah, there’s a ted video that I highly recommend our listeners to ah to go to called you know, um, how to make stress your friend. You know, understanding that video will really teach. You. How. Seeing observing stress as an ally have a multiplier effect on everything that you are attempting to accomplish stress is here to help us. It’s not here to destroy us in hip. It’s here to really make us alert and actually also make us extremely creative and on that fraud. Pay. We grow came from stress because we were we we didn’t have enough our funding. We didn’t raise enough you know and ah we need to find a way to bolster our growth and that stress that pressure you know, led to pay we grow that pressure that stress. Also led to freeappate.com you know now pressure and stress also led you know to ah ah to grow credit and let me buy you know and understanding that stress is actually your ally and setting up system to really.
Joe Bayen: Manage stress effectively in in my case working out a lot running a lot you know, meditating a lot and reading a lot educating myself a lot and so that’s really um, you know what I would teach my younger self.
Alejandro Cremades: I love it so Joe for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Joe Bayen: They can go to ah to Linkedin you know at you know ah Joe Biden you know I’m the only one on Linkedin. So I’m easy to find there. You know on um, ah, Twitter as well. You know on um on Instagram same Joe Biden you know we have a. Ah, medium where where I have a lot of ah a post on that on culture which has been ah, a critical part of our of our we haven’t had a chance to talk about this but culture has been a critical part of our um of our efforts about growth and I have a lot of ah content. You know, talking discussion in our culture on medium and um, yeah.
Alejandro Cremades: Amazing. Well hey Joe thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Joe Bayen: And um, that’s it. Yeah.
Joe Bayen: Um, yeah, thank you.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Joe Bayen On Raising $120 Million To Enable Consumers To Use Their Subscription Payments To Build Credit Scores appeared first on Alejandro Cremades.
Christian Haigh’s journey from a disciplined choir school student in Oxford to a leader managing billions in assets is nothing short of inspiring. In a recent interview, Christian shared his insights on discipline, overcoming challenges, the importance of trust, and the vision behind his ventures, Legalist and Compound.
The latest venture, Compound, has attracted funding from top-tier investors like Davoa Capital, New Form Capital, TeleSoft Partners, and ConsenSys Mesh.
In this episode, you will learn:
- Christian’s early musical training instilled a strong work ethic that propelled him through entrepreneurial challenges.
- Despite losing a major investment, Christian’s perseverance led to the transformation of Legalist into a thriving asset management firm.
- The acquisition of Compound enabled him to merge technologies and create a comprehensive platform for wealth management innovation.
- Christian emphasizes the importance of building and maintaining trust with investors and clients for long-term success.
- Christian aims to revolutionize wealth management by creating a digital operating system for advisors and clients.
- Christian’s journey offers valuable lessons on surrounding oneself with supportive mentors and collaborators.
- Christian’s story inspires aspiring entrepreneurs to embrace challenges as opportunities for growth and innovation.
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Your email address is 100% safe from spam!About Christian Haigh:Christian Haigh is a Co-Founder & serves as Chief Executive Officer at Compound. He co-founded & served as Chief Executive Officer at Alternativ.
Christian is a Co-Founder and serves as a General Partner at Legalist. He is a programmer, Forbes 30 under 30, and dropped out of Harvard, where he was pursuing a joint BS/MS in economics and Computer Science.
While at Harvard, Christian worked in Professor Latanya Sweeney’s lab. After founding Legalist at the age of 22, he led a team of developers in building Legalist’s innovative data-driven technology for sourcing and underwriting litigation investments.
Christian spearheads all efforts at Legalist around technology, outreach, and operations. He leads the singular mission to create a client-centric approach and world-class experience you won’t find anywhere else.
Christian is also the co-founder and General Partner of Legalist, a private fund sponsor with ~$1 billion in assets under management.
He has been recognized by Forbes 30 under 30 and YCombinator and has overseen 400+ investments across Legalist’s various funds.
See How I Can Help You With Your Fundraising Or Acquisition Efforts
- Fundraising or Acquisition Process: get guidance from A to Z.
- Materials: our team creates epic pitch decks and financial models.
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Connect with Christian Haigh:* LinkedIn * Crunchbase * PitchBook * TheOrg
Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So today. We have a very exciting founder serial founder. You know he’s done it multiple times you know we’re definitely goingnna be talking about raisingcing money because say he’s raised quite a bit. He has quite a bit of assets under management. But again, we’re going to be talking about discipline how he got that early on with music almost getting into trouble there with the wifi of Harvard. You know when he was getting started with his company and then how you go about losing a big investor as well as you know, acquiring you know other companies. And growing very fast so without further ado. Let’s welcome our guests today Christian Hague welcome to the show.
Christian Haigh: So thank you Alejandro really appreciate and looking forward to chatting.
Alejandro Cremades: So born in england mostly in Oxford give us how walk through memory lane. How was life growing up.
Christian Haigh: Absolutely um, yeah, um, so I grew up mostly in Oxford um, I went to a choir school there. It was part of the Oxford colleges and um music was a huge part of my childhood and we sang 7 services a week. Ah, we’d get up at about six thirty every morning to to do all of those services and um, yeah, we’d even do music on Christmas day. So when everybody else was at home for their Christmas dinners. We were seeing mass in the cathedral. It was a great training ground to. Become very disciplined and I think um had a big impact on my ability to you know, build businesses today. Um, in terms of you know grinding when things are already hard. So ah.
Alejandro Cremades: And then discipline discipline obviously is a really big one there you know one of the things that you got from being in the music ah space and and waking up at 7 a m well. What did you get out of discipline because I find that discipline is a really big one too. You know as a founder so tell us why you? What did you get? you know from discipline there.
Christian Haigh: Yeah I mean I think that there’s this notion that that building a startup is really cool and it’s really funneled the time and I think that you know there are really great aspects of it that I really enjoy Um, and then there’s a lot of things where you just have to you know do the. Grunt work because nobody else is going to do that for you? Um, and um, you know having discipline gets you through those hard times. Um, and you know helps you to do the hard thing when nobody else will.
Alejandro Cremades: So then for you I mean you ended up a going to harvard but they you know didn’t it didn’t it didn’t unfold the way that you had to hope for because literally while you were there. You know you got the idea of legalist and in fact, you also got into trouble with the wi-fi. So what happened there you know during your time at Harvard. How did you guys come up with this idea and and what happened next.
Christian Haigh: Sure. So um, you know after growing up in england um I took a gap here um spent a year traveling the world and and you know doing music and then after that gap here I ended up going to Harvard University and um there I met my co-founder for legalist. Um iva shang and um, you know we worked on a couple of student organizations together and decided that we really liked working together and decided to start a company together. So three years into my Harvard experience. Um. We um set about trying to do something in the legal space. We were both interested in. You know, um, what we felt was an antiquated industry that um, ah you know did things in somewhat of a backwards way and so you know in January of my junior year. We started interviewing um hundreds of attorneys every attorney who is in Massachusetts who is willing to talk to us and would ask them. You know what are your pain points. What are you struggling with and they’d all say you know we want more clients and and so um, you know. Through one of my courses I realized there was this website the massachusetts court record website. Um, which was you know I think they paid about $70000000 to build it. Um, but it was for this antiquated system that was really hard to navigate and we thought there’s no way that anybody else is using this data for anything. So.
Christian Haigh: I started downloading data and we downloaded a lot of data about one hundred gigabytes a week. Um, and at some point you know the harvard university it department caught on to the fact that we were downloading so much data. Um and cut off my internet access. Um I think they were they thought we were doing something illegal. Um, which we weren’t but um, you know then I started downloading data on iva’s internet. Um, and at some point we actually launched the product and the initial idea was okay. So. Lots of lots of these lawyers want to be able to find more clients. So let’s just download data on new cases that are occurring on a daily basis. Um, find cases where there is a defendant who hasn’t um, got any representation and say to those clients hey do you need a lawyer. Was the the first iteration of what we did and with that idea we got into y combinator um and started legalced Today. It’s very different but that’s how we got started.
Alejandro Cremades: And how do you think that the Y combinator you know shaped a little more the the idea of legalist.
Christian Haigh: Ah, why cominator was huge in terms of you know determining what we ended up doing um ah the most important thing was that the general counsel there John John Levy introduced us to the idea of litigation finance this wasn’t something that we knew about. Um, we had no idea that you could finance lawsuits ah but after getting introduced to that concept. Ah, you know we decided to ah pursue it and that’s actually you know a big part of what we do today. So today Legalist is just under a billion of assets on a management. Um, our core strategy is litigation finance. So basically we invest in lawsuits and we provide the financing for plaintiffs to be able to get you know their day in court and then we also have 2 additional strategies. 1 is bankruptcy financing so we provide. Short-term loans to companies that are going through the bankruptcy process to help them to you know, exit and um, you know, stop being a ah business again and then the third strategy is government receivable financing and we provide we provide financing to. Government contractors who need short-term financing to cover cash flows while they’re waiting for the government to pay them. Um, so yeah, legalists sorry why c was incredibly instrumental to um, you know ultimately ah taking the path of becoming an asset management firm.
Alejandro Cremades: I Know that the um journey of raisingcing money you know for legal is was not easy. You know In fact, yeah, you know at the beginning you know one of the investors you know, fell apart. You know you guys were thinking about going back to school you know as the plan B So what? what happened there.
Christian Haigh: Yeah, so um, you know we we make a number of um litigation finance investments and um, you know for our first fund it was a $10000000 fund and we made approximately forty investments out of that fund. And 1 of our early investments that we made. Um you know lost and if a case loses then we lose all of our investment in that investment. Um, so we’d we’d invested. Ah I think about 150000 in that case and um. Yeah, when we lost we thought oh no like we have a bad track record. We’re an asset management firm. Um, and we live and die by our track record. Um, and so we were worried that um you know that would be the end of our investment firm and that we’d have to go back to school. And I remember that day we went to Costco um, and we went and bought $1 fifty hotdogs and we thought this is our life from now on. Um, and um, ah you know I remember for the next couple of weeks we would um, lie on the couch and eat ice cream. Um. Sort of ah a consolation prize. But yeah, ultimately we got through it and um, you know I think that obviously you know now we’ve got 3 different strategies. Um, and um, you know we’ve been able to build a very large business out of ah you know.
Christian Haigh: This This is an investment strategy. So ah, things definitely turned around.
Alejandro Cremades: So at what point does the idea of maybe you know, starting something else. You know come about because I mean Legal is now is one of the things that you’re doing you know and then also compound. But ah what point does the id of doing something else. You know come.
Christian Haigh: A.
Alejandro Cremades: Come into play.
Christian Haigh: Sure. So um, you know when you’re working on a business. Um, you know you probably have thousands of different ideas of other businesses. You could do um a lot of them are bad ideas. Some of them are good ideas. Um. But you know one of the things that we kept on noticing at legal last was that um so with our investor base we we invest on behalf of a number of nonprofit endowments university endowments um a lot of institutional investors. But we also invest on behalf of a a large number of wealth advisors who would invest their client money in our investment products and um, you know over time. We’d just see the same challenges over and over again. Um the the main one being the you know wealth advisors. Um. They work with the technology stack which is incredibly antiquated and as the job of a wealth advisor has expanded over time. Ah so has all of the different technology point solutions that they have access to there’s maybe you know hundreds of different point solutions that and buys or would use to. Ah, manage their book of business their crm their portfolio reconciliation and reporting engine their trade desk execution platform. Um, you know what they use to to find leads and because of this sort of proliferation of point solutions.
Christian Haigh: The end result is a very clunky client experience and a very inefficient and inaccurate back office for the advisory firm and so you know two years ago I set out to solve that problem on the one side we saw this this problem of all of these. Point solutions and the challenges building a digital native advisory firm and on the other hand we saw that you know over the next couple of decades something like $100000000000000 of assets is going to exchange hands from the baby boomer generation to the next generation of clients. And so you know we’ve given that you know that’s a clientele base that would want great technology that would want to a great technology experience to accompany great financial planning and investment management and so you know where we saw that opportunity. We’re like okay this is something that we should build. Um, we have the right skill set and the right? Um, ah you know partners to be able to go and tackle this problem. So I started raising capital put together. Um a couple of cofounders and you know a small team to really tackle that problem. And then you know started going out to market and bringing advisors and their clients on board.
Alejandro Cremades: So I guess how did the whole idea to you know come about because there were some calls at 2 a m happening you know in the in the early days as well. So what happened here.
Christian Haigh: Strain as well.
Christian Haigh: Yeah, so um, you know so over the first year and a half. Um we were recruiting advisors and bringing on clients and we very quickly got to about 700000000 of assets on a management. Um. And then we came across this firm called ah compound and ah they were also a Silicon Valley startup um both technology firm as well as advisory firm and we realized that you know they were taking the same approach that we were in terms of. You know trying to go after that next generation client and really build a platform and a technology experience that next generation clients would want to operate with and um, you know I heard through one of our investors that they might be looking to sell. So um, you know I had ah a number of um. Connections that I tried to ah, utilize to to reach out to the founder of that business to see if he’d be open to selling to us. Um, and after you know I wasn’t able to get in touch with him through any of those connections. I um I called emailed him myself and asked him if he’d be interested in having a conversation. Um, funnily enough he responded and said yeah, let’s have a conversation but I was in italy at the time it was July fourth weekend and you know a few friends and.
Christian Haigh: I had decided to go to July to go to italy for July fourth. So um, you know we had a lot ah several two am conversations. Ah you know in italy just trying to see whether you know there was alignment in terms of how we thought about the industry. How. Ah, Jordan the co-founder of compound thought about the industry and where he wanted to take that business and after a couple of months we realized that yeah this was something that we wanted to do um so we negotiated to acquire his firm.
Christian Haigh: Um, we spent about a month going through those conversations both with Jordan and then with the board of compound several of his largest investors were you know, interested in learning about our business and what we wanted to do if we merged the 2 firms.
Christian Haigh: And then we spent a month doing due diligence and seeing you know is this ah is this business compliant is it? Um, ah you know do the the numbers work out. Um, do we really understand what this business is trying to do and after those two months we acquired the firm and um. You know now we’re um, you know between the 2 firms and you know what we built together were about one point seven billion of assets under management and we continue to recruit great advisors who have existing books of business. Um, and then provide them with a great technology platform and resources. Ah, to be able to run that book of business on our rails.
Alejandro Cremades: So why? why were they so important to you guys I Mean why do you wanted to acquire you know compound.
Christian Haigh: Yeah, it’s a great question. So um, we had you know? Ultimately what we want to build is a holistic digital family office with all of the different products and services that are pay net worth and I’ll trynet worth client. Would want to be able to use and today we have liquid investments alternative investments tax advisory tax filing um a lot of bespokes of lending solutions and family office services. Um, and what compound brought. They had built an incredible client experience. So think of like mint.com or personal capital. They have client dashboards where anybody on the internet can sign up and can get value out of having all of their accounts aggregated in 1 place. Can see how much they’re spending and you know what they’re spending their money on and compound have built a similar client experience but very very tailored to high net worth and ultra net worth clients. So um, you know they built a lot of equity planning solutions and. You know how do I think about what my concentrated stock position. Um, you know will do over time given liquidity events or you know given tax events. Um, and they’d also allowed not just aggregation of liquid brokerage accounts but also of.
Christian Haigh: Um, all of their gp commits lp investments and basically a true representation for a high net worth I’ll try a net worth individual of what their total net worth is. Um, we had focused on the back-office and middle office technology for advisors. How do you make an advisor more efficient. How do you Um, make it so it’s more seamless for a client to invest in an alternative asset. Um, and so by taking the back-office and middle office technology that we had built and then combining it with. The client experience the compound had built. We realized that we could have a full holistic platform that would accelerate our product development by several years and so we acquired their firm. We combined the technologies. They also had um. You know, several really experienced advisors who were focused on um, high net worth and all try net worth tech execs tech founders tech employees. Um, and so they were well-versed in the kinds of challenges that those kinds of clients experience on a day-to-day basis and so. Um, you know as a mix of the technology. Ah the the team that we were able to bring on um, being able to combine the au m so that we were over a billion of assets on a management. Um, there were a lot of good things you know and in in that acquisition.
Alejandro Cremades: So so obviously acquisitions most of them fail right? because they fail on the integration part. How did you guys go about ensuring that the integration would succeed What were some of the things that you guys put in place.
Christian Haigh: I.
Christian Haigh: Yeah, um, yeah, a lot of a lot of acquisitions fail and um, you know we have a lot of advisors who advise the company on um these kinds of challenges. Um, and yeah, it was a big warning to us hey like this this may fail and you may find that you’ve spent a lot of time only to um, you know have the acquisition fall apart for cultural reasons or you know it’s just not ah a good mesh of of Technologies. And so we spent a lot of time planning for the acquisition. Um, we had spreadsheets upon spreadsheets. Um that we had built out with you know, Step-by-step This is what we’re going to do. Um, on the finances side. This is what we’re going to do for the team. This is what we’re going to do for the external communications. This is what we’re going to do for compliance. Um, and you know every single item that we’d itemized had an owner. Um, who would handle that particular aspect of the acquisition and. So a ton of planning went into it. Um, we had a really great team on both sides both On. Um you know our company side as well as on compound side who was spearheading each of the different aspects of the acquisition. Um, but even then you know even with all of that planning.
Christian Haigh: We still ran into unexpected challenges and hiccups. Um that we’ve been working through over the past six months um it’s actually a testament to the team and how well they were able to plan that we were able to bring over almost the entire team. Um, as well as you know. Ah, very quickly integrate to all of the technology. Um and not run into more hiccups than we did. Um I would say that you know the biggest part of it was just planning um spreadsheets spreadsheet spreadsheets.
Alejandro Cremades: And in terms of fundraising I mean now as you were saying you know you you got like close to 3000000000 which which is amazing between both companies when it comes to raising capital. What are the 3 biggest takeaways that you’ve gotten you know from from so far from your experience raising money.
Christian Haigh: Yeah, um, well ultimately the way that I think about um, you know either the asset management or Wealth management. Um, it’s a trust business. Um, and so you know everything that you do is on the basis Of. Of Trust. Um, and trust can be built in in many ways. Um, right, It’s about the stories that you tell and the marketing that you do, um, it’s about how much em you have assets on a management. Um. It’s about you know, doing right by your customers over and over again. Um, so that you can have you know great references and um, you know people who really want to showcase what you do to other people and refer you more clients and it’s about the team that you have um. You know, can you get really great people who have a track record who can help you to build who can help to you know, make your offering more and more sophisticated. Um, and so um, you know when I think about um, you know either fundraising or bringing on. Ah, investors in helping to manage their Networkt worth um, all of that. All of it is about um building trust ah building those relationships and ah you know getting to a point where yeah you can add value to them. Um, yeah, maybe on the investments management side.
Christian Haigh: Ah, providing them with a sleeve within their portfolio where you can, Um, you know provide them with access to a new asset class that they don’t have they don’t have exposure to on the wealth management Side. It’s about you know, solving pain points for your clients and um. You know building The Trust. So then you can manage all of their net worth um and then you know it’s about doing that over and over and over again over a long period of time. Um, so that you can then work with more and more clients. Um per similar.
Alejandro Cremades: So I guess hey you know when it comes to to vision is a big one. No because that’s what ultimately you know people are betting on you know customers employees investors.
Christian Haigh: Anyway.
Alejandro Cremades: So if you were to go to sleep tonight and you wake up in a world where the vision of compound is fully realized what does that world look like.
Christian Haigh: Yeah, so our vision is to really build the operating system that advisors use to manage their book of business and that clients use to manage their net worth. Um, and so when I think about the great the the last great financial institutions I really think of the custodial platforms like Schwab and fidelity who you know they’ve had such a great track record of um building institutions that um. You know in a name brand that everybody recognizes. Um I think there are very few people out there who don’t know you know who fidelity or who Schwab is um and I think that the next generation of financial institutions. Um are going to be a technology platform. Um. That ah you know is in the advisory space that really help ah clients to manage their money. Um and manage all of the other aspects of their wealth management. Um in 1 place and um and so that’s what we want to build. Um, and today the way that we’re doing that is to um, you know recruit advisors with existing books of business as well as to, um, you know provide ah a great client experience where anybody on the internet can sign up for a dashboard and manage their money today. Um, even without the.
Christian Haigh: Help of an advisor. But ultimately what we want to do is to go to firms who are adjacent to wealth management and say hey you don’t offer wealth management services today. Um, but you could and we can help to provide that platform. So that you don’t have to build out the compliance Infrastructure. You don’t have to build out a team of Advisors. You don’t have to um, build out a great technology platform we can provide all of that to you? Um, and you know we’ll we’ll take a cut the advisors get. Um, you know, client Leadflow. Um, and those firms are adjacent to wealth management like you know Insurance Wholesalers Insurance Brokers Community Banks Um, you know second-tier banks um will get a Full-service Holistic Wealth Management platform.
Christian Haigh: Um, that is geared towards that next generation of client who really wants a great technology experience to a company. You know great financial advice.
Alejandro Cremades: So obviously we’re talking about the future here but I want to talk about the past and doing so with ah learn so reflection if I was to put you into a time machine and I bring you back in time to that moment where maybe you were in the hallways of Harvard. You know, just figuring things out and let’s say you’re able to stop that younger self. Younger Christian that is thinking about maybe starting something if you could stop that younger self and give that younger self one piece of advice for launching a business. What would that be and why given what you know now.
Christian Haigh: Yeah, um I would say um, you know it’s really critical when you’re first starting out to figure out. Um, who can really help you on your journey and who can’t oftentimes when you know you’re first starting out. Um. The ideas that you have seem crazy when we started legalist. Um, you know it’s kind of ridiculous that a twenty and twenty two year old could go out and start a litigation finance company. Um, when we started compound. It was kind of ridiculous that you know we would. Go into the wealth management space and ah, really build something that was a better offering than um, you know all of these you know thirty billion one hundred billion two hundred billion au wealth management firms currently offer. Um. But ah, you know there are people out there who will um, you know be supportive and try to like help you along your way. Um, whether that’s you know with their time with their money. Um with their advice. Um, and then you know there are other people who are in those industries who are like. Don’t bother just give up like why are you doing this It’s stupid. Um, and so you know it’s really important to to get the right people inside. Um, who will help you on that journey because you know it’s not a journey that you can do alone? Um there’s an incredible amount of um, you know people in.
Christian Haigh: Both of the Journeys that I’ve had so far who have really been incredibly helpful along the way. Um and without them. We would never have been able to do any of the things that we’ve been able to do um and you want those people on your side and as many of those people as you can find and you want as few of the people who are going to tell you. Don’t Bother. You have no idea what you’re doing um because you know ultimately they’re just going to. Um, yeah, not not help you on your journey.
Alejandro Cremades: I hear you so Kristen for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Christian Haigh: Yeah I mean you know if you’re um, ah you know if you’re a high net worth or all try Neworth and you know you want to a digital dashboard a net worth Tracker or um, you know want financial planning and investment advice.
Christian Haigh: Um, compoundplanning dotcom is ah a great place to go to you can sign up for a dashboard and get started today. Um, you know if you want to talk about other things whether it’s you know, investing in the firm whether it’s um, ah. You know, exploring other ways to um, you know, help out or become part of the team. Ah, you can always connect with me on Linkedin. Um, I’m Christian Haig the Ceo Ceo of compound planning and um, you can find me on Linkedin and um, feel free to shoot me a message.
Alejandro Cremades: Amazing, well easy enough Christian well thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Christian Haigh: Yeah, appreciated al Hondra and um, yeah, appreciate the time.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Christian Haigh On Managing Close To $3 Billon And Now Building A Modern Wealth Management Platform appeared first on Alejandro Cremades.
In the ever-evolving landscape of entrepreneurship, there exist stories that transcend the ordinary, tales of resilience, persistence, and the pursuit of dreams against all odds. Such is the narrative woven by Philip Inghelbrecht, a seasoned entrepreneur whose journey from Bruge, the Flemish side of Belgium to the bustling streets of Silicon Valley is nothing short of remarkable.
Philip’s latest company, Boomerang, attracted funding from several small investors.
In this episode, you will learn:
- Philip’s journey underscores the importance of unwavering persistence in overcoming obstacles and achieving entrepreneurial success.
- The mantra of prioritizing revenue generation highlights the critical role of sustainable business models in navigating turbulent market conditions.
- Philip’s willingness to take calculated risks underscores the essence of entrepreneurship, where bold decisions often lead to transformative outcomes.
- From Belgium to Silicon Valley, Philip’s story exemplifies the global reach of innovation and the boundless opportunities it offers.
- Philip’s ability to adapt to changing circumstances and pivot his strategies reflects the agility required to thrive in dynamic entrepreneurial environments.
- Strategic partnerships and collaborations played a pivotal role in sustaining and scaling Philip’s ventures, emphasizing the importance of fostering meaningful connections.
- At the heart of Philip’s entrepreneurial journey lies a clear vision, driving him to pursue ambitious goals and redefine industries through innovation and determination.
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Your email address is 100% safe from spam!About Philip Inghelbrecht:Philip Inghelbrecht is a Co-Founder & serves as Chief Executive Officer & President at Tatari. He is also the Co-Founder and serves as Co-Chief Executive Officer & Executive Chairman at Boomerang.
Previously, Philip served as an Advisor at Paraclete Capital and co-founded Shazam (a mobile music recognition app with 150+ million users). He is also a co-founder and chief executive officer at Tatari and advisor to Paraclete Capital.
Philip recently joined Yahoo through their acquisition of Rockmelt, where he was Head of Business Development. Prior to Yahoo, he was President of TrueCar (IPO) and Head of Sports and Entertainment Partnerships at YouTube (Google).
Philip is also an advisor and personal investor in multiple startups and is a self-admitted kiteboarding addict. He served as Vice President at Rockmelt. He founded Road Hero.
Born in Belgium, he currently lives in San Francisco, and when he is not spending time with his family, he enjoys skiing or kiteboarding.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty Hello everyone and welcome to the dealmakerr show. So today. We have a really amazing Founder. We have a founder that they in fact, he’s is one of the co-founders of something that I’m sure that you’ve had on your phone at some point I mean I actually have it right now my watch which is amazing. Very exciting. You know, like what he’s done multiple companies. We’re gonna be talking about the difference of going about you know building a company raising a bunch of money versus you know, like not raising so much money and he’s right now built you know a couple of Rocket Ships. You know in parallel. But again you know we’re gonna be talking about.
Philip Inghelbrecht: Inghelbrecht: Are just.
Alejandes: Persistence ho to go about you know investor pitches and and that roller coaster of emotions to us a founder. How to think about spending your money and also how to think about creating a company that is revenue generating I think that that’s quite the topic today given what’s happening in the macro environment. And then also how he went with for example with he is say first company you know from losing money to just doing a couple of deals and having the company survive. So again, a bunch of good stuff. Very inspiring conversation I had so without further ado. Let’s welcome our guest today Philip Inghelbrecht whow.
Philip Inghelbrecht: Um, thank you fantastic to be here
Alejandro Cremades: So originally baised in Belgium so ive us a walk through memory lane. How was life growing up.
Philip Inghelbrecht: Life was good really? Um I die from a family of wes I grew up in the flemish side of Belgium a city called Bruge um, but I came from ah what I would call a hardworking family small business owners. And so ah, with hindsight I learned the value the benefits from working hard at a very young age you know making some money and the kind of the soft privileges and the freedom that come with it. So so life was good I always say this like you know. When I was 18 or 18 years old I was working I had money I had multiple motorbikes I had girlfriends I was good.
Alejandro Cremades: That’s amazing now one of the at that you ended updoing is I mean you you got your studies. You know you did business engineering. You know there with with some finance involved in the 90 s but before before entering the ah the labor. You know market you know and and going and working you decided that it was you know, perhaps you know, interesting to travel. You know a little bit so what triggered you know that in and what would you say that day that that experience outside of Belgium. Perhaps you know that worldview how how did that impacted you.
Philip Inghelbrecht: Yeah, and I think it actually started in colhen I was in college would attend a university in Belgium um, enjoy that and then I mean maybe it still exists in Europe it was called the erasmus exchange program and so students from one country could study 4 it’s a semester abroad and I did that and I went to Germany I know it’s not far from Belgium it’s knavery but it was definitely an eye-opening experience right? I got to meet so many people from different places around the world and really really enjoyed it so much that when I graduated from college. Unlike any of my classmates I did not take a job I I kind of came to the realization you’re you’re 21 22 years old. You’ve never been to America you so many places you haven’t seen and so yeah instead of um, kind of um. Hopping on the treadmill and and and starting corporate live I just went traveling without much of ah a particular goal but seeing the worlds without particular timeframe I have no regrets around it if anything actually it helped me discover California that helped me discover San Francisco and the Silicon Valley and it’s something I eventually came back to years later the idea of a gap here which is commonly in places like England or Australia or New Zealand I could not more encourage that to anybody. There’s so much you can learn in the world.
Philip Inghelbrecht: Not just university.
Alejandro Cremades: So afteniversity and after te travels you decided k to Europe and you ent into investment banking.
Philip Inghelbrecht: Yeah.
Alejandro Cremades: You know you didn’t really like it mu’m sure that that the shapedttle bit when he cam to seeing what works and what doesn’t work when it comes to companies.
Philip Inghelbrecht: Yeah, for sure I mean by the way so as much as I said look I took somewhat of ah another But it’s extensive tme off I always did know what I wanted to do since I was fourteen or fifteen years old I was enamored with the. Financial world and and wall street and trading and so like I picked my feel of studies very consciously right? kind of I picked something that would get me into that very quickly and so um. I I did what I wanted to do I joined the bank I was a fixed income deriv to straighter which is kind of the hot topic back in the day and so I was really happy very proud of myself except for 1 thing I wasn’t good at it. Um I i. I looked around me and it just like it was not anate to me I I still can’t explain what it was that I was lacking but I looked at my peers my colleagues and maybe they were not as technically gifted or they didn’t necessarily understand the math and the statistics behind what we were doing but they ended up being better traders and so. If. There’s something that you’re not so good at it’s really hard to love it right? And so 7 years in um, again, no regrets. But I realized that that was not what I wanted to do for life and so I decided to go back to school and like many people kind of did an Mba.
Alejandro Cremades: I Hear you.
Philip Inghelbrecht: Very consciously right with the goal of hey how do I diversif of change my careerand so that tck to California inspred by that trip years before that right? because when I came to San Francisco the first time and I think it was 93 or ninety four I came here. I still remember this I sat on the steps of the Berkeley Football Stadium was a beautiful sunset over the golden gate and also this place this magic one day I must come back to live or to study or to work or retire here and so was an opportunity to come back on a promise which I made here earlier.
Alejandro Cremades: That’s amazing. So obviously California you know the land of opportunity the us too and I’m sure that youeriencing all the inovation happening around you and there was no other way than starting your own thing. So how was that the journey to um. Building such an iconic you know and starting such an iconic company like shasam.
Philip Inghelbrecht: Yeah, sure and like all things is a bit of a context and background. So so here I am I arrive in San Francisco start myand um I just knew tht I wanted to out of Berkeley start my own company I did not know what it was going to be. Um, also came to the realization that maybe I shouldn’t do it by myself and so there was 1 classmate his name is Chris Baron and he kind of had the same goal or feeling um, coming out of this program I want to start my own company. So let’s what what should we do? And so. Chris and I not only became great friends but or classmates. But but also business partners not knowing exactly what we’re going to do and so we would brainstorm and come up with ideas some of them absolutely crazy some of them really good. Some of them. Maybe we should have pursued. Shazam was one of those ideas it was actually Chris’s id and I liked it was right? Ah back then you could only listen kind of to fm radio or the or the the cds that you purchased and so the idea of of. Figuring out what you’re hearing in the background was was too good to be true. It was a problem that I identified myself with so I thought that was good and so we went for it now. Ignorance is bliss music recognition as we know today via sat am.
Philip Inghelbrecht: Ah, definitely didn’t exist back then it so it was a very um, it didn’t make sense but typically a technology is invented and then youd of a business appliation for It. We went the other way around were like well this would be a cool business application Now. Let’s go back and invent the technology. Ah. Unorthodox but but I guess we we saw it true.
Alejandro Cremades: And obviously you know the persistence tool that you guys had when he come to financing the business you know was um was a big one becaompany you know, raied in about 100000000 over the course of its lifetime before the acquisition by Apple but.
Philip Inghelbrecht: If.
Philip Inghelbrecht: This.
Alejandro Cremades: But it was not the it was not that easy of a journey. So so how was that the journey of raising money and going through the cycles you know for you guys.
Philip Inghelbrecht: Yeah, well of course some ah that had to do also with the.com ah boom and bust and so there was an initial angel round that was about $1000000 and we were I’d say pretty strategic about that. Um. For example, we would raise money from people out of the music industry or the ah mobile industry and so so that was not so hard. We actually we had a really kind of like ah a good look looking group of angels so to speak now when it came to the series a which was then a seven and a half million dollars round without much of a product and just kind of a deck now that was a whole order ballgame because that’s 4001 when the market completely crashed and so I mean there’s a beautiful story of persistence in dealmaking around it. Um, we pitched over a hundred venture capital firms.
Philip Inghelbrecht: Um, say that you can do one every day which is not the reality I mean that’s you’re you’re tied up for half a year right? there and that um and and so I still don’t understand how we carried on because most people would give up. Ah but I again like not. Having much of an opportunity cost loving the idea feeling that it is possible. We saw it true. Um, and so we raised a series a I think it was August Two thousand and one something like seven and a half million dollars there’s actually a really funny story about that. Um. We had 3 investors um, one of them was Idg Ventures Europe another one was links new media that was Richard Bransome’s fund and the third one was a belgian fund flanders language valley fund and that was the Vc fund from a speech recognition company out of belgian called. Learner and hospi that sounds all good. Ah literally the day after two days after we get the money right? money’s in the bank. The round is closed that fund and the company behind it learner and huspi blew up in a big accounting scandal. If that had happened to a three days earlier we will never have completed the series. A I mean shiza may not never have gotten out of the starting blocks talking about luck.
Alejandro Cremades: Wow No Kidding no kidding now. Obviously for you going through the cycles too and and and and through building the business. You really got the exposure to the importance of creating a business that was revenue. Revenue generating and in fact, you know you had to do a couple of deals to have the company Survive. So I Guess what happened there and what did that teach you about the world of business and and creating companies.
Philip Inghelbrecht: Yeah.
Philip Inghelbrecht: Yeah, um, this is something I often say is it’s revenue to companies a little bit like oxygen if you run out of it. It’s really difficult to survive and and I know till very recently there was definitely a. Ah. A drive or a team of you know growth above revenue in the silicon valley and I’m kind of happy to see that changing again and so if I look back at chizam it was definitely that mentality. Let’s you know, invest and build and spend and then of course you run start running out of money and it gets really tough and you have layoffs and. And difficult series bes in series c um I follow the very different pad at my current company. The Tari was kind of like let’s not raise money and focus on revenue instead and that worked too which is am. There’s a beautiful story. Um. And the team of deal making which I’d love to share here is that looked shazam is known as a consumer business and and and that’s how we started and that business didn’t do so well we launched in August Two Thousand and two and if you were to look at kind of the the growth numbers. It was flatlining for years more in 5 years and and so the the question is well how did you survive that and ah the story behind that is by 2003? Um, by then really understood the company a kind of saw technology. We had the database of digital music.
Philip Inghelbrecht: I started to really understand how the music industry operated and I learned that actually the shazam technology could also be a license to other companies that needed that tech in their business. For example, Bmi right? that that that tracks. Ah, recordings and then pays out royalties or um, a clear channel who needs to report but they aired on radio. So again royalties can be paid out correctly and so unbeknownst to most people back in 2003 I did this multimillion dollar deals with these companies that would license shazam that will license the database that would license services around that ah brought and millions of dollars and that helped us feed the bleeding consumer business. Um, it’s really kind of like. Like for any founders out there that maybe find themselves in a little bit of ah, a financial trap if you’ve been long enough in your business. There’s other often angles that you can explore to make some quick money and if you can do that you can’t survive or at least you’re no longer Beholden to investors.
Alejandro Cremades: So eventually the company had a really nice outcome. You know was reported that the company got acquired by Apple for 400000000 so what was that process like of having the company go through an and a I mean what did that look like and you know.
Philip Inghelbrecht: Shoe report.
Alejandro Cremades: Make us insiders for a little bit there.
Philip Inghelbrecht: Yeah, approach single word painful. Um I I mean I always say that Apple purchased or acquired Shazam for a song but intended. Um and and here’s here’s why I would say this is that. Around that time. There was ah a new shift in music consumption away from cds buying cds into subscriptions right? Rdo and in Europe spotify also in Europe and us and what Shazam did was ah it was very obvious that there was a behavior of. Shizaming a song even if you know what it was so that you can add it to your playlist of by the Cd and Shazam would not understand or the the shazamor would not understand the value of it. What would happen is that we would sell those leads. Fairly cheaply to services like a Spotify and the better decision for shaza would have been to build its own music streaming service on top of the recognition these music streaming services back in the day the cost of goods sold was not so much the the music licenses. Because those are all performance based the costs of good sold was really customer acquisition and czam pretty much gave that away to the incumbents chizam should have built its own music streaming service on top of it and it would have been a multibillion dollar company so for me actually I know this sounds incredibly. Um.
Philip Inghelbrecht: I wouldn’t say arrogant. But but like ah silly, but but 400000000 was was not enough for a worldwide brand with an amazing technology that could have been a business with the valuations of a Spotify so was a bit painful for me to watch.
Alejandro Cremades: I hear you I hear is obviously in this case, you know, still you know first company first incredible outcome. You know, amazing! Amazing company too that you guys were able to build so in your case you know you decide you know to join Google you know out of old things. You know why would you? Why would you join a. Large corporate versus you know doing it again.
Philip Inghelbrecht: Yeah, well, um, 2 things so I was working on a startup id um and then um and somebody came in and said like hey look why don’t you join me instead. You don’t have to worry about your work visa and all that kind of stuff and and and I didn’t take risk. But I almost actually did start another company out of Shazam and I kind of regret not doing it ah with respect to Google um, now realizing two thousand and four five it wasn’t that big of a company I think he had just gone public. It was maybe like 4500 people there and at least still back then it was. Very much operating like ah like a startup. Um and I think it’s still an amazing company and so so I don’t you know I had an incredible time at Google um I very quickly started working on Youtube I mean there’s like 35 people when I kind of moved from Google to Youtube.
Philip Inghelbrecht: And so in many ways it it was a startup and it was a great time now. 3 4 years in you know, the itch came up and I wanted to be my own boss again and so that’s when I when I was sailing in the bay here I came across a gentleman. Um.
Philip Inghelbrecht: Ah, Scott Painter and he had this idea of true car. Ah servers where people can see how how much everybody really paid for the new car and it’s a bit like Shazam It’s kind of one of these problems that you identify yourself very quickly whilst it’s not oh what’s the name of the song again. It’s like oh m gee am I going to get stitched at the car dealership. But if I know what the dealer paid for the car then of course I can negotiate in a much better way and so I thought it was a brilliant idea and so whilst it wasn’t my id it definitely I could argue kind of like the company for me to run so I built a team built the product ship that’s and off we went again. Um, so yeah, back in the start of saddle.
Alejandro Cremades: And that company you guys ended up taking the you guys ended up taking the company public. What was the um devaluation at the peak of true car.
Philip Inghelbrecht: Um, um, so by the time it went public I was I had left true car. Um, my joke is always true car when at the year and which went public I believe it was 2040. My joke is always that it was both the best and the worst performing stock on Nasak in the same year. But I believe I think at one point I hit 2 two and a half billion dollars in ah and public valuation. Yeah, not anymore.
Alejandro Cremades: That’s amazing. So obviously obviously 1 thing led to the next and you know you you experience you know like perhaps you know other companies like rock melt you know where you were able to see what typically works what doesn’t work in the in the case of Rock Melt you know it was aqua hire the company by Yahoo. But this was the most immediate step for you to get going with the company that you’re running and that you created you know, ah nowadays which is tatari so what? what are you guys doing at Tatari what is the business model of tatari how do you guys make money.
Philip Inghelbrecht: Um, yes, yeah.
Philip Inghelbrecht: Yeah, sure I’ll kind of take it in that order. So we’re a technology platform for the modern television advertiser and so essentially we built I always say tech infrastructure for the Tv advertising business. Can be used by brands to run their campaigns agencies to stage Tv campaigns. But we also built tech for the networks and the publishers so that they can show the ad inventory that they have and we can transact on it in a much better way. So the company is now seven years old we have about 300 people focused on the us and a little bit of Canada companies profitable. And yeah, so we have 2 300 brands that run their Tv campaigns directly through to Tari and the tech that we have they actually don’t use an agency anymore. Or we have agencies and then licenses technology that we have so that they can provide better Tv advertising services to their brats. So that’s the tari in a nutshell. Um, yeah.
Alejandro Cremades: So with tatari you guys who and with a different approach instead of raising money you raise just a tiny bit. You know, just a tiny of it. You know, just like a seat round there and then you just like build this thing into like a 200 plus you know employee operation I mean.
Philip Inghelbrecht: Um, yeah, yeah, yeah, just.
Philip Inghelbrecht: Um, yeah.
Alejandro Cremades: That’s pretty amazing. You know, given you know the past experience and and why you had done before So why did you take this approach.
Philip Inghelbrecht: Um, um, well um, multiple things First of all, kind of a market reality is that in 2016 when I started the company I think um. Tv advertising was not a very attractive business or industry to move into as a matter of fact silicon valley considered it heresy right? And so surely I could have raised money kind of leveraging my name and track record a little bit but I would have been pretty tough. And I was just eager to kind of get going get a business growing. Um the other thing Alejandro is that I just didn’t want to raise money having raised money at czam true car and the not so pleasant experiences of having to manage his investors and boards. Um, like you instead of you like it draws your energy and attention away from where you should be I e the company and so I wonder can I do this without raising money and so from day one I was ah by lack of better english revenue obsessed. There was nothing for free ever. Um, and now why did we raise money. It’s a little bit of a personal story I was actually going through my divorce at that time and so when you go to those situations. You actually can’t really use your own money right? because otherwise it could be a conflict.
Philip Inghelbrecht: And so I couldn’t use my own money. So and I was also mortified that I was going to have ah a short liquidity gap in the business. So I just reached out to a few people and within 24 hours we we raised something like $700000 the joke of it is that because we never used it. I was always like hey can I give it back to you. But of course yeah. And of those smaller investors would take that deal. Um look I actually I really encourage people like look at angles for not having to raise money or as little as possible because it gives you control on your destiny.
Alejandro Cremades: I Hear you.
Philip Inghelbrecht: And and you can spend I mean it’s not that boards are bad right? Boards is it’s good. Everybody has a boss. Everybody has a board but um, it it doesn’t become a distraction and so only years. Yeah, so only years later did I bring in an outside board member.
Alejandro Cremades: I Totally hear you on that.
Philip Inghelbrecht: Right? somebody to help me keep me and check keep me sharp in a healthy way. Not a kind of like ah a financial like situation where you’re beholden to somebody and in in ah and a financial way.
Alejandro Cremades: So you didn’t have enough with Tatari because there is another company that you are you know, also pushing in parallel that is boomerangs. So so what happened I mean what happened here you didn’t have enough with the Tarri I mean what’s what’s going on.
Philip Inghelbrecht: I yeah yeah, yeah, so I yep. Yeah, but I hope that at one point you you you you meet with the Ceo of boomang my business partner and co-founder in it but like at fault Alejandro I walk around and I have. Plenty of business ideas. Actually I’ve probably have 10 more that I wish I could do but ideas are cheap. It’s all about the execution. So boomerang is one of those ah simple yet. So powerful boomerang builts technology for lost and found and so we start with businesses. For many businesses, an airline an airport stadium lost and found is a nuisance right? because you meet people who are stressed and you have to lock these items and try to return them and and and everything that comes with it and if you ever lose something say on an airline good luck trying to get it back is not that the. Airline doesn’t have the item they simply can’t deal with you and so we built technology to automate all of this and and make the lost and found experience through the light and so um.
Philip Inghelbrecht: Raise something like seven seven million plus for that business and we’re active in market generate revenue revenue generating so here’s a quick example if you go to universal studios and la and you lose something chances are that you’re going to get it back. Thanks to boomerang and so it’s a lovely business to be in I think it’s it’s ah a worldwide It’s a universal problem. Everybody loses stuff. Everybody finds items and so making that flawlessly work together that’s boomerang and I actually very bullish on it. I can see this boomerang being a worldwide network in the next decade
Alejandro Cremades: That’s amazing. So I’m going to put you into a time machine. Okay, and I’m going to bring you back in time where you were you know in Ucla you know studying and wondering a world where you could bring something to life. Okay.
Philip Inghelbrecht: Um, broadly.
Philip Inghelbrecht: Okay.
Alejandro Cremades: And let’s say you’re able to maybe have a sit down you know in that stadium of UCla you know, watching that the sunrise you know you’re just like able to sit down next to your younger self and you’re able to give that younger self one piece of advice before launching a business. What would that be NY even while you know now.
Philip Inghelbrecht: Yeah, um I mean I think we touched on a few right? So like. For example, I’ll be be be frugal and generate revenue. But the one that I always come back to and the one that I share with my kids almost on a daily basis is take risk. No risk, no reward the younger you are the less opportunity cost. You have the more risk you can absorb and so I think I’ve taken a fair amount of risk in my life but I it I wish I had done more. But I alluded to the fact that I didn’t start a company coming out of shazamne when I had the opportunity I should have but maybe I shouldn’t have joined Google and so yeah, maybe not a way to look at is is like yeah yeah I mean ultimately the one they were all going to die or something like that and so. Ah, people will not remember you for your failures right? People will remember you for the few sprinkles of success you had left and right so they crisk go crazy.
Alejandro Cremades: I love it Philip for the people that are listening that will love to reach out and say hi. What is the best way for them to to do so.
Philip Inghelbrecht: Um, yeah, but I mean you can always find me on the yeah, some social media and stuff like that sorry it’s bit difficult to give my phone number. Ah.
Alejandro Cremades: Ah I hear you so obviously Linkedin and stuff like that you you can be found there correct.
Philip Inghelbrecht: Yeah, yeah, yeah that I it’s it’s tough Alejandro like I actually like at fault I love every founder I love every company id by the way I would be the worst investor because I love everything I love I think everything is amazing. Ah. But there’s only that much you can do.
Alejandro Cremades: Absolutely absolutely well hey, well Philip. Thank you so much for being on the dealmaker show today. It has been an absolute honor to have you with us today.
Philip Inghelbrecht: Yeah, it was pleasure being here and looking forward to seeing the result.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Philip Inghelbrecht On Taking A $2.5 Billion Company Public And Raising $7 Million To Automate Lost-And-Found Processes appeared first on Alejandro Cremades.
In the bustling streets of Bombay, amidst the vibrant tapestry of culture, finance, and ambition, a dream was born. This dream would eventually transcend borders, continents, and expectations, manifesting into a remarkable tale of entrepreneurship, resilience, and vision.
At the heart of this narrative lies Dhimaan Shah, the founder of Isprava, whose journey from the corridors of investment banking in New York City to the serene landscapes of Goa depicts the essence of chasing one’s dreams against all odds. Dhimaaan’s company has attracted investment from top-tier investors like Symphony International Holdings and Burman Family Holdings.
In this episode, you will learn:
- Dhimaan Shah’s journey underscores the importance of pursuing entrepreneurial dreams fueled by passion and purpose, transcending the confines of conventional career paths.
- Isprava’s innovative business model, blending equity financing and SPVs, exemplifies how creative approaches can revolutionize traditional industries and unlock new opportunities.
- Prioritizing customer satisfaction and integrity, even in the face of challenges, is paramount for building a resilient brand with enduring loyalty.
- Isprava’s ability to pivot and thrive amidst the uncertainties of the COVID-19 pandemic highlights the importance of adaptability and agility in navigating turbulent times.
- Isprava’s unwavering commitment to quality and excellence sets it apart in the competitive real estate market, resonating with discerning clientele seeking unparalleled luxury and craftsmanship.
- Isprava’s vision extends beyond luxury homes to fostering vibrant communities and sustainable development, emphasizing the transformative power of social responsibility.
- Dhimaan Shah’s journey reminds us that success is not achieved overnight but through perseverance, resilience, and a steadfast belief in one’s vision, even in the face of adversity.
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Your email address is 100% safe from spam!About Dhimaan Shah:Dhimaan Shah, based in Mumbai, MH, IN, is currently a Founder at Isprava, bringing experience from previous roles at StyleCracker and HSBC Global Banking and Markets.
Dhimaan Shah holds a 2004 – 2008 BA in Economics from Northwestern University. With a robust skill set that includes Financial Modeling, Management, Valuation, Corporate Finance, Strategy, and more, Dhimaan Shah contributes valuable insights to the industry.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the dealmaker show. So today. We have a very exciting guest. You know I guess that they you know it’s really building something incredible. You know in India and again going through the story of building scaling financing. You know in this case, you know there’s like a very interesting approach where. There’s a play here of equity and then also special purpose vehicles sbbs we’re going to be learning about how he left his job as an investment banker overnight. Basically you know like what happened you know with the yeah with. With with with a breakdown that they had you know in the business on how they use that you know ultimately to inspire you know and to really build a fundamental building blocks of the business. Also why you know on how they brought a private equity firm to really help them. You know in the journey. Ah and many other stuff like for example, covid how it affected them. But. Again, we are going to be having a very inspiring discussion today and without further ado. Let’s welcome our guest today demand shah welcome to the show.
Dhimaan Shah: Hi a andro. Thank you pleasure pleasure to be on.
Alejandro Cremades: So originally born in India so give us a walk through memory lane. How was life growing up over there.
Dhimaan Shah: It’s amazing. India is an exceptional place I grew up in Bombay in India bombay is you know one of the biggest not oneoff. It is the biggest city in India so you know bustling it’s ah it’s a huge cosmopolitan city. Um, a lot going on so you get a lot of exposure very early on in life right? You’re you’re exposed to finance, you’re exposed to business. You’re exposed to art. You’re exposed to culture. You have people from all over the world coming in and out. Um, so so really, really just a fabulous experience growing up in Bombay and growing up in India in general. Ah, very very exciting place to be and it always was right through the 90 s.
Alejandro Cremades: So then so then walk us through how you know it was you know that changed from being in India all all Asa to finding yourself in Chicago you know I mean that’s a quite the ah quite the shift.
Dhimaan Shah: Um, yeah, yeah, yeah, sure. So you know like I said grew up in Bombay and wanted to study abroad and do my undergraduate abroad. It’s quite common in India for ah, you know students to go abroad to study. And you know so went to northwestern university in Chicago. Um, for my undergraduate um I studied economics and ah from there moved on moved to New York I graduated in o eight actually which is a funny funnier and and and moved on to New York where I worked as an investment banker with hspc for a few years. Ah, very interesting time obviously to be a banker and especially as an analyst. It was a very very exciting time. So I was in New York from you know, 8 till ah 11 um, and then you know resigned ah and and moved back to India because I was always clear that. I wanted to do 2 things. 1 was start my own business I didn’t know what it would be in and the second was do it back in India you know the country has so much potential and ah the journey so early here that you know I wanted to be 1 of the first to ride the wave so moved back to India and started. Started the business.
Alejandro Cremades: So then so then let’s talk about this is specifically because you know you resigned I mean you you were an investment banker. You know New York City you were doing pretty well because investment bankers do very well in New York city ah and then all of a sudden you know you decide to resign you know, almost overnight you know and and leave that behind. So.
Dhimaan Shah: Yep.
Alejandro Cremades: But trigger that.
Dhimaan Shah: You know again I think 2 things. Oh well, three things right? I think number one was this this desire always actually for for several years even through high school to be an entrepreneur I I loved it. I wanted to be an entrepreneur I I didn’t know right in high school. What I would be or what I would do. But I knew I wanted to do something of my own. Um, ah so I think that was trigger number one that was always you know playing in the back of my mind um trigger number 2 was that India was just such an exciting is such an exciting place and back then you know. It’s now in 2023 and 2024 people are talking about India on the world stage and the global stage as as an economic powerhouse and we’ve always been known as the largest democracy and we’ve had a lot of good things going for us but we were never really considered a really economic powerhouse. It’s only now that we’re known as that. Um, and and back then you know, growing up in India I knew the potential that we had. We have a highly aspirational kind of population people want to do better and get ahead in life ah point two we have a very young population. So I knew the opportunities would only get bigger and more vibrant. Um, and and I knew that if you combine the 2 of this this aspiration and the size of the population. Ah, it would be a really strong consumer story. Um, so I think the the layer of moving back to India for all of these macro factors.
Dhimaan Shah: Ah, were just was just a lot for me. Um, and thirdly of course you know my family was here and at the end of the day you know I kind of ah wanted to be around them and not two continents away you know and literally on the other and other side of the world. So that was I think the third draw to come back.
Alejandro Cremades: And when you when you came back. You know there was a trip that you did to go ah that changed everything what happened during that day holiday trip.
Dhimaan Shah: Um, yeah, yeah, so took ah took a short holiday right and moved to Goa I went to go on holiday and you know I had grown up going to goa actually Goa is very close to bombay it’s about like a forty forty five minute flight from Bombay. Um, so just wanted a quick break when to Goa it was my brother and I and um, ah we fell back in love with Goa right? You had grown up going to go out but then you know I had been away for 7 years or 8 years um and hadn’t really gone to go on maybe a decade by that point. Ah, and um. You know it was then that ah I just fell back in love with go right? and everything to do with Goa and I said look let’s buy a small place for ourselves here and we looked around and there was just nothing ah nothing that I would want to buy or you know have the home. Um, and that’s when we realized hey why don’t we build.
Dhimaan Shah: Ah, truly a world-class product for people like us in Goa right? getting into real estate in the cities Alejandro in India is really difficult right? Ah real estate is very expensive. Land is very expensive. Ah that too many hoops to kind of jump through in India. Um, so we thought goa kind of checks all the boxes. Ah for us, you know the capital commitments etc won’t be ludicrous to start at Goa um, and and ah we um, um, ah convinced our father to mortgage his home. Ah in Bombay got a loan on his home. Ah, bought a plot of land in Goa put our savings into into it as well. Ah bought a plot of land in Goa and built our first home. Um, ah we we sold it? Um, at the time for just about just shy of two million us dollars which which by the way just to give you context at the time in Goa the average selling price for a home was about two hundred to fifty thousand ah us dollars ah and and and here we come and list a home at $2000000 and sell it at 1.9 or 1.8 or whatever. It was very close to 2000000, right? And and and and people thought we were crazy right? They were like who who’s going to buy but $2000000 home and go are right? It’s not a primary city. Ah, where you know where where are you guys coming from and I think for us we were very clear that we have to build if we build a world-class product layer on a world-class service. So.
Dhimaan Shah: Each and every one of our properties are fully furnished down to it’s not just flooring and paint on the walls. It’s furniture. It’s and and it’s it’s white goods. It’s accessories. It’s down to I mean we even have the espresso podsware an espresso machine ah supplied to you by us right. Ah, so it’s literally you just bring your clothes. We bring everything else. Ah, the market hadn’t seen something like this in India ah, you know we I like to think we build some of the most beautiful homes in the world and ah, you know these were really I mean we blew. People’s minds right? when we hit the market with with this product and this service and. We. We always viewed ourselves as a luxury brand not as a real estate brand. Um, and and and we did everything that a luxury brand would do ah and and I think people loved it. The person who bought our first home has since recommended you know at least 35 to 40 new customers for us. Ah, who have actually become customers I mean he’s directly. He’s he’s introduced us to many more so it’s been ah, you know I think we we just came to the market with such a different product and service that it it. It really hit the market at the right time.
Alejandro Cremades: So I guess for the people that are listening to really get it. What ended up being the business model of the company. How do you guys? How do you guys make money.
Dhimaan Shah: Um, sure so um, we buy a plot of land we buy it in. We set up spvs so these are special purpose vehicles in which we buy so specific plots of land. Ah, each. Hspv is a project. We can build anything from 1 home to 15 homes on in that s spv depending on the size of the plot of land. Um, ah now again, you know like like I mentioned earlier we we started when we were kids right? we were in our twenty s when we started. So. Ah, we we were always short of short and capital in the early days. So unlike any other real estate brand. We couldn’t put our own capital to buy land and land bank and sit on these massive land banks on which we could unlock value. Um, ah we could only buy land enough for that 1 project. Um, so what we did is we decided we won’t use our balance sheet. Ah ah to buy the land. We’ll use our balance sheet to construct and sell and we’ve started working with you know, professional investors large family offices. Ah, ah you know, small smaller financial institutions. Kind of became partners and we would identify the parcel of land we would diligence the parcel of land we would put it into an spv these investors would come and fund the spv this spv would then do a gda which is the joint development agreement with us. Um, and we would work on a revenue share model. Um, um.
Dhimaan Shah: You know and and give the give give a return to the sbv holder while we would take a certain percentage of the profit and that’s how we’ve grown so very capital efficient. Ah you know and and and and we still retain that model even at this stage ah because you know it’s just a capital Efficient D risk model and it. Enables us to focus on execution and quality rather than get layered By. You know the romanticism of Land banking. Ah which a lot of real estate people fall into so to us Land is the equivalent of steel bricks and stones it comes in it goes out. Ah, that’s how we view the entire business.
Alejandro Cremades: So I know that the 2 years in the in the making here you know, ah there was something that happened with the roof you know of 1 of the first homes. So well how did that you know ah breakdown event you know, ended up becoming a breakthrough for you. All.
Dhimaan Shah: Yeah, yeah, yeah, we have.
Dhimaan Shah: Yeah, you know I think that was one of our first kind of ah and especially for for yeah for for us. It was a big learning so ah, two years into you know us starting we we now realized hey look way onto something and this is building this is building nicely and then we get a call from the. The person who bought our first ever home and he’s like look guys I have ah you know? Yeah so so Goa like bombay gets a very heavy monsoon for four months in a year three to four months in the year right which are the summer months in say New York right it’s that June to kind of August September period um and he calls us and saying hey I have a pretty bad leak ah in the roof above my kitchen and look the warranty period that you’ve given me is over right? We had given a one- year warranty to him on anythingructural. Um, but look guys. This is like it’s not like I’ve done something or I haven’t maintained the home for this leak to happen right? This is obviously there must be some issue with your structural. Ah the structural work that you guys did um so so so we are now in this situation where we’re still in our early days right? We don’t have all this extra capital floating around ah replacing a roof of. You know, but over over 25% of someone’s home is not cheap, especially not in those days. Um, and ah, ah, you know we were we were yeah so that’s 1 thing the other side of things is. We’re legally not compelled to do anything right? it’s it’s not our problem. We’re kind of out of the warranty period. Um, and.
Dhimaan Shah: Then we had raised some equity in the in in the in the whole core as well. Ah, from you know, a very large family office of in a big industrialist in India we actually happened to be meeting him that day just to kind of give him an update on you know where the business was so we kind of brought this up saying you know what what what. How do you think we should handle this and we got what possibly the best piece of advice which we live by till today which is take a loan do whatever you have to but fix that roof at your dime. Um, ah because the brand if you’re here to build an institution for the long run. And if you want to build a brand that’s going to go way past you guys. Ah, you need to you need to invest in that and and you need to fix it. Forget what the paperwork says forget the legalese you morally need to fix this for the sake of your brand. Ah, and that’s what we did actually we took a loan again. ah ah fix this gentleman’s roof. Um, and you know this this gentleman has actually resulted in over $15000000 in sales since then just through his referrals and it was a very real experience very early in our lives in our in our in our business lives and I think it was a great learning. Great advice and. I guess shows the value of even having good advisors and good partners with you early on and it was a real pivotal moment for us.
Alejandro Cremades: So obviously you know as you guys continue with the business you know Covid you know, hit as well and then I guess with Covid How did the have how how did it affect the business and and how did you guys go navigating that thing particularly you know.
Dhimaan Shah: Um, yeah.
Alejandro Cremades: Tough time I guess for for the whole world.
Dhimaan Shah: Yeah, yeah, so you know if I think of covid I break it up into 3 kind of you know, 3 phases. The first phase was the phase I think everybody went through which is the panic phase and and the unknown the just the absolute unknown right. So in India this was March Twenty Twenty I think it started hitting Europe and the us slightly earlier towards the end of 2019 um, but India got hit really badly. Ah, always remember it was the middle of March Twenty Twenty so nearly four years ago and um, ah there was a period of. 2 to three months where everything just stopped. Um clients stopped calling ah clients who had already committed to buying homes were now kind of you know, getting a little antsy and ah wondering whether they should go through with the purchase, etc. Etc. So there was a state of panic. Um, and you know I I think what was really helpful was you know I graduated in 2008 and I became an investment banker in 2000 september two thousand and eight where there was you know the biggest of blackswan events I think in our decade or I mean in several decades read it happened right about then? um, and and.
Dhimaan Shah: Funnily, um, we had a really good next three years I mean I I then resigned in 3 years so it it carried on but for the next three years business was actually really good. Ah as a banker. Um, and ah, you know that’s when I realized hey look. Think we might need to be in the trenches for a few months but my sense is this might actually be really really good for the business people are going to want more space people are going to want to move out of the cities because you were just you know with with a child and with a family you feel cramped you were I mean. We had very stringent lockdowns here in India and they went on for about eighteen months finally at that point we didn’t know how long it would go on but it went down for eighteen twenty four months really strict lockdowns and suddenly sure enough three months after that first you know March till say may june. Suddenly the phones didn’t stop ringing clients were calling potential clients saying hey look I’d love to you know we operate in Goa. Ah we operate in a place called alibag which is you know the hamptons of Mumbai. It’s it’s a 30 minute vote ride. It’s ah to our car journey from bombay. Um, and you know so so the the rich set of bombay love alibag go as a completely national market so bombay delhi had but you know people from Singapore Hong Kong everybody loves Goa so suddenly three months later right the phones just didn’t stop ringing.
Dhimaan Shah: Um, and we started having really really strong kind of growth. Ah, um, and and I think that was that second phase of covid right? Which for a period of twenty four months I mean you know things just went through the roof right in a great way. Um, and then came the third phase of covid which was when people were done with covid right? and lockdowns were removed. People were not as scared of covid anymore. Ah, people are feeling better. The vaccines were rolled out. Um and that’s when we we it was almost okay covid’s now done. Um, and. A lot of people again told us hey do you think business will be impacted now that covid’s done and you know I think we are very clear from day one of starting this business which was way before covid right? that look people are going to move out of the cities as they get wealthier right? because they can ah people don’t live in Manhattan after a certain point they move to Connecticut right? ah. And so on and so forth. Um, and and you can commute easily as long as there’s good infrastructure in the places that they live um and you want a better quality of life for your children. You want them to breathe cleaner air. You want them to go better schools and and and and to better schools and that’s when we realize that look we think this opportunity is not. The next four 5 6 years we believe there’s opportunity is for the next twenty years in a place like India right? people are getting rich, very fast. They’re aspirational. They want a better quality of life. Our cities are still. You know unlike a London or New York right um ah we don’t have.
Dhimaan Shah: Or we didn’t have the infrastructure that a London or New York has right? We’re building it as we speak. We’re building metros and we’re building highways and we’re building roads and ah you know with that comes a whole a whole lot of challenges if you’re living in that city while all of this is being built. There’s a lot of pollution. There’s a lot of noise. Um. So we were really clear that people are going to move out of the cities and covid kind of gave us that window and the third phase which is the post covid phase has been even stronger than the covid phase because people have realized hey look I can work from anywhere my children deserve to breed better air. Um I want more greenery I want to be around nature I don’t want to be around concrete and steel all day. Ah and hey there are airports and there’s there are highways and you know I can I can commute so you know I think covid really changed the mindset of people. But good for the for forever it it wasn’t a temporary shift. It’s been a permanent shift in hey I want more space I want more greenery I want more nature I want cleaner air I want my own home I don’t want to be you know, boxed inside an apartment again and and I think that’s it’s been very pivotal for us.
Alejandro Cremades: I okay got it and t by the way can you give me a 1 minute I just gotta go open the door and we’ll we’ll edit this piece. Okay, yeah, thank you.
Dhimaan Shah: Of course, of course of course. Yes.
Alejandro Cremades: All right sir about that. Are they the demand demand all right sorry about that will who’ll add this piece all right? So so now in terms of Capital racing to.
Dhimaan Shah: Yes I am sorry no no problem chop.
Alejandro Cremades: How much capital have you guys raised to date.
Dhimaan Shah: So there. There are 2 levels of capital raising in our business one is at the at the hold core right? where the equity level in the company. Um and and and we’ve raised about 25000000 to date. Ah, and then that’s the there. The s spv level raises right? which. Kind of churn in and out as each project kind of completes. Um and there we raise between 65 to $70000000 ah to date. But of course that keeps churning right? So that number keeps growing as we grow. Um, and it’s a really efficient way to kind of raise capital because you’re not giving away equity at the spv level. It’s project funding. Ah, without it being debt. We didn’t want debt either. Um, so we you know like I mentioned earlier alejandro for us. It was super critical to be very capital efficient right? Ah we we we we literally mortgage the house right? So ah, there was no room to be too aggressive in the early days and you know we had to be very capital efficient and we’ve maintained that discipline through the through through the last decade
Alejandro Cremades: So I guess say in this case I mean the spb you know, obviously on the equity side 20 about 25000000 on the spb about 70000000 what is that SPb strategy like I mean people would think that you know they would just like raise money you know inequity for their business. But in this case.
Dhimaan Shah: Um, yeah.
Alejandro Cremades: You guys chose a different route which was the Spb. So why the Spb route.
Dhimaan Shah: So well 2 reasons I think the first reason was um when we started out and we were building ah look I don’t think people had enough faith in the fact that an equity investment would make sense in a business like ours. Ah, they thought their capital would be locked in too long. Ah, they thought that there might might or might not be ah, an exit in a finite. You know, kind of period of time. Um, ah so we were all it was almost compulsion for us right? to set up this spv structure. Ah, where we would say what were we saying to people hey look we will do all the work around land and put it into an spv you come in and effectively fund that land. But this is not a debt structure. You are backed by your you have your secure. You’re securitized by the underlying land. But this spv will then do a Jda. With this prava and you’ll get an equity style return. So while people were giving 12 to 14% returns on debt in India in the real estate space I’m talking back then now it’s much higher right? We were paying out 22% and 23% in ah as an ir in an equity structure but not a fixed coupon debt. So. It’s not like we were liable to pay. Ah, this was only on sale. We do a revenue share so we are paying out much higher irs in the early in the early part of our journey but we were a lot more protected a lot more de-risked um and being a luxury brand we were able to kind of drive margins higher.
Dhimaan Shah: Could kind of make up for some of that delta in in financing cost in a way. Um, ah, but it’s a very D risk strategy. Um and and kind of protects us in the long term.
Alejandro Cremades: So obviously you know when it comes to investors vision is a big one. So if you were to go to sleep tonight and you wake up in a world where the vision of his provis is fully realized Well, that’s that world look like.
Dhimaan Shah: Ah, it’s a great question. So look I think and and it so it’s ah I want to take a second to actually think about how to respond to that Aandra if you don’t mind and. You know it’s a loaded question right? And if I woke up tomorrow and the world could be you know in line with the vision of is prava I think what it would be It would be a very community-driven world where people um, ah where where we like-minded people. Kind of come together to improve substantially improve their quality of life. Ah for themselves and their family right? I think that was our vision right? Let’s give people a better quality of life. Um, and you know in the perfect world. I think that’s what I would love to see right when we wake wake up in the morning ah is see a world where you know people kind of collaborate like-minded people ah to improve the quality of lives for them and their families I think very simply that that’s the way I would see it I’m not sure if I answered your question correct. You know, ah the right way. But but that’s that that would be my my my wish list.
Alejandro Cremades: So then? so then as we’re talking about the future here I Want to talk about the past but doing so with a lens of reflection. So Let’s say I was to bring you back to 2013? you know the time where you’re thinking about starting something of your own and let’s say you were able to have a chat with your younger self. What would you tell that younger self what would be that one piece of advice you know in terms of business before launching a business that you would give to your younger self and why given what you know now.
Dhimaan Shah: Ah.
Dhimaan Shah: Ah, you know if you don’t mind Alejandro I’ll actually give myself 2 pieces of advice one one would be do not be in a hurry. Don’t be in a rush. You know I think there’s so much rhetoric around being the first mover being. Hey the market will go somewhere. It’s a winner takeall market. Ah, you know and and that’s not the case There’s always a market and there’s always room for everybody as long as you’re doing it the right way. Um right? So I think that’s the first piece of advice I would give my younger self which is don’t be in a rush. Ah, don’t be in a hurry. Don’t burn the candle too fast. Um, it doesn’t make sense. This is a marathon this isn’t a sprint you know, really take your time to be thoughtful about how you’re going to do it and even balance your own your own personal life your you know, just all aspects of your life. Um I think that will be the first piece of advice. Um. Nothing’s going anywhere. Um, the the second piece of advice would be that you know, learn to drown out the noise. Um and truly truly believe in your own you know, ah conviction and and you know again when you’re starting out.
Dhimaan Shah: I Guess it’s not just when you’re starting out at any and any stage of being an entrepreneur I think it’s really really natural to keep doubting every step you take right? because you’re kind of doing it alone or you’re doing it with a cofounder um and both of you are kind of or 3 of you are as many cofounders as you are kind of doing it alone. Um, ah and and and a lot rests on your shoulders your your team your investors. You know there’s just a lot of pressure. Um, and what happens is you you you don’t want to be in a case you you don’t want to be in a situation at least in your head where you’re saying hey somebody gave me that advice and I ignored it and hey look they were right? but. What happens is you start I Also think the flip side is I Also think one of the most important and and and ah um, underappreciated Qualities. You have to have as an entrepreneur is just insane clarity of thought right? you have to be able to just drown out everything and and and and get you know, get. Break complex problems down into literally you know bite size solutions and coertive that way and and what happens is when there’s so much chatter right? and you’re doing something different or something new people are going to kind of. Question it and not not. They’re not coming from a bad place many times they’re coming from a good place actually right to try and protect you try and you know make you think differently ah look I think listen to everybody’s advice but drown out the chatter. There’s a lot of chatter right? The truth is no one really knows. Ah, So yeah, you know I think just.
Dhimaan Shah: If if you have strong conviction about something really stick to it and do it the right way. Ah, it’ll work. It’s you know, don’t don’t second guess yourself every day it’s it’s not going to get you anywhere.
Alejandro Cremades: I Love it. So the man for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Dhimaan Shah: Um, email email is the best I’m pretty responsive over email. Um should I would you would I share my email address or.
Alejandro Cremades: Favorite email. Why don’t you spell it out here for for everyone to hear.
Dhimaan Shah: Sure it’s ah it’s my first name Diman which is d for Dallas H for horse I for India am for Mumbai. Um a for Alabama a for Alabama and for Nebraska at israva.com is pravaha is I for India as for sugar p for ah pot r for rain a for alabama v for Virginia a for alabama.com it’s demand at is prava.com.
Alejandro Cremades: Amazing. Well you see you know well man. Thank you so much for being on the dealmakerr show today has been an honor to have you with us.
Dhimaan Shah: Thank you so much. Thank you for having me.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
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In the fast-paced world of entrepreneurship, the journey from inception to success is often marked by unexpected twists and turns. Such is the story of Steve Tuck, whose path from corporate stability to the tumultuous startup landscape is a testament to resilience, vision, and unwavering determination.
Steve’s company, Oxide Computer Company, has attracted funding from top-tier investors like Counterpart Ventures, Intel Capital, Strike Capital Venture, and Eclipse Ventures.
In this episode, you will learn:
- Steve Tuck’s journey underscores the importance of resilience when navigating the unpredictable terrain of entrepreneurship.
- The birth of Oxide reflects Steve’s unwavering vision to revolutionize on-premises computing through integration and innovation.
- Steve’s experiences at Dell and Joyent provided invaluable insights into operational efficiency and the transformative power of technology.
- Through transparent communication, Steve and his team weathered the storm of financial upheaval, reaffirming trust and commitment.
- Steve’s transition from corporate stability to the startup landscape highlights the importance of embracing change and seizing new opportunities.
- The challenges faced at Joyent underscore the critical importance of achieving product-market fit before scaling operations.
- As Oxide continues its journey, Steve’s unwavering optimism and commitment to innovation remain essential driving forces for success.
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Your email address is 100% safe from spam!About Steve Tuck:Steve Tuck, based in San Francisco, CA, US, is currently a Co-Founder and CEO at Oxide Computer Company, bringing experience from previous roles at Joyent.
Steve Tuck holds a 1995 – 1999 University of Wisconsin-Madison. With a robust skill set that includes Sales, Software, Marketing, Leadership, Process Improvement and more, Steve Tuck contributes valuable insights to the industry.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today. We have a very exciting story ahead of us. You know, quite inspiring. We’re going to be talking about changes in leadership how to deal with them. You know we’re going to be talking about the period of going through. You know the first customer the first shipment. Also raising you know a series as and you know in this case, you know our our founder has raised closed with his team. You know to 80000000 which is incredible but they they also they they dealt with some ah ups and downs especially with with with what happened with Silicon Valley you know and then also going through regulatory compliance which is not easy because as a startup as you know. You’re already dealing with the uncertainty of building a business so also dealing with their regulatory compliance is double the trouble. So again today. The conversation quite inspiring building scaling financing all of that good stuff that we like to hear so without water. Do let’s welcome our guest today Steve Tuck welcome to the show. Thanks.
Steve Tuck: Hey thank you very much for having me excited to be here if have enjoyed listening to the podcast over the last couple weeks.
Alejandro Cremades: So born in California Steve Yos I walked through memory lane. How was life growing up.
Steve Tuck: Sure? yeah, grew up in Piedmont little East Bay Community and had had grown up in a household where my folks had a small heating and air conditioning companies that. Was sort of the center of our universe growing up and summer jobs were spent lining plenums and bending metal and running service deliveries out to technicians that were doing furnace installs air conditioning installs and then had the very good fortune of. Being able to go to college and went to University Of Wisconsin spent 4 years there and then moved down to Austin Texas where I started at dell computer.
Alejandro Cremades: Now how was it like you know, being at the dell computer because I mean you got the chance there too of of being at a company like that for you know 9 years and I’m sure that during those years too I mean there’s like some really interesting growth tool. So how how was how was the experience of being Adele for you.
Steve Tuck: Um, it was great. It was kind of wild getting there because I I arrived in October ninety ninety nine and didn’t have the fullness of appreciation for just how high flying dell had been in the previous decade in in the 90 s. I think it was the highest growing stock on every exchange over the course of the decade. So I arrived in in kind of the the the fervor that was dell at the top of the personal computer industry and it was a bit surreal because you know they they had this. Incoming party for our class where they rained fake stock options down from the ceiling and they they played a a song we are deionaires showing a bunch of employees dancing on tables which was interesting. And so it was it. It was kind of a bit of a surreal in introduction into the the technology sector at the time but over the the next couple of years some pretty hard times because this is right when the bubble burst and you had a whole clear out of swaths of folks that were sort of at the top. And and then very quickly found themselves at the bottom and um and then some also really interesting technological transformations as you had the advent of companies like bmware where for the very first time the industry was moving from single application single server to putting.
Steve Tuck: 10 applications on the server one hundred applications on the server which just was not something one did previously and and had the good fortune of kind of going through that transition state at Dell and and a lot of transitions across industry. Thing that I really left there with the deepest appreciation for was just the manufacturing and operational and financial innovation that dell sometimes is not as well known for um, you know, direct from dell was a slogan that was well- known but it was it was really really fascinating kind of going into the factories and seeing. Ah, just how much thought and innovation went into the the cash conversion cycle and the efficiency that that Michael built around that operation.
Alejandro Cremades: Now 1 thing that is really amazing. You know that that I’ve been getting as part of your career and something that you really don’t see often is loyalty and in your case I mean before being an entrepreneur I mean you’ve been with two companies I mean one was Dale the other one was a joy and and and almost for like. Really like a decade on on on on each one of them. So what? What for example, you know, like pushed you to go to Joyent and and what were what what got you into those companies for so long. What was that future that you were living into.
04:46.95
Steve Tuck:
Yeah I appreciate you noting that and noting that with positivity because you you amazingly these days staying with a company for a long period of time is is not looked upon the way that it was I think. In the last couple of decades but um you know there was a period of time at dell I think I was 23 24 years old I was in a big all hands and I was I was you know looking across a sea of people at the stage where a couple of dell executives were up there giving a talk. And I just remember being so enamored with the culture and the product and the team and I I knew I was going to be a delta rest my career. My goal was I want to be on that stage in you know, 20 years I want to be moving on to different companies and doing different things and. Um, but as I as I got kind of deeper into my career dell a couple of things happened one was there was a new sector that was emerging this what you know at the time was was kind of called the web to dot o sector were these little technology companies Yahoo and Facebook and myspace and others. We’re growing very very rapidly and we’re demanding things of their technology providers that were maybe a little off the beaten path to me dell and hp and Ibm and others were building these kinds of swiss army knife systems that were good for any sector. Any user.
Steve Tuck: Um, which delivers operational efficiency and and kind of product ah focus. But for these hyper these kind of what would be the early hyperscaers. Um, it was a bit of ill fit and I was working with some of these companies and. They had been pushing for del to go in a little bit different direction to better cater to their needs and there was some resistance around that and and some trepidation around catering to to these markets and I think you know right in the same period where there was resistance to kind of. Moving and shifting a bit towards this market one of the providers in this market I had worked with them on a project and with Facebook where they were opening up their api for the first time Facebook had done all their development internally and Mark really wanted to open up the Apis. So third -party developers could create content on facebook. Pretty controversial decision at the time he pushed through they had this big developer platform launch and it was going to be sun microsystems facebook and this company join it this little cloud computing company. Ah and at the last minute sun was not able to ship in time. So I got a phone call at dell and and they said hey would you like dell you know dell has a very small window to slot in here and be the technology partner for this important facebook developer launch long story short we were able to get kit in their hands get approval and dell kind of swapped in for sun.
Steve Tuck: In this this pretty big launch that that sort of opened up the Facebook platform publicly and in in the midst of that I ended up working very closely with the founders at join it and began to get introduced to this new abstraction cloud computing that. They had you know, long believed and and had kind of imbued in me that was going to be the future of computing and those kind of combined forces was enough to dislodge me from dell and they had asked me to come over to join it and head up the go-to market efforts there in 2009 and that began. Yeah, the next the the next decade that would certainly have plenty of highs plenty of lows. But um, again, found myself in a company that I thought I would be at for a very very long time.
Alejandro Cremades: So Joe for example I mean I know that there you know you were also as as we’re mentioning you know for a decade and there was like quite a a bit of a turnover when it came to leadership. So what did you learn about you know, perhaps culture and. And leadership that perhaps you know you knew you were going to apply later on.
Steve Tuck: Um, yeah I think the a couple of things that that I was that that I got to to live through at joy in those first couple of years um the company fell into a trap that I think many many startups fall into and that is. Ah, raised a bunch of capital and and with kind of the the aid of investors we’re looking for growth and we’re we’re trying to grow quickly enough to deliver on the promise that that had been made around raising that capital. And the the biggest challenge that the company hit was that that growth that push into go to markete was pre product market fed and and it didn’t matter whether there was product market fed let alone what you’re really looking for is sales market fit. Um, began to scale the the the company in all markets internationally and build out these vast. Go-to-market engines in the hope of generating that demand. Um, and that can be very expensive that it was a very very very expensive lesson for the company. And and and required the company to then go retrench a couple of years later and recapitalize going forward. Um, and it certainly led to some turnover at the top of the company and and that happened you know more than once.
Steve Tuck: Going through that period of having to kind of repair from 1 classic mistake which is growth at any cost and I think just as an industry you saw that across the board when capital was cheap and a lot of money poured into the sbc asset class. In in kind of the tail end of the last decade and it was ah it was a hard lesson that we took into the formation of oxide which is making really really sure that before you start scaling up. Go-to-market efforts you’ve got. A firm understanding of the product that you built the market you built it for the the pain points that the product is solving for and that you are trying to there was there was a great a great quote from and a partner at a 16 who had said. You know you want to make sure that before you are adding that next salesperson you can see the lights of the customer’s eyes like they’re coming over the hill and they’re just about to take you over and that’s when you hire that kind of next person and you know I think we want to be I think we’ve been pretty mindful of investing ahead at oxide where we need to. But. Certainly the um, that’s an important kind of gas pedal clutch balance that is is critical to to keep in check when when building a company and and it was a tough lesson to join it.
Alejandro Cremades: So let’s talk about let’s talk about this um let’s talk about oxide um ah obviously you know like you were now for like 20 plus you know years almost you know, working for somebody else. You know doing the the 9 to 5 yeah, as we as we call it. You know in the in the startup world now. What triggered you know for you to be okay with the idea of venturing into the unknown because I mean that was um, a massive step. You know after you know, being for so long in corporate and working you know for another company I mean how was that you know for you that transition.
Steve Tuck: Um, yeah I mean so a couple of things led to this one was again bearing witness to some of the things that weren’t some of the things that didn’t work in in prior companies and really wishing that there was more change that we could have affected in in those companies and. Um, two was just recognizing a couple of of market factors in our kind of tenure at joint one was this rise of Cloud computing I mean if you if you look at a WS pre Twenty ten and it was less than $1000000000 business.
Steve Tuck: Right today. It’s a $100000000000 business it’s hard to find similar kinds of rises in industries anywhere over a decade plus period so cloud computing really emerging and and we had you know a core belief that cloud computing was the future of computing. Um, the.
Steve Tuck: Ah, company joint. It was acquired by Samsung so in 2 16 Samsung came through and and and bought join it and the reason that they bought joint was another kind of light bulb that went off Samsung in 2012 was was selling devices against. Apple and where they were selling camera quality and processor power Apple was selling. You know we have your whole family and life wrapped up in a software platform much more compelling kind of product vision and that was in Samsung deeply realized they had to catch up on software and to do that they started using cloud computing. So 12 they were a very small cloud computing customer by 2015. They were a massive cloud computing customer you know on their way towards spending you know eight nine figures in the public cloud and they realized that for all the business innovation. They were catching up and developing software faster and they couldn’t afford to stay. They were losing money for every mobile user they were signing up and they recognized like we can’t keep building on the public cloud only we’ve got to keep this innovation but move on-prem got to own this infrastructure. Samsung is 1 of the biggest technology owners in the world. They so they kind of canvassed the market and found that there was no technology solution to bring cloud computing on premises so they bought a cloud computing company.
Alejandro Cremades: So Then So. And I.
Steve Tuck: And needless to stay. There’s there’s not enough cloud computing companies for kind of the the rest of these large enterprises that had that were conflicted in that way and that was that was definitely a bit of ah of a light bulb and then I think the last one was when we were at joint we were building this large global cloud computing business. And we were running into a lot of issues where our software met the hardware where our control plane kind of the sophisticated software layer that helps deal with multi-tenancy and elastic infrastructure services where that ran on commodity hardware dell super micro orrista these these. Systems that you know had largely looked and stayed the same for the previous decade decade and a half that’s where all the issues were emerging in in our large cloud stack and we were talking to Amazon Google Facebook that the folks over there asking them how they were dealing with these same issues and that’s. You know when the big reveal happened’t that they had been designing and building kind of modern cloud purpose built infrastructure for almost a decade and that this was sort of off limits to those that were that were building themselves on-prem.
Alejandro Cremades: So then so then obviously you know you guys send up a getting going with oxite. So I guess for the people that are listening to really get it. What ended up being the business model of oxide. How do you guys make money.
Steve Tuck: Um, yeah, so you know our our core kind of premise and oxide is is number 1 again that the future of computing is cloud computing and that and cloud computing is not this notion of renting space at Amazon or you know Google or Microsoft it’s actually an architecture. It is a programmable interface to elastic infrastructure services that make it super easy for developers to deploy software and operate software and if you also believe that cloud computing is important and will be ubiquitous. Ah, then it’s a pretty logical next step that that that primitive can’t only live in a rental only model with these service providers. It would be like for for for accommodations. The hotel model being the only way you can live.
Steve Tuck: There’s no houses. There’s no apartments. It’s only hotels and so our core belief was that you needed to have a computer that ran your cloud that you could own and it turns out the on-premises market is you know, a very very very large multi $100000000000 market that is largely underserved. And and the third piece was if you’re going to build a cloud computer. You’ve got to do hardware and software design together and this is probably the most important kind of bit ah core belief of ours. You know like. Nvidia and Apple and Tesla and others that these kind of like outsize benefits to customers come about when companies take on both hardware and software which was extremely controversial in the computing industry right? and it was one of the biggest questions we’re raising our seed was like what do you mean you’re building hardware. I thought is are isn’t everything just a software problem or are there are there even computers anymore and so to your to your question we have we set out to build a computer. That is much more in line with what you would find in the cloud hyper scalers that drive all of their benefits and innovation. But now it’s for the first time open to the commercial market. So if you’re a fortune 1000 company that has.
Steve Tuck: And spends half a billion a billion dollars in it infrastructure on-premises every year along with your public cloud spend you now can get the same benefits of cloud computing. But in that on-prem owned model. And so we we sell. Ah we sell hardware and software together in an appliance-like solution that that companies buy deploy and run.
Alejandro Cremades: That’s amazing and I know that you guys have raised a you know close to ah eighty million bucks but I know that they right after the series. A there was ah a nerfraccking moment that involved all of a sudden you know all the money to evaporate you know. How was that because I know that it was a really tough time a tough time where you guys were at the same moment literally in parallel dealing with a reulatory you know compliance and hurdles. So I’m sure that dealing with those 2 things at the same time. It was probably a nightmare but they but what happened there and how did you get through it.
Steve Tuck: Yeah, so we hid we had we were in the process of raising our series a and um and then had a whole lot going on as we were finalizing the product and getting the product ready to market because you know the system is I say hardware and software. It is. A de novo’s server design that’s kind of built for cloud computing. We did our own switch on which in and of itself was a bit controversial early on as we were talking to investors and then we were assured by those that had been say at 8 of the us early that you. And to build the switch into the computer if you wanted to really build for true cloud computing did our own operating system firmware control plane there there was there were a lot of pieces that were that were coming together as we were getting close to ship and so we had raised the first tranch of our series. A. And you mentioned compliance it turns out when you’re shipping equipment like this into the enterprise you have to pass Fcc compliance. There’s these emission standards that you have to meet so that you don’t have people shipping electronic equipment at data centers that are you know sending radio signals everywhere. We we talked kind of extensively about that in in our on on our oxide and friends podcast just talking about these things people don’t typically go to Depthon Pcba bring up and and compliance so we get through compliance huge hurdle. So now we’re ready to ship.
Steve Tuck: And and then March hits and the funds that we had just raised are effectively unavailable because we had everything with Svb and I know that in the in the sort of communities is an all too common story because most people banked with svb but. It was a pretty dark period because all the energy that had gone into getting that raise done and then having no idea what was going to happen over the next couple of weeks. So the first focus was payroll for everybody. How do you make sure your employees get paid. Um, we were. Very fortunate that we had our core investors that had offered to wire money if need be to cover payroll but the other side of it is what does the six month outlook look like twelve month outlook look like because if you wanted to get a comp and look back at what happened to Washington Mutual and 2008 the distributions of cash from that were still happening in 2022 so that means that firms that had their money with svb like the worst case scenarios where you were going to get sixty cents on the dollar and you were going to get that over the course of many many years and you know the the thing that was probably most difficult for us was our employees right? because they is is all in the news. So their families are asking them. Do you stole a job. Are you getting paid? What’s going to happen oxide and um and things were during that week
Steve Tuck: From that Wednesday when the first smoke started to kind of show up to when a fed took over the bank on Friday morning. Um you you heard all kinds of different stories flying around the thing that we you know I mean. Again god bless our investors that that had let us know they were behind us. They were going to make sure we could continue the business that we were going to the employees were going to get paid was just being as transparent as we could at the employees letting them know all the information we had as we had it even even as harrowing as it may be I think it’s more paralyzing for folks. Ah, to to be kind of theorizing about what might happen then even knowing explicitly what is occurring and and and sometimes how little you know about the about the situation. Um, but yeah, that was ah that was an unexpected one I think you know covid. Covid hitting within three months of raising our series seed and then sbb collapse within a couple of months of of our a. We’re definitely. You know we we knew some of the headwinds and the risks in a startup and a a startup like this.
Alejandro Cremades: The the excitement and the adrenaline never stop since Steve now I have a question for you he because obviously as we’re talking about money and we’re talking about investors. You know it’s always betting on a vision. So as we’re thinking about the vision of oxide.
Steve Tuck: Those 2 were not planned.
Alejandro Cremades: If you were to go to sleep tonight and you woke up in a world where the vision of oxide was fully realized what would that world look like.
Steve Tuck: Um, I think you you would see a world in which the on-premise side t market which you know by any by some measures is is on the order of 150 to two hundred and fifty billion dollars um that market today is still made up of a kit car. 4 or 5 different id vendors kind of smash together in these racks that is running in about as inefficiently as you could imagine the the average rack in the data center today 25% of the energy of that rack goes just to moving fans. Which is wild. Ah, the average utilization of the resources available in these racks is 25% in aid of us that utilization is seventy eighty percent it would it. It. It do us be at of business if they ran anywhere close to the way the infrastructure.
Steve Tuck: The the kinds of technologies and infrastructure that’s available to folks that are running on protoday you’ve got very little automation. You do not have the same kind of elasticity and services that make it easy for multi-tenancy and for developers to be productive. So um I think that. A future that is necessary is expanding and extending all the innovations that have gone into cloud hyperscaler infrastructure over the last fifteen years and converting that on-prem market to being vastly more efficient vastly higher utilization. And fully api-drive in and programmables you get to take these brilliant folks that these enterprises and and everyone has that are they are typical that are that are excellent engineers that are working on things like bios updates and license management and server racking and stacking. And letting them free up their talents to go work on the things that each individual business is is building and known for what their customers are looking for and if that happens you’re going to see just gdp growth. You’re going to see productivity in the markets that we just haven’t had before. And and then we’re also going to see the ability to take on new technologies in support of things like Ai because we are much more energy efficient in the way that we’re running infrastructure on premises and to do that. you’ve got to you’ve got to change the.
Steve Tuck: The the definition of what the computer is it no longer can be this little pizza box that is totally disassociated from networking and storage and software and you need to have a ah really well designed together integrated system that is software driven.
Alejandro Cremades: So we’re talking about the future I want to talk about the past to october two thousand and nineteen okay I’m bringing you back in time you have that younger Steve right in front of you. What would you tell that younger Steve before launching the business and why.
Steve Tuck: Um, oh man, well bank with more than one bank nums can I think good that that one that 1 may have that one may have been unavoidable.
Alejandro Cremades: Ah, one one you only have one piece of advice. 1 piece of advice. What would you tell that younger Steve.
Steve Tuck: Um, I think what I would tell myself is that no matter how difficult or seemingly impossible things are at any 1 particular moment i. You’re going to clear that next hurdle the company is going to clear that next hurdle that and and really just maintaining optimism throughout I think the um the the.
Steve Tuck: Optimism and transparency have been the 2 most important values of the values that we I mean I look I could I could pick any any 1 of them. But ah, you know, leaning into transparency and then making sure to maintain optimism I didn’t have to tell myself this at the time that if it were. You know 6 months earlier it would have been make sure that you um are I would put it differently. The most important thing we did was making sure that we when Brian and I founded the company together it was choosing a partner that had. The same goals the same values the same principles and really the same kind of long-term view I mean you you asked a question earlier about being at 2 companies over 20 years you know we we founded this company not to build a computer company. We founded this company to build the kind of company that employees could be proud of saying they work for. In 20 years and that we would be able to recapture that same moment in time where I was at dell and looking at the stage and Brian was at some microsystems and looking at the stage and ah and create a culture and a team and a mission that that folks would be incredibly proud to be a part of and.
Steve Tuck: Um, I think you know just making sure to stay on that original vision and set of goals despite venture capital and despite all the different things that are going to pull you in different directions. Um that that that has been the most important part of the journey so far.
Alejandro Cremades: That’s amazing. Well hey Steve for the people that are listening I will love to reach out and say hi. What is the best way for them to do so.
Steve Tuck: Um, yeah, ah you can can reach me on Twitter my dms are open at sd talk. We’ve got a a a not to ah not to promote one a podcast on a podcast. But. We we have shared a lot about oxide on our oxide and friends series and kind of runs runs the gamut. But if you’re interested in the the hardware software interface that one is is got a lot of the war stories for and scars from. You know pcb bring up to ah to compliance and and all all the things the ups and downs along the journey. Um, and and and I think those are probably the two best factors.
Alejandro Cremades: Amazing! Well hey Steve thank you so much for being on the deal maker show. It has been an honor to have you with us today.
Steve Tuck: Um, yeah, thanks for having me.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Steve Tuck On Raising $80 Million To Disrupt Cloud Storage And Computing appeared first on Alejandro Cremades.
Few stories are as remarkable as those of individuals who’ve carved their path to success against all odds. Today, we have the privilege of unveiling the captivating journey of Rupesh Sanghavi, a bootstrapped founder who defied conventional norms to build a thriving empire from scratch.
Rupesh talks in detail about his experiences building a company to over 400 employees on a $150M revenue. He also reveals how he maintained his focus on sustainability and culture when building, scaling, and financing his venture.
In this episode, you will learn:
- From the bustling streets of India to the corridors of academia in the United States, Rupesh’s journey is a testament to the power of resilience and resourcefulness in overcoming adversity.
- Balancing the expectations of his Indian heritage with the opportunities afforded by American culture, Rupesh embraced the challenge of navigating cultural crossroads to carve his path forward.
- The serendipitous discovery of e-commerce sparked Rupesh’s entrepreneurial journey, leading him to leverage his engineering background to unlock the potential of digital commerce.
- With unwavering determination, Rupesh took the leap from corporate stability to entrepreneurial uncertainty, embarking on a journey of self-discovery and innovation.
- Against the backdrop of a venture capital-dominated landscape, Rupesh’s commitment to bootstrapping Ergode reflects his belief in sustainable growth and independence.
- At Ergode, every employee is valued and empowered, with a culture that fosters innovation, collaboration, and personal growth.
- Rupesh’s journey teaches us the importance of embracing technology and persevering through adversity, paving the way for success in the ever-evolving world of entrepreneurship.
SUBSCRIBE ON:
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Your email address is 100% safe from spam!About Rupesh Sanghavi:Rupesh Sanghavi is an accomplished entrepreneur whose journey embodies the true spirit of determination and hard work. With a humble beginning, Rupesh embarked on a path that led to remarkable achievements and established him as a respected figure in the business world.
From the early days of reselling a used book, Rupesh’s entrepreneurial instincts took flight. He founded Ergode Inc., a thriving e-commerce company that has experienced exponential growth under his visionary leadership.
With unwavering dedication, Rupesh and his team expanded the company’s catalog to offer over 3 million SKUs for sale in more than 150 countries, fostering relationships with over 2,500 vendors.
Rupesh’s entrepreneurial prowess has not gone unnoticed. Nominated as a finalist for the EY Entrepreneur of the Year award in consecutive years, he has been recognized for their exceptional business acumen and innovative approach.
Additionally, Ergode Inc. has earned its place among the top resellers on leading platforms such as Amazon, Walmart and Target.
Beyond his professional achievements, Rupesh is a devoted family person and takes immense pride in being a loving husband and father to three boys.
His passion for reading books and exploring the world has not only enriched his personal life but also fueled his insights and experiences as a CEO.
Alongside his entrepreneurial journey, Rupesh is committed to giving back and empowering aspiring entrepreneurs and startups. He readily embraces the role of a mentor, guiding university students and sharing his knowledge to help others make their mark in the business world.
With a down-to-earth demeanor and a genuine love for learning, Rupesh’s success story is a testament to the power of perseverance, strategic thinking, and embracing opportunities.
His biographical article stands as an inspiration for those seeking to achieve greatness through humble beginnings.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today. We have a really amazing founder a Bootstrapped founder. You know he hasn’t raised any money but here’s the deal. He’s built his company to over four hundred employees on 150000000 topline revenue. So talk about impressiveness here. We’re gonna be talking about. Story how he went about doing it. Also we’re going to be talking about how really to go about running a business that is fully bootstrapped thinking about sustainability as well as how they’ve gone about building their culture to know again, you know building scaling financing. You know, not that much but we’re going to be talking about bootstrapping it. All the good stuff that we like to hear so brace yourself for a very inspiring discussion so without further ado. Let’s welcome our guests today rupeshang gavi welcome to the show.
Rupesh Sanghavi: Oh thank you. Thank you Alandro for having me I’m so excited to be here.
Alejandro Cremades: So born in India give us a walk through memory lane. How was life growing up over there.
Rupesh Sanghavi: Oh it was amazing. It’s literally how I would say how other side of the world lives literally and physically um had a like I mean from driving on the different side of the road to flipping a switch on the different side of the plate. Um I think it was growing up in India was quite an exciting time. It was a pre-internet pre touch phone era of we grew up in a very competitive environment. Um I like most of us were not blaged with lot of resources. So. We had to kind of ah we had to become a very um creative with the resources that we had and ah I’m very thankful for the way I grew up in India.
Alejandro Cremades: So then so then let’s talk about obviously in your case I mean in India there’s a lot of pressure. A lot of cultural pressure to to to study to to become either a doctor or an engineer I mean your case you was an engineer so you became you, you actually went into engineering school. Ah, but.
Rupesh Sanghavi: Um, exactly yes.
Alejandro Cremades: Like you say you know your mother was India and your father was the US so at what point does the mother and the father meet. Ah.
Rupesh Sanghavi: Oh ah, that’s fantastic. So yeah I mean I grew up in I grew up in India like you know, very um, limited visibility environment i. Perhaps learn to move my mouths like I move the mouse on the computer perhaps first time in 99 so at like at a very limited um, resources growing up. But I mean what changed my world and my trajectory is. That I applied for some universities in United States for masters and Texas a muniversity in Texas and muniversity invited me to do masters from there and here is the kicker absolute hundred percent scholarship and now on top of it. They give me some additional law compensation or money to just study change study there I was just blown like no matter us is one of the greatest country on this earth is because of what they do and how. They treat foreigners. There are not many cultural cultures that they do that I’ve been to more than a hundred countries traveling myself. But I’ve never seen and a country as generous and as open as us so that is how I think ah I think of us I was fortunate to do my masters. Um.
Rupesh Sanghavi: From Texas a and m and within eighteen months and then found my first job in California doing simulation engineering for a company called wonderwear.
Alejandro Cremades: And how was how was it like coming here to the Us you know the land of opportunity How how was it for you.
Rupesh Sanghavi: Oh my ah that you’re taking me to some very happy memories I mean even if I had to pick 1 year of my entire life like perhaps the first twelve months that I was in United States was my happiest year of my life I must say that with very limited resources. New country new, new everything. But just ah, life was a fantastic year at that time. Um, fortunately like um, start like I mean given that. We grew up in a very competitive environment I felt that um study here was a breeze I mean I was able to score 4.0 in a m I was able to work 20 hours a week ah was still cooking running a house for the first time because in India. Doing bachelors I lived with my parents I mean it was I believe it or not it was as common as the school student living with the parents at that time. So I was never by myself and yeah, everything changed here and changed for better. So had a fantastic experience. Great professor, great thinking and super good culture.
Alejandro Cremades: So that’s pretty amazing now in your case you know you ended up being going into the corporate world and you did that for close to 6 years you know it’s like you were waiting for something to happen. You know what? what do you think needed to happen because.
Rupesh Sanghavi: This that certainly.
Alejandro Cremades: Ah, what point did that whole entrepreneurial thing started to to incubate in you.
Rupesh Sanghavi: Oh that’s a I mean now thinking backxi perhaps I did not even knew the full meaning of be what it likes to be an entrepreneur. Maybe even I’m learning today but I can tell you this. That I used to do some small gigs all the time like selling um selling some stuff. Um, kind of doing some service jobs I like I was like that way tinkerer what kick started me was um, like I while buying a book. For my wife I realized that there is a book I can buy for go fifty bucks less than $50 and sell it for $1600 that to instantly 0 weight time. So I took the plunge did the transaction and it kind of got me hooked. Once I realized that it’s just not for money but the amount of opportunity in ecommerce at that time sounded enormous and that got me hooked then and there.
Alejandro Cremades: So then obviously you you started doing this on the side. You know for a little bit and they what was that moment where you were like hey I think that they it’s time. It’s time to get this thing done.
Rupesh Sanghavi: Um, that is correct.
Rupesh Sanghavi: Great! Great. So yeah I mean like once I sort of realized what I kind of stumbled on or what really my calling? Um I just I like I mean I just started spending time as in when I could ah work was my still first priority I still. Continue to rank 4 or 5 on 5 or 5 scale. So I was doing very well on the job. But then I realized at one point that look I mean I can only go so far I mean I I mean my real calling is from entrepreneurship and that’s when I took a plunge and that’s when. I sort of um, ah I mean started doing this full time.
Alejandro Cremades: So then let’s talk about that moment where you were like okay I’m going to go for this I mean how nerf rocking was when you gave your ah you know notice and and you went out this you know on your own for for ah for the first time.
Rupesh Sanghavi: Why you’re magical eandra you’re taking me to the right spot and right time let me tell you this I walked to my manager at least 3 times and like with the full intent of um resigning from the job. From giving that no taste could not do it. It was the fourth time that was a charm like I mean my boss really thought something weird resolve because I would just walk up to him change my mind at the last minute talk something about project or something else and then just walk back. Maybe a week to live a week or two later I’ll do the same thing until fourth time when I gathered enough courage to tell him and that’s it I mean he tried to retain me he tried to tell me that like look you will have a better future year which of course I respected it. But then at that time I stitched stood my ground and decided to step out.
Alejandro Cremades: So then let’s talk about the early days what were the early days like you know, really pushing the company pushing airgoat I mean what? what? what? What were those early days like.
Rupesh Sanghavi: Oh early days was a fun I mean talk about transformation transformation ah into business I mean I felt like for first six months or so I mean sorry first few years I thought that we are changing business model or evolving business model every 3 to six months so there was a constant um, tinkering and constant fine tuning of exactly what we want to do and it is almost like when you tinker with the ongoing business. It’s almost like changing a tire.
Rupesh Sanghavi: While car is in motion. So it was not easy, but it was a lot of fun um few other things I mean like from chemical engineer I mean we started selling books even though right now books are less than 2% of what we do, but at that time we started selling books so imaging a person doing a. Very well in chemical engineering chemical plus computer science and suddenly you start selling both so like I mean even if I tell my friends or family that I’m doing this full time that next question and sorry that next question was how would you support yourself I mean implying that. Would you even make enough money to support yourself compared to where you were and um I did not real like I did not understand working capital I did not understand profitability. There was no sophisticated system at least not that I know I mean luck and ah I did not add a exposure to it. So. I was even wondering that have I done the right thing because I did not realize that I’m reinvesting all the profits at that time back into business. So I was like I was just buying more items to sell and I did not realize that hey I’m making this invisible money I thought like oh. I don’t know why I’m working so hard and not making money. So ah, those were the earlier days um I was everything from um, strategy to accountant to cleaning the room to or shipping the books. Everything was done by me. Um, it was pardon.
Rupesh Sanghavi: Interesting exciting period Now when I look back.
Alejandro Cremades: So then for the people that are listening to get it. What ended up being the business model of her gold. How do you guys make money.
Rupesh Sanghavi: So at the moment. Ah our vision and ah I mean our vision is to transform great American brands from a physical retailing world to digital.
Rupesh Sanghavi: Digital landscape now from physical to digital involves a lot of the lot of work because the like spial. Yeah, so that is what we do. We? Ah, we work with various businesses and brands. And we buy their products and we sell their products online and we help them. We help them grow so we help brand grow not as a agency but as a retailer as a their retailing partner and as in when if we see a ah mutual opportunity. Acquire the businesses that we are working with either businesses ready to exit for some reason or we see ah potential to work together. We also acquired that business and become a hundred percent owner of that brand so we have acquired 15 businesses in last three years. Yeah, and. We we work with over finded brands as a reselling partner. So essentially we either help you grow your brand or we help you continue? Um, the survival of the brand for many many years or decades to come.
Alejandro Cremades: And we’ll talk about the acquisitions in in just a bit but 1 of the things that strikes me here is I mean you guys have built a really meaningful business. Why didn’t you guys ever think about raising external money because I’m sure that you’ve had like all types of people knocking on your door. You know for.
Rupesh Sanghavi: Should.
Rupesh Sanghavi: Thank you.
Alejandro Cremades: Helping you with giving you money or with whatever that was.
Rupesh Sanghavi: Absolutely so ah up until 2020 up until pandemic we were. We were just we were ah cash we were doing I mean we are still doing um, amazing job that we are. We have been a cash flow positive.
Rupesh Sanghavi: We have all the working capital has come out of our ah profitability over many years and because of like I mean because of that we never needed a cash to like run our business because our cash flow cycle. Was always um, ah positive in terms of we get paid before like um, like I mean we get paid much faster thanks to our real like thanks to over ranking and relation with some of the major marketplace like Walmart Amazon where they pay us much faster than. They pay to any other sellers so because of that um we we we never needed a money after Twenty Twenty um we when we started acquisition business at that time. Yes, we needed a lot of upfront cash and.
Rupesh Sanghavi: Up until the like by the time we ran out of our own cash to invest into Brand We realized that and actually we started thinking about raising money but then by the time we ran out of our own cash to buy Brands. We realized that those cash comes with lot of conditions. And those conditions may ah may limit our growth to an extent. So. That’s why we continue to focus primarily on um, growing the brands growing the profitability ah growing the vendors that we work with. Rather than being distracted by more brands and because of those profitability reasons and like that staying independent. Um, as long as we could led us to not explore um, many like I mean we had ah have had many. Um. Unsolicited. It seted inquiry to invest into our business. We have said no so far and as we acquire more brands in the future We We are open to it. But for now we we are we are going doing well.
Alejandro Cremades: So then let’s talk about the acquisitions. No so at what point does the whole idea of growing inorganically be ah acquisitions at that point at what point that’s that kind as ah as an option because I mean it sounds like now you guys have built more of an assembly line on the way that you’re able to plug those in and.
Rupesh Sanghavi: Chen.
Alejandro Cremades: And put them on there. The Umbrella So at what point does that idea come knocking and then how have you guys gone about really building that assembly line to make to ensuring that integration. You know of those transactions end up being a success. So.
Rupesh Sanghavi: Absolutely so that’s a keyword a landro very well said. So we have built an assembly line. Um, check the base part like bee part about is that because of the more than one and a half decades of experience. We knew. Like even when we acquired brand we were doing even when we were not owner of the brand so it became very natural for us that um now we have something of our own. We kind of take an extra care so we always have. Perfected and mastered this assembly line concept where we ever like we have a team of 450 people. Um, who do everything from search engine optimization to digital marketing to customer surveys to research and analysis to create a social media. Everything is done. Ah, in ours and because of that strong team when we added like and the one part I should say that when we add brands we typically like when we acquire company we typically want to see that their manufacturing is not in ours. So they are ah I would like to see they get their manufacturing. They have our manufacturing done from an outside either somewhere in Asia or Mexico or even United States but the manufacturing cannot be in ours so that is what we have focused on.
Rupesh Sanghavi: So when we acquired brands. We primarily focus on growing product lines we focus on um, ah, growing top lines and so on we usually typically don’t get ah, bogged down by manufacturing at this point.
Alejandro Cremades: So then so then in that case you know, let’s talk about to the um how you guys have gone about people right? I mean you obviously those acquisitions are all about people too and now as you said you have over 400 employees. What is it like you know to be an employee of ergo day and and and. And what are some of those values that you guys have built a culture on. Yeah.
Rupesh Sanghavi: Brilliant. Thank you? Um, so I think ah I mean I’m fortunate to have my first job in the in job job in California and imaaging a culture of California in early 2000 when company. Would give you almost like almost a resource treatment um inside the company and they will encourage you for from every perspective so I was I’m fortunate to have spent those years in California where they would. Give me, they would give me unlimited access to any training courses. Um, ah, access to gym various programs foods sports stuff like that I like and I’ve not worked anywhere other than. The United States so I’ve taken those values and those thinking back to my team. Our team is spread all over the world. We have some in Japan some in um, ah quite a few in India some in Philippines some in United States so our um our employees or our ah like people who work with us are all over the world now we like whatever is practical, um, like ah, whatever is practical. We offer them as a motivation and compensation. There are 8 different ways.
Rupesh Sanghavi: In which we compensate employ in terms of like various sports efforts sports ah sports rewards to obviously monthly compensation to on ours to incentives to all kinds of stuff that we offer in terms of compensation. They were unlimited access to um, ah, any course and company reimburses for them. Then we have a program when then we provide Eso even though as ah, ah as an independent company. We don’t have to. Give of a equityity but we have chosen to give eesop that is a little stock in our company to almost to all the employees and why why that because my fire goal one of the fire goal is to hack a create find it. Millionaires and I know we can do it. Um, if we continue to be on the path we are on so with such small equity I think we can have a lot of people. Um, benefiting from esop and then we have programs like mga we have programs like token of appreciation. Um, in in the like 1 of the interesting program that I can say is that like in token of appreciation we have ah clay chips made with the name or go and we actually give out that chips to um, somebody who is performing well or was performed well um, on given day.
Rupesh Sanghavi: And then like every week they get some awards and like starting from um, smartphone to who knows all kinds of awards we give out so those things keeps employee engaged. Of course we celebrate lot of Festivals. We Celebrate Birthdays. We have our all end meetings. All those parks are part of working in our good and here. Ah.
Alejandro Cremades: That’s amazing. So then so then I want to ask you something here then imagine if you were to go to sleep tonight and you wake up in a world where the vision of the company is fully realized what does that world look like.
Rupesh Sanghavi: So. Great. Great question. So um I think um okay 1 is that um I would like to see I would I would like to see that we have we have we we we have worked with at least. 100 brands we have like we have some great branch stories that I’ll get to later but some of the brands that we have saved from oblivion is quite an amazing. So maybe a hundred plus of those stories that we are fully capable of executing is but my goal second is about. This finded million find it creating a finded plus millionaires. It may not be much but being a millionaire in some part of the world still means a lot and I would love to see that everybody who has been working with us gets benefit from um. This chundra output I know that money cannot solve all the problems but definitely it helps to reduce so alleviate some of the problems. Um, the the third goal in my my mind is to be a net exporter of the products from United States right right? now I mean as a us we export lot of um lot of stuff but not so much into this retail era. But I think as ah I mean our products the brands that we have acquired are from United States and we can actually um I mean like right now.
Rupesh Sanghavi: Our international cells are less than 20% but I think we can easily grow that to fifty sixty percent and that would be my vision to see that we our american ideas american products becomes popular worldwide.
Alejandro Cremades: So we’re talking about the future here but I want to talk about the past and with a length of reflection because I mean you’ve been at it now for close to 15 years which is obviously you know building a company 15 years is like in in corporate that will be like 200 years now in in dock years right? I mean absolutely unbolio. So.
Rupesh Sanghavi: Yeah child.
Alejandro Cremades: Imagine I was to put you into a time machine and and I bring you back in time you know maybe to that moment where you know you were now giving your notice. You know they’re in inventes and there you were like a having the opportunity of having a chat with that younger rope.
Rupesh Sanghavi: Ah, so.
Alejandro Cremades: You’re able to give your younger self one piece of advice. What would that be and why you know that piece of advice for launching a business given what you know now.
Rupesh Sanghavi: Fantastic I think um I I think as much as we adopted technology early on I think we did not do enough. There is no reason we could not have we could not have become another Amazon. Size company at that time only if we are focused more on technology. So the way I think about now is that every company is sort of a technology company. Um with that application in different areas like Healthcare Finance Retail who knows right? so. I think if ah only if I had invested more time into technology. Um I think we would have been even much better off. So I mean if there is a 1 advice yes technology second maybe ah I think lot of time. It’s a persistence because. Entrepreneurship is not about all the glory days when I get recognized rewarded or I feel a sense of pride in god like creating a team of the size we have okay, there are a lot of hard days that. Have to live through and persevering through those hard days when situation is tight when we are in a problem of not our own making it is hard to go through those days but a it’s negative of like I mean we just have to persevere through this. So I think.
Rupesh Sanghavi: Technology on the like actually um, a technology on the doing side and perseverance on the mindset side is what I can share with the younger myself.
Alejandro Cremades: So for the people that are listening. You know that will love to reach out and say hi Rupesh what is the best way for them to do so. So.
Rupesh Sanghavi: Linkedin is the base test way. Um I’m on text message whatsapp message as well. But Linkedin like I’m sure we can easily my name is through page songwi so you can just find me there and. I do respond to every message on Linkedin. Thank you, thank you? Elandra! Thank you for having me and it’s really a pleasure to be here. Thank you.
Alejandro Cremades: You see enough. Well rupesh. Thank you so much for being on the deal maker show today. It has been an honor to have you with us.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Rupesh Sanghavi On Bootstrapping A $150 Million Company To Nurture eCommerce Brands And Help Them Grow appeared first on Alejandro Cremades.
In a recent episode of the Dealmakers' Podcast, Daniel Theobald, the visionary entrepreneur and founder of Vecna Robotics and Mekable, shared his remarkable journey from growing up in Silicon Valley to pioneering autonomous forklifts and revolutionizing the robotics industry.
The post Daniel Theobald On Raising $128 Million To Have Robots Do The Dirty Work For You appeared first on Alejandro Cremades.
In this episode of the Dealmakers' Podcast, we had the pleasure of sitting down with Carl Hartmann, an Australian entrepreneur who has taken his innovative ideas and turned them into two successful businesses. His latest venture, Lyre's Spirit Co has attracted funding from top-tier investors like Futurecraft Ventures, VRD Investment, Doehler Ventures, DLF Venture, and DLF Venture.
The post Carl Hartmann On Raising The Highest-Ever Seed Round For No-Alcohol Spirits With $11.5 Million In Funding appeared first on Alejandro Cremades.
In this episode of the Dealmakers’ Podcast, Ramin Shirani, a seasoned entrepreneur with a remarkable journey, shares his inspiring story of going from a young immigrant delivering pizzas to becoming a successful technology innovator in Silicon Valley.
Ramin’s story is a testament to the American dream, resilience, and entrepreneurial spirit. His latest venture, Ethernovia, has attracted funding from top-tier investors like ENEA Capital, Qualcomm Ventures, VentureTech Alliance, and Porsche Automobil Holding.
In this episode, you will learn:
- Embarking on a life-changing move to the USA before the Iranian revolution, starting from scratch in a new country.
- Choosing engineering over his family’s wish for him to become a dentist, following a passion for electronics, ultimately shaping his career in the tech industry.
- Understanding the invaluable advantages of being in Silicon Valley, emphasizing its unique ecosystem, access to resources, and proximity to investors.
- Involvement in ethernet technology at its early stages with a blend of luck and dedication leading to his central role in its evolution over the years.
- Latest venture, Ethernovia, that aims to revolutionize automotive communication systems, emphasizing the importance of understanding and solving customer problems holistically.
- Valuable advice on fundraising, emphasizing the need for aligning objectives with investors, creatively raising seed funding, and retaining ownership control.
- The significance of persistence, patience, and maintaining a founder’s compass to navigate the entrepreneurial landscape successfully.
Alejandro Cremades · EP 717 Ramin Shirani On Selling His Last Company For $452 MillionSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Ramin Shirani:Ramin Shirani received the B.Sc. and M.Sc. degrees in electrical engineering from the University of California at San Diego, La Jolla, in 1984 and 1986, respectively.
Ramin has been spearheading products in Ethernet communications for 25 years and is adept in mixed-signal IC design. He is the co-founder and VP of engineering at Aquantia Corporation, Milpitas, CA, which he started in 2005.
Ramin helped form the team, raise the funds, and run engineering products from concept to production toward market leadership in 10GBase-T transceivers. In 1996, he cofounded Enable Semiconductor, a mixed-signal Ethernet PHY company, which was acquired by Lucent Micro-electronics in 1999.
At Lucent, Ramin was the General Manager of all physical-layer IC developments, including the OC line of products (OC48, OC192, OC768), Ethernet physical layer devices (10 M, 100 M, 1 G) with cross-functional teams on research initiatives with Bell Labs.
Ramin began his career in 1987 at National Semiconductor as an Analog Design Engineer, and, in 1991, he led the first integrated 10 Base-T MAC and Phy IC. In 1993, he was the Technical Manager and lead for National’s entry and subsequent 90% market ownership of 100 Base-TX transceivers, and helped drive the standard for IEEE 802.3au.
Ramin invented auto-negotiation, which later became part of the industry IEEE 802.3au standard. Auto-negotiation is an out-of-band capabilities negotiation mechanism built into more than a billion Ethernet devices shipped to date.
Ramin holds 21 patents and has 10 pending patents in the area of IC design and communications.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today. We have a very exciting founder a founder that has done it multiple times and very successfully so you know from getting his company acquire the first one to his say latest one actually you know like he’s up to some really exciting things but the 1 right before this one he took it public you know at ah the peak it was like about 500000000 or so but he got acquired for a size level amount. So again, we’re going to learn a lot. We’re going to learn about fundraising how to balance that with the way that you go about building your business. And other really interesting stuff as well as the ups and downs of building a business because it’s not you know a path full of roses like you would see and as we know you know entrepreneur entrepreneurs so without further ado. Let’s welcome our guests today Ramin Shirani welcome to the show.
Ramin Shirani: Thank you very much a lot. Dr yeah excited to be here and to share some of my experience.
Alejandro Cremades: So originally born in Iran Ramin give us a little of a walk through memory lane. How was life growing up there and then also moving to the us.
Ramin Shirani: Um, you know that obviously back in back in 70 s 1970 s I was in Iran and I was going to you know top schools in Iran and life was good. You know the the.
Ramin Shirani: You know the the experience I had as a child growing up and loving the country loving the you know by family and and soon enough at some point we decided obviously to come to United States primarily for. My sister’s education and at the time I also decided to stay here. This was right before the iranian revolution and my intention was to go back and finish high school back home but due to the revolution. We decided that hey it’s probably best for me to continue my education here. And then the whole family obviously moved here and we pretty much started from scratch. Ah you know building yet another life from scratch in United States back in late 70 s
Alejandro Cremades: So then talk to us about you know that moment of coming here for a better life. Um, you know from delivering pizzas to anything that you guys you know could do to really you know, go after the american dream I’m sure that was. Inspiring. You know to see your family. You know, like really doing whatever you know it was possible to really get that better tomorrow and to go after the american dream and and I’m sure that shape who you are today.
Ramin Shirani: absolutely absolutely so back home we had a reasonably comfortable life and I was raised in that environment when I came to us and after the revolution pretty much the money dried up the you know and we had to. Practically start from scratch I was delivering pizzas to make ends meet at some point I started teaching math. I was always very good at math and I remember getting you’re gonna laugh at this but I remember getting to ninety five an hour to to teach math which was. Back then kind of a minimum wage and my sister started working in cols junior and then my parents even though they’ve already put in a lifetime of work. They yeah. Pretty much started from scratch working in various businesses and restaurants to make the ends meet so be truly truly started from scratch and you know I I kind of paid partial payment from my parents but pretty much paid for myself through school. And you know so did so did my sister and my younger brother who became a dentist but it’s it’s truly an american dream. You come here with little money in your pocket and you go all the way to you know, finishing school and.
Ramin Shirani: Starting companies I’m living an American dream. But so it’s been. It’s been. It’s an um, it’s been an amazing journey up to this point and I would love to share some of the details with you.
Alejandro Cremades: Now in this case for you. How did you get into engineering you know because obviously you went to ah use see San Diego to ah to get your bachelors there but that problem solving that engineering you know mindset where do you get that from.
Ramin Shirani: My family excuse me my family wanted me to be a doctor right? I mean back coming from Iran you’re either a doctor or an engineer and you know we have ah we have a lot of dentists in the family. So my mom wanted me to be a dentist. And I I then on you know, talk to various Dennis I went and checked out the program at Uop but deep in my heart from childhood I always like to you know play with electronics I used to sit you know for hours and hours building gadgets out of. Kind of taking my old toys and breaking em apart and building new ones and you know electronics was really kind of a passion and it was it was a no- brainer that I wanted to be an engineer so I told my family I said I’m not going to be a dentist and probably one of the best decisions I made at a young age kind of. Going against the grain and I pretty much going to college I took mostly engineering classes. You know, excelled at it and then looked at various ucs and I loved u see San Diego it wasn’t only about the academics. But also the environment the campus that I used to play soccer I used to do weightlifting so you know it was the right campus that I yeah you know that I found that I can feel comfortable for the next four 5 six years of my life
Ramin Shirani: Ah, with the goal I had a goal of getting a ph d and I was actually in the ph d program. But then you know after a few years of getting my bachelors and masters and being in the ph d program I decided to put it on hold and come and actually get a job in Silicon Valley
Alejandro Cremades: And why Silicon Valley out of all places.
Ramin Shirani: Yeah, my family was still here right? The rest and we’re ah we’re a close knit family and you know my sister my brother my mom and dad and we really wanted to be together and that was honestly the primary goal if they were in New York I’ll probably go to New York right at that that at that age but it it luckily right? you you need to be in Silicon Valley to to be ah, you know you don’t necessarily need to be but being in Silicon Valley gives you a different perspective of being an entrepreneur right? The resources that.
Alejandro Cremades: Yeah.
Ramin Shirani: Totality of the companies. You know the sand hill road with you know, venture capitalists and just of what vibe of Silicon Valley is unbelievable. So you know I didn’t quite realize it when I was a young engineer but over time. I realized what a blessing it is to be in Silicon Valley to be able to practically go across the street get a different job. Go talk to people fundraise and it’s been It’s been my home since coming back from San Diego so
Alejandro Cremades: So obviously the first job that you got there was at the national semiconductor company there and that was a pivotal moment for you because that’s when you stumble upon the ethernet and that was a life changing.
Ramin Shirani: You.
Alejandro Cremades: Or I would say professional you know career changing for you. So what was so exciting about the ethernet that you know got you so hooked you know over the course of time you know in your life.
Ramin Shirani: You know, honestly how I stumbled across ethernet part of it was luck part of it was you know, kind of research and understanding what I want to get into but national was at the early days of kind of the growth of ethernet and it. I was a young engineer that you know regardless of working in a big company in all honesty I used to work twelve sixteen hour days even weekends right? You know people come to me. It’s like why are you still here. It’s like because I want to learn right? I mean I I finished school I have this. Hunger in me to want to learn and do something and impact the industry and grow. So I I did I did I did well in the first few tasks that I were assigned and soon enough I mean within I would say a year or year and a half. Managers there saw the potential in me and said hey listen do you want to get involved in our next generation ethernet controller 32 bit internet controller called sonic and you want to take over doing this piece. It’s a very important topic. It’s very important you know project. And but we think you can do it and sure enough you know I dived in worked even harder I started doing the digital design master that master that in you know so a year
Ramin Shirani: And then they transition me to analog design generally you’re either a analog designer or a digital designer. But I mastered both and within a year and a half two years I knew that chip inside out I knew the digital design the analog design I could you know the physical design. And I became kind of the lead for national ethernet controller products and it was it was you know an amazing opportunity and did I did I know where ethernet is goingnna end up to be honest with you I didn’t. There were many competing technologies. There was token ring fddi atm but but sure enough you know ever since I’ve been involved with ethernet right? Whatever ethernet touch it wins. Right? They’ve they’ve gone from local area to wide area to wireless to mean if you look at internet in general right? The the fundamental core technology at where the where the people interface to internet either is through you know. Their phones or their computers or their service but all the primary initial connections are ethernet. So yeah, that’s how I stumbled across it and been lucky enough to be involved in it now since then.
Ramin Shirani: And ah, every company I’ve ever done has been some variation of ethernet kind of the next generation Ethernet Faster Ethernet Ethernet for various, you know, sectors of the market. So that’s that’s kind of where the story goes.
Alejandro Cremades: So then at what point you know in about 96? Do you realize that things are different because after you know close to 10 years then it’s like something hit you. And at that moment you know you realize that perhaps you were ready to start your own business. So why? Why did it take you so long being in the land of opportunity in Silicon Valley what needed to happen for you to really feel good about you know, branching on your own.
Ramin Shirani: Bri Red so so so when when ethernet from went from 10 meg to hundred Meg which was right about you know 90 ninety 1 92 93 timeframe I was given the responsibility to lead the next generation hundred Meg and you know with. With with the pieces we had with the involvement in I trip eao two dot 3 which is foundation of standards for ethernet which I was very involved in ah we were able at national to be you know first in hundred me ethernet. We had we we grew that that business from infancy to multi $100000000 sales a year at so at the peak national had 95% market when with a set of products called cat five five twister. And you know I saw that success I saw the business success of of kind of after nine years ten years I kind of grew beyond just looking at technology and getting excited with technology. So I I looked at that business success and I said this is amazing. These kind of things can be done. This kind of market success can be achieved and at some point you know I approached my boss I was very very loyal his name was edwin de soza and I approached my boss and I said hey Edwin we can do this for ourselves right? I mean not this one. We’ve already done this one but the next one.
Ramin Shirani: Right? The the gig of it or the ten gig or and he he he said? Okay, yeah, they’ll do it together this and that but he was so embedded in a big company thing and I kept waiting and waiting and you know, really good guy I learned a lot from him but at the time he. He wasn’t ready. So I said you know what I’m gonna bite the bullet and I go do this on my own I there’s a lot to learn I’ve never raised funds I’ve never didn’t even know where to go look for funding I didn’t even I’ve never leased a building right? So so. So then I came across some other colleagues who already had the infrastructure. The gentleman’s name was Robert Chen and he already had the infrastructure he already had some limited funding but then I joined you know I joined hands and hands with him. And we we really created an enable which was focused on x- generationion ethernet. Ah for but the prior generation ethernet that national we did in Buyi Moss and it was multiple chips but this one we said we can get it done in single chip cmos. And sure enough we did it and we sold the company.
Alejandro Cremades: I mean it took no time you know 3 years for what it was worth at the time you know a total package of about 100000000 so for being the first company quite the exit I guess what? as as part of that process of getting that company acquired. What do you think you know like made it to. So successful you know for you guys to be able to achieve that finish line on a high note like that you know what was that acquisition process like.
Ramin Shirani: Ah, big. Really, it started by us the first chip the first chip seamos first chip in I believe back then half a micron cmas technology was one of the most leading edge hundred make products out there. And at the time there were you know talks of Broadcom getting into this market or they were in the market marvel still wasn’t in the in the market back then and you know getting you know, working around the clock and you know having the right team with the technology background. We had. Within a year and a half or 2 of starting the company. We had first fully functioning hundred Mex Simoss seaoss was important back then now nowadays everything it sees but having it in the lab and first time functioning and back then it was about cable reach. I mean if you could do longer cable reach it shows more robustness of your technology. So the very first chip very first day in the lab and never forget this right? We plug it in. we connect the netcom box and We connect hundred meter it works we connect 100 twenty hundred forty 6070 then be stopped. We said there’s something wrong, right? This can’t be so good. There’s probably the test equipment is broken but sure enough it wasn’t and the chip worked you know flawlessly and at the time we had. Ah.
Ramin Shirani: You know a number of companies out there trying to do the same thing to compete in the marketplace and 1 of them was lucent. We were interacting with them and they demoed it soon after we demo did and we got the production version out and they said we got to have this technology so lucent initially licensed the technology. It was but it wasn’t about acquiring company right? off the bat and then over time we got so embedded in loosecent and their programs and you know what they were gonna go do on the roadmap. It only made sense for us to for them to pick us up and make us part of their team and you know soon after. You know that I I joined lucent one of my old colleagues at national who’s at Roberts who was at lucent independently and he liked me back at national. He you know he he helped acquire the company and he promoted b to be the general manager of a rather large group.
Alejandro Cremades: And then after lucent I mean you were there for a couple of years and then obviously as they say once an entrepreneur entrepreneur always an entrepreneur and then the idea of Aquaantia you know started. Okay I mean here you know obviously was ah it was quite um, a tough time for you at the beginning you know a lot of Nos that you explored. And they obviously coming out of such a success like you had you know with with a prior company with enable semiconductor. You know, obviously now you know, starting up again and and hearing no I’m sure it was really really tough. So so walk us through through through the ups and downs there you know and and and why you thought it was a good idea to go out it again. You know with with what became you know, eventually aquantia.
Ramin Shirani: Um, yeah, absolutely absolute So ah so back in when I left lucent. You know it was it was right about 2001 And it was probably the worst time in the history for us to go raise funds for yet another you know, high-tech startup the post dot you know dot Com crash and I had I had a vision of kind of the next generation Ethernet. It was a combination of initially it was a combination of optical ah and you know electrical which eventually morphed to be you know, fully electrical being ten G based T but you know I felt everything I’ve learned and also some of the key partners Of. Had on the side. Ah, we had a technology that could fundamentally change the connectivity in the data center and upgrade it from Gigabyt to 10 gig and I knew that’s very very important that the ever growing need for Bandwidth I mean the trend. Regardlessof.com crash and you know the the environment being tough the the ever-growing Bandage requirement was there so we started on that path I self-funded it for a good period of time.
Ramin Shirani: Had consultants I had some of my cofounders who were putting in you know time just for the sake of being involved with the company but I exaggerate none right I heard from 2001 to 2003 I heard no less than 50 knowns right? I mean. I went on up and down the sandhill road I went to you know vcs in the East Coast ah talk to individuals this and that but the reality of it was I wasn’t ready to give up and once you taste this is the key once you taste being in a startup. Once you taste the pace of a startup once you taste what it takes to build a company sell the company. You know it’s it’s hard to go back to a you know corporate environment I was in a corporate environment post enable acquisition and as much as. Loved loosened. Love the people but I didn’t like the corporate structure right? I I want fast making decisions I want you know fast moving environment I want to be able to influence the outcome of the company I don’t like bureaucracy. So. So and again I’m not saying every company has that but my experience you know at least toward the tail end of staying at loosen. So so sure enough I said you know what? I’m not going to give up I continue doing this. We’ll self-fund it I’ve made a bit bitd of money in selling enable and.
Ramin Shirani: Then I partnered with other people who had similar vision and we got the first seat funding from lightspeed venture which was small but 750 k for proof of concept in 2004 and that kind of jumpstart everything right now we had a Vc behind us a gentleman named Eric O’brien who’s actually a board member in my current company. He was kind enough back then to give us the 750 k and he stuck with us and after the proof of concept. We got the major funding and and then the rest is history and I can tell you about it but eventually you know we took the company ipo.
Alejandro Cremades: Well let’s talk about that. You know as ah immigrant you know to the us ringing the bell in The New York stock exchange you know having your family there around you that was that moment for you.
Ramin Shirani: Oh it was it was amazing. It was amazing. You know you stand there looking at the crowd. You know there’s all the all the commotion and you you kind of reflect back at your life right? and all the all the accomplishments. All. But but it just puts everything in perspective. It’s like oh my god I’m here this this this is this is really kind of an indication of all the hard work all the innovations all the you know sleepless nights and. Ultimately, it’s not so much in all honesty about me right? It’s not so much about ah you know personal games. It is more about hey listen I’m impacting the industry I’m impacting the world in a positive way. To the point that this company is going Ipo and ready to serve you know ah is a good section of the technology sector with the kind of products that have that weaver putting out. It’s just satisfying to be in that position. That I’ve accomplished something that actually does impact people’s lives.
Alejandro Cremades: So then in this case I mean the company ended up getting acquired for 450000000 plus but in your case I mean part of the startup you know driving the adrenaline and the mentality that that you have Ramin you know that’s saying ultimately what they drove you to get going again with. Ethernobia. So how did ethernobia come knocking. Why did you think that it made sense to go at it with ethernoia and what is the business model. How do you guys make money with the company.
Ramin Shirani: Absolutely so so toward the tail end of our stay at aquantia we saw the qant of was obviously focused on Data Center Enterprise that was the business case. Our key customers were you know Intel La Cisco and so on. So so you know automotive for us at that qantia was a secondary target and secondary targets really never flourish right? because you have you have a daytime job and then you know partial focus on something doesn’t make doesn’t make sense. So. There’s significant interest in automotive we had various oems come to us and say hey listen we want you to build this. We want you to borf your 10 g based d technology to do a single pair transceiver for data communication within the car and as I learned more and more about automotive. And the requirements in automotive I honestly came to a realization that you know at least the nervous system of the car. What what connects the brains of the car to the to the sensors of the car is really really outdated right? it’s It’s kind of a hodgepodge of 30 years of putting multiple networks in a car. You know, ah some of some of the cars that are even on the road today may have as many as and I know this is hard to believe but as many as eighty eighty different networks.
Ramin Shirani: 30 cab 20 lenn most flextray ethernet. You name it and I said how is this even possible I mean look at where Vrv Data Center Enterprise with ether internet ethernet needs to penetrate the car and you know again at some point. In aquantia we were at the point where we were you know already Ipo the company was on a successful path. So I decided independently to leave and kind of start thinking more about ether ethernet inside the car. You know some other colleagues I had they independently left. On their own for various reasons and we came back together and we said you know what? let’s focus on doing an ah ethernet-based communication system within the vehicle. Let’s bring the totality of our experience from 30 years of ethernet 30 years of chip design and you know everything we know about ethernet and the success of Ethernet. Let’s try to bring it inside vehicle. It’s a tall order There’s no doubt and honestly if it was my first startup I would probably not do it because. Automotive cycles are long. Automotive is a tough is generally a tough business but but since I’ve been there I’ve done it I’ve done multiple companies before I said you know what? let’s dive into it. Give it our best shot we can raise money we have the reputation to raise money. We know it’s not going to be a 1 or 2 or 3 year deal.
Ramin Shirani: Gonna be more like a 7 8 10 year deal but we were ready for it and you know we came in primarily to change the nervous system of the car to make the core of the network ethernet and it’s not just about doing one chip or 2 chip right. Spend the first year of ethernoia entirely right? rather than doing and starting a chip or starting a design the first year of the company was entirely about finding what is the problem in the customer application. And how could we impact it not at the chip level. But at the solution level. This is very very very important again. You can go start a company focus on a single chip. And in automotive the customers are going to say okay come back to me when you have the chip I’ll look at it right? You’re a small company who cares? what we did for the first year especially hands and glop with volksvacken is we looked at the totality of the problem we realized it’s a much tougher not to crack. If you want to solve it in automotive. It’s not about just having at the right physical layer the right switching layer but it’s also about how you interface to cpu and ecus and gpu and then the totality of the software that sits on top of it and.
Ramin Shirani: Additional hardware and software offload capabilities that you need to have to make sure the whole thing works again to give you an example without you know, prolonging this. It turned out that you know the cars many cars had hundred mega at the time. But in transition to gigabet what they realized is that the protocol processing of ethernet for transition consumes, a significant amount of their cpu which has nothing to do with the nervous system of the car and the cpu exhaustion. Right? for protocol handling multiple arm processors trying to do the protocol handling of ethernet so transition to Gigabyt or 10 gig was meaningless. So so effectively early on. We realized that the totality of the problem is not just about doing a single chip. So we defined a solution which intels multiple chips and it intails a layer of software and their necessary protocol offload you know mechanisms built into this solution and what what I one one very important. Thing I want to cover with you is that a lot of people a lot of entrepreneurs go to customers and say I’m going to go to a lot of different customers and I’m gonna hear their requirements then I build something that’s wrong as much as we think it’s all correct as long as even big companies. Do that.
Ramin Shirani: In my opinion in my book. That’s wrong, right? You go to your customers you learn everything that there needs to be as long as you have credibility for them to tell you right? and you then compare and contrast then you define your customer’s roadmap. If you just do what the customer tells you they’re going to tell 20 other companies. So who are you as a small startup to go outcompete them. So the foundation of building a company if you’re an entrepreneur if you want to be successful is you have to have enough knowledge you have to have enough diversity. You have to have enough system knowledge that you define your customer’s roadmap. That’s when they respect you right? And in all, honestly, that’s exactly what we did in ittanovia to date. We’ve raised sixty four billion
Alejandro Cremades: And and for ethernoia how much capital have you guys raised to date.
Ramin Shirani: And we’re on a path of ah you know in the next you know in the next six months to a year we’re on a path of raising but in excess of that for kind of expansion of the company and that’s that’s our plan.
Alejandro Cremades: Now you know you were talking about like there I thought it was fantastic. The um, the advice on on how to think about building a company and and the way to really digest the feedback from customers. So. On. That note if I was to put you into a time machine and I was to bring you back in time to that moment where you were still. You know, maybe you know like coming out of um, you know University or even Better. You know where you were you know, like now you know thinking about what your next you know first company would be while you were working at National semiconductor.
Alejandro Cremades: If you had the opportunity of giving your younger self one piece of advice for launching a company. Why would that be and why given what you know now after launching 3 companies.
Ramin Shirani: Bye bye but so so as much as being an entrepreneur having a vision being technical you know, having being passionate being a good communicator. Understanding the market is you know is is important those are fundamental traits of a good entrepreneur but it is equally as important to know how to raise money a lot of young entrepreneurs or myself included back. You know twenty five years ago they come out and they look for funding but they really don’t know how to structure the funding because ultimately in my book. The companies that are successful look at Apple look at Facebook look at Netflix right look at there’s a million examples right? but. Ultimately the companies that are successful are are run by founders who have a compass in their heart right? and having a compass in your heart means you know you not only have the fundamentals of what it takes to be an entrepreneur but you also have the diversity on. You know the business side the management side and and companies again companies like Apple right? It’s all about innovation. It’s not about management. It’s ah the management. All of that is important. Those are to me secondary. It’s all about innovations.
Ramin Shirani: And having the company be run by the founders of the company. So but again you know I kind of digress to this to this topic but going back to the fundraising right? You want a fundraise in a way that the founder with the compass in their heart actually runs the company. And keeps innovating and the culture that that founder says should never be tainted by in in again in my humble opinion right? It shouldn’t be tainted by bringing other ceos or what have you to try to change the direction or the focus of the company. So. How do you fundraise and I had to go through my set of mistakes. How do you fundraise so you ultimately have enough say in the outcome of the company so you can continue running the company and again if you’re a founder who cannot run the company then you need to be. You know, wise enough to step aside I’m not saying you should stick in there. But have the have the guts have the ah you know passion to want to run the company create a compass in your heart. Do the fundraising in such a way that you effectively have an opportunity to run the company and make sure very very key. Is that make sure your objectives are aligned with the Vc objectives if you go after a certain set of Vc just because they give you money right? off the bat. It doesn’t mean your objectives are aligned right vcs have commitments to their lps and lps.
Ramin Shirani: Require money back. They don’t want to wait ten years right now they may out of necessity but they want to get their money back. You know soon enough so they can redeploy it. So um, you know again, align yourself with vcs who have who share your vision and are patient enough. For for especially in automotive right now for us, you know we’ve already been into this five years and I know it’s going to probably take another three 4 five years before you know any kind of you know, major outcome but we’re patient or Vcs our patient. And and again on that on that note when you start a company. Um you know, many entrepreneurs go and they they raise say 10000000 Fifteen Twenty million and by time it’s done 50% or 55% of the company is already gone right? What’s there to celebrate right? You just. You just gave control away. You just bought yourself a job your and again all due respect to venture capitalists have been more than kind to me throughout the number of years and that’s why I’m here right? because of a lot of people on Sand Hill Road and you know other corporate investors. But. The reality of it is the initial funding of the company in my humble opinion should never be from a venture capitalist because their objectives demand that they take you know, certain ownership sense certain control this and that and you should find creative ways and and seed funding of.
Ramin Shirani: Few million dollar you know prevaluation is just deadly for the company right? You have to use vehicles like used to be convertible nodes but nowadays it’s safe as a fe and creative ways of raising safe from various individuals. Corporations is especially corporate partners if your vision is to go after something you can always find the corporate partner to support you and they’re less valuation sensitive. So really approach the fundraising with as much ingenuity and smartness as you do your business case. And make sure you raise the money in such a way that you don’t give the company away I mean ten years fifteen years of your life and if you don’t have a say in the outcome if you don’t have enough ownership. It’s it’s still a good experience right? It’s not bad, right? If maybe maybe you do it once. But. But the reality of it is if you’re smart you fundraise for success to start with.
Alejandro Cremades: I Love that so Ramin for the people that are listening. What is the best way for them to reach out and say hi.
Ramin Shirani: Ah, ah the best way. The best way I have a Linkedin profile. So if you have a Linkedin which I’m sure most of you do please don’t hesitate to send me a you know a note or a message I’m open ah my my Linkedin profile is open so. Be glad to reach back out to you and um, um, um, I’m a very social guy and I you know coffee breakfast dinner this dad and as busy as I am I always make time for people. So if you know if it makes sense and there’s you know, reach out to me and. Be glad to be glad to help you.
Alejandro Cremades: Amazing! Well Ramin. Thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Ramin Shirani: Thank you very much for your time and thank you for giving me the opportunity to kind of share with you. Some of my experience.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Ramin Shirani On Selling His Last Company For $452 Million And Now Raising $64 Million To Revolutionize Communication Systems For Cars appeared first on Alejandro Cremades.
Nathan Harding’s journey into the world of innovation began with a simple childhood curiosity. From his early years in Houston, he found himself captivated by the art of deconstructing and fixing things.
Little did he know that this innate curiosity would pave the way for a groundbreaking career that would span the realms of mechanical engineering, robotics, and even the beauty industry. His startup, LUUM, has attracted funding from top-tier investors like SaxeCap, XSeed Capital, Foundation Capital, and Handshake Ventures.
In this episode, you will learn:
- A childhood fascination with deconstructing and fixing things set the stage for a journey into mechanical engineering and innovation.
- Recognition of the gaps in education leading to the pursuit of further studies at Berkeley, which exemplifies commitment to continuous learning for personal and professional growth.
- Experience with Berkeley Process Control revealed the unpredictable nature of capital equipment demand and the need for adaptability in the face of market changes.
- The discovery of power-saving breakthroughs in exoskeleton technology highlights the potential for innovation to reshape industries and create new possibilities.
- Showcasing the potential and challenges of hardware startups and demonstrating the value of patient investment despite the allure of rapid returns in software.
- Pivot into the beauty industry, exemplifying the power of cross-industry innovation and the potential of technology to revolutionize traditional sectors.
- Focus on safety, precision, and augmenting human capabilities, offering a blueprint for ethical and impactful robotics applications.
Alejandro Cremades · EP 716 Nathan Harding On Building A $600 Million Business And Raising $15 MillionSUBSCRIBE ON:
iTunesGoogle PlayStitcherTuneInRSSSoundCloudSpotify This episode is brought to you by Boopos. Get pre-qualified in 48 hours and funded in as little as 7 days. Boopos is your trusted partner throughout your investment journey.
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For a winning deck, see the commentary on a pitch deck from an Uber competitor that has raised over $400M (see it here).
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Your email address is 100% safe from spam!About Nathan Harding:Nathan Harding is the CTO and Co-Founder at LUUM. Nathan has also held the titles of CEO and Co-founder, CTO and Co-founder, CEO, and Co-Founder at LUUM.
Nathan was responsible for the management of product development projects at Ekso Bionics (formerly Berkeley Bionics). At Muhtayzik Hoffer, they were an Innovator in Residence and were responsible for finding innovative ways to leverage the power of the award-winning M/H team to create new products and industries.
At HVF Labs, Nathan was an Entrepreneur and was responsible for testing the market and technical feasibility of a transdermal electronic stimulation device for erectile dysfunction.
Nathan has been instrumental in recruiting leaders for the Quality and Manufacturing departments, as well as in locating and recruiting a defense industry insider as CEO in order to close a licensing deal in the defense sector.
Nathan Harding attended the University of California, Berkeley, from 1991 to 1993, where they studied mechanical engineering. Nathan then attended Carnegie Mellon University from 1986 to 1990, where they studied ME and economics.
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Read the Full Transcription of the Interview:Alejandro Cremades: Um, already hello everyone and welcome to the dealmakerr show. So today. We have a very exciting founder is a founder that has done it multiple times you know he actually took his last company public. So we’re going to find you know his journey quite inspiring. But again you know I don’t want to wait I don’t want to make you all wait any longer so without further ado. Let’s welcome our guest today Nathan Harding welcome to the show so born in Midland Texas give us a walk through memory lane I was left growing up there.
Nathan Harding: Thanks, Thanks for having me.
Nathan Harding: So I don’t really remember anything about midland I left there after 2 years but I do remember a lot about growing up in Houston and you know we were way out in the suburbs and I basically played in this area near Buffalo Bio all the time. So I got kind of ah, almost like a cajun upbringing though that would that would make my California mother crazy to hear me say that.
Alejandro Cremades: And how how do you get? How do you? How do you got into you know the whole thing of engineering and and problem solving and robotics and how did that come about.
Nathan Harding: You know it was just like a natural obsession. It was something I never could have stopped I started when I was a little kid just taking everything apart and fixing anything I could find broken and. You know building mini bikes and go carts and that kind of thing and um and you know when I heard of what mechanical engineering was I was like well that’s me that’s what I want to do so. Ah. I You know, kind of found out where were good schools to go do that and and started applying.
Alejandro Cremades: So you went to Carnegie to do your undergrad and then after that you did you know some stage there. You know with some robotics a startups. So at what point do you decide that it’s time to go to Berkeley and do the grad.
Nathan Harding: Well I think when I exited Carnegie Mellon I I still felt like there were missing pieces like I was extremely focused like I really wanted to know exactly how to design machines and I wanted all the academic part of that as well as the practical part. And I felt like I still didn’t have all the academic part that I wanted. Um so I applied to Berkeley about I don’t know year year and a half after getting out of Carnegie Mellon I went back to school.
Alejandro Cremades: So then you go back to school and you go to Berkeley you see Berkeley out of all places and definitely you know there. You know what are pivotal you know moment that you see I mean I guess people tell you know, influential everything that you can think of because only you got. You know your degree there but then also you kind of like give you the push with your next thing you know with you with one of your companies now and we’ll get there in just a little bit but right after grad school you know, basically you went into one of the one of the companies there that was not that far off and you actually worked for that company. 14 years what kept you for so long.
Nathan Harding: Well, it was an amazing opportunity. The company was called Berkeley process control and they’d done an ah amazing job of hiring just brilliant people like that was the 1 core competency that company had that always worked so it was a brilliant team of people. And they were making machine controllers. Um, and some of their customers. They were telling their customers like hey you should try to build the machine like this and their customers would say will you build the machine for us and so I was the first gearhead. You know the mechanical ah person that they brought on to do that and so. Had a really great opportunity to deform a team of mechanical design engineers and mechanical designers to do that work. Ah and it was really successful. We went on a terror for a long time.
Alejandro Cremades: So then what got you to go back to UCBerkeley
Nathan Harding: Well, um, the what the equipment that we ended up manufacturing was mainly optical fiber manufacturing equipment and the bottom fell out of the optical fiber market. In fact, it fell for us even before that because 80% of our business was to. Ah, one customer and they they had an accounting scandal and so we we went dead a little bit before everyone else went dead and you you literally couldn’t sell anything in capital equipment. You know demand is almost like a square wave. It’s like when they’re growing. It’s like give me every single thing you’ve got. And then when they stop when they put the brakes on they actually start to repair their machines with parts from their other machines. So so you can’t even sell a spare part. You know so it it kind of went belly up my team dispersed. I I talked to my old advisor back at Uc Berkeley he was still doing human exoskeletons which he had been working on while I was there and I you know I I got talked into going into the lab. In fact, he he bribed me in by time he had. 3 d printers at the time which in 2003 was really rare and so I really wanted some time on those printers for some things I was doing and so we did an exchange and he wanted to bring in consultants and mix them with students and see what would happen.
Nathan Harding: And he was right? as soon as I brought in some of my old team. We started breakthroughs and that was the genesis of exobiionics.
Alejandro Cremades: So how did the exobiionics come knocking. How did that happen.
Nathan Harding: Well, we had a you know we the the real boy and the the only people funding exoskeletons at the time was really darpa in the us and it was all defense stuff for load carriage and the real. Barrier everyone was seeing was like how do we? How do we provide enough power to these exoskeletons. You know, like ah because you couldn’t carry enough batteries to power the thing and um we had ah you know we had a breakthrough that allowed us to make. The exoskeletons use much less power than had ever been distributed that had ever been demonstrated before and and so that you know all of a sudden it was like wow maybe you really can make a business around exoskeletons and so we you know we. We incorporated and we started to get a lot of grants both from Darpa and nist and some other government organizations.
Alejandro Cremades: You know there’s a lot of a founders that that are listening that are really used to raisingcing money from vcs and how does it work really, you know the the whole thing around grants. How do you get 1 and what’s the process of getting 1
Nathan Harding: Yeah, um, you know there’s there’s a whole bunch of grants and there’s a cycle where they they publish the the ones the the topics that they want explored. And um, you know the easiest ones to get are ones called sttr grants where you team with an institution. So if you know any professor at ah at a top institution like you see Berkeley you team with them and and those are the ones that are really the highest hit rate. Um and and then you get. Ah, you get the money in various phases over time and back back then you could make it add up to one point five or two million dollars if you got through all the phases. But the thing that’s the tricky part about it is you have to make something that that. That is actually gonna be good for your business fit into their topic and that’s where it can get really tricky because sometimes you can find yourselves doing things that you know aren’t necessarily necessarily on the critical path of your company and you’re just doing it because. They provide another million dollars right
Alejandro Cremades: Now in this case, you know with exobiionics for the people that are listening to really get it one ended up being the business model. How are you guys making money there.
Nathan Harding: Yeah, so um, we did a great licensing deal early on with Lockheed Martin to do the to do the military accessoskeletons and we got to a we got to a pretty great demo with ah natic soldiers center that did a study and we had. With some soldiers. We were really doing well on their metrics and some soldiers we weren’t we kind of we kind of like increase the standard deviation of the differences of load carriage and at that point the army was getting cold feet about how much they wanted to keep looking into exoskeletons and ah, fortunately. We had been doing grants in the medical area at the time and we we had our first medical exoskeleton up and running right about that same time so we pivoted to that and we created a human exoskeleton that you know. You could easily strap on to patients of multiple sizes and it could do a ah variable amount of assist so that you could handle people who were either completely paralyzed or or you know barely paralyzed. Um. And and get them up and walking.
Alejandro Cremades: And what was the ah the journey of raising money for for the company. How much money did you guys raise prior to taking the company public.
Nathan Harding: Um, prior to taking the company public. We probably raised, especially if you count the non-dillutive capital of the um of the grants and the Lockie Martin contract um I would say we we raised something near $40000000
Alejandro Cremades: Got it.
Nathan Harding: Probably um Beforehand ah being going Public. We raised 30 and then I soon thereafter raised another 26 and then another fifteen so we started to really get money because at that time we were. You know we were gearing up to be a real medical ah manufacturer a medical device manufacturer which is it’s a very costly game. Um, you know and so sorry ah that’s my.
Alejandro Cremades: Nor is all that it.
Nathan Harding: That’s my son is the only person who can ring through and no no I want to what I’m trying to do is get remember how to actually turn it off because he’ll just keep calling a bit. Okay, there it’s off.
Alejandro Cremades: Um, no words you want to mute yourself and pick it up.
Alejandro Cremades: Um, all right are glad go ahead. The recent money.
Nathan Harding: Ah, ah so where were we? Um, oh yeah, so um, you know what exo it was. It was a I would say it was a tough road raising money and I had a Cfo who was very. Innovative and really helped and we did all kinds of different ways to raise money. Um, you know, in fact, our largest investor for a long time was chickasaw nation industries which was definitely not the you know, typical sandhill road. Ah, vc um, I’d say it’s it’s really difficult in general to to finance hardware startups and so it led us to be ah, really scrappy and in in fact, in going public. We did it through.
Nathan Harding: An old-fashioned reverse merger not not one of these like glorious Sps you hear about now. But um, just ah, a reverse merger into an empty shell. Um, and ah, you know that. That really worked and we were able to raise a lot of money I mean and I think we we really gave it ah a good run.
Alejandro Cremades: Um, and what makes it so difficult to raise money for hardware companies.
Nathan Harding: Well, you know the vcs know that the timelines are longer. I mean there’s no there’s no way that I can say that ah you can have a. Ah, startup like ah Facebook or something like that happened in the in the hardware world because you can you know I remember Skype it was like when they were valued at $3000000000 I think there were like 9 people. Or something you know is something crazy like that it can happen very quickly. Very small teams in the software world and so um, the vcs all want to find those. Ah you know those software unicorns that go so fast and so I don’t fault them for looking for that but I do fault them for you know, especially the smaller vcs I mean the best deals in the in the software game are you know they go to the they go to the top vcs by reputation. And then there’s kind of a halo of of vcs connected to those and I think it’s it’s a little foolish when I see that some smaller like peripheral vcs who can’t really get the great deals. Don’t think that they could do better with hardware startups but they they keep.
Nathan Harding: Working on the exact same things as the as the big vcs. Do So I think that um I think that there’s a lot of money to be had by ah by ah vcs that can really invest in hardware properly and find the right deals.
Alejandro Cremades: I mean obviously what a remarkable journey. The company did speak you know in the market cap it hit 600000000 plus so really amazing. But as always you know for you. It came to a point where it was time to turn page and the turning page you know came with.
Nathan Harding: Just takes a little longer.
Alejandro Cremades: Making some phone calls to the people that they that were very smart that you know and they that they ended up you know with that very unique industry that maybe you would have not imagined that you would land in so who did you call and what happened out of those conversations.
Nathan Harding: So I called I was calling old advisors of mine and I called ah a brilliant advisor of mine who who was a brilliant marketing guy and who was like retiring at 48 or something like that and I was like you want you know what are you going to do with yourself and he tells me. Well I just bought a franchise region of amazing lash studios and you know I almost fell out of my chair. It was one of the more ah shocking things I’d ever heard because I was frankly I was the typical dumb guy I had no clue how great the beauty business was. Had no clue how big it was um and you know the kind of the ah the regulation environment. How great that was I didn’t know any of that you know and so I was like wow here’s this brilliant guy I know telling me he’s going into beauty salons. And he starts telling me like oh it’s great. There’s this recurring revenue and it’s exploding and and I was like but I don’t I don’t even know what you’re talking about like what is a lash extension and he. Describes to me the process of putting on eyelash extensions where you glue one little lash at a time on and it takes you know a couple hours to do an appointment and I immediately joke with him like hey that sounds like a great job for a robot and he he laughed and I laughed. You know it was totally meant to be a joke.
Nathan Harding: And then you know two days later I remembered this conversation and I thought ah you know I’m going to look at that on Youtube and I went and I looked at people doing it on Youtube and I was like man I think this is a killer app for robotics I mean it looks perfect.
Alejandro Cremades: So what did it look like from there. What what happened next.
Nathan Harding: So the media thing I wanted to do was figure out like is this a market would women let robots be near their eyes. All these things because I didn’t know anything about ah beauty and I went to some friends of mine. Who had a successful ad and branding agency in the city and I traded equity for them to give me a team and they gave me a team lead and Rachel Gold who’s now co-founder and Cmo of loom because she got so addicted to the idea. And we started doing focus groups. Ah and you know we do focus groups where we’d hold a big machine mock up over someone in a lounge chair you know and ask people like what do they think that this would intimidate them. you know what and ah and these things um and you know we we started to learn a lesson that I’ve learned so many times on this adventure is that women are just braver than men about all this stuff number one. Ah and so women love the idea. Ah when I’d talk to men. They’d be like oh my god I don’t know about that right. Um, and we also learned we did salon owner interviews and we found that there was a huge labor shortage and they were just tearing their hair out trying to train and retain people and we also found out that it’s it’s like.
Nathan Harding: The one of the reasons I Love this app for robotics is it’s literally right at the edge of human Capability. So a lot of people who train to do it end up giving up because it’s so hard and I love that I Love an application. That’s you know. Right? at that edge of human ability because I don’t really like the aspect of like just replacing people I like to augment humans. Um, and that’s that’s essentially what we decided to do was augment these lash artists and give them a really fast tool to do the bulk of the lashes.
Alejandro Cremades: So then for the people that are listening to get it. What is the business model. How do you guys make money.
Nathan Harding: Ah, so what we do is we deploy our machines into third parties ah stores like our you know first strategic partners are ulta beauty and benefit cosmetics. Um, and. You know we charge them $62000 when we deliver the machine and then we are going to charge them fifty. One dollars each time they run a full set of lashes and $24 each time they do a ah a refill of lash extensions and and that ah. That works out with fantastic economics for both us and them both both entities see a payback on the machine in about six months um and then you know it just it just goes from there and then what they also see that they love is a very addictive service that’s in there. Store and keeps bringing those customers back because because of course when those customers are back in their stores. They buy others things.
Alejandro Cremades: Now in this case, you know how much capital have you guys raised today and what have you done differently about the capital raising you know efforts based on what you know already with a prior company.
Nathan Harding: So ah, we raised about 15000000 so far. Um like all hardware startups. It’s been a hard go but we’ve done it I would say in much more mainstream ways we did not do any grants I mean I guess you. Some people suggested that because we’re doing this fine manipulation. We could have couched some of this into a ah research grant. But I I did not want the distraction of of grants in this business. So. Um, so we’ve um, mainly financed it with ah vcs and a lot of Angels and we’ve also you know dabbled in the crowdfunding world as well.
Alejandro Cremades: Now for something like this you know when when it came to to loom I Mean how do you guys think about perhaps guaranteeing safety.
Nathan Harding: Yeah, so that was a big thing right in the beginning is like we didn’t want to do anything where we could actually hurt someone and we’re working right near their Eyes. So This is really the you know the big factor In. And what we what we ended up doing was a paradigm we call Gorilla in a box where the the machine is a big steel box and there’s a bunch of fast robotics in there but none of them can reach the client none of that can reach the client.. There’s a little window where the client’s face is. Presented to the robotics and the only thing that can physically reach through that window are these little featherweight tools and we call them featherweight because they’re literally like the weight of a feather and those tools we attach to the robotics with just tiny little magnets. So. If you were to go up to our machine and you bump those tools with your finger. They just fall off. So so you can imagine that ends up with a system that it doesn’t matter what happens in the box. It can’t hurt the client below and that’s what we really wanted was something inherently safe that just you know couldn’t. Couldn’t produce an an injury if it wanted to like.
Alejandro Cremades: Um, and what does it look like when you’re applying Ai on stuff like this.
Nathan Harding: Well, we use a lot of Ai. Um, and we we use it for image processing and looking at images and telling us very specific things like a great example is like looking at an image of the eye. And drawing a line right? where the eyelid line is um and and but and that’s really pretty easy for ah for a neural network. The data set that you train the neural network with the the set of images that you show it to to learn. Doesn’t have to be that large. Um, but if you try to do it with classical techniques I can tell you it’s a nightmare because that’s what we do is we always do it at first with classical techniques and then we use that to build data and then we train a neural network and then we replace the. Classical techniques with the neural networks and what’s funny is when we were doing classical techniques on that particular problem. Ah, people would come in with a permanent eyeliner that’s been tattooed on the on their lid line and we just couldn’t we couldn’t deal with it. Like with the old school classical techniques. We just couldn’t deal with it at all and you get enough data and you train a neural network and the neural network has no problem at all and knows right where the lid line is regardless of of what tattooing I have on their eyelids or not.
Alejandro Cremades: So imagine you go to sleep tonight Nathan and you wake up in a world where the vision of loom is fully realized what does that world look like.
Nathan Harding: Yeah.
Nathan Harding: Um, it means that there’s a global brand called loom that stands for you know the cutting edge of ah of beauty services and. And automated beauty services in particular and that there’s loom machines. Um that can give me great lashes whether I get them in Dayton Ohio or wherever I get them in Paris I can get the same lash great lashes and I can get them super fast. And have a great experience while I do it.
Alejandro Cremades: I Love it Now. Let me let me ask you something now towards the past because we’re talking about the future here. So Let’s say we put you into a time machine and I bring you back to that moment where you had just a returned to UCBerkeley and And you are there at the lab you know just playing with stuff and let’s say you were able to go there and enter the room and have a sit down with your younger self and being able to whisper to your younger self one piece of advice before launching a business but would that be and why you know what? you know now.
Nathan Harding: Wow um, maybe make it simple I think that um you know, ah. I think that a lot of us entrepreneurs. Um, we think that we have to create something entirely new and entirely different. Um, and you know it’s hard enough to make a successful business. Anyway, um, so I think that you want to you you want to pick things and and I’m kind of the opposite of this in a lot of ways is you want to pick things that are that are that seem easy at first because the truth is everything is hard right? Um, and. Ah, you if you pick something hard then you’ve you’ve made it even harder right? So so that might be it. Um, because I see that with a lot of entrepreneurs and robotics in particular ah where. You know they want to develop a brand new arm to do an application and I’m always like well why don’t you just buy a robot arm and go do that application and really figure it out become a service provider. You know, simplify what you’re trying to do um.
Nathan Harding: So I think I think that might be it.
Alejandro Cremades: I love it now for the people that are listening Nathan that would love to reach out and say hi. What is the best way for them to do so.
Nathan Harding: Um, you can contact me on Linkedin um I think that that’s the best way. Ah nowadays I’m not the fastest at Linkedin but I will get back to you.
Alejandro Cremades: Amazing. Well hey Nathan thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Nathan Harding: Great. It’s been an honor to be here. Thanks Very much alejandro.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Nathan Harding On Building A $600 Million Business And Raising $15 Million To Bring AI And Robotics To Eyelash Extensions appeared first on Alejandro Cremades.
In the fast-paced world of entrepreneurship, where innovation and perseverance are the keys to success, few stories are as inspiring as that of Courtney Guertin. In a recent episode of The Dealmakers’ Podcast, Guertin shared his remarkable journey from a curious college student to a successful entrepreneur.
His story embodies the spirit of determination, growth, and adaptation that characterizes the modern startup landscape. His startup, Ease, has attracted funding from top-tier investors like Centana Growth Partners, AWS Impact Accelerator, Google for Startups, and Spectrum Equity.
In this episode, you will learn:
- Embracing new experiences and following your curiosity, as they can lead you to unexpected opportunities and passions, and seizing opportunities to gain experience in different industries and domains that can shape your entrepreneurial journey down the line.
- Not being afraid to take risks and stepping out of your comfort zone to pursue opportunities that can accelerate your growth and learning.
- Embracing innovation that often involves trying different ideas, learning from failures, and leveraging emerging trends to create successful ventures.
- Tailoring fundraising efforts to the business’s growth stage, and seeking investors who share your mission and values.
- Effectively communicating your vision, setting clear expectations, nurturing a motivated team, and accepting that constraints can foster creativity, efficiency, and resourcefulness, leading to innovative solutions and outcomes.
- Understanding how repetition helps ingrain important messages within your team, customers, and stakeholders, leading to greater understanding and alignment, and remaining open to unexpected opportunities, partnerships, and acquisitions that can elevate your business to new heights.
- Entrepreneurship is a journey filled with twists and turns, and success often requires a blend of ambition, adaptability, and patience.
Alejandro Cremades · EP 715 Courtney Guertin On Raising $128 Million To Streamline Human Resource ManagementSUBSCRIBE ON:
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HealthBird is also a sponsor of this episode. They are the ultimate platform for healthcare coverage. Get started today by heading over to HealthBird.
For a winning deck, see the commentary on a pitch deck from an Uber competitor that has raised over $400M (see it here).
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Your email address is 100% safe from spam!About Courtney Guertin:Courtney Guertin is the Co-Founder and CTO of Ease. Courtney has a long history of working in software development and technology consulting.
Courtney founded Courtstarr in 2006, which provided technology consulting and web development services to its clients. In 2008, they began working as an application architect for SoftBrands before joining Digg in October of that year as a software developer.
At Digg, Courtney assisted in developing one of the largest Facebook Connect integrations at the time of launch, the Digg Ads and Digg Content Ads platform, publishing tools and widgets, writable API, web, and internal analytics.
In September 2010, Courtney co-founded Kiip, where they served as CTO until December 2014. Since then, they have been focusing their efforts on Ease, which they co-founded in 2015.
Courtney Guertin received their Bachelor of Science in Computer Science from the University of Minnesota. Courtney also has an Associate’s degree in Japanese Studies from Akita International University.
See How I Can Help You With Your Fundraising Efforts
- Fundraising Process : get guidance from A to Z.
- Materials : our team creates epic pitch decks and financial models
- Investor Access : connect with the right investors for your business and close them
Book a Call
Connect with Courtney Guertin:* Linkedin * Crunchbase * TheOrg * PitchBook
Read the Full Transcription of the Interview:Alejandro Cremades: Um, already hello everyone welcome to the dealmakerr show. So super excited about the guest that we have Today. He’s done it multiple times and they also successfully so you know the last one you know just went through a really interesting merger. But. We’ll get to that in just a little bit but again, you’re going to find it super inspiring so without farther ado let’s welcome our guest today kurtnie gerting welcome to the show. So originally you were born out of Minnesota. You know it sounds like you were there quite a bit.
Courtney Guertin: Hey thanks so much Ilejandro Thanks for having me.
Alejandro Cremades: So give us a walk through memory lane. How was life over there.
Courtney Guertin: It was good. Yeah, so grew up in Minneapolis minnesota or just north I went to after high school didn’t quite know what I wanted to do ended up doing community college and then um, found myself at University Of Minnesota did i. Ah, study abroad to Japan and it was that trip that kind of made me land on computer science. Um, and so I was inspired by reading wired magazine you know, ah different programming books. But and that trip just talking to people abroad. Through like the internet was this really surreal and I was fascinated by um, the culture there in kind of the tech forwardness of that area and so when I came back to the University Of Minnesota I decided to go all in on computer science ended up graduating worked at a small company. We did vertical crms one for the financial industry 1 for real estate and one in healthcare and that healthcare one ended up kind of ah early seed it grew into something that kind of stayed with me in my later life and was ah the genesis of my last company.
Alejandro Cremades: Amazing. So so one of the pivotal moments was definitely working a dig. So how do you land? you know a dig.
Courtney Guertin: Yeah, so this was 2006 I really wanted to kind of Silicon Valley was sort of calling my name in a way but I didn’t I didn’t initially move. Um I was a little bit. I guess fear was this was there I just bought a house in Minnesota felt I was rooted but I had a couple friends that moved out there 1 of them. Leah Culver who’s a great engineer and she’s done things and sold companies to Twitter and things. Um, she went out in 2006 and started building a lot. Networking a lot doing very exciting projects that gave me the motivation to kind of say hey I really need to go do this and I finally did so in 2008 and I wanted to live in work in San Francisco and so there weren’t that many companies at the time in San Francisco um so I applied to stumble upon and dig I got offers by both I chose dig and um, it really set off an incredible network of people of very interesting company at the time um, trying to pivot into some not pivot. But.
Courtney Guertin: Rebrand themselves into something stronger and I met lifelong friends and I I learned a lot from building architecting scaling businesses or scaling. Ah you know feature sets and that gave me the confidence then in 202010 to venture out on my own.
Alejandro Cremades: Um, so let’s talk about that you know venturing out on your own. What happened.
Courtney Guertin: Yeah, so I had a few ideas. Um, one of them was ah a project that called follow style it was in a pre-pinterest we did curation and fashion decor and things at another one where I was this 8 bit avatar called 8 bit. Um. Kind of hit the scene and and 20 ah started in 2010 got a little bit bigger and in and 2011 um on Twitter with tech Twitter later became an nftt project for kind of a fun thing on the side. Um I also created a mobile game you know mobile app development was was ah. Peaking my curiosity in in that I collaborative with a friend and we did some kind of a tweak on mobile advertising because we thought it sucked at the time people were putting small banner ads everywhere and so we did rewards for virtual achievements and real rewards for virtual achievements created a company around that. I mean it was called keep and that we hired a really amazing early team and that was a fun adventure from starting in 2010.
Alejandro Cremades: Um, so with keep what was the business model. How are you guys making money.
Courtney Guertin: Yeah, So it’s kind of a double sided Marketplace This is um before Programmatic advertising came in in a big way and so we found games or other applications that had basically moments where and. Ah, their customers were really engaged maybe beating a level or or getting a high score or completing a to do list in those moments we would offer a reward. It could be virtual currency in that app or it could be a real award like you get done running in my fitness pal And. Ah, propel could give you a powder pack that you could claim and go to a store and redeem and so it was brands being there at your highest moments of achievement getting you rewards and it was just a different kind of mobile advertising engagement play and it was.
Courtney Guertin: We we had a Bd team that would go out and talk to all these debs and then we I was on the cto um the Cto and so I built a tech stack and basically what we ended up doing is scaling the kind of the rewards inventory.
Alejandro Cremades: Um, and how much money do you guys say raise for that company.
Courtney Guertin: Um, total we raised ah $32000000 from 2010 to I think it was 2016
Alejandro Cremades: And you’ve also yeah mean you, you’ve raised quite a bit you know, throw your journey money from bc you know over a hundred millions I guess what are some of the things that you’ve learned from ah you know dealing with venture capitals.
Courtney Guertin: Yeah, well one, you definitely need to have a process so and and so you know typically I think the traditional thing would be you kind of create your target key key partners. You know your your personal tier 1 tier 2 tier 3
Alejandro Cremades: Are.
Courtney Guertin: You have to really um polish your pitch and it’s different at each stage. You know the earliest stage its its team its vision. Its energy. Its are you doing something? um that you feel you have an unfair advantage in um, ah and. Then it just becomes very metric based you know after series a and and so do you have the right metrics and you have to find people who may or may not um, you know for example, you might have to go a p route if you’re not a private equity route. If. You’re not growing at the multiples that like perhaps in Adreessen Horowitz would look at so you have to adjust your thinking and pray perhaps targets depending upon your business and the scale of that business.
Alejandro Cremades: So what have you also experienced you know between bootstrapping like you’ve done with other projects to. For example, you know raising money the way that you guys did it with keep.
Courtney Guertin: Yeah, so with with with ease my last company. It actually started out as a side project. Um I as kind of mentioning I met my co-founder in Minnesota when I was we did that cr m for the health care industry. And he was an insurance broker by trade but very tech forward meaning ah trying to adopt anything technology to help his business grow and so I chatted him about different feature sets products. You know, got doing customer research and we hit it off? well.
Alejandro Cremades: Um.
Courtney Guertin: Well, ah while I was out building and working in Silicon Valley he um he left the insurance industry and kind of worked on tech plays to help insurance brokers leverage technology and he realized that he couldn’t um, do it with off the-shelf software products. Catered to larger insurance brokers he wanted to help the small medium businesses and the insurance brokers that helped those businesses and so he contacted me and this was roughly like June to 2012 saying hey I need I need a platform for this. You know the smaller kind of broker. Ah, that helps customers that have employers from 2 to 500 employees and he had a couple contractors and a couple quotes I gave him some feedback and I gave them kind of like hey option a probably won’t work option b could work but I’ll give you option c. You know and this is where I came in I said I’ll do this on the side. Um I know a lot about this industry I’m excited about it and we came up with an agreement and so that I started my nights and weekends doing this because I really wanted to make about $5000 a month. And I figured I could do this as a side hustle to do that and eventually um I told him I would you know deliver kind of the first version and ah around ninety days and then he was a very good salesperson had a very good network as.
Courtney Guertin: You know I think as you you and a lot of your previous guests. Ah are aware distributions everything and so he had ah a really good. You know sales ecumen and and had a good network. So after the Mvp was created about ninety days later we were ramen profitable. And so it had immediate product market fit. So my side project turned into a lot of late nights and all my weekends I eventually had to make a decision on continuing with with keep or going all in at ease and after about 4 years I decided to call in on ease just because I thought.
Alejandro Cremades: Are.
Courtney Guertin: That it would be too much of a missed opportunity to not throw myself at it a hundred percent of the time.
Alejandro Cremades: So now in this case I mean what did having immediate product Market fit look like.
Courtney Guertin: Yeah, so really, it came in is once we? Um, we had a big vision for what ease could be and just for some background ease is a employee benefits platform and you can think of it as a a zen. Or augustto rippling or namely but through the traditional insurance broker. So a traditional insurance broker they have lots of clients already and but they don’t have technology so’re dealing with paper fax excel lots of different web portals. We do all that in in 1 platform. So we combine. Employee benefits management onboarding payroll connections care connections on 1 and our goal was hey if we we get the broker’s trust they will onboard all of their clients and we don’t have to knock on the door and have a huge sales team. Trying to call all these employers. The brokers will just do that for us and if we needed to make the platform easy to use and hence why we called it ease took me a couple years to get the domain name ease dot com but finally did it I was proud of that moment and the. And what immediate part market fit was we had big goals and dreams but we started really small. We started with the state of Minnesota and every employer when they want to do? What’s called medical underwriting. Let’s say they got a ah big increase in their their rates.
Courtney Guertin: For the year that’s their company of 10 employees. They get a big great increase. It’s going to be very expensive next year to continue with the same carrier what they do is they have to go and fill out like four different health applications for the 4 different carriers in Minnesota. It’s very tedious very time consuming. A noise employees because they’re filling out the same thing 4 times we basically package that up so an employee could do that once the broker would be aware. We’re getting rid of all the paper you know and we make sure that it’s filled out accurately and legibly. And that all then at the end of the experience. It’s like a docusign you know you go fill it out once all 4 forms are presented to you. You can review them and sign you’re done streamlines the process immensely. Well we started with just that that feature set alone and. The product market fit feedback was people loved it and they kept asking for more features immediately. So they they use it on 1 group they wanted to use it on another but they demanded hey I need you to do x though I need to do y I need all these different feature sets. So when you have someone. Wanting to reuse it but pretty much demanding that you add a lot more functionality you kind of know you got something so they’re excited to use it but they wanted more and so we gave them more over the over a couple years of bootstrapping we got to a million in revenue and again this is all on the side. This is just me.
Courtney Guertin: Ah, working in San Francisco in the evenings. My co-founder at the time ended up being in Las Vegas and it was just like a couple of us jamming away.
Alejandro Cremades: Um, so then how did you guys go about racing money as well For this How much have you guys raised today.
Courtney Guertin: Yeah, total was $68000000 um, it really started out with the following Zeni came on the scene and they did something really? Ah, ah, they lit a fire on the whole hr in short text space. They raise a lot of money and they use that money to call every employer in America and basically say hey your current broker sucks. You need to use our platform. Everything’s all in one solution and that made every employer talk to their broker and and say hey. Um, do you this company’s and if it’s calling. Do you have anything that does everything online. They went out searching for it and they found ease so we started getting a lot of calls um from players and so we couldn’t really meet the demand that we knew was coming so. Bootstrapping gives you a lot of flexibility but you grow slower if you’re just using your profits. We knew that because of the war chest that zennifi has we’re gonna lose and miss an opportunity if we do not also try to grow faster. So in 2015 we set out to go raise money? um. And I thought because of my connections that it was going to be easier, especially because we already had a lot of revenue and we’re profitable and I was I was wrong I I my first 2 people that I thought were like shoe ins on investment said no and they said no because we were.
Courtney Guertin: Remote I was in San Francisco my co-founder was in Las Vegas um he’s not a traditional you know tech person. He’s a um and so they just they wanted us under 1 roof and even though I said hey if this works out. Well we’ll likely move here. Um I had to change that pitch and so on the third conversation I said you know David’s moving to San Francisco we’re going to be working together. He’s in a move in like a month and ever it just that was never a yellow or red flag from anyone there on and then freestyle capital. Um, led the round but we had upside partnership Kent Goldman Semil Shaw from haystack and a lot other great angel investors come in and help lead that seed round which was ah two point one million
Alejandro Cremades: It’s amazing. So and then how did that they grow over time because I believe that you guys say prior to the transaction. You guys have raised a close to 70000000 correct
Courtney Guertin: Yeah, so how that kind of progressed was in 2016. There was this little snap of um saas not doing very well. It was very cold market and it was short lived but it was it was real for us. We felt that and one of our investors. That didn’t get ah a big of a bite so to speak they didn’t invest as much as they were hoping to there wasn’t room for that. They basically said hey we’ll lead in early a you might not be totally ready for it. But we’re there for you and that was metamorphic which is now compound and they. They helped forget that exact amount but that was roughly $2000000 and so that was an insider kind of thing to get us. It was. We didn’t need it as a bridge but it was just that grow and and add more to the people to the team then in um, then we raised I think the following year. Um, from propel ventures and we raised a proper a round and Ryan Gilbert and David Mort epiproelll ventures were were big believers in us and they had other companies like guideline you know it’s a 401 K Big company they done investments in like coinbase and so kind of the the new fintech or or insurer tech kind of play so that aligned really well with them. We then went on to um, kind of we went a little bit more of the pe route and and just to be but we just didn’t have. We had good numbers.
Courtney Guertin: But we didn’t have the numbers at like a benchmark or excel or we talked to them but they they wanted us to grow a little bit faster. We couldn’t at the time and so we we ended up for this is the first time for me, you know, being investing in only kind of traditional vc to kind of. See what? ah some more of the pe world would be and that was centenna growth Centtana Growth Partners a great team. There. They let our series be that was 19000000 and then um and then spectrum equity came in on series c for 41000000
Alejandro Cremades: Nice now talk to us about the recent cell because there was a recent transaction that that has happened here with these.
Courtney Guertin: Yeah, so if you would ask me a year ago would would we be sold and would we have sold to employee navigator I would have said no so these things happen out of nowhere sometimes and if you build a big business. I mean and you have treat your customers. Well you know good things can happen in this case it did. We had our biggest competitor employee navigator approach us. They’re really big on the East Coast they deal with companies a little bit bigger there and you know. Same business model. They go direct to they sell through the insurance broker they’re not calling employers directly like a lot of these gustos and if it namely companies do and so they’re very aligned and they’re also carrier in payroll agnostic meaning they’re not creating their own payroll company. They’re not. You know they they work with every insurance company. The goal is is to be a ah hub for um, the marketplace and choice of of brokers and in their employer clients and how the data gets entered so we’re kind of the system of record so to speak. For the employee benefits choices that these employees make and then we send everything electronically through Apis um, etc to these insurance carriers and so they were um.
Courtney Guertin: They had a little bit more employees we at the time had roughly three point five million employees that we managed employee benefits for roughly eighty five thousand employers and their average employers were a little bit larger so you know we ease was 43 employees on average There’s just over a hundred and so they similar kind of employee ye and customer account but they had a lot more employees on their platform. They owned again, kind of the East Coast side we did really well and we had a strong foothold on the west coast they said hey we have a lot of different customers. I’m sorry a lot of the same customers. Um, and I think it would be great if we kind of partnered together sort of compete together and we decided that that kind of made sense and we wanted to go through an loi process. Um, that loi. Kind of happened I guess December late December of last year and then we did ah the diligence was roughly just over three months and and we agreed to terms and so yeah, we did a merger acquisition and now ease is with employee navigator and we have 13000000 employees collectively. That are managed and I believe that we’ll be on the way to do pretty much half of all small media and businesses in the next few years in America representing close to 30000000 employees.
Alejandro Cremades: And I heard that it’s rumored to be close to a billion and the the the the resulting entity. So so really, really good stuff here.
Courtney Guertin: Yeah, it’s it’s a sizable company and we’ll continue to definitely be in the billions. Ah beyond.
Alejandro Cremades: So I guess a you know obviously to to get it to this point you know you you definitely have had you know the opportunity of dealing with people and really experiencing leadership at its best I mean.
Courtney Guertin: Ah.
Alejandro Cremades: What have you? What have you learned and what are your beliefs around leadership.
Courtney Guertin: Yeah I think the biggest one is I’m actually a big believer in do more with less and have constraints on yourself and team So it’s interesting. We made the most we we did the best.
Alejandro Cremades: Are.
Alejandro Cremades: Are.
Courtney Guertin: And persevered the most when we had I would say um more constraints on our capital. We made more mistakes when we had lots of capital you know, hiring too fast um and and and I think it’s.
Courtney Guertin: So less is more basically constraints can be a powerful motivator and I think you can you can really amplify your smaller teams to do more so that’s key keep teams small keep them motivated you know and um and have that kind of constraint. Another one is is really I found as you’re hiring and as you’re growing. We had to consistently repetition is key so keep your business model. Simple easy to explain keep your um. Your values of your company simple. You don’t need 10 of them. You know 3 is enough right? and repetition. What do you do? How do you service your customers. How do you care? repeat it always you got to be a broken record because you might say at once at an all hands meeting. And then if you don’t say it again for another couple months if you’re growing fast 10 % of the people have never heard you say it and so and you know fast forward than six months you know a third of your company has never heard you say this so you feel like you’re were saying these things once in a while. But you gotta constantly repeat. It. So keeping things simple constantly repeating um lead. By example, you know, ah really care do the work and show up. Um I made a couple mistakes of I thought I was delegating a lot. But.
Courtney Guertin: Kept on probably taking on too much personally so be really aware of you got to? you know you got to be in the trenches sometimes with your team but you also have to delegate and and consistently motivate. Um and and offer up. Ah, it’s the only way to expand. Your goal is to have your team be able to automate themselves out of a job or you know grow themselves out so that the company can grow including yourself like you don’t want to be needed in the weeds.
Alejandro Cremades: Um, now imagine if I was to bring you back in time you know maybe to that moment where you were still a dig and and thinking about starting something of your own. Imagine if you had the opportunity of giving that younger self one piece of advice before launching a business. What would that be and why given what you know now kerny.
Courtney Guertin: Um, I would say that um sometimes for example I wish I would have given a couple things a little bit. Don’t chase. The first thing always immediately. So I had a lot of different ideas on on the plate. And sometimes having a little bit of momentum just pulls you you have this inertia and you just go and so I had a 4 or 5 things that I was really excited about curiosity was great. I had the time to explore them and we got a seed. Ah.
Courtney Guertin: Basically a term sheet and and I was excited about the you know the rewards platform but there was other big things out there and curation space and Pinterest was coming on and that term sheet kind of just like. Pulled me and I had to give up all these other things without the proper research I know timing’s there and it was and it led to some some very wonderful friends. A great business and a lot of lessons learned but I feel like a lot of people chase. The first thing that they kind of see. And and um, you don’t want to delay forever. But if you get inertia behind something you might look back 5 years and been like why did I do that and it was just because you just got missionally down that path so just make sure that it’s something you really want to do for a decade. These things definitely take a decade or more to play out in any big way. Um I think taking venture capital is um, necessary at times but less so than most people think I think the biggest lesson that I learned on this is um, it. Really make sure that you think you need it. It’s needing for scale. It’s a certain type of thing. Um bootstrapping is is and or building a cash flowing business can can net out a lot more I would say liquidity.
Courtney Guertin: And and better results for for you personally um than doing the Vc game but it is it. It changed my life. Um I would say that.
Courtney Guertin: I Wish I would have been a little bit more cash restraint on the money. Sometimes you’re kind of told go higher hire Grow grow grow and um, you don’t always need to go do that you should You should do it in a I would say ah um I learned a lot of lessons from from over hiring. Um, but ah the at the end of the day that’s kind of what I would do is say hey to summarize it um term sheets. It will build inertia and and you make sure that you’re really excited about it for the 10 year Journey I had.
Alejandro Cremades: Missing so Knie for the people that are listening that will have to reach out and say hi. What is the best way for them to do so.
Courtney Guertin: Yeah, so um, courtstar c o u r t s t a r r on Twitter at quastar and then I have a fund. Let’s go fund and you’ll find some of the investments that I’ve done and some more contact information there please reach out i. You know I’m going to continue to build buy and invest in businesses and I’m excited to connect with everyone in your excellent audience that you have so. Thank you.
Alejandro Cremades: Amazing knie! Thank you so much. And yeah, again, you know anyone that is listening you know feel free. You know now you know man but anyhow Kerny thank you so much for being on the dealmaker show today. It has been an honor to have you with us. Thank you.
Courtney Guertin: I Appreciate your time. Thank you so much for having me.
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In a recent episode of The Dealmakers’ Podcast, we had the privilege of speaking with the visionary leader behind Vishaal ‘V8’ Hariprasad, a groundbreaking cybersecurity company that is transforming the landscape of digital protection.
This conversation delved deep into V8’s journey, from its inception to remarkable accomplishments. His venture, Resilience Insurance, has attracted funding from top-tier investors like General Catalyst, Lightspeed Venture Partners, Corey Thomas, and Intact Ventures.
In this episode, you will learn:
- Growing up in a culturally diverse community that laid the foundation for understanding unity, reliance, and mutual support as essential elements in cybersecurity and innovation
- The turning point of 9/11 highlighting the need for innovative cybersecurity strategies that combine technical excellence with an empathetic understanding of adversaries.
- Understanding how the digital revolution has integrated cybersecurity into daily life
- Marking a paradigm shift where cyber risks are an intrinsic aspect of our interconnected world.
- A journey showcasing the power of adaptability, as a shift from selling technology to underwriting cyber insurance, leading to a transformative pivot and the creation of a holistic approach to cyber resilience.
- Aligning investor expectations with realistic projections and valuations forms the cornerstone of successful growth, requiring transparency, credibility, and a shared vision.
- Navigating a global workforce necessitating intentional communication, empathy, and frequent gatherings to foster unity and clarity across geographically dispersed teams.
- Future of Cybersecurity in a world where cyber threats are no longer sensationalized headlines envisioning a future where comprehensive cybersecurity strategies make malicious activities less viable, creating a safer digital environment for all.
Alejandro Cremades · EP 714 Vishaal ‘V8’ Hariprasad On Raising $225 Million To Rewrite The Rules Around Cyber RisksSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Vishaal ‘V8’ Hariprasad:A veteran of both the U.S. Air Force and the cybersecurity industry, Vishaal provides the leadership skills he honed in his years with the NSA to his position as CEO of Resilience, responsible for the strategic direction of the company. Known across the industry as ‘V8’, Vishaal co-founded Resilience in 2017.
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Read the Full Transcription of the Interview:Alejandro Cremades: Um, already hello everyone and welcome to the dealmakerr show. So today. We have a very exciting founder. We’re going to be talking about the good stuff that we like to hear building scaling financing. Yeah and exiting I mean there’s a founder that has an exit underneath his belt and he’s doing something really remarkable in a very yeah. Exciting industry right? now you know everyone is talking about what they’re up to so I guess without far ado let’s welcome our guest today and let’s see if I say it right? that is visal hiri prasat and also known as v eight welcome to the show.
Vishaal ‘V8’ Hariprasad: Alejandro. Thank you so much I think you just said my name perfectly. But the nickname does make it easier for others I really do appreciate that though. Thanks for having me.
Alejandro Cremades: I love it I love it. Well we ate let’s say and let’s do a little of a walk through memory lane. How was life growing up being born and raised in New York city
Vishaal ‘V8’ Hariprasad: Oh it was it was amazing um you know I was very very fortunate and lucky to have be surround by loving family. A great community. You know I was born in the South Bronx very strong caribbean guy andese culture around me lot of great trinidadti and Puerto rican and jamaican culture as well. Um. But it was really just just wonderful to have that community atmosphere the understanding and reliance on each other to survive to make it and to appreciate each other for what you can do.
Alejandro Cremades: Um, so what? what ended up getting you into um into math and you know technology I mean what? what? what developed the love for for all those things.
Vishaal ‘V8’ Hariprasad: It’s a good question so you know growing up. Um as a young kid we were right under the flight path for Laardia airport and I would all see the planes coming overhead from from my grandparents um walk up and I knew from a young age I wanted to be a pilot and I fell in love with aviation.
Vishaal ‘V8’ Hariprasad: Less computers because they weren’t really a thing backland or at least not not in the personal sense. Um, but fast forward a couple of years I was in high school when Nine Eleven happened and I was actually I remember this very clearly I was in in Fetty Hall and I remember watching the the towers get hit. And I was also going through my selection list for for the schools I wanted to go to um at the very top of it was the us air force academy great spot to become a ah pilot. But I also realized at that point there was much more than just flying that really mattered to me. Um. And I think you know my my hometown I had friends and and relatives that were in some of those towers. Thankfully they got out but some of their coworkers didn’t um but it really it really struck me the importance of service as well and the opportunity to. Do both of those things and and so I selected the us air force academy which as a natural aside you have to get into technology. You have to get into computer science and other things if you want to be a great air force officer and that’s where I really developed my love and and and appreciation for it.
Alejandro Cremades: And it’s pretty amazing because you were there for I mean and you’re still you know in reserve. But you’ve been there for many many years so I guess like how has it been the experience of being part of the. Air force and obviously you know like without talking about classified stuff. You know what has been some of the things that you have been you know doing there.
Vishaal ‘V8’ Hariprasad: Um, yeah, you know a super super fortunate I decided not to go down the flying path given the opportunities that cybersecurity actually presented at that time and and this was before Cyber warfare was a really top of mind or headline topic.
Vishaal ‘V8’ Hariprasad: After graduation from the from the us air force academy I was a math major but they they assigned me to a communications officer role and I got to really experience what it takes to do enterprise it and communications and its importance to accomplishing complex technical missions. Um. That combined with my map background got me reassigned to the the national security agency and at that time that was at the forefront of cyber securityity and cyber warfare defense against nation-state attackers and I was lucky enough to be able to. Take my leadership experience as a military leader and a technical leader and apply it to really amazing missions overseas helping prevent and id attacks on our troops in Iraq and and and other places now I really got to appreciate the mindset of being. Innovative lean and focused on the mission but also respect and understanding of your adversary and what it takes to get into their decision loop and drive your innovation faster than theirs so that you can accomplish the mission I think a lot of those trends have. Really served me well both as a leader as an innovator and as a technologist in uniform and out.
Alejandro Cremades: You know it’s It’s amazing. Also you know like the the change of of of how things have developed. You know when it when it comes to to conflict because before people you know I would think about War or or countries going at it against each other with just like.
Vishaal ‘V8’ Hariprasad: I.
Alejandro Cremades: You know, moving tanks you know inside now it’s it’s incredible like cyber um the the how how important it has become and and how much you know Bob. Countries are really investing. You know in in this cyber you know programs that they have going on is that right.
Vishaal ‘V8’ Hariprasad: Oh hundred percent I think you you’re spot on the the digital revolution that’s occurred over the past two decades for businesses of all kind has been significant and it’s only been accelerated by the covid pandemic right? I mean every business whether you like it or not. Directly or indirectly is exposed to cyber risk of some kind everybody has a reliance on remote work technologies or supply chains that have dependencies on cyber technologies and so whether you’re a technology company or not. You have some level of cyber risk associated with you and it’s just whether you realize it and are accounting for it that really matters. What I think is very fascinating is that society has shifted from it and cyber as a nice to have tool to an integrated part. Of our daily lives whether it’s with social media and communications or with business operations and supply chains right? and and I think that shift happened without people really realizing it I think one hundred and fifty years ago it was the industrial revolution in the move from steam to factories and we had the industrial evolution. Which led to the industrial age nowadays we have the the cyber revolution that’s led to this digital economy that we we really operate on in today’s today’s world
Alejandro Cremades: Um, so entering the world of entrepreneurship tell us about this. How did it happen.
Vishaal ‘V8’ Hariprasad: So so you know I was finishing up my last tour of duty in Iraq I came back to to the and nsa and and I was um was finalizing my move to the reserves I was going to go do my ph d and math I met my cofounder Raj who at that time said look there’s a really interesting opportunity. And cybersec security was over a decade ago and a lot of companies were still trying to figure out how do they solve their cyber security concern. Um and the venture world was investing heavily in in security startups said look you’re you’re a trained attacker. You know how attackers think you know nation states think. Um, let’s figure out if we can come up with a solution that helps companies get ahead of the bad guys at that time defense in depth was the big thing for most companies it was. It was really how can I keep my perimeter walls higher and higher and higher. Um. Maybe a little bit of interior defense but not much it was more about the perimeter cloud was still coming online and so what we did was create a product that helped companies look inside their own networks for evidence or traces of bad guys or criminal activity. Moving on inside their networks. We got funded by Andreessen orwiz here in Silicon Valley that that led me to move out here and build that company and it was. It was really fun. We got to hire our first engineering team our talent respect and understand the importance of making sure our lunch orders were correct for our engineers. Um.
Vishaal ‘V8’ Hariprasad: Which was not something I ever thought I thought it was all just going to be on solving cool problems. Well the lunch order is very important as well. Um, but separately getting in front of clients for the very first time and ensuring that we understand their problem and that our technology actually works. It was great. We got a couple of.
Vishaal ‘V8’ Hariprasad: Enterprise 500 sales cso sales and that took a while that was a huge learning experience for me. Um, and ultimately it was a great result. We were the first acquisition by Paul Alto Networks a year and a half later and that led to the rest of my journey understanding what it takes to make a huge security platform. Scale and go at a global level.
Alejandro Cremades: But I’m sure that that also gave you um, a great amount of visibility into what the full cycle of a company looks like because you know the fact that you guys were able to have that first company you know be they also the first time that you guys were able to raise money from. So sophisticated sophisticated investors. You know tier 1 investors actually but then also the fact that you’re able to bring it to the finish line. You know with high flying cols where you were able to achieve it even though it was not disclosed. You know it was a 3 x you know the returns. Um, you know, giving that back to the investors I mean that’s quite an achievement. So. What kind of disability did that give you into the journey of of of going through the full cycle as ah as a founder but then also kind of like make us insiders. How was that process of really going through an acquisition like.
Vishaal ‘V8’ Hariprasad: Well, you know and a lot of credit to my cofounder Raj here but it’s all about alignment of incentives across all of the key constituents right? and you know at every level. It’s slightly different but but ultimately Ceos have to manage expectations of their investors expectations of their employees.
Alejandro Cremades: Um, you.
Vishaal ‘V8’ Hariprasad: And expectations of their clients or perspective clients and expectations of the market 4 key areas that you’re always continuously marketing or understanding or learning about and aligning um ensuring that our investors understood where we were going to make our investments. Um, what our expected returns are on that product development that our employees understood what our targets were from a revenue perspective and a timeline to achieve those targets and that our clients understood our need our requirements. And also the value to them the problems that we were actually solving and I think in all 4 of these understanding the aligning. The expectations is what a really good founder and Ceo should be doing at all times and it’s a careful balance I think for getting to a. Solid exit is a careful journey that has to thread the needle against all four of those because if any one of those goes off or overinvested. You’re going to lose the scope on where your product development is or where your sales numbers are or what your investors are expecting. And so managing the expectations were processed for constituencies is as crucial.
Alejandro Cremades: So and talk to us about then once the transaction happens then you ended up going to Palo Alto so that you could help with the integration I mean you were there for about two years and a half but as they say once an entrepreneur always an entrepreneur entrepreneur. So. Right? after the 2 year Mark where perhaps you know the vesting and resting was up right? I’m sure there was been a lot of resting but definitely a lot of vesting after that was up. You know it was time to um to take a look at what the next chapter looked like and obviously that led you to now launching your your latest baby. So.
Vishaal ‘V8’ Hariprasad: I might point really.
Alejandro Cremades: Walk us through what were the sequence of events in order to bring resilience to life.
Vishaal ‘V8’ Hariprasad: Yeah, great. Great question. You know and a big part of this a good entrepreneur is always learning right? always looking for opportunities but also getting smarter in the process. The cybersecurities is a poor passion of mine. Um, whether it’s from my my military days. Or from my entrepreneurial days and the Paul Alto acquisition we were so fortunate from the timeframe. The returns were great but the lessons learned the ability to have to be a a cog in that machine as it scaled as they went from a few thousand clients worldwide to 70000 clients worldwide.
Alejandro Cremades: Are.
Vishaal ‘V8’ Hariprasad: Seeing that March from a few two three billion market cap to twenty billion at market cap um, looking at the strategy that they that executive team did was was really eye-oping and what it takes to engage clients and scale a business so that was just operationally and strategically very eye-opening for me. But. Also afforded us an opportunity to look at the problems that the industry was facing um people were spending more and more on cyber security year over year yet cyber crime was far eclipsing that cost. Um.
Vishaal ‘V8’ Hariprasad: You know by 2025 a lot of reports say that there’ll be over ten point five trillion in cyber crime losses yet cyber security investment will only grow to one point seven five trillion right just 10% of that amount. Um what I found fascinating and and what the ceoopolitan works at time Mark often I think. What he said that really struck a chord in me was if we’re going to do something big in the cyber securityity space. It has to be more than just a security feature. We have to as he would say shift the economics of cybersecurity and that really was the genesis um or the instigator. Behind resilience right? is economics cyber security and shifting really what we’re thinking about is how do we make the world harder for the bad guys making it more expensive for them to do the cyber attacks and it was very simple. How can we. Translate cybersecurity economics to finance. Don’t just spend more on every single device that’s coming out in the cyberurity world. Let’s prioritize what your value at risk is let’s prioritize what your security plan is and then let’s ensure that you’re adequately spending on the. Devices or approaches of security that will lower your risk and wherever there’s a gap ensure it transfer it over to the cyber insurance arena and that requires the translation layer and that’s that’s really what resilience is about.
Alejandro Cremades: So for the people that are listening that you know for them to be able to get it. What ended up being the business model resilience. How do you guys make money.
Vishaal ‘V8’ Hariprasad: So at the core of it. We sell insurance Cyber insurance to corporate enterprises and then we also sell Cyber Software Cyber Resilient software is redefine it which is that translation layer between the. Technology security stack people and processes that they have quantifying it to a cyber action plan and hygiene plan and then pricing it in the form of Cyber insurance and our business model is is very Simple. We sell insurance.
Alejandro Cremades: Anything.
Vishaal ‘V8’ Hariprasad: And and we also sell a resilience platform license that does that translation layer for them.
Alejandro Cremades: And and and also for you guys I mean things have evolved quite a bit. Obviously you guys got started you know with a company you know, right in 2017 I believe it was and they trade 2016 and then in 2019 Basically there was a pivot that happened so. How how did that paper come about and and at what point did it become like so clear that that was the way to follow.
Vishaal ‘V8’ Hariprasad: Ah, Andre, it’s it’s a great great question. So um, our first the first iteration of design was actually called arseo ai and the thesis was very clear. It. It was the thesis and mission has always been remained the thing. How do we connect the technical. Security stack people and processes to better cyber hygiene and incentivizing that hygiene. Um, the first thought was let’s create the technology that connects to a company’s security technologies and security stack use that technology. To help in the insurance industry. Underwrite policies profitably and then eventually innovate and create new policies based on their connectivity. Our original business model was to sell insure tech software. To the insurance industry so that they could innovate on insurance products what we realized a year and a half in and I think this is this is very important when it comes back to aligning investor expectations industry expectations and customer expectations is we have revenue targets we have to hit to validate our value valuations. Um, we have timelines to do so if our customer base does not share the same problem solving and timeline views if there is if those aren’t aligned. Um, we have to shift something in this case, what we did is the technology we realized the insurance industry is it’s great. It’s great at doing what it does.
Vishaal ‘V8’ Hariprasad: Sell insurance policies not necessarily too great at creating or or innovating on new risks inherently we would have to do that ourselves and so what we did is in 2019 instead of selling bad technology to the great clients we had at that time. We pulled it back. We said thanks. But no thanks and and these were interesting I had to tell the board we were doing this I had to call those coins and say guys I appreciate the the 2 3 year contracts that you you did with us but I’m returning your money for the next two years thanks for the first year and we’ll keep this going for your business interests. But that’s not the future of where we’re headed now we’re taking this technology in-housed and we’re starting our own insurance company and mga on top of it and that’s what we did in 2019 resilience was the rebrand of our sayo using that technology is the core of our business now to underwrite profitable insurance policies. And also power the saas solution that we provide to do the risk translation for our coins.
Alejandro Cremades: Um, and how much capital have you guys raised too late.
Vishaal ‘V8’ Hariprasad: Um, we’ve raised just over 225000000 across but we just finished our seriesrs d round we announced that two weeks ago was a $100000000 raised and you know I was really happy to show that it was a upground for my food as well.
Alejandro Cremades: And that’s quite an achievement in a market they that we’re in So I guess what have you guys learned too about the perhaps raising rounds in economic downturns.
Vishaal ‘V8’ Hariprasad: Um I think it all starts conve that alignment of investor interests and expectation management when we did our c round and and we were very fortunate our a round was lightspeed our b round was founders fund and our c round was general capitalyt. All amazing tier one investors. That set very high bar bars and do excruciating diligence looking into the internals turning over a relief and ensuring that there really is quality. Um logic coherence and integrity behind the numbers and then most importantly. Their sanity to the projections both in terms of what we think we can do in sales and the valuations that we should receive for them. We raised our sea round in in 2021 at the height of a very frothy valuation market and I can tell you we we had investors that were. Um, maybe not tier ones but we’re very much interested in doing whatever it takes to get get in on the round and offering valuations that were probably a little less realistic than what we would say we could grow into and and I think the beautiful part here was general catalyst lightspeed found fun. All of them have been the same that have said look. Let’s keep it sane here’s what we really think you can do but we’ll add our brand our reputation and we’ll keep that diligence going throughout the process. So raising a round that you know you can grow into I think that’s been.
Vishaal ‘V8’ Hariprasad: With realistic valuations is is crucial.
Alejandro Cremades: No Kidding I mean there’s going to be a big reset because people went with valuations that were not realistic and now we’re seeing the Bloodbath. So really remarkable What you guys have done in that department I Guess you know for the for the folks that are listening to get an Id on the scope and size of resilience to you know. Anything that you can share me like even number of employees. Whatever you feel comfortable sharing How big is resilience today.
Vishaal ‘V8’ Hariprasad: Yeah, we’re one hundred and seventy hundred and seventy employees across 14 different time zones and we’re in all the major time zones here in the Us but we also have operations in Canada London and now moving across europe as well.
Alejandro Cremades: Well hey that sounds like a lot of operations and a lot of different places where there’s like mini cultures that they are getting influenced by the actual culture that you guys have but obviously every office every every spot is going to have their own way of being now as ah as a culture but I Guess. What what has been through the experience of leading in a hybrid and remote environment like the one that we have right now.
Vishaal ‘V8’ Hariprasad: And I think that is honestly one of the key challenges for for leaders of all sizes and working across time zones with experts in various industries you lose out on the opportunity to just drop by an office. And or a water cooler and have a conversation or a hey what? if or let’s just get on a whiteboard day and chat about it so you have to be very intentional to make those connections and that’s just on the ideas and business front separately. You have to be very intentional about making the human connection. Um. Having that empathy because we’re on slack all the time and and I can very quickly just type up a quick request to 1 of 1 of our our team members and they could take it the wrong way. They they don’t have the tone of me saying and and not sounding too serious when I’m asking this question and you can take that tone the wrong way. Which could lead to a lot of strike a lot of frustration so having empathy and understanding of the human behind that remote message is also key. 1 of the things that we do here is infering that we have quarterly or or semi-annual get togethers of key business units and functions across functions across geographies so that we can. Reaffirm our commitment to each other and to the mission and cultural values of the business I think that’s absolutely essential for all leaders in this complex and hybrid environment.
Alejandro Cremades: So I like to double click on that you know, especially as we’re thinking about people as we’re thinking of vision imagine you were to go to sleep tonight v 8 in you wake up in a world where the vision of resilience is fully realized. What does that war look like.
Vishaal ‘V8’ Hariprasad: That is that’s a good one. Um so a world fully realized I think we don’t worry about cyber crime anymore. It’s not sensationalized you know bank robberies were headline used a hundred years ago in the wild west. Think that’s the same thing for ransomware attacks today in the future ransomware attacks 1 don’t happen as often and even when they happen. They’re not profitable or worth anybody’s time I think the same thing could be said for business fraud or spam. Business email compromise all these items that we worry about and end up becoming the headline of and the cause of a lot of fear for cyber is gone. It’s handled. It’s incorporated into our daily lives into our business lives into our personal lives. Don’t think about it much like we don’t think about crime or fire or other type of property risks and the reason for that is because we have clarity and certainty around the right steps to protect ourselves to get better on our hygiene from cyber our exposures to cyber and um, our recovery. From cyber incidents.
Alejandro Cremades: So We’re talking about the future here. So I Want to talk about the past but being able to do it with a length of reflection. So imagine I’m able to bring you back in time and I bring you back in time to the moment where. You met rush or you know you were thinking about like doing something you know if you own more on the entrepreneurial side of things and you have the opportunity of whispering to your younger self one piece of advice before launching a business. What would that be and why given what you know now.
Vishaal ‘V8’ Hariprasad: Be crystal clear on the problem that you’re trying to solve and who you’re trying to solve at every step of the journey and it’s okay that that shifts over time.. It’s not 1 problem 1 Client 1 Market segment. Um, if you want to build a long laughing Enterprise. You need to continuously innovate on that problem with those clients and with that industry and and I guess the real takeaway from that is that there’s no, don’t have that um, don’t have any guilt.
Alejandro Cremades: Um I love it So we had for the big good.
Vishaal ‘V8’ Hariprasad: Or fear of making those changes or those pivots. It’s not you didn’t get it wrong. You’re learning and that learning in that iteration is essential for hitting the next higher steps of growth.
Alejandro Cremades: I Love that nothing like listening everything happens in the listening. Thank you so much for that V eight. So for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Vishaal ‘V8’ Hariprasad: Easy v eight at cyberresilience.com that’s my email and cyberreslience.com has our information.
Alejandro Cremades: Amazing! Well v eight thank you so much for being on the deal maker show. It has been an absolute honor to have you with us today. Thank you.
Vishaal ‘V8’ Hariprasad: Awesome! Thank you so much. Ah, Andrew.
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Jonathan Matus, the founder and CEO of Fairmatic and co-founder of Zendrive, has had a fascinating journey from his birthplace in New York to leading two successful tech-based ventures. His time in the tech industry, studying at prestigious institutions, and serving in the Israeli military have instilled a unique blend of tenacity, vision, and innovative thinking in him. His venture, Fairmatic, has attracted funding from top-tier investors like Foundation Capital, Battery Ventures, Bridge Bank, and Aquiline Technology Growth.
The post Jonathan Matus On Raising $140 Million To Reduce Road Accidents With AI-Driven Insurance appeared first on Alejandro Cremades.
Christian Gaiser is the cofounder and CEO of NUMA Group which is a German technology provider for short and mid term rentals and travel accommodations. The company has raised so far over 60 million euros from top tier investors which include DN Capital, Cherry Ventures, or Kreos Capital to name a few. Prior to this, Christian Bonial which raised a strategic investment from Axel Springer.
The post Christian Gaiser On Raising Over $90 Million For His Last Company And Now Raising $60 Million To Bring Some Soul To Travel appeared first on Alejandro Cremades.
Christopher Golec is a seasoned entrepreneur with a demonstrated record of fostering innovation and leading successful start-ups. Golec's journey spans from his early days as a chemical engineer to becoming a key figure in the world of fintech, with his co-founding of Demandbase, a pioneering B2B marketing platform, serving as a remarkable testament to his visionary leadership. His venture, Channel99, has attracted funding from top-tier investors like GTMfund, Norwest Venture Partners, Jackson Square Ventures, and Bloomberg Beta.
The post Christopher Golec On Selling His First Company For $400 Million And Now Raising Millions To Pioneer B2B Marketing appeared first on Alejandro Cremades.
Todd McDonald is the cofounder of R3 which is financial innovation firm dedicated to the design and deployment of DLT to build the new operating system for financial services. The company has raised over $120 million from top tier investors including Intel Capital, Temasek Holdings, and 40 other top tier banks.
The post Todd McDonald On Raising $120 Million To Spearhead An Open And Trusted Digital Economy appeared first on Alejandro Cremades.
With his latest company valued at over $2.5 billion, Sweden's very own, Mattias Hjelmstedt, has an impressive record in the tech and gaming world. He's contributed significantly to the global e-sports industry, built a myriad of successful digital platforms, and made lasting impacts on the lives of millions of online users. His startup, Utopia Music, has attracted funding from top-tier investors like FiveT Fintech (formerly Avaloq Ventures) and CV VC.
The post Mattias Hjelmstedt On Building A Billion Dollar Business By Reshaping The Global Music Industry With Transparent Data Solutions appeared first on Alejandro Cremades.
Kevin Frechette brought his sales experience to the startup world, and has built a highly successful venture in a massive industry. The startup, FairMarkit, has attracted funding from top-tier investors like Highland Capital Partners, OMERS Growth Equity, GGV Capital, Insight Partners and ServiceNow.
The post Kevin Frechette On Raising $80 Million To Deliver An Autonomous Sourcing Solution With AI To The Enterprise Procurement Space appeared first on Alejandro Cremades.
Diego Caicedo is now championing his third industry in Latin America. He not only took his latest startup through an acquisition, but also bought it back, and raised $100M in capital in the process. The venture, KLYM, has attracted funding from top-tier investors like JP Morgan Chase and International Finance Corporation.
The post Diego Caicedo On Raising $100 Million To Build A Scalable Credit System For Companies Of All Sizes appeared first on Alejandro Cremades.
Amar Sawhney has built up an impressive record of startup exits. He’s created billion-dollar companies, sold some, and has taken others public. Now he’s heading up three startups at once. His startup, Rejoni, has attracted funding from top-tier investors like Catalyst Health Ventures, Ascension Ventures, Delos Capital, and Sparta Group.
The post Amar Sawhney Building Companies Worth Billions And Now Launching A Trio Of Startups To Revolutionize Healthcare appeared first on Alejandro Cremades.
Bob van Luijt has gone from building websites in middle school to raising tens of millions of dollars for his tech startup. The venture, Weaviate, has acquired funding from top-tier investors like Index Ventures, Cortical Ventures, Zetta Venture Partners, and Battery Ventures.
The post Bob van Luijt On Raising $70 Million To Unleash AI’s Full Potential By Revolutionizing Generative Models With A Vector Database appeared first on Alejandro Cremades.
BJ Johnson went from academia to launching a clean energy startup that has already raised $50M for its mission. The venture, ClearFlame Engine Technologies has acquir3ed funding from top-tier investors like Mercuria, Rio Tinto, WIND Ventures, and John Deere.
The post BJ Johnson On Raising $50 Million To Reimagine Diesel And Save The Planet appeared first on Alejandro Cremades.
Jon Sabes is a serial entrepreneur who has built and scaled successful businesses by going public. Now he’s charting a new venture that could be much bigger. His startup, GWG Life, grew to a $500M valuation, with $3B in assets. Jon is now poised to start his next eagerly-awaited company, Longevity Partners.
The post Jon Sabes On Building His First Company To A $500 Million Valuation And Now Taking On The $2.5 Trillion Life Insurance Industry appeared first on Alejandro Cremades.
Doug Brien has gone from success in the NFL to kicking his first business through a billion dollar IPO. Now he’s working on an even bigger vision to bring peace of mind to others, for which he’s already raised $200M. His startup, Mynd Management, has acquired funding from top-tier investors like Lightspeed Venture Partners, Canaan Partners, Invesco Real Estate, and Jackson Square.
The post Doug Brien On Going From Super Bowl Champion To Building A $1 Billion Business appeared first on Alejandro Cremades.
Alexander Asseily has gone from being born in a war zone to creating breakthrough technologies that we use every day. The companies he’s been involved in have raised over $1B in capital, and he’s not done yet. His startup, Lilium, has attracted funding from top-tier investors Aceville, LGT, Atomico, and Lightrock.
The post Alexander Asseily: Unveiling The Genius Behind Billion Dollar Ideas And The Journey Of A Tech Titan appeared first on Alejandro Cremades.
Chase Garbarino has built, sold, and invested in startups since he was in fifth grade. Now he’s taking on the world’s largest asset class. His latest venture, HqO, has attracted funding from top-tier investors like JLL Spark, DivcoWest, Allegion Ventures, and Pagliuca Family Office.
The post Chase Garbarino On Raising $150 Million To Transform The Workplace Experience appeared first on Alejandro Cremades.
Amar Kendale has already raised $70M for his latest venture. A healthtech startup focusing on a sizable, yet underserved niche, with big potential for impact. His startup, Homeward, has attracted funding from top-tier investors like Breyer Capital, Glen Tullman, Human Capital, and Blackstone Group.
The post Amar Kendale On Raising $70 Million To Deliver Healthcare For Rural America appeared first on Alejandro Cremades.
Lluís Cañadell chose to look a crisis in the face and turn it into a huge opportunity to leap into business as an entrepreneur. His startup, Treinta, attracted funding from top-tier investors like Rhombuz VC, Goodwater Capital, Luxor Capital, and Sherwin Gandhi.
The post Lluís Cañadell On Raising $60 Million To Streamline Financial Management For Small Businesses appeared first on Alejandro Cremades.
Now on his third startup, Yannis Niebelschuetz has already raised tens of millions of dollars to scale his global mission of making coaching more accessible for entrepreneurs and their employees. His venture, CoachHub, has acquired funding from top-tier investors like Signals Venture Capital, Holtzbrinck Ventures, Partech, and Speedinvest.
The post Yannis Niebelschuetz On Raising $330 Million To Democratize Coaching For All Career Levels appeared first on Alejandro Cremades.
Steven Wongsoredjo chose a path and market that everyone else has been overlooking. A $200B TAM that he has already been making great headway in. His app, Super, has attracted funding from top-tier investors like TNB AURA, DN Capital, Dorsal Capital, and Softbank Ventures Asia.
The post Steven Wongsoredjo On Raising $160 Million To Revolutionize Retail In Indonesia – Without A Single Store appeared first on Alejandro Cremades.
Marcelo Lebre has engineered his way from being turned down for a $20k investment from a startup accelerator to raising half a billion dollars for his growing remote work platform. The venture, Remote, has attracted funding from top-tier investors like 9Yards Capital, Accel, Sequoia, Index Ventures, and SoftBank Vision Fund.
The post Marcelo Lebre On Building A $3 Billion Business By Empowering Remote Teams Globally appeared first on Alejandro Cremades.
Rishi Mandal knows how to take a startup all the way from being birthed in the garage to being acquired for billions of dollars. The venture, Future, has attracted funding from top-tier investors like Fitt Insider, Optum Ventures, Caffeinated Capital, and Trustbridge Partners.
The post Rishi Mandal On Raising $100 Million To Mainstream Digital Personal Training appeared first on Alejandro Cremades.
L.D. Salmanson is a repeat entrepreneur who has been through spinoffs, acquisitions, and is now building his biggest company yet. His new venture, Cherre, has attracted funding from top-tier investors like Mark Schwartz, Glilot Capital Partners, Trustbridge Partners, and Navitas Capital.
The post L.D. Salmanson On Raising $75 Million To Unlock Data-Driven Insights In Real Estate With AI appeared first on Alejandro Cremades.
Yanda Erlich has now cofounder four venture backed startups. He’s been an angel investor, and a partner at a venture capital firm. Now he’s going at it again with a company that provides the best development tools for creating the next generation of software. His startup, Weights & Biases, has attracted funding from top-tier investors like NVIDIA, Insight Partners, Felicis Ventures, and Coatue.
The post Yan-David (Yanda) Erlich: Inside The $1 Billion Startup Building The Best Machine Learning Tools appeared first on Alejandro Cremades.
Matthew Roberts has brought about one of the biggest revolutions in the coffee and beverage space that we’ve seen since the birth of Starbucks and the frappuccino. His startup, Cometeer, has attracted funding from top-tier investors like Greycroft, D1 Capital, Elephant, and Tao Capital Partners.
The post Matthew Roberts On Raising $100 Million To Change Your Coffee Experience appeared first on Alejandro Cremades.
Tanis Jorge seems to have come up with a magical recipe for consistently starting and selling businesses rapidly. Her last company raised over half a billion dollars through a Series D round. Now, she’s going even bigger with her latest company that aims to give back to the founder community and equip others to scale successful businesses. The venture, Cofounders Hub, has attracted funding from top-tier investors like Blumberg Capital.
The post Tanis Jorge On Building A $2 Billion Company By Helping You Know Who You Are Doing Business With appeared first on Alejandro Cremades.
Nick Tuzenko has now raised $170M for his startup which is acquiring ecommerce brands. His venture, Accel Club has attracted funding from top-tier investors like Flyer One Ventures, North Wall Capital, Flashpoint Venture Capital, and Redseed.
The post Nick Tuzenko On Raising $170 Million To Disrupt The Future Of Ecommerce appeared first on Alejandro Cremades.
Vicente Zavarce has already raised tens of millions of dollars for his LA based startup that is expanding in Latin America, beyond the usual suspects of just Mexico and Brazil. The venture, Yummy, has attracted funding from top-tier investors like Y Combinator Continuity Fund, Softbank Ventures Asia, Sovereign's Capital, and Ethos VC.
The post Vicente Zavarce On Raising $70 Million To Deliver Anything To Your Door appeared first on Alejandro Cremades.
Svilen Rangelov and his brother have already raised tens of millions of dollars for their tech startup that has reinvented the supply chain. Their venture, Dronamics, has attracted funding from top-tier investors like Speedinvest, European Union, Strategic Development Fund (SDF), and Founders Factory.
The post Svilen Rangelov On Raising $40 Million From 1,500 Investors To Create The First Cargo Drone Airline appeared first on Alejandro Cremades.
Gaurav Sharma has already started and sold multiple businesses. His latest venture is shaping up to be his largest venture so far. It has attracted funding from top-tier investors like Amit Agarwal, Allison Pickens, Sequoia Capital, and Base10 Partners.
The post Gaurav Sharma On Selling His First Two Companies For Millions And Raising $56 Million To Automate Your Business appeared first on Alejandro Cremades.
Kishor Patil has dedicated his career to building a lasting company that has gone through an IPO, and is now worth over a billion dollars. His venture, KPIT, has attracted funding from top-tier investors like CX Partners, KPitalism, and Chrys Capital.
The post Kishor Patil On Building A $3.6 Billion Business In India By Disrupting The Future Of Auto Tech appeared first on Alejandro Cremades.
Luka Ivicevic is now on his third startup. After having his highly successful fintech company acquired, he’s now on a mission to help this generation to live to 150 years old. His latest startup, Index Health, has attracted funding from top-tier investors like LAUNCHub Ventures and Inovo VC.
The post Luka Ivicevic On Building One Of Europe’s Biggest Online Banks And Now Raising Millions To Personalize Medical Treatments appeared first on Alejandro Cremades.
Jonathan Steinberg has built one of the world’s largest financial services companies, which is also the fourth largest gold manager in the world. His venture, Wisdom Tree, invests in exchange-traded funds (EFTs) via the WisdomTree U.S. LargeCap Fund, WisdomTree U.S. Quality Dividend Growth Fund, and WisdomTree U.S. Multifactor Fund.
The post Jonathan Steinberg On Taking On BlackRock With $92 Billion In Assets Under Management appeared first on Alejandro Cremades.
Elad Gil has now launched two startups of his own. He sold one to Twitter, and has raised almost half a billion dollars for a second. That’s along with investing in some of today’s most successful companies, like Stripe, Airbnb, and Coinbase. His latest startup, Color Genomics, has attracted funding from top-tier investors like T. Rowe Price, Kindred Ventures, Pegasus Tech Ventures, and General Catalyst.
The post Elad Gil: From Selling His First Company To Twitter To Becoming The Biggest Solo Venture Capitalist appeared first on Alejandro Cremades.
Michelle He has already raised hundreds of millions of dollars for her fintech startup that is increasing access to credit and affordable loans, beyond just relying on credit scores. Her venture, Abound, has attracted funding from top-tier investors like All Iron Ventures, D.E. Shaw group, Left Lane Capital, and PointState Capital.
The post Michelle He On Raising $700 Million To Overturn Financial Norms And Make Affordable Loans Inclusive appeared first on Alejandro Cremades.
Arik Shtilman is the cofounder and CEO of Rapyd which is a payments platform that inserts fintech services into any app and simplifies
The post Arik Shtilman On Building A $15 Billion Business By Disrupting Traditional Banking With An API appeared first on Alejandro Cremades.
JP Errico has developed an incredible amount of IP in the medical space. On the way, he has built, financed, sold, and taken companies public. His venture, electroCore, has attracted funding from top-tier investors like American Investment Holdings, Easton Capital Investment Group, Tullis Health Investors, and Knoll Capital Management.
In this episode, you will learn:
- The pros and cons of taking investments from strategics
- How Electrocore is targeting the vagus nerve to improve and enhance our lives
Alejandro Cremades · EP 653 JP Errico On Going From Patent Attorney To $20 Billion In SalesSUBSCRIBE ON:
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Your email address is 100% safe from spam!About JP Errico:An accomplished inventor, JP received his undergraduate degree in aeronautical engineering from the Massachusetts Institute of Technology and worked at the Air Force National Laboratory, Lincoln Laboratories. He holds both law and mechanical/materials engineering graduate degrees from Duke University.
JP trained as a patent attorney in New York and is the author of a treatise on international intellectual property law. Through ongoing collaboration with investing partners, JP, along with fellow investor and board member Thomas J. Errico, MD, previously founded and sold or took public numerous med-tech ventures, including Fastenetix, K2 Medical Systems, AD4-Pharma, E2, and SpineCore.
Products conceived by these start-up companies have generated more than $15 billion in sales to date and delivered over $500 million in liquidity events to their investors. He also served as the CEO of SpineCore from the inception of the company through its sale to Stryker in July 2004.
JP is a named inventor on more than 125 issued US patents and is a named inventor on more than 230 pending US applications. Additional patents and patent applications outside the US on which he is a named inventor number greater than 250.
In addition to his current role as Chief Science & Strategy Officer, JP continues to make significant inventive contributions in all aspects of electroCore’s key patent portfolios, along with the clinical and market validations of the company’s products and their indications.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So today. We have a incredible gift. You know I guess that they you know has not only build scale finance and done all of that but also exited. You know we’re going to be talking about the private side of things taking companies public. Doing billion dollar exits I mean really impressive and quite inspiring so without furtherdo. Let’s welcome our guest today J P Erico welcome to the show.
JP Errico: Thank you, Glad to be here appreciate it.
Alejandro Cremades: So originally you were born there. Ah in Massachusetts so give us a little of a walk through memory lane. How was life growing up and also going to catholic school.
JP Errico: Yes, so my father was a physician and had the opportunity to work in an obgyn practice up in Massachusetts which was away from his family up in Massachusetts they were. They were originally from New Jersey um and I was born up there during a ah couple of years that he spent up there but they returned back to New Jersey when I was young enough not to remember so while I was born up there I really grew up in New Jersey
Alejandro Cremades: So I guess a you know it sounds like you know there. Ah you had a ah nice childhood and 1 thing led to the next and you ended up really developing that law for problem solving and engineering. So how did you get into the whole engineering thing.
JP Errico: You know it’s interesting. I was always good at math and science. Um, and I remember in fifth grade I asked my teacher my math teacher where somebody who was good at math and science and like math and science should go to school. And she said that mit was the best place in the world I’m certain that if she had said Caltech or georgia tech or someplace like that that would have been the place that was in my mind that I wanted to go but she said mit and that’s what ah where I decided I wanted to go and I was fortunate enough to be accepted and so I went to mit and majored in engineering. Aeronautical engineering and then decided to go after ah, a law school degree because my mother had gotten a law degree so she had some influence on me as well. So I was sort of going in 2 different directions 1 in engineering and and 1 in the law managed to get a graduate degree in engineering at the same time I was. Studying law actually wrote a book on international patent law at the same time and that’s how I became a patent attorney.
Alejandro Cremades: Now that didn’t last long because eventually your uncle you know, comes knocking So what happened there with your uncle. So.
JP Errico: Ah, yeah I was only ah, actually a practicing patent attorney for a few months before my uncle called me and he’s a world-renowned Spin Surgeon actually ran the spine service at and Nyu in New York for 30 years and it was during that time when he was coming up with new ideas. He wanted to talk with somebody. And since I was a patent attorney and a family member. He was actually my godfather the 2 of us began sitting down and talking about new products and and the direction that the spine field was going and it was around that time that I realized that I was actually a pretty inventive person as well. So he and I in the first year that we were working together developed. Something on the order of I think 30 or 40 patents that were ultimately issued by the patent office and began discussions with many of the large companies in the medical device field who were in the spine world and orthopedics and that led to. Us developing a few companies and those companies licensing the technology off and seeing them through to products that could help people and it was really quite gratifying to meet people that I hadn’t met before who had actually had products that I was part of the inventive team to develop in their bodies. Um, so it was it was a very gratifying and fulfilling and financially rewarding business to be in. We would develop the ip work with large companies to see that technology actually embodied and then marketed to people and it was ah was quite quite a.
JP Errico: Quite a great time in my life I really enjoyed it. Ah, those products my understanding is that those products have done over $20,000,000,000 in sales. At this point it’s pretty pretty incredible.
Alejandro Cremades: So what are we looking at in terms of sales.
Alejandro Cremades: My god that’s ah, that’s a lot of Zeros and nJP now now now the other thing too is the impact because they have been you know, used by hundreds of thousands of individuals. You know I’m sure that you know having an impact you know making a difference you know I’m sure that that.
JP Errico: Um, it is this.
Alejandro Cremades: Probably felt very good to you and and to your uncle.
JP Errico: It is. It’s really remarkable I remember I was sitting out in California at ah at ah, but a lunch place met somebody I hadn’t met before and he was telling me about how he had been through a really very challenging time in his life after he had been hit by a car. He’d been a pedestrian hit by a car. He had serious back issues and he told me that he had had several levels in his back fused and I said really I’m sure that surgery was you know, quite quite difficult. But do you remember what screws. They used when they put you back together. You know the the screws and rods and and other things and he said yes In fact I do remember it. They told me that they were using products by a company called cynthes and I I smiled and I said you know it’s funny I think the products you have in you are actually products that I help develop. Um I hold the patents with my uncle on on those products and so it was really kind of remarkable I mean he was actually almost brought to tears over the fact that it had changed his life. He had been in so much pain prior to that and now he was able to get back on his feet and walk and run and and. Get back to what you’re supposed to be doing when you’re 25 years old
Alejandro Cremades: That’s absolutely remarkable and hey like everything you know like when you you know, create Value. You get to extract value too because one of the companies that you created you know they’re you know was spinecore using those same different ips and initiatives that you were doing with your uncle and that ended up having a really nice outcome. You know it was like your guys his first day Exit So walk us through what happened there.
JP Errico: Sure so you’re absolutely right? We developed the technology of the the initial technology in the late 1990 s and around 2001 we decided to actually take that technology and develop it into a product that we ourselves would bring to the market as opposed to simply partnering with another company. Um, we went out and raised some initial capital from friends and family who saw what we were doing and wanted to be part of it and then we went at and got some venture capital from some venture capitalists who worked with some private equity people. Um, but things moved very quickly from 2001 by 2002 We were working with the Fda to get approval to start a study by 2003 we were in the study and rapidly enrolling patients and sometime in the early part of 2004 we were approached by a company that wanted to buy us. And it was for a lot more money than we had invested into it at that time at that point including all of the different capital that we had raised we were into it for about $15000000 so we had spent fifteen million over a 3 year period done a tremendous amount of work. And the offer on the table to buy us was three hundred and sixty million dollars which you know if you do the math that’s something on the order of 24 times more money than we had spent and it was interesting because the Ceo of the company that was buying us sent me an article in which he talked about.
JP Errico: The importance of small companies and the intellectual property that they develop and how critically valuable that is to large companies and in the article in the opening line of the article. It actually cited that it was on average 24 times more expensive. For large companies to develop technologies then for small companies and I laughed because it was exactly almost to the exact number 24 times more expensive for that. But that company to buy us than it was for us to develop the technology ourselves so it was a great experience happy to have been through it. You know. There was struggles along the way but they were well worth it.
Alejandro Cremades: And how was that approach initially I mean did they reach out to you guys called be a email was it a phone call Linkedin message I mean I don’t even know if Linkedin was around at that point you know or ah, maybe like even a letter on the on the mail snail mail. So so how how did that approach happen.
JP Errico: So interesting. Um, they happen to be that company happened to be a licensee of 1 of our other products they had done very well with it and we were actually going out to dinner to sort of ah a late Christmas dinner in the in the new year to just. Rekindle our relationship and meet some new people and they’re their head of their division. Their their president came up to me and to my uncle who is my my business partner and said we’re really interested in this other product that you’ve got in this other company. We’d like to put a bit in to buy you if you’re interested. Um, there were other companies that came to the table shortly thereafter also asking but we ended up doing that deal.
Alejandro Cremades: That’s incredible now. Obviously 360000000 as you were saying that’s life changing.
JP Errico: It is of course I didn’t take all that or we had investors we had private equity equity involved and the deal was structured as many deals in the in the medical device and biologics and pharmaceutical spaces are with what are referred to as contingent value rights. So. The actual upfront payment was one hundred and twenty million dollars of the 3 60 um and the balance of the two hundred and forty million dollars was structured in contingent value rights which means that getting that money is contingent on certain milestones being met. Um. And I would say that the lesson that I learned from that experience is that when you structure deals in that manner you want to make certain that you retain the ability to control the success of those of those contingent events. You want to be able to make certain that you meet those milestones without interference or control by influences that might otherwise try to stop it and so you want to you want to make certain that you do that the right way.
Alejandro Cremades: Yeah I mean you typically see that too on deals. You know where they structure as an earnout based on like milestones and things like that and I fully agree with you because you know that ultimately is a risk and you got to do as much as you can to the risk and being able to unlock that. So absolutely what about. What about here you were saying that you guys raised from private equity firms. How was that they like because obviously you know the p firms they’re like sharks. You know they’re all about numbers. You know vcs they typically invest more in people. But how is it like you know like dealing with the private equity firms. You know here in this year
JP Errico: I was a little challenging. It was challenging I will say that there were points along the way where I became very disillusioned by the whole process. Um I would I would really point to one moment we had. We had gotten this offer in across the across the transom from this company. Wanted to buy us for three hundred and sixty million dollars and at that point my investor group including lots of friends and family et cetera. We owned about 2 wo-thirds of the company and but the venture capitalists and the private equity people they were opposed to us selling I mean imagine you’ve you’ve put. $15000000 into a company and you have an opportunity to sell for 360 that seems like a gigantic win. But sometimes these private equity groups. They don’t want to do that they want to continue to invest because they believe that the value of this company could ultimately be a billion dollars and so I remember very clearly having a conversation in which they tried to convince me. That I should stay on and we should stay independent and that we could ultimately create a billion dollar company and I asked I said okay, that’s very enticing very alluring but tell me how much will I in my investor group own of the company. At that time when we have that billion dollar exit versus the three hundred and sixty million dollars exit and they were proud to tell me that it was very possible that we could own as much as 25% of the company at that point and so I did the quick math in my head and I said well 25% of a billion dollars is 250000000 but.
JP Errico: 2 thirds of 360000000 is ah is 240000000 and so I turned to them I said so basically you want me to give up 240000000 to get 250000000 but in the process take on a tremendous amount of risk and what could be 5 to 10 years worth of effort.
JP Errico: Why would I do that I understand from their perspective they were going to go from making 120000000 to making 750000000 so it was a huge increase for them but not for us and so ultimately I I convinced them that it was better for everybody involved if we if we sold.
Alejandro Cremades: So amazing outcome. Obviously you know great great returns for everybody now k two you know k 2 comes knocking. You know as the next opportunity because as they say once an entrepreneur always on a entrepreneur. So what happened next? okay.
JP Errico: Yeah, so it was actually around the time that we were first negotiating and building um to the sale of spincore that a group of people that I was close with and that what my uncle was close with came to us and said that they were thinking about starting a company. Um, and did we have any intellectual property that we might want to invest into what they were doing and so we got involved in strategically planning how the company was going to be formed and how it was going to be built and we weren’t going to take an active role in driving the operations of it but we were going to help them raise their first capital. And help them with the intellectual property and that company was it was such a great experience to be sort of on the outside of another group building something because I had written all of my experience had been with my own group but watching them function and how they work together and how they thought about things because. Was coming at it for more from the science and the engineering and the financing side they were coming at it from the sales and marketing side of it and it was great to see how their strengths built their company in a sort of a different direction. They were very successful in what they did they ultimately that that company was called k two medical. They ultimately were acquired by a private equity group. The management team stayed on fully invested and ultimately the company went public and it was ultimately coincidentally bought by the same company that bought spinycor so it was ah it was a great exit for them I think it was ah a.
JP Errico: Billion 4 or something I built one point four billion so a great exit for them as well.
Alejandro Cremades: That’s absolutely unbelievable I mean second company you know second like massive exit like that I mean did it were you like a little bit scared of hey you know like things are going too. Well here you know I I don’t want to get too cocky.
JP Errico: No, because you know what I’m not talking about are the few failures that I had along the way. Um, and there were some You know we started a ah pharmaceutical company looking to develop an oncology product with some intellectual property that I had come up with and we had some. We had some.
JP Errico: Good success is along the way but and I still think that the technology is ah is a good idea but you know as with these things it’s it’s something of ah a roll of the dice and the product that we the specific product we developed just ended up not being quite as as powerful as we wanted it to be. Um, and other products were better. Another example was some technology that we were given by the acquirer of spiny corp they wanted us to develop it. They felt that we were better better suited to developing it. It was in the gastric bypass field. We developed some other intellectual property. We got. Through animal work that looked really positive but a competitor in the space ended up having some catastrophic failures with their product that actually ended up killing some people and even though our product had avoided the the features of the product that would have. That caused those problems it put a taint on the whole industry and as a result even though he had invested. Ah you know a significant amount of money into it a few million dollars at that point we really just had to close shop because the the Fda was just no longer going to be interested in products like that because of what. Another competitor had done to us so you have to be you have to be careful of all sorts of different things that can trip you up along the way.
Alejandro Cremades: Now in this case, you know 1 thing that you definitely got right? was developing relationships with the strategics. What have you learned about this.
JP Errico: Um, I think that developing relationships with strategics can be very powerful. Um, you know one of the major investors in ah in another company which is I’ve spent a lot of time on and is now publicly traded is a company called Electriccorp. When we originally started that company in 2005 late 2004 early 2005 um, that company raised probably $30000000 from friends family and close associates and people who wanted to be invested with us and our our core group of partners put in lots of. Ah, lots of that but we went out and spoke to Merck and Merck ended up being an anchor strategic into a medical device company now Merk is a pharmaceutical company. They don’t sell medical devices and so it was never it was never intended to be. Something where their investment was going to lead to them buying us. But it also I think had something of a chilling effect on other strategics wanting to be invested in us so we had ended up having to do it all with ah with investment raises from. High net worth individuals and Merck and a small private equity group that decided to come in so we ended up raising close to two hundred and fifty million dollars to get to the point where we could take that company public with.
JP Errico: With ah without ever actually going out and raising traditional venture capital.
Alejandro Cremades: So just so that people you know, end up getting it. You know in a way that is that is simplified especially for the people that are not so technical. What is the yeah business model of electro core. How do you guys make money there.
JP Errico: So electricorre developed a neuro modulation device. There’s a a technology called vagus nerve stimulation which has been around for about 35 years it was developed in the late 1980 s by. Ah, company out of Houston Texas called cyberonics and they had an implanted device much like a pacemaker. In fact, they used to refer to it as the pacemaker for the brain. Um, it was implanted into the chest wall like a pacemaker but instead of the leads going to the heart. The leads went to a nerve that sits in in your neck. It’s actually right next to your car crodid artery and that technology was used to treat epilepsy and ultimately they also got an approval to treat refractory depression but it required surgery and it was about a $30000 investment to get that get that implant in place. We started studying and and based on some research that I had done I realized that that product could be used to treat other things and that what we needed to do was focus on other places where cyberonics hadn’t been looking one of which was in anaphylactic shock another was in asthma. And that ultimately led us to treating very severe forms of headache cluster headache migraine headaches and going through the Fda and getting clearances to start marketing. The product. So currently, we are our electricorp is selling 2 products one is called gamma core.
JP Errico: And it has the Fda clearances to treat migraine headaches, cluster headaches and and other very severe forms of of headache and they do that through a salesforce that calls on the the va calls on um on medical practices to either prescribe or to actually buy and then. Sell through their practices and we just ah, recently at the end of last year decided to launch a wellness version of the product a vagus nerve stimulator that is for stress and and managing your stress resilience and your your whole. If. You want to call it your sympathetic axis that when you’re in sympathetic overdrive. You’re very stressed at’s your fight or flight response. Um and helping to manage yourself out of that into the rest digest rebuild and restore mode which I think everybody in this world needs right now I think are. I think our world is in sympathetic overdrive and we need to ah we need to all take a chance to to take a deep breath and and relax and our product true vega really does a great job with that I would encourage anybody to go to the true vega.com website. Check it out I think you’ll you’ll see some great testimonials from people who’ve used the product. These are real people really use the product and and the the thing that they always talk about is how much it gives their it gives them their life back that they felt that their their lives were hijacked by stress by not being able to sleep by not being motivated by the.
JP Errico: Fatigue of of carrying all that anxiety around and it just it helps them manage that so much better.
Alejandro Cremades: Now in this case, you know for you I mean you started there as the you know like you had the role of a chief executive you know for about 8 years and then you know like as they say you know founders you know the role in a company you know is going to It’s going to transform. It’s going to transition. You know as the company you know my church as the company goes from 1 chapter to the next how has your role changed because you you were the chief executive officer then you know you you transition all the way now to being a board member. So how has that you know journey been for you.
JP Errico: Um, you know as with all Journeys there’s ups and downs. Um I feel that my strength in being an executive or chief executive or in the c-suite has always been on managing people and managing technology and managing finance. When it comes to marketing and sales. Um I I didn’t have that background didn’t have didn’t have grow up in the field learning that side of the business. In fact, when I when I talked about k two medical. It was great to partner with people who had those as their as their strengths. Because those I didn’t think were my strengths. Um I think I’ve learned a lot about those areas along the way. But when the company reached the point where we felt it was. We were close to getting our approvals and needed to go out and deal with insurance companies and deal with distributors and deal with. With pharmacies and pharmacy benefit organizations. Those were those were things that I had never done before so I was I’m very fortunate I have a wonderful wife. My wife has has been in the pharmaceutical field as ah in hr so she gets to know everybody? Um, and so she made some introductions to me. Ah, for people who could come into our company learn it and then ultimately succeed me in in running the operations and becoming the chief executive officer. Um, and that’s what we did. So I I transitioned from chief executive officer into chief science and strategy officer.
JP Errico: Which is a role that I held and and gave me the opportunity to take the company public I really spearheaded that that opportunity while our Ceo really kept the day-to-day business going. Um I had the opportunity to interface with the bankers and the lawyers and the investors and. And go through that process. It was a fabulous fabulously interesting process that takes about eight or nine months it worked out very successfully. We raised close to $100,000,000 I think a little over $90,000,000 in our Ipo. It was a screaming success and. And I enjoyed it a lot I I would caution everybody though if you’re thinking about going public remember that going public is a financing event. It is not an exit when your company is bought. That’s an exit when you have the opportunity to sell your shares you know, hopefully at a profit that is. An exit. It’s not an exit to go public. It’s ah it’s a milestone one that should be celebrated one that should be enjoyed. Um and you’ll learn a tremendous amount I always suggest getting people who’ve been through it to help guide you but it’s something that you have to go through to understand and it’s.
JP Errico: It’s a wonderful experience but don’t think of it as as an end. It’s just a new beginning.
Alejandro Cremades: And I love how you say that you know it’s interesting. You know there’s been other people that have come to the to the show and have shared the um the ipo experience like eating shrimp you know in in private jets with the bankers going from 1 place to another. You know what? what when you were saying that you enjoyed it I mean what? what were the parts that you enjoyed the most you know of that the process of going public.
JP Errico: You know I Love talking about the technology and I love talking about our business I Love talking about the potential of this therapy to do so Ah So many things? Um so any opportunity for me to talk to people at any level whether it be you know. Literally ah a customer walking up to a booth and talking to me about what the the therapy can do to the leaders of ah of an insurance company to bankers who are interested in investing or finding investors for us to investors I Just love talking about. In fact, somebody once said, that.
JP Errico: I don’t think JP has ever sold anything. He’s proselytizing. So I do feel like I’ve got that preacher or teacher spirit in me more than sales I like to be to get other people to be as enthusiastic about what I’m interested in and what and show them. How it affects their lives and how they should be excited and interested in what we’re doing sometimes I’m successful. Sometimes I’m not but that’s that’s why I found that process so exciting because it was meeting so many new people and people who were open and interested to hearing our story. That’s why I found it really it was exhausting. Don’t get me wrong and and there was no flying around on private jets and eating shrimp. It was it was commercial. It was economy flights but it was 2 or 3 a day for you know, two or three weeks flying to different cities meeting with people and. And I just found that the meetings were the exciting part. Obviously you know hotels and and taxic cabs and you know getting to airports and struggling through security lines and ah, that’s not the fun part but the fun part is succeeding at what you’re doing and getting all of these people. Interested in what you’re doing and interested in willing to invest.
Alejandro Cremades: I Love it now. Imagine you were to go to sleep tonight and you wake up in a world where the vision of electro core is fully realized what does that world look like.
JP Errico: That’s a wonderful question. Um in that world. There are so many people who are feeling less pain who are experiencing cognitive clarity. Brain fog has been lifted. Um, there’s less. There’s less Autism. There’s less Schizophrenia. There’s less depression. Um, there’s fewer people suffering with autoimmune diseases. Um. That’s what I think the the ultimate promise of this therapy is and and and whether it be something that Electricorre does or it’s one of our competitors whether it’s that company cyberonics which is now called Levanova whether they advance the technology in in the world that I want to wake up In. Where electricor has been successful all of those other companies have been successful and the and the world has been has has grown and advanced because they’ve understood how vagus nerve stimulation can be beneficial I. I was just talking to some people and I said I really feel as if I am incredibly blessed I feel as if this journey of developing this company somewhere along the line a wormhole in space time opened up and the instruction manual for life.
JP Errico: Written 1000 years in the future has landed in front of me open and I had like a minute or 2 to leaf through it and look at it before it evaporated into the ether and so I had the opportunity to see it just a couple of pages of it and read it and understand it and that’s what I want to bring to the world. Want to bring to the world that little bit of understanding how human beings and frankly, how life works and and and explain to them how veggus nerve stimulation. We’ve known about it as ah as intuitively for 10000 years Ayurvedic Medicine Ancient Chinese Medicine and acupuncture ancient egyptian medicine all of those things were based on the idea that the human body has 2 2 places 2 modes that it can exist in it. It can exist in that fight or flight sympathetically driven mode. Or it can exist in arrest and digest and restore and rebuild mode if you spend too much time in that sympathetically driven state you are going to find yourself in pain. You’re going to find yourself anxious and depressed. You’re going to find yourself having difficulty sleeping you’re gonna find that you’re. Gastrointestinal trackc isn’t functioning properly. You’re going to find that your metabolism is disrupted. You’re going to find that you may even come down with cancer and you may have joint problems and rheumatoid arthritis if that lasts too long. You have to be able to shift back efficiently shift back into that mode.
JP Errico: Of rest and digest and restore and unfortunately a lot of western you know western society and western culture is geared around 20 so 24 enty four seven access with our cell phones constant screen time demands of work that never end. Um, financial stresses. Um, you know trying to manage your children. All of these things leave us in a permanently stressed state and more and more we’re we’re pulling back from the social interactions and the enjoyable things that we need to we need to have in our lives and so. I think what vagus nerve stimulation allows us to do is to very briefly shift back into that rest digest and restore state and hold onto it for a period of time necessary that our bodies can heal and our bodies can get centered and we can be back into that. And I don’t want to sound woowoo and new age because there’s a tremendous amount of real science I mean I’m an mit guy I want real science I want to understand the mechanisms so we’re there but that world that you’ve described or that you’ve asked me to describe is one in which people have. Come back to recognizing how important that is and that they’re using various techniques various technologies. Hopefully some of it is is technology that electricor has to get back into that healthy state. It will make you smarter. It will literally make it will change your iq. It will make you smarter.
JP Errico: Will make you more capable of managing life stresses. It will make you more capable of having the energy that you need to in order to to live life to the fullest. So I want people to feel amazing I think that that world in which I wake up in in the future and people are using this technology and and doing it.
Alejandro Cremades: I Love it now. We’re talking about the future here. So let’s talk about the past and doing so with a lynch of reflection imagine I was to bring you back in time and I bring you back in time to that moment where you’re a patent attorney you know right? before you know you receive that phone call from your uncle.
JP Errico: That’s what it’s going to look like.
JP Errico: Okay.
Alejandro Cremades: And you’re able to just enter the office and just have a sit down with that younger self and you’re able to give that younger JP 1 piece of advice before launching a company. What would that be and why given what you know now.
JP Errico: Take all your money invest in Amazon um, um, I’ve thought about that one a lot because there’s been a few times along the way where I had some extra money and I didn’t do that and I wish I had but in all seriousness I would I would tell myself.
JP Errico: That not everybody who appears to be a friend is and not everybody who appears to be disinterested is an enemy and everything will happen if you keep working at it. Um. Early on so it was after that that that time that you’re talking about early on I realized that so long as you’re not breaking the laws of Physics So long as you’re not doing that. Everything is possible. The only thing it requires is energy. And so the question is how much energy are you willing to put into it in order to make it successful because you can do it and you have to believe in yourself. But you have to do it with a level of dedication that you. You really have no idea what it’s going to take until you’re in it. Um, it’s tremendously fulfilling. It’s like being a parent honestly, it’s It’s like having another child I have 4 children 4 living beings. Um I have a couple of other children that are in the form of products and technologies and companies and. They all take a tremendous amount from you but they give back such an incredible gift. Um, so be willing to put the time in be willing to put the energy in be willing to sacrifice because it will come back to you. It will be come back to you in a positive way.
Alejandro Cremades: I Love that So JP for the people that are listening. You know that will love to reach out and say hi. What is the best way for them to do so.
JP Errico: You know I have a website JP errico.com happy to have everybody go there and check check that out. It’s it’s still in the process of being built. It’s always being renewed. Um, there’s also a great way to to hear this story if you have interest in Veggu nerve stimulation and in. In how we can become healthier beings. Um I do a podcast called the Health Upgrade Podcast it’s it’s my cohost is ah is a is a great health care provider by the name of Dr Novaz Habib so go So the health grade up upgrade podcast and and frankly if they want to. Ah, get to me you know, ah go go to those websites and and leave me a message I’m also on Instagram as you know, not surprisingly the vns guy so it’s the v n s guy um guy and love to hear from people would love to hear people’s stories and. And if they have questions they can direct. You know, direct message me and I’m I’m usually pretty responsive. So I’d love to talk with them about anything whether it’s be business finance or frankly health I love I love talking about it.
Alejandro Cremades: Amazing. Well hey JP thank you so much for being on the deal maker show. It has been an honor to have you with us today. Thanks.
JP Errico: Ah, Handra appreciate the ah the opportunity at really had fun.
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Aviv Leibovici took a different route than many of his peers. Yearning to have a real-world impact with his work, he dove into a big industry that has been begging for modernization. His venture, Buildots, has acquired funding from top-tier investors like TLV Partners, Future Energy Ventures, Maor Investments, and Lightspeed Venture Partners.
In this episode, you will learn:
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Alejandro Cremades · EP 652 Aviv Leibovici On Raising $106 Million To Transform Construction With AISUBSCRIBE ON:
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Your email address is 100% safe from spam!About Aviv Leibovici:Aviv Leibovici works as a Co-Founder & Chief Product Officer at Buildots, which is a Database & File Management Software company with an estimated 80 employees and was founded in 2018.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today. We have an entrepreneur entrepreneur that is joining us. You know, originally from startup nation. We’re gonna be talking about building scaling financing all of the good stuff that we like to hear. Especially on transforming you know something that has to do with our old and outdated industry and getting into an industry where you have no idea you know you have no experience nothing you haven’t done it before or no ties and there is also you know an environment that doesn’t really facilitate that because people are on something else but without further ado. Let’s welcome our guest today so that we can learn everything about it. So let’s welcome Abbi Levichi welcome to the show.
Aviv Leibovici: Hi and ah thanks for having me glad to be here and yeah, happy to speak about all those things and more.
Alejandro Cremades: So originally born there in Israel so give us a little of a walk through memory lane. How is life growing up there.
Aviv Leibovici: Well grew up in Israel. It’s ah it’s ah it’s a fantastic face in many many ways you know weather wise especially well except for the summer which is a pain in the Middle East but but pretty much a pretty standard childhood. But. In Israel like in Israel everybody. You know you you become 18 at some point and you do this thing where you join them. You know? Yeah the army your service. So. That’s where it pretty much starts.
Alejandro Cremades: And how did you get into computers you know before the army and before all this I mean what? what? what? What was that the that trigger to computers.
Aviv Leibovici: Yeah, that’s a good question. You know I don’t think I’ve been asked that almost ever. But I guess well both my parents come from the field so that surely had something to do with it and it just always interested me.
Alejandro Cremades: So in your case, you know you see when when you’re in Israel. You need to do the army and in this case, you did a program that combined training and education. You know all in 1 and you did that for 9 years I mean that’s ah, that’s a long time I mean. Typically it’s doesn’ it last that long is said les I mean did you were you liking it so much that you were like I’m going to just take it to a whole nother level or what? what? what was going on there I you.
Aviv Leibovici: Yeah, yeah, no, it’s actually no, no no standard service would be 3 years and it’s actually quite a crazy thing because they offer you this program if you’re you know if you’re accepted to it which is for your 3 years where you’re meant to serve. You’re not. Exactly serving. You’re more learning. You’re getting a university degree and you’re learning about technologies and you’re being trained and you’re you know they’re building your skills and and and leadership and presentation and and all sorts of things and you do that for 3 years but the deal is that you then. You know have a proper role for 6 years so if you think about it. You’re an 18 years old kid and you sign up to a program that is basically signing up for nine years. So you’re signing up for a duration that is 50% of your life. But at that point thus far. It’s quite a crazy thing. But I I don’t regret it.
Alejandro Cremades: And what what did you gain out of this program and obviously you met your co-founders Roy and and you care about the but what did you get out of out of this programming. What what were some of those lesson I’m sure that the ethic and the discipline was of the charts.
Aviv Leibovici: For a second.
Aviv Leibovici: Well, ah, yeah, many many things. First of all, there are many many israeli founders that have come from that program even though it’s not that big a program and I think that’s a lot to do with the sort of training that happens and the sort of people that are recruited and it’s meant to build. You know it’s meant to build people that can go then and lead technological efforts in you know in the israeli defense defense industry. So obviously that means that you need to understand technology and you need to understand leadership and you need to understand how you know to motivate people and need to understand how to manage and and as such. So that is very good prep for you know, starting a company but not just the skills and the the learning that you go through all of my best friends in this world are from that program as you said my two co-founders are from that program who also happen to be 2 of my best friends and it’s Ologist. You know it’s it’s it’s.
Alejandro Cremades: So when you meet your cofounders there I mean they they they stayed for a little bit longer. You know you got out you were doing your consulting your skiing. You know they good life. They good life. You know waiting for your cofounders to come out and yeah, yeah, yeah, so so I guess say.
Aviv Leibovici: Ah, very big part of my life.
Aviv Leibovici: Um, yeah, please be good life.
Alejandro Cremades: Ah, what point you know when you guys men and you guys were discussing There is it really clear that you guys are going to be doing something and that it was worth the wait for you to wait for them to come out and build something. So.
Aviv Leibovici: Yeah, well that’s actually that’s pretty crazy because we were good friends and we thought that we know how to you know, cooperate that we have completing personalities and we can cooperate together quite well and so I finished my service this was like 2016 I knew they still had a year but in any case I wanted I wanted to do my skiing time and I could consult remotely so I went off to live in France and the alps ski when you when there’s sun work when there’s not work by the hour as you say the good life I gotta tell you to this day. Obviously being a co-founder is quite the you know the stressful and the busy life and I have these days when I say man you were living in a ski resort what was wrong with that. You know what was the problem with that. but ah but then they actually came to visit me. Um, then in other friends you know for a week of skiing and Roy’s wife said you know gathers gathers the three of us in a room and says well come on. You know you’re doing it. You’re not actually saying it just say it and do it and then we’ll well yeah, okay, we’ll do it. Ah, so then I came back. We started just chatting because they were still in their roles and then towards the end of 2017. They finished their roles and we started you know started actually doing this looking into it.
Alejandro Cremades: So what was that process of looking into it. But what? what? what would it? What did that look like until you guys were like okay, let’s go.
Aviv Leibovici: Yeah, we didn’t know at first what the industry will be what the technology will be what the product will be. We didn’t know anything really we knew 2 things we knew it’s going to be the 3 of us together and we knew that we wanted it to be solving a very much real world problem. So we were looking into all sorts of Industries Healthcare Agriculture Automotive Transportation all sorts and we were basically the nice thing about being in Israel and from talpiot is that you can very easily. Speak to a lot of co-founders and we just went through meetings and meetings of you know learning from people’s experience. How did they go about starting their company. How did they go about deciding what they do, um, such a process and looking into things regularly and then suddenly at some point we got to construction. And sort of it started caught from there receiving a bit more focus.
Alejandro Cremades: But construction. You know it sounded like not the typical segment that someone would do there in Israel because I mean there in Israel is more like cybersecur and stuff like that construction. You know it’s a a little bit you know out of left field. So why. Did you guys have the fear of um, you know, maybe hey you know we don’t have like this crazy experience or maybe we’re not in the right type of environment or ecosystem to be able to build this.
Aviv Leibovici: Well I think we should have had it. We didn’t but you probably should have. Um, we again, we wanted this to be very much real world. You know and we thought we actually what happened is yakkiir a good friend of his from like from like yeah the age of 6 or something. Works for 1 of the biggest construction companies in Israel. He told us man you got to meet this guy who works with him. We met that guy and that guy just sat with us for an hour and told us why it is that we need to come to construction why that is the right thing to do why this industry. Has a lot of room for innovation. Why it wants innovation. Why it doesn’t have enough of it yet and the such and the such and we said okay, we’ll give it a go. We’ll give it two months and if in two months we don’t feel like it’s real. We will step back now. Obviously when you say that. That won’t necessarily happen when those two months come but later down the line. We found that? yes, we are the odd duck. You know we would get into once we already had an idea and you know we knew what we were doing. We knew what the product was going to be. We knew what the market was going to be well to an extent. And then we started meeting with investors and some of that experience was telling certain people. Oh we’re doing this thing in construction and they look at you and say construction seriously because it’s very you know, weird and unique.
Aviv Leibovici: We actually had 1 experience which was extreme obviously I won’t name the person but where we sat in a room with an investor and said said look I don’t know anything about construction and I’ve never had a construction tech company and honestly I won’t invest in you guys if you do construction deck. But if you say right now that you do cyber security. Without knowing what it is that he will do I will give you a seed round of $4000000 and now and you go figure out what you do with it.
Alejandro Cremades: Wow and I mean that’s ah, a really nice sweetener that’s like putting money on your face. Why didn’t you guys take that.
Aviv Leibovici: Yeah, because we didn’t want to do cyber security because we wanted it again. You know for me, it was all about seeing.
Alejandro Cremades: But what conviction I mean what conviction did you guys have to because I mean it it sounds you know like you get four million bucks in front of your face and you know I’m sure that you guys thought about that and and and and you had a thought process there or some type of conviction. You know that they it was just like a no-brainer to keep going I mean what? what was that.
Aviv Leibovici: It was never really about completely the money you know I’m and um, um, with I won’t see the here and and Lie. There’s there’s that’s an aspect of it but we wanted to do something that we feel. Um, we feel is right for us. We feel. Big We feel affects something that we can feel and see and changes processes in the real worldl of people We can really see and and relate with and we wanted it to be something along you know along those lines and be in in a more call it concrete excuse the pun.
Alejandro Cremades: So what? what on those two months that you guys gave yourselves to see if you could do something here or not what was the goal. What was the validation or the signaling that you were trying to to find or to look for to say okay I think that they will keep going.
Aviv Leibovici: Industry.
Aviv Leibovici: It was first mainly just understanding what this industry is you know we don’t have didn’t have at the time any background from this industry. We did not have any family ties in this industry or anything of the sort. It was about learning. Okay, what is a construction company. What is a construction project. What does it look like how does it operate so that we can understand if we find a problem that is a worth solving and b we know how to or hope we know how to solve so that was the 2 months we’re saying we’ll see if in two months we have a good idea in this industry did we really have the idea in two months no did we feel like we are really on the you know on the path to get it. Yes, so we stuck around.
Alejandro Cremades: So then tell us about that day where all of a sudden you are trying to go to sleep and you’re looking at the ceiling and you can’t because you know you’ve stroken gold. You know you finally found what you were looking for.
Aviv Leibovici: Yeah, yeah, it’s um, we were. We came here to London to a it’s called open doors the construction industry and in London arranges you can sign up online for guided tours of construction projects. It’s a very unique thing. It’s not meant for. Software people from Israel. It’s mormon for people who are considering to work on site or for people from the area but we signed up and we came and we were weird I remember 1 guy you know doing this tour asking everyone where they’re from what they are and we’re like we’re software people from Israel and he looks at us like shocked like. Okay, moving on. Um, and as we did that we also managed to get a couple of them to allow us to just sitting sit in on their meetings of the construction project like weekly ones and you’re sitting there and you’re seeing how they’re trying to. Discuss what needs to happen next week but they cannot agree on what has already happened up until now there are 4 people in the room. There are more. But anyway 4 people discussing and there are 4 different views of what has actually happened and what has not and for me coming from you know. The back day we came from we like how can you manage a project when you’re trying to plan next week but you don’t actually know what is already done so how can you plan? What’s gonna happen next week. It can’t be done you know and then you start discussing it with them and you walk around side with them and you understand just how difficult it is.
Aviv Leibovici: I will say impossible to really know fully truly what is done and you realize that this is a big issue and we need to solve that.
Alejandro Cremades: So obviously you know at that point build dots you know is born and you guys are off to the races. So I guess for the people that are listening to get it. What ended they up being the business model of build dots. How do you guys? How do you guys make money.
Aviv Leibovici: Yeah, yeah.
Aviv Leibovici: Yeah, so the tool is is simple and complex. You capture a video of the construction project. Our Ai will analyze that and will tell you what is done what is not done what is missing what is delayed what was done incorrectly everything you need to to you know. Information that you need to make decisions and to manage the process. We sell it to companies on a per project basis. So if they do 1 project with me. They do 5 they do 10 if they do 50 and it’s just um, a monthly you know software as a service subscription which they pay for and and that’s it. Typically or I’d say 90% of our customers are construction companies. So not say real estate developers or anything 1 else, but the actual construction company.
Alejandro Cremades: So So then going back to the Story. You know when you realize that you guys are into something you know now big and and and you see that you know you have the validation you know, especially you know after interacting with all of these you know industry people. What were the next steps that you decided to take because I mean obviously you needed to build this thing. You know that that cost money I mean what? what were the next steps that you guys decided to take to to really bring this to life.
Aviv Leibovici: Yeah, so obviously at that point you want to start this company and you say well. My first milestone is to get a seed investment and start building a company. So what do I need to do to get a seed investment and going back to what I said before construction is. Especially at the time was weird for investors especially in Israel you know most of them have never heard of a construction tech company. So we fought ourselves we need to have some level of showing that it can be done. We need to have some level of showing that the industry is interested in it. Those were the two pillars so we started building and yakkiir started building. You know the the the very first ai algorithms that we’ll be able to to do some of this um and at the same time we started interacting with construction companies so we were doing that in two ways one is. Whoever would let us you know, walk around with them or be with them and learn I actually had a I had a deal with ah what is called a construction superintendent has a different name in Israel. But anyway I would come in in the morning I bring coffee and pastries if anything needs to be carried during the day I carry it. And his side of the deal was that I get to walk around with him and I get to ask as many questions as I want so you’re doing things like that and of course we wanted to start approaching these companies and saying you know this is what we’re going to do and get to some level of.
Aviv Leibovici: You know, real validation from them that they’re interested and we wanted to you know, almost have them on board but we don’t have a product yet and we were actually you know we were building like pocs of that technology and doing captors ourselves and you know building like videos. With 0 obviously production budget because we weren’t even working we we didn’t have money. Yeah, so a 0 budget but we built quite embarrassing videos to be fair because we built them ourselves but they showed what this thing will be and how it will work and what it will do. And with that we started going to to companies and we got 2 of them onboard 2 very big construction companies here in the Uk like onboard to say yes, we’re seriously interested in this and we could allow then. And and 1 big company in Israel as well and we then could allow potential investors to speak to people from those companies and see that you know that’s a real thing.
Alejandro Cremades: So then you know obviously you know I could say everything becomes more real as days go by and you ended up you know raising money just for the people that are listening now you know to get an understanding of it. How much capital have you guys raised to date.
Aviv Leibovici: One hundred and six million dollars
Alejandro Cremades: My god I believe that’s a lot of millions and so um, so how how how was that journey of raising this money you know from the seat you know all the way to the latest round that you guys have done. You know what? what has been that experience going from one cycle to the next.
Aviv Leibovici: Yeah, well um, I’m sure we have entrepreneurs and I’m sure we have investors listening to this so they both sides would know that it’s a crazy ride. But you know we took the seed money in it was like about 3000000 late twenty eighteen started working on the product and we’re really just looking to get a first version of it and a couple of customers and that’s what we did and the very first customer started using this and paying for it like 2019 and we got a few more and some interest and discussions and then we raised another round which was about $11000000 this was actually just before covid like really a month or two before covid ah became a thing and covid hit and we started deploying all across the world. Really? um. Because it was all virtual anyway and started having a few projects in london in the states in elsewhere in europe in israel of course and then raise the next round if you’re getting some more traction and of course developing the product. Which was 30000000 more or less that would be ah satellite 2020 late 2021 mid mid 2020 or mid 2021 I’m losing track of thailines here. But one of those and.
Aviv Leibovici: And then continued and what we also did we we developed our you know the market but we also got one very big customer that I cannot really name but but but was a very big deal and that showed the potential that could be here because there are many possible. Such. Clients and therefore we raised another round which was late last not last year the year before so late um, late 2021 or beginning of 2022 which was the extra 60000000 which brings us to this total and here we are now.
Alejandro Cremades: So obviously to bring all those investors you know, trust needed to be present what does trust look like when he’s present and how do you work on building that with investors so that they you know, go over the edge and and and sign you a check.
Aviv Leibovici: It’s a good question I think we we treat investors and customers in much the same Way. You know it’s not about I’m not gonna tell you stories I got to do things that aren’t true and I’m gonna sell to you things that don’t I don’t have yet. I Going to say you dreams about this company that aren’t real I will tell you what my dreams about this company are but I will tell you that they are not you know reality yet and I think it’s just being a very real person and and I think people know relate to that and we allowed. Anything you want to speak to a customer you speak to a customer you want to speak to an employee you speak to an employee I mean it’s fine.
Alejandro Cremades: So then in that case you know too. You had to sell this investors on vision right? So when we think about the vision imagine you were to go to sleep tonight and you wake up in a world where the vision of build us is fully real lives. What does that world look like.
Aviv Leibovici: Fully realized but I don’t think I’ve ever been on record saying what does it mean to be fully realized but let’s go um in a fully realized world construction Projects buildings are just built much quicker.
Alejandro Cremades: Fully realized first.
Aviv Leibovici: Much quicker I mean at least 30% less time if not 50 the costs are way down because there’s a lot of less waste of all sorts of kinds of time of effort of people’s time of a resource and that makes everything cost less. You know that makes apartments cost less that makes homes cost less this makes office spaces cost less everything um and very importantly, it’s a world in which construction companies make make real money because right now they’re making very very very tight margins and. It becomes an industry of a lot of stress and a lot of risk and I you know part of it is to make that risk a bit a bit lower.
Alejandro Cremades: Now talking about those construction companies. You know you guys literally are bringing innovation to a very outdated you know Space. You know an industry. How does it work to really you know pave the way be a trailblazer and most importantly. Educate people, educate people that have been used to a certain way of of doing things for so long where you know all of a sudden This is kind of like putting people outside of their comfort zones to to certain Degrees. So How do you go about? really. Getting that education getting people ramped up and in and and so that you guys can continue to grow right.
Aviv Leibovici: Yeah I think you know going back to that guy that we sat with until this construction construction come to construction it needs it. He promised that the construction industry is looking for it and years after now I can say that he was right because the. The people in this world who most feel that the challenge of construction is unbelievable and that something needs to change is the construction people now. Yes, construction has been managed the same way for 50 years but they know far better than I do that. It’s extremely difficult. It’s difficult to get a good result. It’s difficult for them Personally, It’s a very stressful life to be managing on site on construction site and they know all this and I think they are They are very very very down to earth and they have very real problems and a lot of stress. So if you come with something that isn’t accurate. Will kick you out the door. But if you come with something that they can see will have true value for them for their company for them Personally all of it then they completely hug you and then yeah you need, but but you need to do that work of showing them that it’s a real thing. You know and that’s a marketing challenge. That’s a sales challenge. That’s a customer success Challenge. It’s all of it. But if you do that? Well and they and you succeed to send them the right message and explain what you’re really trying to do they embrace it.
Alejandro Cremades: So for the people that are listening. You know to get an idea on their scope and size. You know what do you feel comfortable sharing mean how how big is the company in terms of maybe like number of employees or anything else that you feel comfortable sharing. Okay.
Aviv Leibovici: Yeah, the company is of about 150 employees give a give or take um it’s the main office is in Tel Aviv that’s where about a hundred of the employees are based. We then have an office here in London of around 30 people. And others spread so we have people in the us we have people ah a few in Germany things like that.
Alejandro Cremades: So what does culture look like when you have people spread all over the world. Yeah.
Aviv Leibovici: Yeah, it’s a difficult one. It’s a difficult one you have people spread over time zones and you have people spread over cultures. There’s ah, there’s a funny, funny little slide I think it’s from Intel or somewhere where ah the american side explains to people. You know what israeli is are going to be like and why it’s it’s a different culture so it it requires a lot of work integrating. You know that requires a lot of work. We made mistakes at first like I say you know we were a company full of israeli people and started hiring people elsewhere and we. We didn’t necessarily do that ideally, first. But I think that right now it’s working very well and somehow we have Israelis working in London yeah, myself included we have british and american people working in telviv we have an israeli in New York so we kind of have people over from all sorts of backgrounds and it’s working quite well.
Alejandro Cremades: Now I Guess you know we’re talking about the you know, future earlier and I want to talk about now the past but doing so with a lens of reflection if I was to bring you into a time machine back in time and I bring you back in time. Perhaps that moment that you’re in a ski resource just enjoying you know, living your best life and you’re wondering at that point you know why you’re waiting for your cofounders. You know what kind of company. You know you guys were going to be building but you have the opportunity of all of us sudden than just sitting down right next to you right there and they. Being able and giving yourself the chance of giving that younger self that younger Abib one piece of advice before launching a business. What would that be and why given what you know now.
Aviv Leibovici: Ah, it’s a good one I’ll tell you this our very first investor our very first board member told us the 3 of us that if we don’t have 20% of our time that we don’t know what to do with that is a problem.
Aviv Leibovici: And he said that because he said you are this company and you need to have time you know to think about things to think about the real issues to to digest and to to think about the big picture and what needs to change. Not just do do do and I think that was the best. I mean the most important thing I did not implement. It. Let’s be fair. Okay I was and am still extremely busy. But I think I’m better at it today than I was at the time and I think I think it means that it took me longer than I would have wanted to you know, identify certain things I think ah this needs to change. And if I had more breathing space that would have been better and of course that comes hand in hand with hiring everybody knows it everybody says it but I will say it to hiring the right people is just so much more important than anything else.
Alejandro Cremades: Wow That is so profound and so powerful avib I Actually love that now for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Aviv Leibovici: Well bill.dotcom is 1 option emailing a vi a vive avi v atbu dot dot com is another I’m happy to to chat to or basically anyone what interesting things. How.
Alejandro Cremades: Easy enough aviv well hey, well thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Aviv Leibovici: Thank you! It has been an honor to be here.
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The post Aviv Leibovici On Raising $106 Million To Transform Construction With AI appeared first on Alejandro Cremades.
Troy Helming is a Unicorn Founder (with 6 company exits) and a modern-day industrialist. He’s an inventor (60+ patent claims), an elite athlete, an author (1 book + 100s of articles), and a clean energy executive. He’s founded companies that have generated more than $30 Billion of economic impact, and he serves on numerous boards. He’s a longtime wellness practitioner & yogi.
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Your email address is 100% safe from spam!About Troy Helming:Troy Helming is a Unicorn Founder (with 6 company exits) and a modern-day industrialist. He’s an inventor (60+ patent claims), an elite athlete, an author (1 book + 100s of articles), and a clean energy executive. Troy Helming has founded companies that have generated more than $30 Billion of economic impact, and he serves on numerous boards. Troy Helming is a longtime wellness practitioner & yogi.
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Troy Helming is a former runway model, former gymnast & national champion (1990) and 2-time All-American male cheerleader, and an American Ninja Warrior. Troy Helming was invited to compete on the hit NBC show in Seasons 10 & 12, was ranked #8 in the world in the Over-40 category in 2018, and then began winning competitions in the “Masters” division.
Troy Helming now competes – not in the Master’s Division – but as a Pro alongside much younger competitors and regularly places in the top 10% of most competitions, occasionally making the podium (top 3). Troy Helming has been the founder & CEO of two impactful clean energy companies: TradeWind Energy, which he founded in 1998 & sold in 2004 (>$8 Billion of wind projects were built by the company Troy Helming founded since then, and was the #1 Wind Developer in the USA in 2017) and then Pristine Sun: >350 solar projects built so far totaling $500 Million in market value (including projects sold to other companies such as Renesola (NYSE: SOL) & Enerparc) and many high profile projects including the largest floating solar project award in North America & the largest community solar projects in both Vermont and Wisconsin. Troy Helming is the author of the 2005 book The Clean Power Revolution, co-inventor of FloatoRack (an innovative floating solar system with multiple patents pending) and inventor of the Red Gopher (a world-changing technology in stealth mode also with patents pending).
Troy Helming has been driving an electric car since 2012, alternative cars since 2004 (biodiesel & CNG) as an early adopter, and was the 1st customer of the world’s fastest production motorcycle, the all-electric Lightning LS-218. Troy Helming is a yogi, rock climber, and family man: he’s married to Alysia Helming, author of the best-selling young adult novel Protogenesis and creator of a TV series in development & co-writer of a movie script in development. They have one son and live in the San Francisco Bay area.
Connect with Troy Helming:* Crunchbase * LinkedIn * Twitter
Read the Full Transcription of the Interview:Alejandro: Alrighty hello everyone and welcome to the dealmakerr show. So do today we have a very exciting founder a founder that has done it multiple times. So many times that I lost track record unbelievable. But we’re gonna be learning quite a bit. You know it’s incredible. You know, building scaling financing. All the above. You know that’s what this founder has done so without farther ado let’s welcome our guest today Troy Helming: welcome to the show.
Troy Helming: Alandro. Thank you so much for having me.
Alejandro: So born in Denver Colorado but you travel quite a bit you ended up, you know, finding yourself in Kansas City so give us a little while of a walk through memory lane. How was life growing up.
Troy Helming: Ah, yeah, Kansas City was a great town. Great barbecue. Lots of fountains but fairly fairly conservative and my family roots are from California but my folks moved me there when I was five years old and my dad was in the agriculture industry.
Alejandro: And always see you know seeing your family being entrepreneur entrepreneurs themselves I’m sure that they you know that that that taught you you know that that gave you exposure to the apps, the downs and and all of that good stuff. So so how was it like for you to experience that you know at least indirectly.
Troy Helming: Yeah, well growing up I was really shy and introverted and my dad had a ah radio show called the helming report for 30 years over most of the country and he was a ah speaker and and so it kind of. Taught me almost forced me to learn how to how to you know, get comfortable with public speaking which was a big fear of mine growing up and and also watching his challenges. You know the ups and downs of his business and the the struggle frankly that. That my mom had you know with that you know because the the security that that was there for near the end for quite a while but it was tough in the beginning so you have to have a stomach to be an entrepreneur I know your listeners know that.
Alejandro: And nothing nothing like being able to find you know the gaps because in your case you know you ended up working at at and t right after that you know like you ended up starting your first business. You know after a few years of working at at and t where you became a distributor of equipment. You know for them. But I guess at what point do you realize hey I think I’m ready you know I mean kind of like it’s strange that having that entrepreneur entrepreneurial bug. You know having that in your family you went and worked for another company. Yeah.
Troy Helming: A huge company. Yeah at and T but I kind of figured that it and I got this advice from my dad. He Also I was going to college as an engineer he’s like get a business degree. You can hire engineers. So I did and I did but it it helped me learn what I was good at and what I was not good at. Working at a big corporation and more importantly, it helped me build up a nest egg and that’s I think one of my earliest lessons is and again I get credit to to my uncles and my dad but you know build up savings before you start your own Company. So I did and that that allowed me to make. Better strategic decisions rather than short-term only thinking.
Alejandro: So in this case, you ended up becoming a distributor and you did that for a while until you find yourself, you know reading a newspaper one day.
Troy Helming: Exactly 9098 after doing really well at at and t and and oh by the way, another reason I left at and t is they rewarded me for breaking all these sales records by shrinking my territory you know so I had to do just as well with fewer potential customers. So I was like no, that’s not the right way to do things. So I left and competed with them. But anyway yeah I read an article in 9098 that said 3 States Kansas Texas and North Dakota had enough wind energy potential to power the whole country I was like wow we should be doing that so I had no idea what I was doing although I grew up in ah and a home that was a solar powered home solar eat at home. So I had an exposure to clean energy since I was a kid in the 1980 s but yeah, sold sold my distributorship started ah a wind company promptly made some mistakes but surrounded myself with smart people that knew better than I did how to do it and some partnerships. And yeah, we ended up becoming by 2017 Trade Wind energy became the largest wind development company in the United States
Alejandro: And how are you guys say making money how thus like ah like a company you know like this you know make money I mean what was the business model there.
Troy Helming: So as a developer kind of like a real estate developer. We would develop solar excuse me in this case, wind projects and that means when I say develop that means get the permits get the land tied up leases and so forth or buy it and almost always leases get. Interconnection agreements with utilities to connect to the grid and then get a customer that wants to buy the power once you have all those things lined up then you can sell the project to somebody and they’ll pay you. What’s called a developer fee. And so we sold our projects to Anel and I sold most of my shares in 2004 but I was the you know Ceo and founder and under my watch a number of projects were were developed.
Alejandro: And in fact, they right now those assets today are worth thirty. Five billion is that right.
Troy Helming: That’s right, yeah, it’s the assets that were acquired over the years by Anel and the team that I hired to replace myself. Stayed there until fairly recently. And that’s right, solar and wind assets that were built and or under development are worth thirty five billion so I guess I started a company that became ah a deca unicorn.
Alejandro: So what was your listen you know to be learned from ah from that company because a you know that I’m sure that there’s a lot of things that you learned along the way.
Troy Helming: There are you know grit again making the right decisions to stay stay focused and and make strategic decisions but bringing in a partner. We farmed a joint venture with podoma wind power which out of San Diego and they knew. The business way better than us and we’re like okay you know we’re coming out of nowhere. Let’s let’s get somebody with a track record and share the upside with them on the first 2 2 or 3 projects so that was a lesson and then another lesson is to is is. Is to not sell out too early I really wanted to own the projects which is why I sold most of my shares in 2004 I should have held on a little more of the equity I was too eager to you know to to just get out I should have been a little more patient.
Alejandro: So So obviously after this success you know anyone would get cocky and you went and you started crystal energy and when you did Crystal Energy. You know I guess that there what happened is that you kind of like get a got a little bit of head of ahead of the game. And and and basically you know like you guys ended up achieving an outcome that it was not the one desired So as they say you either succeed or you learn I’m sure that the lessons that you learned here were even bigger than the ones that you learn on the previous say company because typically when you succeed it’s not you don’t really learn much. So I Guess how was that the experience from you going from such a smashing you know blockbuster you know, success to all of a sudden you you find yourself picking up the pieces.
Troy Helming: Yeah, Crystal energy is my my failure. My one company that that I failed all the others I’ve had exits but a lot of lessons but the main one is to stay focused the wolf that chases two rabbits goes hungry and at Crystal energy we were selling. Basically energy efficiency and renewable energy products and services to you know, consumers and small businesses and we tried to please everybody. We were trying to do too much and we got just spread out way too thin. And capex and opex got too high and we were trying to do it and the margins were too thin so we eventually just had to shut the company down. So Yeah focus is really the the primary key and you’re right I felt like I you know everything I touched turned to gold I Thought you know I can do this but no I couldn’t.
Alejandro: And at what point do you realize? hey we got to pull the plug I mean how does that team because I mean that’s a really tough decision and I’m sure that they you know those were really dark days for you.
Troy Helming: It was yeah it was. It was very tough I mean there was regulatory. Scrutiny. There were financial challenges. There were all kinds of things and at some point we realized you know hey without I was going without salary. My wife was too. She was a co-founder with me and and. Financially, it was hard on us and eventually we realized either the company has to fold or we have to you know, put a bunch more money in either from ourselves or raising money and I didn’t feel right trying to go out and raise money for a business plan that I At that point had. Finally admitted was not a good business plan.
Alejandro: So obviously the company Folds and the incredible lessons that you take with you What happened next.
Troy Helming: Yeah, so I started ah a little bio diesel I had ah a diesel vehicle so I started a little biodiesel experimentation in my garage while I was doing some consulting trying to figure out what to do. And I made too much of it. So I sold a few fifty five Gallon drums to a local construction company for their off-road caterpillar equipment and they were like oh we love this stuff. It has great lubricity and anyways so I designed and built a ten million gallon per year bioddisel plant. Kansas City and we were on a rail spur had rail cars and vacuum trucks to collect cooking oil from restaurants and hotels and casinos and we bought chicken fat and beef fat from agricultural rendering facilities and anyway built built up a little nice little Biodiesel Plant business
Alejandro: Now 1 thing here that is interesting too is that you did it in parallel with another one and that was with a pristine and they ultimately you know like with the with pristine you know pristine son you know what you what you realize is that the passion was really not there. You know with Casey Biofuels and and eventually you know you decide that it’s time to you know Um exit. You know that company and to fully focus on pristine son. So what? what happened there with a passion.
Troy Helming: Well growing up around a solar system in the 1980 s I always loved solar. But the economics were challenging for a long time even at crystal energy. We. We did a few little solar projects and some of the clients that we had met. There continued to work with me and so I was still doing doing solar projects in the midwest in California but you know living living in Kansas City and I realized gosh California is the land of opportunity for solar they they passed ah some legislation that basically. Created a multi-billion dollar industry with you know, feed-in tariffs and and and subsidies and credits and so forth I was like you know what we need to relocate to California and ride the solar wave or the solar coaster that we that we call it now and so yeah I sold my and that. That was my passion. You’re right? You know that drew me and so we sold the the biodiesel plant you know, made not not a lot of money high six figures on that exit but enough to invest more into the solar company relocate the family to to move to California and pursue.
Alejandro: Now with pristine son. You know the way that it works a say is pretty unique I mean because for the company now you guys have raised for those projects 250,000,000 so how that say it they work. You know when you have like the money that you raise for projects versus the money that you raise for the corporation itself.
Troy Helming: Pursue the solar dream.
Troy Helming: Right? So project capital is what’s called project finance where you get a contract from say a utility or a data center or tech company or something where they say yeah we want to buy the output of the solar farm over a 15 or 20 or 30 year period or something like that. And you take that contract from a credit worthy customer and you put the development time and effort and money in as the company you earn ah a developer fee and then you raise outside capital and in our case, we raise 250000000 from a private equity fund. We will co-own the projects together. So unlike. Tradewind energy. We were able to own these projects and still do pristine sun still owns a minority share of a bunch of solar farms that are operating anyway. But then you go get a construction loan at really cheap financing. You know like four or five percent interest based on that 20 year contract
Alejandro: So I guess say you know in this case, 1 thing led to the next and eventually there is ah joint venture that they ended up and not working out the way that you had hope so what what what is what was this joint venture about and why. What? What? What? What? What? What happened there.
Troy Helming: Yeah, so that was ah years ago before this this latest 250000000 so in 2000, let’s see 2015. We had grown the company. We we got a $10000000 investment in 2011 from capital dynamics a swiss private equity fund. We spent the money wisely. Two years later and 13 we had $100000000 of assets on the balance sheet operating solar farms. We bought out capital dynamics paid them their 25% return and we basically owned all all the company and then we we we grew too fast. We had 80 employees actually more than that. And we had over $26000000 of debt that we took on to get the projects to the point where we could start construction. We didn’t have any equity and we tried to raise equity and it was challenging at that time and ah so we were about to be acquired by first solar, a huge solar company. And then oil prices crashed something we couldn’t control and I had no way of predicting this. But when oil prices crashed the stock price of first solar and many other publicly traded solar companies also crashed because for whatever reason wall street thinks that oil has something to do with electricity. It doesn’t but anyway affect it there. Stock so they fired their m and a team and our lender freaked out so they said you got to raise equity and you have ninety days to do it and so we’re like holy cow. So we hired an investment bank tried and tried and everyone just wanted to buy our projects. No one wanted to invest in the company because our projects were so valuable.
Troy Helming: Like we want to build a real business. We don’t want to just sell projects so we entered into a joint venture that was with a publicly traded company called renasola chinese solar manufacturer this is all public. Unfortunately yeah, they paid us the 10000000 at closing but didn’t they didn’t. Honor the agreement litigation eighteen months later we finally settled but eighteen months of litigation tied up all of our best projects so we had to fire almost everybody in the company and put everything on pause. It was a really dark time in my life. It was very challenging. But. Came out of it. Okay, and and now the company has rebounded and and we have over $5,000,000,000 of of solar farm projects in development and we’ve been profitable every year except for that one bad year.
Alejandro: And dealing with litigation I mean that’s a a nightmare you know for entrepreneurs because I mean not only you’re dealing with the uncertainty of building a company from the grownup. But now you have this.
Troy Helming: Tell.
Alejandro: You know, nonsense of of people that are that are you know, just trying to to put you out of Business. So How do you deal with with that you know, uncertainty too because I mean that’s like double double the whammy you know and it comes to the Uncertainty. So How how do you deal with that. What what have you learned about Juggling. You know, ah this type of uncertainties Tool. So.
Troy Helming: Yeah, so I’ve I’ve been doing yoga for thirty years but I had to do more yoga more time in nature. A lot of meditation to deal with just the emotional and mental toll. The litigation takes because it’s like hurry up and wait you know and it like I said it took eighteen months and then I started working out again. I kind of had a dad bod and my son saw the show american ninja warrior we got hooked on that I was like oh I could do that I was a gymnast in college been a rock climber off and on for years and so I essentially. Poured myself I was doing some consulting to pay the bills because we had no employees of pristine sun anymore and I had a little side project earth grade I’m sure we’ll talk about that but I spent a lot of time getting myself into amazing shape. You know, better shape than I was when I was a gymnast in college or you know a track athlete in high school. So um. Was invited to compete on the show american ninja warrior 4 times and and it really helped me with not only my you know physical energy but also my mental clarity and my ability to sleep better and process things better and work out my frustration and my anger. My rage about the litigation. You know I was feeling like I was being taken advantage of and all these people’s lives were affected so I poured that that frustration into working out and that really was a great outlet for me.
Alejandro: That’s amazing and obviously you know ah now the company today. Pristine Sonny is saying is is doing great. You know you’re there the chair you know of the of the company and then also you know, ah the valuation is is pretty is pretty high. You know we can say. Ah, they’re in the unicorn status. So I guess in your case you know. Obviously you don’t like to stay put. So um, you know you kept the drive going. You know that the entrepreneurial you know, but eagerness I would say and and and you ended up you know launching your latest baby which is earth grid. So um. What is earth great about.
Troy Helming: We invented or I invented plasma tunnel boring robots or trenching robots that essentially act like a light saber and it vaporizes or spalates or melts the rock and it can go up to 100 times faster and up to 10 times cheaper than conventional mechanical. Trenching drilling and boring technologies.
Alejandro: Wow And what is the process there of making money. What is the and what is the model.
Troy Helming: Yeah, so we have 2 products we call them boom and badass boom stands for ah, build on operate and maintain. That’s where we own the ditch or we own the tunnel and we lease out space or we charge a toll on all of the commodities flowing through our project badass. Stands for boring and drilling as a simple service. So for a customer wants to own their own ditch or their own tunnel. We just charge them per meter.
Alejandro: That’s incredible Now. In this case, you know like for the people that are listening to I mean how do you go about time management because you have all these different you know things going on at the same time you’re a chairman of pristine you are now you know leading Earth Grid. How do you go about managing yourself when it comes to time when it comes to like dealing with the crazy amount of emails that you’re probably dealing with the operations on on all fronts. What does that look like.
Troy Helming: Yeah I’ve become hyper efficient with everything I do you know I constantly spend time. Well I shouldn’t say constantly but every day I spend probably ten or fifteen minutes unsubscribing to emails and and you know delegating and and. Trying to be as efficient as possible I use G Suite Gmail and you know I I snooze things I set reminders I’m super efficient but time management in studying the lives of successful men and women throughout history. They all had 1 thing in common only one thing and that’s self-discipline. And so I’m very disciplined about being a father being a husband. My dad was a a workaholic I hardly knew him growing up a you know good relationship with him now. But so I didn’t want to I didn’t want to do that and so I I set aside I don’t work on Sundays I only work half a day on Saturdays and I set aside time to do emails I set aside time. To be a husband have date with date night every week with my wife. It’ll be 20 years married next year so you know these are these are the things that are important at least for me and work for me to to have balance in my life and then I’m also disciplined about with respect to where I sit on boards like pristine sun and I sit on a few other boards. A couple other and and I I only spend time on that on certain days. You know I set aside 30 or 45 minutes to to focus on that and so I don’t I don’t look at the emails or or anything for those companies until that designated time.
Alejandro: So How are you able for example to um because you know it’s very difficult to to control our mind you know and how it races you know and and being able to perhaps you know switch it like you were saying like being a father being a husband going on date nights. How can you compar a combat. How how do you just Grapp Whatever thought whatever thinking with whatever you’re you’re dealing with and just put it aside you know until you know you have the time that is allotted for for for that topic. So
Troy Helming: Yeah that’s a great question because you’re right thoughts pop into my head like. For instance I was at a happy hour with pristine sun and my team in 2016 when the idea for earth grade came to me and because Dominic one of our. Dominic Lopez 1 of our solar engineers was bragging to his girlfriend about he’s a former navy seal and he was bragging about how his seal team used to practice entering enemy ships underwater by cutting through the side of the ship with a plasma coating Torch he’s like ° take your arm off. We’re like dude you’re badass. Anyway, but then I popped up in the middle of the night and I was like wow plasma that could go underground go through rock probably and could stop thinking about it anyway. So when ideas come to you and they they do for all of us right? So for me what what works for me is I will send an email if I’m if I’m in you know, solar mode. I’ll send an email from my solar to the other company. My other email address and I have you know separate g suites and separate browsers and tabs and everything in Chrome. Um, and so I send the email to remind myself and then I can just let go I let go of the thought after I sent the email. Um, because it’s there and it’s sitting in the inbox. So then when it comes time for me to look at emails for that particular company I can process it right? So anyway that that’s how I do it.
Alejandro: Now talking about ideas here because basically Earth Grid. You know went from just being a hobby to something Meaningful. So at what point do you kind of like realize hey I think that maybe I need to. Allocate more time to this. What does that look like when you’re like validating and vetting. You know, hobbies that you know actually could transform into a business.
Troy Helming: But. Right? So I built the first prototype in 2017 after you know the idea again couldn’t stop thinking about this using plasma to go through rocks to solve the you know the bad infrastructure in the United States and the problem with overhead power lines causing fires and killing people and you know going down and. Ice storms and tornadoes and hurricanes and everything and not only does our power go out but our internet goes out because everything is above ground in the Us where in Europe it’s 80% underground. We are only 8% underground here in the us so 10 times worse anyway, so for me, it was gosh. I got to hire a feasibility hire an engineering firm did a feasibility study. They came back said yes, it’ll work 2 no one is doing this 3 you can bore at speeds of one kilometer per day which is crazy fast and four here’s your operating cost and I ran the math because I’ve built hundreds of tunnels and trenches over the years for solar and wind farms I was like this this. Looks like it could be either a billion dollar company or a nothing company I just don’t know if it’s gonna work and so I was like all right I’m willing to put some of my own net worth into building a prototype and so I did that in 2017 started testing in two thousand and eighteen eighteen didn’t even tell my wife.
Troy Helming: Didn’t hardly tell anybody there was a small team of engineers that I identified and and we built a little prototype and it punched a hole through a big boulder of granite I was like yeah it worked awesome and so anyway. That’s when I realized hey we have something here started filing patents and and then realized this this could be a heck of a company.
Alejandro: That’s amazing. So um, so what does say it thing look like when you end up turning a corner here. You know what was that moment where you know you are like Wow I think that they that we’re into something big here.
Troy Helming: When I started talking to potential customers and realized the demand was very high and I didn’t I didn’t believe our cost structure because it was so much cheaper like you know, eighty seventy eighty ninety percent cheaper I was like that can’t be right? But as we did more and more testing I realized it was so. I was an early employee of of Petra used to be known as arkbit sold my first patent to them and and earth grid though though was formed in 2016 at the time I was still running my solar company. We were just coming out of the the litigation and rebuilding the company and it was very emotionally draining I didn’t have. The stomach to to be the Ceo again of of ah of 2 companies at once while I was still cleaning up the you know the very emotionally draining mess there at Pristine Sun anyway but without going in any you know too much detail there i’m. Earth grid sold its first patent to Petra now earthggrade has its own patents separate companies Petra’s not doing plasma they’re using a different process and I wish them the best but to answer your question. It was it was when I knew the tech worked and I knew the demand was there and I knew that the economics were there. The margins. Even worst case scenario I felt like the margins would be 50 to 50 to 80% or maybe above 100% and so I was like all right? We have a we have a business here. We got to invest in this and raise raise some outside capital.
Alejandro: So let’s say and and and in terms of racing Capital I mean how much capital have you guys raised to date for the business.
Troy Helming: 25 little over 25,000,000 of of equity plus some debt capital and on top of that we have a crowdfunding campaign on on net capital that’s going well because I want to democratize the ownership of utilities and infrastructure. So we’re making it available people can invest as little as a hundred dollars on on the crowdfunding platform.
Alejandro: Nice. So obviously you know when it comes to investments. You know it’s saying it has to do with vision with selling the vision to know and getting people aligned with that. So I guess imagine if you were to go to sleep tonight Troy and you wake up in a world where the vision of earthgrade is fully realized what does that world look like.
Troy Helming: That world looks like we’ve built an underground supergrid across North America and then we’ve started to connect the continents by putting our tunnels underneath say the atlantic ocean from Northern Canada to the short hop over to Greenland another short hop to Iceland to the faroe islands into the yeah uk and then mainland europe and then eventually connecting to the Middle East North Africa Asia Australia South America you name it. That’s what I see us doing and in fact, we signed a binding. And Mou from a large institutional investor last month that’s going to invest and this is going to sound crazy coming out of my mouth twenty seven billion of commitment in a joint venture. And I my eyes wide open this time. It’s going to be a good joint. Venture. We’re taking our time to make sure we have really good lawyers negotiating it. but but yeah that’s going going to fund 100% of the construction cost of twenty four Thousand Kilometers of underground tunnels and trenches across North America
Alejandro: My God that sounds wild. So um, imagine you know, let’s talk about the past now imagine I put you into a time machine and I bring you back in time to that moment where you were working at at and T and figuring out hey I want to do something on my own now. Let’s say you were able to have a chat you know, sit down your.
Troy Helming: Um I.
Alejandro: Younger saw that younger Troy and have the opportunity of giving that younger Troy one piece of advice before launching a company. What would I be on a why given what you know now.
Troy Helming: Well that younger Troy was kind of a cocky arrogant son of a bitch to be honest with you. You know I I did really well in in college at at and t in college I was captain of my yele eating squad and we won the national championship on Espn and I was all american and anyway. So I would tell myself to you know that hey look you’re going to get your nose bloodied. You’re going to make a number of mistakes so you need to be more patient and you need to recognize your limitations and not just assume that you can make anything work. You need to be more more patient and more careful. About the decisions you make and the business risks that you take.
Alejandro: Nice now for the people that are listening Troy that will love to reach out and say hi. What is the best way for them to do so.
Troy Helming: My handle on social media is solar ninja troy so on Facebook Instagram Twitter Linkedin and so forth feel free to connect with me on Linkedin or you can send me an email to troy@earthgrid. I o for input output.
Alejandro: Amazing! Well hey, easy enough. Well Troy thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Troy Helming: Thank you so much for having me alejandro.
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Dee Choubey is the cofounder and CEO of MoneyLion which is a mobile banking platform for borrowing, saving, and investing. The company raised over $250 million prior to going public in 2021 from top tier investors which included Edison Partners, DHVC, or Capital One Ventures to name a few.
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Your email address is 100% safe from spam!About Dee Choubey:Dee Choubey is the co-founder and CEO of MoneyLion, a mobile finance platform that helps consumers borrow, save and invest better through proprietary AI-driven tools.
Together with his co-founders, Dee launched MoneyLion in 2013 with the goal of combining AI, machine-learning technology and behavioral science to bring consumer finance into the future. Dee began his career as an investment banker at leading Wall Street firms including Goldman Sachs, Citadel and Barclays Capital, where he advised on M&A and capital raising with a focus on payments and specialty finance companies.
Dee holds a Bachelor of Arts in Economics with Honors from the University of Chicago.
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Read the Full Transcription of the Interview:Alejandro: Alrighty hello everyone and welcome to the deal maker show. So today. We have a really incredible guest. You know we’re talking about his company his journey I find that his journey you know super inspiring. You know, building scaling financing taking the company public I mean really remarkable. You know what? he’s done but they but again you know we don’t want to make you wait any longer so without further ado. Let’s welcome. Our guest today dehubi welcome to the show.
Dee Choubey: Um, hey how are you thanks for having me.
Alejandro: So originally born in India but I know that you know your parents eventually came here to tackle the american dream so give us a walk through memory lane. How was life growing up.
Dee Choubey: Yeah, yeah, no the 80 s you know my dad came to be a computer scientist. He you got a masterss from Syracuse and my mom and I I was four years old. We kind of followed in tow with a couple of suitcases a very typical immigrant american story. You know, ah my dad moved to New Jersey worked at Bell Labs as an engineer so had been around the modems and routers as Bell Labs transitioned into at and t and then kind of changed hands into being lucent. Um, so always had the ability to be around computers Tinker Tinker with my my father we live the ah great middle class life. You know a lot of you know what we’re building here today. Moneyline was influenced by that early immigrant story if you will right? We got. I remember my dad and mom they got denied for the Mx account. They got denied for the discover account and you know, ah we we always used to talk about that around the dinner table as you know how you know ah for for a family that was the dinner conversation and the importance of money and kind of ah you know. Using the tools that american financial services ecosystem has to offer. It wasn’t always accessible to us right? So you know the way we grew up certainly had had a big influence in some of the career decisions I made over time and ultimately to the founding of of moneyline.
Alejandro: And how did you develop this same this passion this this love for the intersection of finance and mathematics was that you know bea The you know, kind of like the as you were mentioning like what your parents you know like were you know, really instilling you know in you early on.
Dee Choubey: Ah, yeah.
Dee Choubey: Yeah, look you know I think that I was always I was always interested in how you know goods and services and money and contracts moved throughout our society whether it was micro I had the pleasure of working at the federal reserve. But I was at the University Of Chicago that was my internship making you know 8 to $10 an hour back then in the early two thousand s I did it for beer money of course but along the way you know, um, really was exposed to. You know how the labor markets worked how you know agriculture in the midwest impacts. Ah you know, shipping in the northeast and just kind of you know, ah commerce. Overall. And then you know really parlayed that into korean wall street started an internship of Lehman Brothers right after 9 11 saw kind of you know the country recovering. Um, you know I’m sure later in the conversation. We’ll be talking a lot about you know what? What do you do when you see massive shocks. In the economy right? So of course coming right out of the.com bubble we had nine Eleven right and ah you know then when I joined wall street we had 5 years or so of recovery, right? So oh 3 oh 4 oh 5 we saw we started to see a lot of the capital flow come in.
Dee Choubey: Um, you know after after I started wall street I started at city and I went to Goldman and I saw the lbo boom um, you know I saw you know $80000000000 lbos happening I worked on a couple of them. You know in the financial institutions group. We saw a lot of the banks. Um, you know, really think think about. Ah consolidation. There was a big boom wave of Bank Consolidation 1 of my clients was capital one so we walked you know we walked them through multiple. Um you know acquisitions they transitioned from a monoline credit card company into a full-fledged bank. Um, and if you look at what we did from ah from a. Parallelism perspective at Moneyline in terms of how we built the full full spectrum suite of products. Um, you know that playbook for surrounding the consumer with no reason to leave your ecosystem. I had I had an ability to see that firsthand advising the ceos of some of the greatest iconic american financial institutions whether it was discover or American Express working on different types of transactions and then we also saw crashes. We saw another crash in Eight zero nine right when um you know the availability of. Cheap debt fueled um the mortgage market it fueled the lbo market we saw that come down the reason why we exist is because of that credit crisis right? The regulations were put in place that you know, kind of really put the banks on the sidelines from innovating for technology.
Alejandro: And we’ll talk about what you guys are doing at money lying in in just a little bit but you know one thing that is very interesting here is obviously during your time in corporate you know you were working as you said you know you did your internship in Lehman you know Goalman then you did citadeale barclays.
Dee Choubey: Are ah.
Dee Choubey: Um, yeah.
Alejandro: I Guess you know more on the investment banking side of things. What were you seeing where you were able to see companies that were doing well from companies that were not doing so well when it came to Pattern Recognition You know what were some of those ingredients that you were seeing on companies that. Ended up doing magical things. Yeah.
Dee Choubey: Yeah, look I think it always goes down to the ones that are customerobsessed over the long run will generate Alpha right? and that was clear from working with iconic companies like American Express with with capital one. Um, and then you know where where we didn’t see that success translate from just you know if if you want to use the stock market or stock price Alpha creation as a barometer you didn’t necessarily see that with the community and regional banks right. Um, because at the end of the day those were just portfolios of assets and liabilities a lot of these commercial and community and and regional banks are the reason why they exist is they they have a portfolio of commercial real estate or commercial loans or construction loans. And then they match that with deposits right? They take advantage of the fact that you know they’ve got branches in a neighborhood and they get deposit funding low-cost deposit funding or access to the sort of sort of the wholesale markets to finance them. That’s where you yeah, that’s where unless you know someone had a very specific underwriting edge We We we saw that those businesses would be the ones that got either got bought out or consolid or went out of business but the ones that really focused on building for the consumer in the long run. The consumer could be an enterprise or a commercial client.
Dee Choubey: Or an enterprise client. Um, you know that that that was one 1 thing that stood out if you look at of course the the tech companies Amazon being the top one that pattern exists there as well in a lot of ways the power lock curve Apple and Amazon they both you know espouse that. And are very few banks and financial services companies that do the same and that created the opportunity for disruption that fintech had.
Alejandro: Now let’s talk about that disruption because back in 2011 you know you now had a very strong network. You know you were alluding to dealing with people like capital one amis you had a good network into into you know that was Dee Choubey:p into technology. But I guess walk us through how things.
Dee Choubey: Um.
Alejandro: Ultimately unfold it towards you finding yourself hey I’m taking action I’m um I’m giving my notice I’m I’m going in and starting money lion. So.
Dee Choubey: Yeah, look at you know I think that you know entrepreneurship doesn’t have an age limit right? You can do it when when you’re 18 or maybe even younger and you can do it all the way till there is no age limit there but there are a um. Confluence of events that need to happen in your in your career trajectory arc like I wasn’t a technologist by training I didn’t go to Stanford I didn’t grow up in the west coast where the entire network pushes you towards um entrepreneurship at a much earlier age. Um, the network on the East Coast wasn’t really built towards that if you if you think of New York city as one um, kind of ah destination New York city at that point in time was. Career arcs were either. You’re either a lawyer or in wall street or you’re in real state right? and they all had their own idiosyncrasies in terms of what you had to do to be successful. It was very uncommon when I did it to leave. Ah, you know at that at that point a cushy kind of ah sort of compensation trajectory to leave wall street to go try to build something. Um, you know when I first started very smart people and very successful and in very high roles.
Dee Choubey: Basically would go to to the assumptions and basically try to say look you’re going to have a hard time raising capital financing this credit modeling the technology. Um, there are a lot of there are a lot of reasons to say no right. The confluence of events that led me to say yes was I had I just gotten married. My wife was working in Goldman Sachs um you know I had a very supportive family and it was the right time for me from a mental space perspective I had two co-founders that I relied on for technical and engineering ah from a technical and engineering perspective they had just happened to sell their company so they had they had time they had resources to work on something without having to get paid immediately. So those confluence of events. Ah when I look back at it was actually pretty special right? It was. It was the necessary conditions for the cam brain explosion if you will um, it’s not every day that you get that what what wasn’t there was you know we’re working there wasn’t a clear path. So if if you’re someone who just needs to be told what to do and then you, you’ll do a great job at it. This is probably not for you because you have to really kind of go and create that canvas yourself the roadmap and and 9 times at a 10 you’re going to do things wrong and you just need a lot of luck as well to get you from at least from 0 to point 5.
Dee Choubey: In that in that initial journey if you will.
Alejandro: So then when you guys got going you know with this you know I mean there was like several stages I mean you did lending robot advisory so what ended up being the business model of money lion of the moneyline that we know today are you guys making money you.
Dee Choubey: Yeah I mean I looked a know the the mission and the vision were exactly the same In fact, they did it all hands yesterday and we were you know we were remarking on the fact that the the mission statement was the same when we started the business rewiring the financial system. So every hardworking american. Can live their best money life. We’ve tweaked it a little bit over the years but it’s more or less stayed the same um and you know to do that. The first thing that we we said was like look where do we have a competitive advantage if you think back to 2013 when we started the business and. Um, you know a lot of the things that we take granted for now just didn’t exist this this massive amazing Api economy where you can use other companies’ data for a small transaction fee and you can you can access their identity data their um you know, ah their bank transaction data that that didn’t exist. We had to build our own version of plaid. We had to build our own version of identity management. But what we did say was because we have a technical ability in artificial intelligence. There’s a massive hyper around ai right now, but we’ve been pioneering it and it’s been in our Dna since the first day we started the first day we started. You know our cto built a random forest model around predicting default. So then we did that we we got our hands on a lot of anonymized credit data transaction data we spent months before we even started the business.
Dee Choubey: Back testing that and saying hey do we really have a edge here in predicting when a consumer would have money and when they would run out of money and we got comfortable enough while we were still you know either exiting our previous gigs or still working in my case at a day job. Ah. We. We got comfortable that we had something here and that no one was really kind of looking at it this way and we were using at that point the Facebook api we were looking at um you know utility data we’re looking at cell phone data. No one in financial services was really looking at it that way because because of the regulatory environment but because we were a brand new startup. Um, you know we said look let’s look at everything. Let’s have a paper portfolio and let’s see if we can predict when you know people have money and when they run out of money and and we were. Relatively successful at doing that and then of course um, you know we said look let’s go ah run these in the real world and we started off with lending right? and we we were able to prove with our own money that we were able to you know, return to alpha versus. You know where the historical loss rates were we took that to the vcs and we were off to the races from just our initial capital to go build a cheaper faster more convenient, better. Um, you know online consumer lending business and over time you know we said that hey we the insight was.
Dee Choubey: Yeah, people love our brand but they don’t need to take a loan every day they need to take a loan maybe once or twice a year when they have to smooth their earnings or for whatever shock that they’ve had but they do think about rounding up every day so we created a roboadvisor right in in 2017 after 3 years really ah honing in on the lending side. We started a roboadvisor and then two years later we added the digital bank and so on and so forth, but it was all around this idea that we want to help the american consumer the 90000000 or so of us that self-ident identify struggling with finances really take control on a daily basis. Use Moneyline across inflection points across different needs. You know. In fact, it wasn’t a popular opinion with the venture capital world right? They they always urged us to do one or the other. But we said that the insight we we we went against that advice. And we said that the insight here is that the consumer doesn’t think about their financial lives as 4 different separate apps. They think about it as 1 outcome or 1 objective from a first principles perspective that they want to drive towards um and we also realize that ultimately to make this business model work. You had to have a diversity of revenue streams because the ah the the customer acquisition you know proposition for consumer was getting more and more complicated we had an advantage in 13 because we can go and run algorithms on Facebook to car consumers cheaper than anybody else.
Dee Choubey: But whenever you have an arbitrage like that you know those arbitrages get priced out pretty quickly right? they get taken advantage pretty quickly. So just as just as much as it works for us in 2013 and 14 it stopped being that efficient in 2015 and 2016 and we realized that. Once you get your consumer in the door. The best economic return is to be able to ah really tie them in into your ecosystem. Give them no reason to leave your ecosystem than it is to get a net new customer where you have a lot more risk of churn or default or what have you.
Alejandro: Now for you guys. You obviously went public but before going public How much capital did you guys raise and how was that journey of going from one cycle to the next.
Dee Choubey: Yeah, look I mean I think that um from a macro perspective and if you if you go back and you kind of study what happened over the last fifteen to 20 to 30 years um you know after 119 and after um, you know the the credit crisis I think the whole world. Took on the 0 interest rate policy ineffectively as we look back on it right now it probably shouldn’t have been that but that’s what it was and from an inflows perspective. It created a pretty pretty good environment to to use venture capital you know everyone was looking for alpha the pension funds were looking for alpha the sovereign wealth funds were looking for alpha um and you know that that wave of technology that was making things productive were generating ultimately stock market returns right so the stock market was um getting getting aggressive returns from technology-drive companies and of course that was then flowing the alpha that was generated and the stock market was coming back in by way of venture investments. So let’s go create more supply for similar returns in the stock market. So we we of course you know, kind of benefited from that we raised. Just over two hundred and fifty million dollars of equity capital in the private markets. We were about to do a series d in 2020 right after covid and we saw that the public markets were all of a sudden open with the sp product. Um and we were able to raise over $300,000,000 through that.
Dee Choubey: Ah, through through an ipo. Um, all of it. You know if you if you if you kind of look at our arc our evolution all of that capital has been invested into building what we believe is one of the most dynamic platforms. To to to continue executing that original vision that we had the original mission of rewiring the financial system give the consumer no reason to leave your ecosystem. So. It’s all been towards that ideal and we’ve we’ve got you know we’ve we’ve had a lot of success doing it and we’ve also seen a lot of 2 by 4 s to our face. Um, in terms of just the last couple of years in the public markets. But none of that really changes the fact that in the long run. We believe we’re off to an incredible value off towards building an incredible value proposition for our consumers if you look at at a point of time you can say oh wow, that’s been super successful or. You can look at another point in time. Oh wow, that’s been a disaster but I take a view of of this being you know when you’re when you trying to create an iconic american brand it’s going to take time right? and some what I had to learn over time. Was that sometimes 5 years or 10 years or 11 years is not enough. Maybe you need 15 years for that to happen because you need to see a a high cyclee a low cycle and back to a high cyclee may actually take it takes take significant time and that’s what we’re you know, executing around and executing towards.
Alejandro: So when you guys say went public back in 2021 I mean you you were nearing their three billion valuation I guess say what was that journey like of going public. You know I’m sure that the.
Dee Choubey: This is.
Alejandro: Many things you know, went through your head as well. You know you came here to the Us you know immigrants you know what was going through your head you know what? how how was that journey of going public like.
Dee Choubey: Smoothing.
Dee Choubey: Yeah, look I think that um when when we were going public. You never have an appreciation that somehow to that moment in time is ah pricing in the the highest. The valuation of your sector a subset of the sector or subset of the market could be right? You you always think that it’s going to go. It’s going to continue performing like it did last year or the year before um so you know there was a little bit of just kind of learning. About the iron laws of interest rates right? that you know when you have such a such such a drastic increase in interest rate regimes the segments of the market that are going to get hurt are risk assets right? and and we saw that and that was a lesson by the way that was very easy to forget when you had a 15 year run where you effectively had access to capital very very easy capital through a 0 interest rate policy so it was it was a great um outcome when we when we raised the capital but we looked at it at capital rate. So we were saying when a little bit because you know it wasn’t it wasn’t our exit if you will. Um, it was a great milestone It was great validation that Moneyline was a company that could go public. Um, a lot of things a lot of necessary conditions need to be in place for even that to happen. You’re accounting your team regulatory in compliance getting through an scc process we we just launched a crypto product.
Dee Choubey: In the summer of going through the scc process right? So getting all of that. Um, you know in a place where um, you know you could be public was the biggest milestone not off us saw it as a exit because. Ah, you know from from a monetization perspective. It wasn’t that it was just more capital to continue executing on the vision so it did it. It did provide a little bit of a backdrop to be sanguine about it. But of course, um, you know human nature is to is to forget. Um, you know the downside that lies ahead of you as well.
Alejandro: And they obviously you know now operating um a public company is a little bit different. You know in the in the talent side of things because you know before you had the options. You know you were able to ah promise them hey you know whenever we go. Public or you know a liquidity event Happens. You know you’re going to make it Happen. You know for yourself or your family and you’re able to get people to sacrifice a data and to get that incentive. How do you?? How do you deal? you know, like with having that on the private you know side of things and now on the public side of things being able to retain and then also you know how how do you go about? you know. That talent talent side of things.
Dee Choubey: No, it’s it’s a great question right? and it’s probably 1 of my biggest challenges and our team’s biggest challenge is you know when when you have the ability to take the company public when you’re valued a certain way. You’re also able to retain you’re also able to attract some of the best talent in the world. And and that best talent has an expectation of um, you know, ah being able to think about their stock-based comp as as ah, as really you know, kind of banking on that being recurring every year. Um, and of course when you have you know the drawdown in your in your stock price as we did um, you know, looking someone in the eye and saying that hey our mission and our vision and the values that our business has are worth fighting for this is a moment in time. You know we always borrow Benjamin Graham and Warren Buffett’s in the short term. It’s a voting machine in the long run. It’s a weighing machine idiom all the time right? But there’s only so many times you can say it these ultimately there are market factors. The best talent have bids away. Um, you know we we are known for. Ah, you know, being one of the best technology breeding grounds especially around Data Science Artificial Intelligence our r and d team is one of the best in the world right? So you know even that that’s just ah, you know objectively if you look at the number of products that we’ve been able to launch and scale.
Dee Choubey: Um, you know, very few platforms are this built of a super app. Um, so whenever you’re able to do that from an outcomes perspective your team becomes ah pretty valuable for everybody else, right? Um, and. You know we’ve we’ve done a good job of saying look the the vision and the values of the firm are are there 1 year does not change the trajectory. The secular taillowinds that are behind us from a consumer adoption perspective nor. A ability for us to create a really large business with a really high margin profile none of that has changed just just a year later right? Um, than it was then it was when we went public and oftentimes more more times than not, we’re able to retain that talent. Um, but again, yeah.
Dee Choubey: What’s happened in Tech also creates opportunities as a mitigant to be able to um to to get the next wave right? So I think that’s what we’re going through right now is that we’re realizing that from the outside in it’s still a very dynamic place to grow your career and. You know we always have to continue investing in our recruiting and and and retention platform.
Alejandro: Now Let’s talk about vision because obviously vision you know is something you know that you’ve shared you know with investors you know, private you know on the private side on the public site now and then also with Employees. So if you were to go to sleep tonight and you wake up in a world where the vision. Of the companies fully realized what does that world look like.
Dee Choubey: You know like that vision always needs to get tweaked right? So you know if you asked me and when we were in 2020 the the vision was to be a daily destination for money conversations and. Every transaction that you could think of should be happening on the moneyline platform and we we met that vision so when you meet that vision. You have to say okay, what’s the vision for the next two years or 5 years we acquired a company called even financial. We renamed that engine by Moneyline. Um. Engine is a piece of technology that now powers some of the largest suppliers that you see on the internet and it powers them to match that supply with the exact with exactly the right financial product that’s. Personalized contextualized for that consumer at that moment in time whether it’s a credit card a personal loan a helock a mortgage an auto loan. You know we’re able to bind that through a seamless integration. We also bought a media company so we can tell stories. And we can we can we we can have content whether it’s you know podcasts like this short form videos influencer led creator led we can now use a fourthathird dimensional ah view outside of just you know, silly blog posts or se or sem.
Dee Choubey: To actually talk about financial products Five Twenty Nine a plans four and a four zero one k how does a personal loan differ from from 1 provider to the next with all of that coming together the vision for moneyline in the next five years is to be an insights business right? because we’re generating billions of insights. From the transactions that we see happening on our bank account or our invest management investment management product on our trading product on our membership product at our lending product on our network where billions of dollars of loans and credit cards are being matched every year so those um, you know what? what consumers do and importantly, what they don’t do create insights and we believe that across our enterprise client base over a thousand clients. We can deliver better brand outcomes better roi better revenue. If you think of us just as a neobank and and we we do get lumped in and people ask us. You know your your peer group is a b and c oftentimes I’m saying no no, no, you’re you’re thinking of us in the wrong way. Um, you know I know we told you that the vision was to be the most built out digital bank when we went public but what we have seen is that that is just one part that powers the the data business that that that’s incumbent here at Moneyline right the insights business and now we can use those insights that are being built by the that are that are being generated by the most built out digital bank to power a lot of our enterprise clients.
Dee Choubey: And that’s been the one big ah C change step function change in why we still think this is a massive business is because we’re able to use that flywheel put the pieces together and actually build really powerful B Two B to c. Ah, products that we can you know generate new revenue line items with over time. Um.
Alejandro: So we’re talking about the future here. So I want to talk about the past but doing it with a len of reflection. So let’s say I was to put you into a timeish indie and I bring you back in time I bring you back in time to the days of Barclays where you were like wondering what? what do I want to do next and imagine. You were able to sit down. You know that younger self and given that 1 younger self one piece of advice before launching a company. What would that be and why give me what you know now.
Dee Choubey: Yeah, look I take that um the the advice is to is to jump in right? You have to know yourself a little bit. You have to have the confluence of. Necessary conditions. You know I had a wife who was working in Goldman I had ah a supportive family I been in ah, a decent career for 10 years so you know I could afford to not get paid for a couple years right? So those are of course necessary conditions. Um. And you know the advice would be is just like look you know if you have the right team none of that you’re going to figure it out right? and you know continue betting on yourself right? So you know as as long as entrepreneurs set up that right confluence of events that. That they don’t have to you know they start a company and then they’re worrying about paying rent or they start a company and then you know their spouse is unhappy about it. Those things are the sand in the gears that sometimes lead to over agitation. The other advice I’ve give to myself is you know don’t take everything so seriously. Not everything is a fire drill. That’s a more tactical advice and I’ve learned that probably over the last couple years to actually let go sometimes and trust the team if you if you get chat gp to summarize all of Bezos leadership learnings. You know the top 3 things. It’ll always say is you know.
Dee Choubey: Hire the best talent and number 2 make sure that that best talent work well with each other so I’d give myself that advice is that you know we always looked at the resume of people when we were hiring them and we made sure this this guy went to this school or this guy knows how to do code in this language and this guy’s worked at Google or Facebook or wherever. More important than any of that is is this person going to be in the trenches with you when things go wrong which they will and will they be a multiply multiplier effect for us on the people that they work with. Are they going to be sort of an asshole that no one wants to work with. They actually didn’t but demotivate people thinking about that second derivative now that I’m just kind of rambling I realize that that would probably be the number one advice is make sure that the people that you’re hiring spend the time affront create the right channels. The right context the right first principle thinking that they all work well together. Um.
Alejandro: That’s very profound the so for the people that are that are listening that will love to reach out and say hi. What is the best way for them to do so okay.
Dee Choubey: Ah, look you get all, um, always email me dc@moneyline.com yeah I’ll do my best first? Um, yeah.
Alejandro: Amazing! Well hey is he is he enough d well hey, thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Dee Choubey: Thank you very much I appreciate it.
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The post Dee Choubey On Taking His Company Public For Close To $3 Billion By Rewiring The American Banking System appeared first on Alejandro Cremades.
Jonathan Chen took his previous company FiscalNote public for $1.3 billion and now has raised $61 million for Nitra which is overhauling the healthcare industry with radically efficient and transparent solutions – starting with spend management. So far the company has raised financing from top tier investors such as New Enterprise Associates, Andreessen Horowitz, or Gaingels to name a few.
In this episode, you will learn:
- The ideal number of founders, and make up of your cofounding team
- The advantage of being a second time founder in fundraising
- How to handle running out of money
- Who you should be hiring at your startup
- Spotting opportunities, and timing your start
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Your email address is 100% safe from spam!About Jonathan Chen:Aidan Rushby is the developer of an online financial lending platform designed to reinvent how people pay for cars.
Jonathan Chen is the founder and CEO of Nitra, a software development company based in San Francisco.
Previously, they were the co-founder and CTO of Pathover, a social media platform for connecting with friends and family members who have similar interests. Jonathan was also the co-founder and CTO of OrangeNow, a mobile application development company.
Jonathan has a degree in computer science from Stanford University.
Jonathan Chen attended the University of Maryland, where they earned a Bachelor of Science in Computer Science. Prior to that, they attended Thomas S. Wootton High School.
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Read the Full Transcription of the Interview:Alejandro: Already hello everyone and welcome to the deal maker show. So today. We have a really incredible founder a repeated founder and a repeated founder that has done it. You know multiple times with Suk says you know. In fact, he’s a last company you know like hey went public. And now you know he’s raised a bunch of money too for what he’s building and they you know I think that we’re going to be enjoying quite a bit. You know this time with him so without farther do let’s welcome our guest today Jonathan Chen: Chen welcome to the show.
Jonathan Chen: Um, thanks, thanks for having me I’m really excited to to be here.
Alejandro: So give us a little of a walk through Memory Lane Jonathan Chen: how was life growing up in Maryland because you liked it too much. You didn’t leave for quite a while so tell us about it.
Jonathan Chen: Ah, you know, grown up from Maryland was great. Um, um, my entire family there. So I grew up with a bunch of family members East Coast you know, love the snow. Um I don’t think you know West Coast is great. But I think snow growing up is like a childhood thing. You know like playing around with. Ah, Snowman and like all those things so it it was. It was great I you know I went to college there. So definitely stayed there. Um, in in the early stages of my life.
Alejandro: Now you got into into computer science quite early. You know we’re talking about ninth grade I mean that’s a pretty impressive. So what? what? what got you in that direction.
Jonathan Chen: Yeah,, that’s it’s a good question. Ah it wasn’t um, my choice. Actually my my mom Actually this was back in the early two thousand s said that what she thought that computer science and technology was the future instead of her wanting me to be a lawyer or doctor. Like other parents Asian parents. Um, she wanted me to get into software and you know she made the right call there and she signed me up for computer science. Um, my you know my freshman year of high school and you know I Love the class and I just pursued that ever since.
Alejandro: And obviously you know you kept going. You know you got your degree there computer science in Maryland even your master of science too now 1 thing that I want to ask you is eventually when you ended up being going to college you are. Yeah, that’s that’s the moment where you really got into the whole idea of hey maybe I want to launch something of my own now before we even get into that you even were the valedictorian and you gave the commencement speech. So how was that experience like of talking I mean obviously now you talk to to tons of people all the time.
Jonathan Chen: Um.
Alejandro: But I guess you know at that age you know talking to so many people you know I’m sure that was nerve-racking.
Jonathan Chen: Yeah, it was actually a ah funny thing um throughout high school in my early life I had terrible ah stage fright. Um and I think you know in college I Really want to um, really conquer this fear of Mine. So. I would say in my junior year I really wanted to um, do the commencement speech and you know I wanted to deliver that speech so it was part of my goal and at the same time it was terrifying as well. If I really wanted to conquer my fear there because I knew going forward in life like public speaking is just like a skill set you you just need to have like everywhere you go. So you know I worked super hard and you know, um, definitely you know, got top grades of course and then it was something you had to be nominated. Um for and um, the know set of Deans ah had to select you for. So yes, it was extremely terrifying but it was something I really wanted to do because um I knew. You you know going forward in the future is just something that was a skillset that was necessary.
Alejandro: And you know during the high school years there in Maryland you met team hu who ended up being your cofounder at fiscal note. So why? So you didn’t have to go too far away to to meet who ended up becoming your cofounder for your first company. Which was an incredible success but then tell us about how the that idea of perhaps you know like building something came about because you know you guys you know, started pushing this thing you know right out of college. So I mean within college they call it year. So. How was that experience like of you and Tim you know all of a sudden you know thinking hey maybe maybe do something here.
Jonathan Chen: Um, yeah, um, you know lot I guess like a lot a lot of people think that you know you just have an idea you just go for it I will say um more often than on and this happened with my second company too. Um, before fiscal node my first company or our first company. We actually chat about many many ideas. Um, and even before I was chatting about ideas with Tim just like myself I throughout my tenure at ah in college I actually try like 6 different ideas and I build like different apps all failed by the way. All didn’t really care anywhere and Tim and I also have many different ideas that we were trying to pursue. But then we realized after you know a couple weeks of doing it wasn’t feasible wasn’t like that great of an idea. So I think it just starts out with just having conversations with friends and people and just throwing out ideas and eventually. You know you’ll land on something that um, you know you really like and you decide to to go for it because the opportunity was there.
Alejandro: So how do you guys land on fiscal note you know what was that process of that brainstorming process of taking a look at things taking a look at different markets and then all of a sudden you’re like my God this idea is meaningful enough. Let’s go.
Jonathan Chen: Yeah, um I think as a younger entrepreneur it was less so less less analytical and less practical. Um whereas nowadays I think as someone more mature we definitely take a look at the markets in in more detail. But previously. You know first company as first time entrepreneur I think for us, it’s about having that experience already in the field. So Tim um, who’s who was a Ceo and currently is still a Ceo of fiscco node um did work in government’s had experience. Um, you know with with that environment. And solve a lot of the issues. Um, you know being there. So the idea kind of came from his experience working. Ah you know as a student member board of education for Maryland and all the issues with data. Um. And the decision making process and we wanted to build fiscal to really solve those issues and that was kind of like the process there. It’s really finding that that core problem and figuring out you know, can we bring ah bring a solution.
Alejandro: And how do you guys I mean you were you were quite young. So what was that process of figuring you know hey I’m going to be Cto. You’re going to be Ceo and we’re gonna be co-founders. So how how did you guys think about distributing responsibilities and and what that would Intel I mean being so young.
Jonathan Chen: Um.
Jonathan Chen: Um, yeah, you know I think this is probably widely widely known already like in general when you start a company. Um, ideally I personally think ideally 2 or 3 founders is um and the best. Ah, you have the Ceo you have some technical person and then third person. Um either someone in operations or or growth or or you know one of those 2 areas um in general and um, we did have a third cofounder who was kind of working on um, sales and growth. Um and ops all through at the same time. But for myself since my background was in technology it was obvious I was ah, always the obvious choice for a cto.
Alejandro: So then going into plug and play. You know why did you guys think hey maybe we should go and and and take on you know, an accelerator experience.
Jonathan Chen: Um, yeah I think ah, it’s It’s probably the best routet to go if you have no experience right? like just starting companies or just Anything. We’re just networking and you’re just starting out and you really don’t know you know where to start off. Um, join an accelerator. It doesn’t have to be plug and play can be you know anything even something local in your community. Um will definitely help you just structure your understanding of how to approach startup and just getting connected with the right people probably in the area so you can start getting investments start. Um, hiring folks and start building the true company.
Alejandro: So I guess for the people that are that are listening to to really get it. What ended up being the business model Fiscal note.
Jonathan Chen: It was ah it was a saas company right? So like essentially we built software and we sold the software to businesses. So essentially what Facebook did was we we gathered government data public data. Ah, like regulations legislation that was distributed by the government through gov websites and the issue there was as someone working and understanding the law. Um, especially on compliance teams within businesses themselves. It was very tedious to you know, go through all these different websites and understand. You know what new law was introduced in your industry and it was just a pain to butt there. So what we did was we aggregate all that data into 1 platform and then we have analytics and also workflow software to help those folks with their day-to-day. Jobs. Um, and you know with that said. The ah the software itself we sold seats like a Percy basis and it was a so subscription over like 1 to 3 years
Alejandro: And your responsibility there you know was so easy product and getting it right on the product at what point do you realize? hey you know I think that they were into something here.
Jonathan Chen: Um.
Jonathan Chen: Um, yeah, um, you know probably is very interesting. You know there’s so many playbooks it’s it’s really, ah, it’s trial on air. That’s probably the best way think about it. You’re pumping out 10 features potentially 3 of them are going to actually stick. But. The velocity of how quickly you do so will determine how quickly you’ll figure out what those 3 are so for us like we were just like you know, a client was asking for something or telling us about an issue. We just try to get out as quickly as possible because like you know those are where you get your ideas essentially is talking to clients and customers. Sometimes I mean. Probably more than 50% of the time they’re not right? but like you need to move fast and sometimes they’re half right? so that you can kind of figure it out. Um from there. So just you know we got to move super super fast and you know pump out as many features as as you can.
Alejandro: And the company you know, did many many rounds of financings all the way up until you know, becoming a publicly listed company on The New York Stock exchange but but I guess the the question there is what was that journey like because I know that at the beginning.
Jonathan Chen: So.
Alejandro: You know for you guys. You know what’s probably not easy to you know you have to probably kiss a lot of frogs until you were like to find the one that that made sense.
Jonathan Chen: Ah, oh it was definitely a lot of frogs for sure. Um I would I would say you know for us to the road to Ipo was you know was a 9 year journey and it was a lot of ups and downs to the point where I think. You know what makes a second time entrepreneur. So ah, attractive for vcs honestly is because it’s like you’ve been to war and you survived and you have so many battle scars to the point where like if you get cut a few times more It’s like it’s nothing right? So like after the the first year was tough I would say the first year year and a half is tough like. Course like every start probably went through this but we almost ran out of money. Um, and you know we had to basically pull employees aside and tell them you know the hard things that are about to happen and you know the lot tough conversations in that in that aspect and. After a certain point of 2 3 years of doing this like you know some apocalyptic event happens. You have to let your team know and its all is very awkward and sometimes very stressful but I have to do it maybe 2 3 times you kind of get used to it and it’s expected and then if your early team stays on with you. They expected this will and. Um, that also speaks you know to how well you should hire in the beginning is folks who are really resilient to you know issues and whatnot so it was a very tough journey. Um, there’s many times many apocalyptic events that could have killed the company and um, that happens all the time and really, it’s not about giving up is about.
Jonathan Chen: Think about solutions how to get past that. Um, that hump right consistently and you just keep going and keep your eye on the vision there.
Alejandro: And I believe that prior to the ipo. The company had raised a what was that like a little bit over 200,000,000 yeah
Jonathan Chen: Yeah I would say 2 2 3 hundred millions um we also raise a bunch of debt as well. So it’s like ah it’s like a mix.
Alejandro: And when the company did the ipo in August Twenty Twenty Two it ipoed at one point three billion I mean what what goes through your mind when you know August first 2022 you see the company that you found it.
Jonathan Chen: Yeah.
Alejandro: You know with your high school buddy. You know going public you know like the value that you create one point three billion I mean it’s it’s it’s kind of ridiculous I mean what was what was going through your head. Yeah.
Jonathan Chen: Ah, quite honestly um I think you know we got we got a last so the ah ah, um, what do you call it the period of time where it’s like the the lockup period I was say oh crap we got we all lasted lockup period. But ah, but besides that like I think it was. And incredible experience to be on the floor. The New York stock exchange. Um, it’s only you know things you just see on tv and um and when I guess when I was there I was thinking back to the early days and we we wanted to you know, get this far but ah. Being much younger, we were like early twenty s it was just about having fun and building something with with my friends. Um, and the fact that we got it this far was just like it. So amazes me like how you know we just didn’t give up and we just kept going so ah. It was just quite an an amazing journey. There.
Alejandro: Now in your case, you took the ah foot of the gas or fiscal note you know a little bit earlier. You know before the ip I mean now you’re with with nitra which you actually started in October Twenty Twenty one but I guess you know you had a bunch of projects on the side. You know why you were in fiscal node. Mean you you you had that entrepreneurial drive and I’m sure that eventually you know like you were like my god fiscal note is growing like crazy this is becoming more like a corporation type of feeling and you know maybe at that point you know you realized that you had to do something about it. So what? What would you say that really triggered. You you know to to perhaps you know, take a look outside and and think that the grass could be greener. You know somewhere else.
Jonathan Chen: Ah, yeah I think you know as as a founder in general I think most folks are always looking for opportunities and new opportunities and just like not in terms of like job wise but like opportunities in the market right? because like I think in order to start really amazing companies. Um. Ideas are great, but it’s about when you pursue an idea and how ripe the market is right in the timing of everything so that’s like you know you could you could be an amazing like engineer and you could start a Facebook like company now but you probably won’t get anywhere. Um, you really had to do it like in the early 2000 s right? So it’s always like looking for. You know is it the right timeline for a certain certain industry to really dive into um and you know so for nitro specifically I think ah you know I was monitoring. What was happening in the fintech space and I mean I’m sure most people on the podcast know like fintech was like exploding back. You know like 2021 Twenty Twenty and you know crypto definitely accelerated that aspect as well. Um, crypto was insane. You know, backed in. So ah, the next What what generally happens you know when you observe an industry and you observe a huge change that is occurring um is once the technology or a certain trend becomes very general and um reach reaches the masses it tends to verticalize start to verticalize into specific industries.
Jonathan Chen: Um, you can see that with like On- the man back in the early Channel Thousand and Tens First you have very general Ondeman um companies and then it starts to like verticalizing the specific like industries and it’s the same thing with um, just like ah any type of trend in general but fintech was what’s happening now right? so. You know you have companies like braxs ramps Stripe. They’re very general generalized but then you have companies that are starting to take that and then target a specific industry and be the winner in that industry and we or you know for for Nitra I Just felt like the opportunity to um, do this. And for the an issue that we chose in Health care was just too big of an opportunity to miss out On. Um, so I decided to um, unofficially Pursue Nitra because I was technically still at physical notes. Um, and then after the ipo I I took my leave and started to Pursue nitra.
Alejandro: That’s amazing now with Nitra you know for the people that are listening to get it. What ended that up being the business model. How do you guys make money.
Jonathan Chen: So it’s it’s similar it’s it’s saas so basically what nitra is is. We’re building financial services for the healthcare industry so you can think like doctors physicians even the medical suppliers and whatnot so general healthcare industry and we’re building services that are you know corporate card. Ah, financing loans insurance, banking services and really taking what was very ah traditional like most folks in the industry still using traditional banking solutions traditional lending solutions and don’t really have any form of technology or workflow softwares. In their financial workflow. Um, like we’re building basically the next generation of that for this particular industry and um, you know for ah this ah this industry in general I think the ah. It’s kind of similar to fisco you know, given our experience. Ah my experience in the past you know we basically have a kind of Freeman model for our corporate card. They use a corporate card and we make make money on the interchange fee but we also are starting to charge more for our software components because you know we don’t just want to be the finance. um part of the the um ah the experience right? You know your so card. Sure we also want to build software that kind of enhances the financial workflow experience for the doctor for the clinic in charge of subscription as well.
Alejandro: And I guess you know now that you had that experiment with with with with fiscal note Obviously when it comes to putting the band together here and and the team you know the way that you think about hiring employees for an early stage company is completely different for. The time that you’re you know, hiring for later stage companies. Why is that the case.
Jonathan Chen: Um, yeah, you know it’s ah it’s it’s always very tough like hiring. It’s sometimes hit and miss and you know I’ve been hiring for 10 years and it’s you just it’s you’re not always, you’re just never going to get it right? like hundred percent of time and. I think for for me, there’s a couple of things I look for right like a course like skillset is kind of like a prework isite I think you definitely you know skillset you could test for like for engineers you you know, coding ability all these things. Um for sales like your ability to to close clients. But really, it’s about 1 thing I look for is about attitude. And the um, the understanding of what you just got yourself into is extremely important. So the probably the best story I have for this and in particular is at Fisco Nots ah you know we hired really stellar people and it was pretty much in hindsight that we kind of found this out because like. Our company after the first year at fiscal notes we were run out of cash and we pulled everyone aside and we had to tell them hey we’re running out of cash. Can you take a huge pay cut ah and and or like take 0 pay and it was a very tough conversation and we had about 12 employees then um, this is at fiscal note. Um, early days and every single 1 employees said that they would take the pay cut and they believe in us and they believe in the company. Um, and you know they did and it was really it was really awkward somewhere I would tell you that um because no one got paid but then we eventually pulled it off. We raised like a bridge round that led to a massive series a of $7,000,000 and then we backpaid everybody.
Jonathan Chen: But really, it’s about employees that and folks when you bring on the company like it’s not about the good times like everyone’s happy in the good times right? But like what that really tests is like when you think about to yourself when you’re about to hire this person is if there’s a bad time happening if if there’s apothelypic. Apocalyptic event. What would this person do right? like will this person just leave us and just be ah goodbye this company’s failing right? and to me like I always ask this question every time I interview somebody like what do I think this person will do will this person stay will this person would hustle harder and try to make sure that we all survive and. You know, get to the next stage because like that’s truly what I’m looking for like skill set is 1 thing but like it’s the tenacity and like um your ability to take on huge amounts of stress and uncertainty in in terrible times.
Alejandro: And for Nitra. For example, you know I’m sure that the amount of experiences and listen and lessons learned with fiscal note you know was pro and Bo you. So I guess with Nitra. You know when you guys were thinking about tactical ways to be able to achieve product Market Fit Faster. You know how did you guys think about that.
Jonathan Chen: Um, yeah, um, it’s ah it’s very interesting I think you know for us. It’s truly about how fast I mentioned this earlier like how fast you can pump out certain features and how close you can get with customers. Um, ideally in the beginning you want to have. Just 1 or 2 customers that are like your champions. So like even just one that you just started with one customer and I know a lot of people in the corporate environment. They tell you hey you got to interview 10 customers find similarity similarities you know and then you know find out the tradeoffs of what what you’re building and then build the right thing. Ah, that’s great in large companies. But I think in smaller companies. There’s a lot more uncertainty and you just want to make a customer happy and you start building for 1 or 2 customers. Even this is very specific because what will happen over time is you’ll start to build ah something for the general masses. But it’s hard to it’s like it’s like it’s it’s like a dilemma where you like you want to build something where a lot of people will use it and you feel like it will um, be relevant for like you know 10 twenty thirty or 100 different customers. But the dilemma is you have to get to talk to a hundred different customers who potentially will be customers but in the beginning. You know you you only have the opportunity you really taught the 1 or 2 if you want to get it out fast enough and start getting revenue. So by advice generally I mean what what we did is like we started off with just a few customers. Um, find out what the issues are and generally ah some of them sometimes they overlap sometimes they don’t but.
Jonathan Chen: What happened is your product would start to evolve to a point where the next customer you taught to you know, 80% of the problem is already solved you like hey we were to solve this and they’ll tell you the next 20% and it keeps growing where the and the product becomes more valuable over time and I would not try to try to figure out what are the similarities between you know, like 50 customers and try to build that. I would just incriminatingly build features um to get your product off the ground as quickly as Possible. So and that that’s exactly what we did.
Alejandro: Now I guess a you know another thing to think about in a tactical way is investors because first you need to get the connection and then second you need to get them to invest now one would have thought that it gets easier. You know I say someone that has you know that is. Ah, unicorn founder. You know someone that has built a company worth a billion plus at some point so I guess for you guys. How was this experience second time around you know of taking out your hat and hoping that people are going to throw money in.
Jonathan Chen: Yeah, um I will say it was. It was definitely easier because you remove the um the doubt of credibility where like if you’re a firsttime founder right? like you have to prove to them that you know you’re capable of executing. Um, and then after you prove that then you got to prove that your idea is worth it for them to invest in. So really, you know in the early days at fiscal notes. You know we had to do that or so it’s like getting your foot indoor getting the connections and just getting your name out there just for them to know who you are. That’s like step 1 which ah is just hard in general and and that’s why I say like an accelerator may help because they help you introduce you to generally like investor communities or angelro communities and you can get your Ah yeah, you get your start there. We did pitch like 200 plus investors just to get our c round so it is a. Its like a sales game. You just got a pitch pitch pitch get rid rejected for 99% and you just keep going. Um as a second time founder like I said that’s that part was removed um because we already had the connections we you know we just reached out to folks who already knew. But then you know what what I learned about um, investing in general. It’s you know team and you know the founder is definitely an extremely important for sure and um, if the investor believes in your ability to execute. But I think the most important thing and I think isn’t isn’t set enough. Um, as general advice for people who are trying to get investment.
Jonathan Chen: Number 1 thing you want to do is you want to align with the philosophies and beliefs of the investors now what this essentially means is um, ah you have to be building towards a vision. That’s you know the investor you’re talking to whether it’s a Vc firm angel whatever. Um. It has to align with what they believe is the future right? If they think you know Ai something about Ai is the future and you’re pitching that exact thing you have a much higher chance of getting that investment for us with nitra. It was actually fairly. Um. Ah, we you know we were extremely fortunate where you know we this is very analytical on our part. Um, we were looking at the fintech industry um predicting that it would verticalize into healthcare and various other industries as well and you know what’s you know our philosophies and my prediction. Align with all our investors. They all believe that you know virtualization of fintech was happening and it was happening in this decade and healthcare was also being disrupted and there’s a lot of things that helping happening in healthcare and that’s you know that’s why they invested in Nitra. So if you’re able to get that alignment like that’s when the investment happens. And it’s not about like oh you have a good idea. That’s great. Maybe investor may think you have a good idea but they don’t they don’t have you know they didn’t really do any research in the industry. They don’t have any predictions or philosophies about the future of that industry. You’re not really going to get the investment even if they think you’re a stellar founder sometimes.
Jonathan Chen: So like 1 you know you got to prove your credibility somehow right? and then 2 you got to align with the philosophies of the investor.
Alejandro: Now for you guys with Nitra How much money have you guys raised to date.
Jonathan Chen: So with Nitro we raised about sixty Ish million dollars part equity part debt. Um, and ah it was a massive round I I know you know we were at the tail end of the the fundraising. Um. Craziness of 2021 so we we got lucky there before everything crashed in 2022.
Alejandro: So obviously with investors you know vision is a big one so they were thinking about vision now and let’s say you were to go to sleep to an night and you wake up in a world where the vision of nitro is fully realized what does that world look like.
Jonathan Chen: Yeah, ah, this is pretty crazy but for us like we are in the fintech space I’m sure but more so in the healthcare space. We think the bigger opportunity isn’t healthcare care and and I’m sure. Um, for folks who potentially in healthcare space. You know the biggest company is in healthcare. Folks like you know mckesson Carnal Health Henry Shine they’re all when you think about they’re all like medical suppliers. They’re all you know in the medical supply space and and that space is just massive like hundreds of billions if not a trillion dollar you know industry in itself. Um, and yet. These these traditional players that I’m talking about here. You know they’re still doing things that are just not up to today in terms of technology. You know their solutions are very traditional. Um and we want to I hate using this this word but we want to disrupt this entire workflow. Um, and really be the next mckesson be the next carnal health and this is moving beyond fintech you know we’re starting off in fintech and we want to own the entire financial stack of the healthcare space but beyond that like how else can you expand? Well you know going into more workflows and. Um, the medical supply space and um, you know, get into the territory that is you know caral health mckesson and really be kind of the the Amazon of of healthcare.
Alejandro: So let’s shift from future to past. So let’s say you know now we we go to the past but we do it with a ledge of reflection I put you into a time machine and I bring you back in time back in time to that moment that you were still in the university of Maryland. Think what the hell to do with your life right? What was going to happen next and and let’s say you know you have the opportunity of having a chat with that younger Jonathan Chen: and you’re able to give your younger self one piece of advice before launching a company. What would that be and why given what you know now.
Jonathan Chen: Um, ah I mean that’s a good question There’s far so much I want to say um the biggest I think you know probably the biggest thing um is essentially. what you what you want to do is um I know this sounds very ah cliche and it’s it sounds cliche and but it’s really hard to do in the moment is you kind of just you you got to get to a point where you’re numb to rejection you’re numb to like. Bad things happen around you and I wish I I was numb to that much earlier because they definitely want to save the um me a lot of a time and just like frustration and stress I think it’s just like you know, put yourself in situations where there’s. More uncertainty and try to power through it as early as you can um and you know there’s a reason why like ah when you you firefight pretty much every day as a startup founder like in every especially if you’re a Ceo right? You’re firefighting every department if you’re cto is just tech. What not I think. Putting yourself in challenging situations where it’s uncertain and you’re extremely stressful more often will prepare you for that of you know the war zone of of startups. Um, so my advice to myself you know is like ah you know don’t be afraid of rejection. Just.
Jonathan Chen: Keep going and don’t let affect you emotionally because like you know if things are affecting you emotionally it affects the business if you’re more level ah level headed and more practical about things get reject and move on to next thing you’re going to execute much faster and I wish in the early days like like I said for first two years like man it was. Motion roller coaster. Yeah, firefighting out time and not knowing the way the company would survive I think nowadays like we firefight lot I mean it’s a startup but it’s expected and I kind of just power through it and like I know I’m gonna solve the issue like there’s always an issue that comes along and my mindset now is oh. Another issue we’ll solve it my minds back then it like shit is a company. Go die. Oh crap is coming and die and I think you know that wastes a lot of time in general and you worry yourself and you worry your teammates around you and um, if you just tell yourself hey we’re gonna do it. You just power through it like it’s nothing like That’s what I do now and I wish I had that much earlier.
Alejandro: I love that. So why Jonathan Chen: for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Jonathan Chen: Yeah, um, you know you know my company is nitra.com um my content is just Jonathan Chen: Nitra Dot Com I also have Linkedin my handler is or my user name is hackford h a c k b y r d ah. And you can reach out to me on Linkedin as well. Um, and I’m happy to connect.
Alejandro: Amazing, well easy novel Jonathan Chen: thank you so much for being on the deal maker show today has been and on earth to have you with us.
Jonathan Chen: Yeah, Thank you so much for you know, having me as well and really, really, really good questions and you know I wish for all those who are listening I Wish you best luck I Know the journey is hard and it’s Lonely. Hopefully you’re with friends I was with friends which made it a lot Better. Um. And you know I know you’ll be super successful. Just don’t give up and and keep going.
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The post Jonathan Chen On Taking His First Company Public For $1.3 Billion And Now Raising $61 Million To Blend Fintech With Healthcare appeared first on Alejandro Cremades.
Now on his second startup, Aidan Rushby has raised over $100M to help transform the experience of financing your next car. His new venture, Carmoola, has attracted funding from top-tier investors like QED Investors, VentureFriends, InMotion Ventures, and NatWest.
The post Aidan Rushby On Raising $110 Million To Shape The Future Of Car Financing appeared first on Alejandro Cremades.
Nick Cromydas is the cofounder and CEO of Hunt Club which is a talent company that leans on subject matter experts to help clients find their next hire. The company has raised so far $51 million from top tier investors such as FJ Labs, WestCap, or New Coast Ventures.
In this episode, you will learn:
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- The three core energy trends changing our impact on the environment
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Your email address is 100% safe from spam!About Nick Cromydas:Nick Cromydas is a skilled entrepreneur, known for his role as the co-founder and CEO of Hunt Club, a technology-driven recruiting service designed to help businesses attract and hire top-tier passive talent. Hunt Club, under Cromydas’ leadership, reimagines the traditional recruitment process, leveraging proprietary technology and an expansive network of industry experts to simplify and optimize talent acquisition.
Before establishing Hunt Club, Cromydas founded New Coast Ventures, an innovative hybrid of a creative agency and a venture capital fund based in Chicago, Illinois. This venture showcased Cromydas’ multidimensional business prowess and commitment to fostering growth in the entrepreneurial ecosystem. New Coast Ventures invests in start-ups while also providing them with creative and strategic services to ensure their success.
Cromydas’ dynamic entrepreneurial journey and consistent focus on leveraging technology to solve traditional business problems reflect his forward-thinking approach. His leadership style centers on fostering innovation, empowering teams, and creating sustainable growth strategies, characteristics that have made him an influential figure in the tech and start-up world.
In addition to his business ventures, Cromydas is also an active participant in various community initiatives and has shown a commitment to giving back to society. However, it’s worth noting that detailed information regarding his early life, education, and career journey up until the establishment of New Coast Ventures and Hunt Club might not be publicly available as of my last update in September 2021.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmaker show. So today. We have a very exciting founder. We’re gonna be talking all the good stuff that we like to hear building scaling financing I mean you name it, you know and and also quite a competitive entrepreneur entrepreneurry you know he used to be a really good tennis player. But. Again, yeah I think we’re gonna find this inspiring so without further ado. Let’s welcome our guest today Nick Crovin us welcome to the show. So originally you know, grew up there in Illinois in the suburb so give us a walkthro memory lane. How was life growing up.
Nick Cromydas: Um, Andre thanks for having me appreciate it. Excited to beer.
Nick Cromydas: Yeah, it was it was great I mean we grew up in a northern suburb of Chicago called glen view it was idyllic. Um, you know schools were great so it was it was really a great place to grow up and um and we had a small even though I’m Greek. You’d think I have a large family I actually. Just have one brother and it was my dad and I grown up. So is you know it was different. We’re a small family but we loved it and um, still have a ton of great friends there and I actually live three miles away now so still still close to to where I grew up.
Alejandro Cremades: Now tell us about getting competitive because I mean you picked up the racket and and that was it.
Nick Cromydas: Yeah, yeah, so tennis was a huge part of my life. So I started playing tennis when I was about ten years old now actually started when I was 5 but really like sunset at every other sport when I was 10 so only focused on tennis which was kind of sad at the first because I quite love baseball and basketball and everything else, but. You know it was one of those moments where I just need and to specialize in something and put my heart into it and so it was a weird decision for a 10 year old but it was my decision and um and I loved it and so started practicing 4 to five days a week at a young age and. Playing tournaments and missing you know 50 to sixty days of school a year at it isn’t a 12 year old on to toro playing compete across around the country in the world so is playing tennis was a huge part of of who I am.
Alejandro Cremades: So So then so then tell us about getting into college you know with the with Tennis. You know you went to bunder bill there D one tennis. Ah I’m sure that it was quite the um, how would I say this like. Like heartbreaking because all of a sudden you know like your dream is to make it to a us open and and then all of a sudden you know like that’s not the case when did you realize that they perhaps you know that was not the path for you to follow.
Nick Cromydas: I think pretty soon um in my in my college 10 career. So I had a good college careerifying college career. But we we were fortunate in Nashville to host a professional tournament every year so one of the almost minor league tournaments. So yeah, it was called the challenger. The equivalent in professional baseball would be. You know, kind of Alea Baseball so one click right? before some of the major events or the pros or the real pros and um and so we hosted this event and I got to play a guy that was like 120 in the world 130 in the world and he beat me so badly. Um, that I was just like wow is this the level that I’ll have to rise to and I was a sophomore in college. But I think I pretty quickly realized like my athletic ceiling had a certain limitation and I was going to make the best out of it in college but I probably wouldn’t have too fruitful of a career as a professional.
Alejandro Cremades: Wow. So then so then when when that comes to mind you know like what ended up happening there because you know things stay took a turn there. You know you ended up becoming a you know out of college. You know an assistant coach. But then you were like yeah I’m not into being a tennis coach.
Nick Cromydas: Yeah, and I love the sport and like maybe one day I’d go back into it and so still. It’s still a huge part of who I am but I’m interested. It was one of those things like the life of a college tennis coach is it’s grueling like you are recruiting all summer on the road. And during the season you’re basically living on the road as well. Your weekends are monopolized with matches your days off for Mondays I think ah as ah as a tenure basically from 10 to 23 my whole life and my whole schedule was dictated by the sport and after that. You know I just got to a point where yeah I wanted to make sure that the decisions I made on where I lived the things I’d spend my time and and do I had a little bit more control of and then aligned to traditionally a little bit more of the normal society and so so I think that was a big driving force I wanted to pick where I wanted to live I wanted to pick the nights I could go out I wanted to pick the nights and and the days I could. Do different things. Um and then frankly I was just burnt out like when you play nothing but you know the same sport since you’re 10 years old and my last year at northwestern I was in the court. You know 8 to 10 hours a day and my body was just burnt out I was physically and mentally tired and so I think ah transitioning out felt really right. And it’s not to say I don’t didn’t love my time in the sport I still cherish it and it’s given me so many different blessings in a wide variety of ways. but but um but I kind of knew it was it was time to to hang out my rackets.
Alejandro Cremades: So going into business tell us about that. Okay.
Nick Cromydas: Yeah, so I I had a interesting transition from tennis to my professional career. So I graduated in the last sort of recessionary period in 2009 could not find a job only job I found was obviously being a tennis coach and then um after that which. You know thank god is recessionary proof mostly and after that I really wanted to go try my hand at business and so I wanted to get into consulting I was a part of a program at vanderbilt before I graduated that like really gave you real real-world experience and working on a wide variety of different projects with real companies and I was intrigued at this idea of. You know you could be paid to learn how different businesses work and not necessarily do the same thing every day for years and that really appealed to me and so I tried to pursue a career in consulting and given it was 2009. You know I was able to get and network my way and to get an interview but I was competing against people with 3 to 5 years of real consulting experience or. Ph ds or investment bankers and like my only real tangible skill set was hitting a tennis ball and so you know really then found my way into doing kind of a small family business job for a year we manufactured and built things out of glass and metal and. It was it was sort of a baptism by fire where I knew nothing about business but I was effectively the chief of staff and of a Ceo and about a 3 to $ 4000000 company and was really learning a ton about what it takes to actually run a small business and and during that experience I started building my first software business on the side which is called alliance.
Nick Cromydas: Which effectively was a way to aggregate student athletes and their alumni in 1 database kind of like Linkedin groups before Linkedin Groups existed and um in a way for them to network and sort of solving the pain point that I had trying to find a job and so um, you know, really left the small business. Got this product got this business off the ground had a couple paying customers and then I actually use that experience to convince Kpmg that ah that I had enough business acumen to be considered for an experience associate hire in 2010.
Alejandro Cremades: And why did you realize that corporate was not for you because I mean obviously you know like a Kpmg would be your last day rodeo in corporate America it only took like 2 years for you to say it’s not for me.
Nick Cromydas: Yeah, actually new in two weeks too um you know I think I think there’s a couple things that a few of my mentors in life have told me that I’ve always rung true and and then there’s obviously these experiences of playing like a competitive sport in your entire life and so. You know I think from the competitive sport angle. You know I always wanted to be an environment where you’re only limited by your own imagination and work ethic and corporate America although serves an incredible purpose for a wide variety of different professionals is not the most attuned to really. You know, creating and jettisoning someone’s career for those who really want to work. There’s all these organizational structures and barriers to grow in a company as fast as you’d like um and you have to play someone of a game versus really you know your own excellence in a role and so as an athlete that was used to kind of thinking or swimming on my own merit It didn’t really register for me. And so that was the first and the second was and this is no knock on my previous employer like I love my time at Kpmg I met great friends that I still talked to today and learned so much but you know one of my best mentors said at the end of the day in the job you’re at you want to look around and see if there’s anyone you aspirationally want to be down the road. And I always found myself. Um, admiring entrepreneurs the way they built and created or the way they buck the system or the way they took a wide variety of risk and um and Kpmg was a very safe place where you do incredibly well over the course of your career but you know there wasn’t a ton of risk associated with it and so.
Nick Cromydas: And so really I I wanted to kind of try my own hand and build build things and in the first experience of building that software company gave me the bug and I needed to go do my own thing.
Alejandro Cremades: Now a software agency you know, ah you guys were developing stuff for others. So I mean you you were not a technical. They are really a technical guy. So how do you come across? you know there is and and and how did you go about it.
Nick Cromydas: Yeah I think passion, you know it’s amazing. What you can do if you are just really excited about learning something and I found that in tennis I found that a lot of different elements in my life and so yeah, at the time native mobile apps weren’t a thing they had just launched Instagram and just got acquired for $1,000,000,000 and um, by facebook or meta now and I was obsessed with like what you could create using a cellphone what you could create using the internet and so we had built our first business called eth alliance which didn’t end up working out but it got me my first job. But I love that experience like whatever you can imagine. You can go create. You can do so with limited cost structure. You just need an engineer or 2 and I had a great cofounder who’s still a co-founder day of of home clubb. Um, and so really was passionate about this idea of like just leveraging technology to create a wide variety of different things and so. So that really fueled it and so kpmg helped tone those skills a little bit. We did a lot of tech-based projects. Um, learn how to be kind of a stronger project manager create clear outcomes and goals things of that nature but you know a big reason. why um why I think I’m in was in the software space or started becoming building a software agency called newcast years ago just the idea that you could create for a lot of different people and I’ve almost applied this idea that I love consulting which was learning from so many different industries and and other people to something I love to do which is build software.
Alejandro Cremades: And as a result of that you know one of the projects that you guys ended up incubating was say Hunt Club. So So tell us about Hunt Club you know like how does the whole idea of Hunt Club come about and. And at what point do you realize? hey you know like what maybe we should they put a little bit extra muscle into this one.
Nick Cromydas: Yeah, so hunk club for starters. Hunk club is a new category search firm. So we leverage all our own technology to automate and augment as much of the process as possible. Um to create a better experience and our big differentiator is we use a network of thousands of business leaders to refer for your roles. So. You know, not just 1 recruiter’s network cold calling think of you know thousands of cmos giving you warm referrals and and warm introductions to really great talent all across the country. Um, and so it’s been really fun building that business like the genesis of it was really kind of on 2 or 3 observations. So the first was. With newcast. We we had created an investing arm and we kept investing in early stage growth, stage companies and realized many of them were engaging recruiting firms or head hunting firms and routinely kind of I think a poor experience and we thought a big reason for that was the type of talent that you need to. Make dollar shave club successful versus potentially like p and g is quite a bit different right and the market really didn’t have a service provider yet or a provider that really understood what it was like to help these growth stage early stage companies drive impact and so I thought there’s a huge delta there. And then the second was um was actually just an experience I had so I had a friend that was a partner at 1 of the major search firms and he got incredibly good at looking at my Linkedin Network my Gmail network and saying hey Nick I saw you’re connected to Alejandro. He looks a great fit for Ceo of this company. Can you make an introduction and so I did that.
Nick Cromydas: Multiple times over a summer placed multiple people for him and just kept getting a thank you note back saying hey like I you know I would have never taken this job had it not come from you and I’m so excited and I’d call my recruiter friend and he said yes, thank you for helping and and I was like what is this industry? Um. So I spent a ton of time shadowing different firms big ones small ones public ones private ones wide variety, different business models and just came to the conclusion none of them use any technology really to power their process certainly at the time and it’s actually hasn’t advanced too much since with the exception of people using Linkedin. You know, really stale tools and technology that aren’t dynamic that help make any part of the experience better or create more productive ways for their consultants or recruiters drop but they all use networks and they all built networks in different geos and functions and they call them those networks. When they want a new search and they needed id as a new’d be a great fit and asked who would you refer and so I thought what if we just built a totally new model which combined best in-class technology and the world’s largest referral network for talent. Um, and that was kind of the idea and so we we got off to the races and 15 and.
Alejandro Cremades: And how do you guys make money for the people that are listening Nick to get it.
Nick Cromydas: Been building it since.
Nick Cromydas: Yeah, so we charge a a start Fena Success Fee. So as a retainer to start search with Hunk club and then and then ah a more on the backend Once we actually successfully complete the engagement which our clients generally love because if you think about most of the Market. It’s this fully retained model that is a bit misincentivized with um. With people’s clients.
Alejandro Cremades: Founder market Fit Nick why were you passionate about about you know this segment to really you know take a stop at it.
Nick Cromydas: Yeah, yeah, I think I’ve built a lot of businesses for the last twelve years and and I work with a lot of different entrepreneurs who are creating businesses whether it’s investing or whether it’s supporting them as an advisor or just partnering them with via hung club. And I think there’s always a clear distinction between those that create something really special and it’s this concept of founder market fit and so when ah when ah when a founder is solving a problem that they’re really passionate about one that they really want to solve. It may not work in the end for a wide variety of reasons but like because there’s passion rooting the cause you’re willing to run through walls. You’re willing to to keep going when you lose that big customer or you lose that big pitch or when one hundred vcs say no to you because they don’t quite get it or for a wide variety of other reasons right? And so. Yeah I think when you think about like the the challenges of building a business or being an entrepreneur and starting a company. The amount of problems and issues and obstacles that present themselves. It’s really easy just to quit and I’ve done that before in other businesses ones that I was less passionate about solving the problem and so when I think about hungk club. And and others that you know we work with that really have this idea of founder market fit every challenge or over obstacle just feels like another challenge or obstacle not like a you know a existential moment every time something goes wrong right? and.
Nick Cromydas: I Think that’s how you know you’re building something you’re meant to build and something that has a chance of maybe being successful one day because you’re really just trying to solve an acute problem that that you’re passionate about and and that sort of Founder Market fit.
Alejandro Cremades: So building teams. You know you guys. Obviously you know help with search for a living. So how did you search for people for yourselves.
Nick Cromydas: Yeah, you know we have a cobbler shoe problem. No I’m kidding we use hung club so you know I think there’s a lot of things that people get wrong when they think about hiring executives or building teams in today’s world talent looks different all the time right and skill sets because of how fast technology is evolving are changing all the time and then I also think like post covid. You know what people want in the world both personally and professionally is constantly changing as well. So like you look at precovid. There’s this idea that you would work. And continue to evolve your career and eventually you get to a certain point then you retire right? and I think postcovid people are starting to prioritize a wide variety of things for the first time quite differently work life balance worklife integration. Ah mission-driven companies value-driven companies high growth slow growth like you know I think people’s whole framework on what they pick. Has changed post covidd pretty dramatically and so so when we think about like talent and helping our clients. We really think about like what is the right archetype of different profiles that might make a grid fit for their role because it’s really not one size fits all those who go to market. Looking for talent and have a very rigid framework on it has to be these 14 things. Otherwise we won’t hire them. You know general the ones that never really get great talent. Um because it’s more fluid than that, right? organizational structures are more fluid. Um.
Nick Cromydas: Talent is more fluid and the skills you need Today may not be what drives success tomorrow and so we really encourage both ourselves and then also our clients to make sure that they’re really flexible in setting up a couple different profiles that could work as well as a couple different ways that org might work depending on the type of talent we can get and that generally yields a way better. Output. That um, then a really rigid framework.
Alejandro Cremades: So what is a question that you would always ask the people that you’re looking to bring on board to your team that you’re like I’m definitely gonna pay much attention to the answer on on this one fine.
Nick Cromydas: Yeah questions for someone we bring on to our team.
Alejandro Cremades: That’s right, the number 1 the one that you’re like this one is going to really make a difference for me. You know when I listen to the answer.
Nick Cromydas: Yeah, it’s it’s all about resiliency and change management. So when you think about our company. We’ve grown from 40 people to close to you know 15080 in the last eighteen twenty four months and the business has changed dramatically every single time every single cycle and so. You know what? we really think about is like how do people handle change tell me about how you handle change your last company in your life in some moment where where things were complex and I think that the way you listen to those answers the way that they answer the question. The things they pick. Um I think is a really good leading indicator and how they might. Operate in sort of a higher growth environment or ah sort of changing environment.
Alejandro Cremades: That’s a good one now. What about what about when it comes to people on the investment side because you guys have raised quite a bit of money. How much capital have you guys raised today. So how did you go about getting the right people for the right reasons to give you the money.
Nick Cromydas: Yeah, we raised $54,000,000 today
Nick Cromydas: Yeah I mean a lot of it’s serendipity right? and I think like a big thing. A big mistake that serendipity for us and I’ll tell it story in second. But I think a big mistake a lot of founders make is they take hundreds of calls without being super targeted and selective of like What’s their business model. What’s their business. What’s their vision who are their relationships who are the right investors for the business and you know I think they’d save a lot of time if they really like were selective on who they actually engage with versus trying to boil the ocean and so we’ve always been really selective and deliberate and how we’ve raised money. We’ve never actually. Been in a full fundraising process. Um, we’ve always either put together capital through family and friends family office entrepreneurs and customers for our first 2 rounds people like we were screaming with excitement to work with that. We wanted to be a part of our story that we wanted to have skin in the game that we wanted to learn from. Um. And so we the great couple early syndicates of just like entrepreneurs who have built billion-d dollar businesses family offices who created like companies that are still standing creating a legacy for their their next generation to their families and more um and then in our previous two rounds. Yeah, it’s really serendipitous and so and all through network effects which is our whole business model home club. So. Um, one of our ah investors and our clients g 2 their ceo gutard dabel introduced us to you know a guy named Thomas Learman and another guy named Steve Schmalhofer who led our series a and they founded the expert network industry in ah in um, in a company called glg many years ago and so they like quickly got what we were doing.
Nick Cromydas: It was serendipitous through one of our relationships. Um via goodard able and um and it was just felt like a lot of really good culture alignment and a lot of really good sort of institutional knowledge if they built the category in expert networks you know it’s they’d certainly be able to help us unlock that vision for search. And so we weren’t raising during that process but we met them and thought they’d be a really additive partner to helping us go build our vision so that was one and then two was um was actually our most recent round with westcap where the partner that led around founded ah a firm called Agon Zeer and agon zeender is one of the largest. In the United States he found the firm so he’s one. It’s one of the largest executive search firms in the world and so him and I had been building a relationship for 7 years where we met and I met him in his office in Dallas and you know right? when we were getting started and it was this like literally 2 wo-person company and I was pitching this big vision. We stayed in touch over the years and when he left Aon Zender you know he gave me a call and we just started working together on a couple projects. We have a software product called Atlas that they um that they’re using now to manage their own network and I can share about it more on that second. But. You know through that experience working together and getting to know each other we we decided there was something we you know wanted to go do together and and they end up leading our series b and so um, for us. It’s always been serendipitous but I really you know push founders or anyone listening that pick the right partners you know.
Nick Cromydas: Raising capital is very serious. You have to pay it back one day you have new owners and shareholders in the business and you want partners that you’re really excited to work through all the problems. The good and the bad times with not just the ones that look great on paper or in the Techcrunch press release.
Alejandro Cremades: And you were talking about cultural alignment. Can you expand on that.
Nick Cromydas: Yeah I think from an investment perspective lajandra like cultural alignment. Yeah I think I think you have to be very clear on what the business is and isn’t right and you have to be somewhat principled as a founder you know which is hard to do right? Especially if you have cash issues but here’s the vision of what we want to do.
Alejandro Cremades: Ah, that’s right, That’s right.
Nick Cromydas: That vision is the vision of what we want to accomplish I hear you miss Mr or Mrs Investor but like that’s not aligned to who we want to build what we want to build who we are as people and what we want to create long-term and so like at Huk Club we were really principled that like this is probably a you know multiple year journey. Maybe even a multi-deca journey. And just building something to arbitrage growth and selling. It was not what we wanted to do. Um, we really wanted to create sort of category defining business and you know we wanted partners that were on that journey for a long time with us and so that was a huge part of of as we spoke to people about investing in hung club um, where there was really good culture alignment that like. If the pressure to grow 1 year is greater than provide a great experience for our clients and our customers like we wanted the optionality to stop growing to make sure we’re getting that right as we scale and um and we’ve been really fortunate to have amazing investors that that share that sentiment with us.
Alejandro Cremades: Obviously with with those investors you know you had to share a vision So when it comes to vision Imagine you were to go to sleep tonight and you wake up in a in a world where the vision of the company is fully realized what does that world look like.
Nick Cromydas: People are doing business almost primarily through trusted relationships and introductions whether it’s your next business development deal or your next great hire or hiring a great service provider to help you with a need. The network effects power how you find things and it’s rooted in trust and we think that creates a better world and a better business.
Alejandro Cremades: So how does for example, like network effects you know work with with you guys you know with with your company.
Nick Cromydas: Yeah, so when you sign up. So if you think about humc club think of it as almost like a bit of a 3 hree -sided marketplace so we have candidates we have experts and we have our clients and so when we run a search. We really leverage our expert network and their network they sign up, they’ll drop their Linkedin Networks through Gmail Networks and we know who they know we know who they’re connected to we build technology to understand their strength relationship between their network and our technology makes it really easy to serve up. You know the 5 to 10 people in their network who might be an amazing fit for 1 of our clients search. Um, and so. You know that’s really an example of how we’re investing internally is like how do we really understand you know what do our clients need who’s the perfect person in our network and who’s the perfect person to introduce them? Um, so it’s really powering trust in every interaction across the board.
Alejandro Cremades: So in this case I mean imagine you were to um, have the opportunity of going back in time and you’re able to go back in time to that moment where you know perhaps you were like thinking about doing something of your own maybe during the days were right before going to kpmgn.
Nick Cromydas: Yeah, yeah.
Alejandro Cremades: You were able to give your younger self one piece of advice before launching a business. What would you say that would be the piece of advice that you would give to that younger Nick and why given what you know now.
Nick Cromydas: Yeah I think it’s it’s a hard 1 right? but um because part of I think what like gives you the fortitude to start something is probably um if you remove that edge is probably the reason why you would never get going but I think for me I would just say be patient. You know I think growing up and starting. Our first thing. You read the tech crunch posts you compare yourself to the world. You compare yourself to everyone tweeting on Twitter and you know everyone’s practice is different. Everyone’s timeline is different and what success looks like is different to everyone right? and I think like you know I would have encouraged myself hey. Business is a decade decade decade long game like you know it’s multiple decades like slow down be patient and always make sure you’re doing right by every interaction and I feel like I’ve lived through that mantra a lot but you know there are moments where I’ve burned a bridge or 2 or moments where I was so you know. Determined to pursue something with vigor and complete it that um that the interaction wasn’t perfect and I think it’s just you know, be patient and great things. Happen.
Alejandro Cremades: Do you remember in your own journey when you came to the realization that this was more of a marathon versus a sprint.
Nick Cromydas: Yeah, yeah, I think you know’s ah that’s a cool thing about the way we built this business has always been kind of set up that way. So we we bootstrapped it for 3 years before we raised a single dollar of outside capital business was you know, basically been profitable 5 or 6 out of 7 years since we ran it and so. You. It’s really one of those things where I think we’ve always sort of designed it that way and I actually think like you think about like some of the best companies in the future like there’s so many different iterations of software in today’s world there’s so many different asriations of consumer marketplaces getting a consumer’s attention now is nearly impossible right? like. I actually think the only types of businesses one can build if you’re not dealing in some sort of exponential technology or like generative Ai or something that truly is transformative um in a certain category like the only thing you can build is something that really solves customer problems and in a slower scale and so I think I think the future actually looks more like. People being really patient being capital efficient focusing and solving smaller customer needs and then growing their sort of base revenue and their scale as they get a stronger foundation.
Alejandro Cremades: Love it. So what Nick for the people that are listening that will love to reach out and say hi. What is the best way for them to reach out. They say enough. Well Nick thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Nick Cromydas: Just nick at humclub.com
Nick Cromydas: Thanks for having me Andre. It’s fun.
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The post Nick Cromydas On Raising $54 Million To Inject AI And A Network Of Experts Into The Recruitment Process appeared first on Alejandro Cremades.
Joey Levy is now on his third startup. A venture with Jake Paul that went right into raising a $50M Series A round to take over the sports betting space. His venture, SimpleBet, attracted funding from top-tier investors like GoodPaper Ventures, Sachse Family Fund, FJ Labs, and Grit Capital Partners.
In this episode, you will learn:
- Customer acquisition and product experience
- Taking market share in a big space, with well-funded incumbents
- Joey’s own $15M investment fund
Alejandro Cremades · EP 646 Joey Levy On Raising A $50 Million By Creating The Robinhood Of The Gambling IndustrySUBSCRIBE ON:
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Your email address is 100% safe from spam!About Joey Levy:Joey was a Co-Founder and CEO of Draftpot, a daily fantasy sports platform that was acquired in 2017. He was a Thiel Fellow and previously studied at Columbia University.
Joey was the Chief Operating Officer at Blue and White Publishing Inc. He is now the Co-Founder and board member of SimpleBet.
Joey is also the Co-Founder and serves as General Partner at 305 Ventures. He invests in startups as an angel investor.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the show. So today. We have a very interesting guest. You know he’s been actually tackling you know the the problem that he’s solving from many different angles for the past ten years with different companies I think that we’re going to be learning a lot. We’re going to be learning about building scaling. Financing all of the good stuff that we like to hear on this show so without further ado. Let’s welcome our guest today Joey Ley welcome to the show.
Joey Levy: It’s good to be on Thanks for having me.
Alejandro Cremades: So originally born in Florida so not far away from Miami so give us a little far walk through memory lane. How was life growing up.
Joey Levy: Sure, um, yeah, so born and raised in South Florida and in Broward County which is just north of of Miami and um, yeah, enjoyed enjoyed being raised down here I’m I’m back you know, basically at at home now but growing up as a kid I never thought. You could be a technology entrepreneur in in Miami so it’s great to see some of the recent developments around Miami you know becoming a tech hub and there’s a ton of work to do on that front. But it’s trending in the right direction. Um, ended up moving to New York when I was eighteen years old to go to college at Columbia University um during my sophomore year I started my first business um called draft.
Alejandro Cremades: And where where and where did that where did that day drive. You know for entrepreneurship come from. Did you have anyone in in the family or anything you know happening there around you in Florida that that got you this book right away or what where did that come from.
Joey Levy: Yeah I you know I would say if I were to identify a family member. My my grandfather was like a you know businessman and very entrepreneurial and um was certainly an inspiring figure for me. Um, but I think like the the. The the primary source of it was you know I started working when I was like fourteen or fifteen years old I had like a tutoring business I you know worked at a sandwich shop I did like all this other type of stuff these random gigs and um, because really I just. For whatever reason I don’t even know the you know maybe because I was like arguing with my mom as a kid or whatever and I always wanted to have independence right? I always wanted to make money so that I wasn’t beholden to anybody. Um, so that was just something that came um to me from a very very young age. Um, having been working since I was like 14 or or 15 and um and and sort of got the creative juices flowing and and when I started in in college you know I didn’t I didn’t start university thinking that I was going to be a technology entrepreneur I was a. History major focused on Nineteenth century american history and the reason why I did that was because I was good at history and I thought it was a good thing to study because you read a lot and you write a lot and you analyze a lot but the primary reason why I did that to be honest was because I didn’t come from a lot of money and I thought that.
Joey Levy: And the reason why I wanted to go to an ivy league school in the first place was because I would go on all these Wikipedia pages and see like these successful political leaders and business leaders and the 1 common denominator I saw was a lot of them went to ivy league school. So when I was young, you know a freshman or sophomore in high school. Um, like okay I just got again into an ivy league school and then step 2 is get into the ivy league school and get as high of a Gpa as you could possibly get and then get a job at like Goldman Sachs or something like that and you could start your life with a six figure income and then sort of figure out what you actually like to do from there. So. I started college I was focused on studying something that um you know I was good at and you know started making Dean’s list and having a high gpa and my plan was working but then along the way I was introduced to fanduel and Draft Kings which were these new businesses that were really starting to. Gain mainstream attention back in you know, 2013 2014 when I was starting school and I thought that those companies had amazing ideas like I was like as a kid. My favorite hobby was season long fantasy sports and they essentially introduced. Instant gratification to make that consumer experience orders of magnitude more engaging and but I thought that their product experiences were too complicated and intimidating for normal mainstream casual sports fans.
Joey Levy: So I started draftpot initially as kind of like a project I thought you know it could be a good thing to do something a little bit entrepreneurial on the side and I had a lot of belief and in the need for a casual fan-focused daily fantasy product and. The more that I got into building it and marketing it and getting users and generating revenue I just became addicted to it there. There was nothing better than um, just building something and like so my strategy as I alluded to a couple minutes ago was like. Get into this ivy league school get a really high gpa make Dean’s list every you know semester and just keep going and I did that freshman year but then sophomore year when I was really going after the project in earnest I find myself just I found myself just not going like I couldn’t go to class like I was so like I missed like. I missed like a final exam because I had an investor meeting that like I just had to take and it didn’t even cross my mind to like take the exam and you know my Gpa ended up plummeting and um, it was just ah it just my.
Joey Levy: My point is it wasn’t like super deliberate it just kind of happened as I went along the ride and pretty much ever since then I’ve been you know now I founded 3 businesses and ah the second and third of which have you know, really you know taken off and and but i. It’s been ah one decade long journey of essentially just trying to solve the same problem of of building the category defining consumer product experience for a mainstream casual sports fan to enhance their consumption of sports.
Alejandro Cremades: So on the on the first attempt with a Draft Pot you know you ended up it became every then I mean as you were saying you know you had investor meetings you had the exam so you had to prioritize you know the business building so eventually, you know you decided to drop out I’m sure that your parents were very excited with that. And they you drop out and so so so so so obviously you drop out but then you know like with dropout you know, obviously there was like a bunch of stuff. You know that that ended up unfolding and you end up exiting the business. So what happened there.
Joey Levy: They they thought I was a moron. Yeah, they literally called me a moron. Um, yeah.
Joey Levy: Yeah I mean know a lot happened there. We we launched. Ah you know like an alpha beta product and early of 2015 and and then over the course of the spring and the summer we made a lot of progress on the product and. Ah, started acquiring customers and things were generally going pretty well and there was a lot of growth happening in the daily fantasy sports sector during the first half of 15 so you know our strategy was to really invest in growing during the upcoming football season. 15 um, so we did things like overlay some contests so that our guaranteed price pools were six figures which we thought was table stakes if we were going to be competitive in the category and you know we we did. We just didn’t raise enough money to support that strategy but our ah but our thinking was if we showed growth. Then we could go out and raise a series a to fund that additional growth and then do a series b in series c and beyond just given you know. Ultimately, we all thought that the ltv of these consumers would be really high so the investment in Upfront customer acquisition particularly behind a differentiated product experience would ultimately be. Have you know proof to be fruitful and it was working to to some extent. Um and this is generally the strategy that Draft Kings deployed when they you know fanwol was founded in 2009 2009 or 2010 Draft Kings came two and a half three years later
Joey Levy: And they ended up blowing past them in the daily fantasy sports sector because they have this more aggressive strategy around overlays and um and customer acquisition. So we were trying to replicate that a little bit with a differentiated product approach and and.
Joey Levy: You know, but ultimately I don’t know if you recall but in like October of 2015. There was like this insider trading scandal between like a Draft Kings employee on fandul and that led to a whole slew of um, like cease and desist letters that came to all the operators in the category and. New York attorney general at the time Eric Schneiderman led this like weird crusade against daily fantasy sports claiming it as being illegal gambling and um, it basically crippled the industry from late 15 essentially almost pretty much until the repeal of paspa. Which lifted the federal ban on sports betting in may of 2018 so it was a years-long. You know, sort of industry paralyzing predicament and we were just way more aggressive than we should have been with our customer acquisition budget with our pretty you know. Immaterial $2,000,000 seed round or or whatever it was we exactly raised at the time and we just couldn’t survive that and there were some other smaller companies in the space. So very small amount I think a couple that were able to survive that they were a lot more um, disciplined and resourceful than we were and. Um, you know and and we exited the business in a way that wasn’t like a you know super positive financial outcome by any means. But um, it was ah it was a tremendous learning experience and made a ton of mistakes that I you know and you know have have learned from and.
Alejandro Cremades: Um, yeah.
Joey Levy: But that business was ultimately the inspiration for what became simple, bad and um because I started draftpot with this as I alluded to thinking that the daily fantasy sports product experience was too complicated for a casual sports fan. You have like this. Lobby of hundreds of gpp you call them these guaranteed prize pools and then you enter the guaranteed prize pool and you try to create these fantasy lineups against arbitrary salary caps and you know the quantitatively savvy users were taking everybody else’s money and um, so. It was ah it was ah it was a clunky intimidating complicated product experience but through that experience I was introduced to traditional sports betting and when I first tried to bet on sports. Um I saw what essentially was an uninterpretable spreadsheet. So the product experience around traditional sportsbook back then in like 2 16 and still to this day quite literally looks and feels like a spreadsheet if you go on these other companies. You know, desktop sites or or mobile apps. But then you also see things like minus one seventy five moneyline plus five and a half points bread and. I remember thinking to myself when I first. Um when I first tried to like bet on the dolphins to beat the jets minus one seventy five moneyline like I had no idea what that meant like it wasn’t intuitive to me that minus one 75 meant to bet one seventy five to win $100.
Joey Levy: Or plus 200 met you know for every hundred dollars you bet you win 200 if if if you’re successful in that outcome. So I started forming this vision that kind of like what Robin hood did today trading like etrade fidelity Charles Rob etc built really robust. Product experiences around power users in the day trading segment but regular casual people weren’t buying and selling stocks and day trading until robinhood came around and obviously they had business model innovation through the 0 Commission trading model but I think it was really the simple intuitive nature of their uiux that enabled them to capture a lot of incremental tam and bring a lot of new people to the day trading category and um and I felt like back in 16 when I first stumbled upon traditional sportsbook that. The same thing was going to happen in this category or needed to happen in this category and the data today shows that I mean fanwill and Draft Kings are twenty billion and ten billion dollars businesses respectively. But they only have about one and a half to 3000000 monthly active users depending upon the quarter. Which is a lot for real money gaming and it’s informing really large. Um you know, profitable businesses. You know fandoll is already profitable and and Draft Kings is is is on a path to profitability I mean fandoll did $3000000000 in revenue last year. Um, and they’re rapidly growing on a path to $10000000000 in annual revenue.
Joey Levy: But 3000000 may use which is what they’re peaking at is not a lot when you consider that there’s a 100000000 gambling aid sports fans that they’re already in front of and there will be and they will be in front of about 200000000 gambling aid sports fans at maturity. So and they certainly don’t have a brand awareness problem they they quite literally advertise like car insurance companies except they’re perhaps not as as funny in the marketing I think there’s a product problem where the experiences that are out in the marketplace back in 16 and still today are are built for. Hardcore gambler and sports and and sports better. That’s been doing it for a long time with these offshore books. But I think the more interesting opportunity is to build a product experience that really is simple intuitive engaging entertaining for the casual sports fan who is. Betting on sports for the for what sports betting should all be about which is enhancing your consumption of sports and being all about entertainment value. So I started simple bet with that vision started it as a project in Eastern Europe because there wasn’t any legal sports betting at the time in in the United States back in 162 realized along the way like even if it wasn’t legal in the us I needed to headquarter the business in the United States this would be far more successful as like a us-based venturebacked business which is you know what? what draftpot was so we incorporated the company in New York in in April of 2018 and.
Joey Levy: You know, sometimes it’s better to be lucky than smart because literally six weeks later the supreme court repealed the federal ban on on sports betting. Um and that didn’t result in like sports betting being legal everywhere right away. But um, it basically said that it was unconstitutional of the federal government to. Not allow states to go ahead and legalize sports betting and pass legislation legislation excuse me to do so and codify their own regulatory frameworks um, and what what since happened is a ah ah very aggressive proliferation of sports betting in this country I think we’re already at you know over 30 states that. Have passed legislation for sports betting just in the span of literally 5 years the anniversary of Scotus repealing passpo was about ten days ago um
Alejandro Cremades: And I guess and I guess in this in this regard. You know for a simple bet you know because obviously this was the segue into better. What ended up happening with simple bet that you know landed you guys you know, pushing better.
Joey Levy: Sure, um, so like I said I started I started simple bet um to initially go after this direct-to-consumer product vision and literally called the company simple bet because it was all about simplifying the betting experience when passpo was repealed. We decided. To focus exclusively on us sports. So we started designing the simple user experiences around us sports and specifically we were interested in offering experiences around things like what’s going to happen in the next pitch or a bat of a baseball game. Will it be a ball strike and play will the app app be a single double triple home run strikeout walk at other. Um. And Nfl is King right? play by playbatting seemed like an obvious thing that needed to exist will the next play of a football game be a pass or run will it be a first down or not will the drive result in a touchdown vehicle punter turnover. So we started designing these product experiences and then we went to the b two b technology companies like sportradar. Um. You know bet genius stats and perform who were 2 separate businesses at the time and we realized the extent to which pretty much none of these companies offered really robust technical infrastructure to enable. Microbetting on us sports which is ultimately the play by-play stuff that I just alluded to but really a lot of other forms of like in-play betting around us sports and and just bespoke forms of betting content for Us sports and it made a lot of sense why they didn’t do it because before paspa was repealed.
Joey Levy: The global marketplace was driven predominantly by soccer and if you think of the cadence and composition of a soccer game. It’s a very different product experience than or a different consumption experience than baseball which is pitches and at bats Nfl plays and drives soccer is a fluid game. Without any discrete moments without a lot of scoring and the us sports are just the opposite. So we realized it’s simple that the sort of holy ship moment for us was there. There was a lot of opportunity to build the requisite technical infrastructure to enable microbetting on us sports. Other forms of betting that were bespoke to us sports that maybe didn’t make as much sense for soccer so we went down this path of building a lot of machine learning and automation infrastructure to enable this to exist and then along the way it became very apparent to us that that was a wholly separate business of just building the product and technology. And so we decided to license it as a b two b technology provider and companies like Draft Kings and caesar’s and v 3 six five and this week they you know we they had announced hard rock as a partner and um. And it’s becoming ubiquitous the technology to enable microbetting around us sports powered by simple bet is becoming ubiquitous in the marketplace and it’s become ah, you know, ah really thriving successful business. Perhaps the fastest growing most exciting b two b technology company in the us online sports betting market today. But the problem is.
Joey Levy: By licensing technology as a backend technology supplier to other operators we have at simple bet. We had no control over the frontend consumer experience which I thought. Was the most limiting factor to the mainstream adoption of sports betting to begin with that’s why I got involved in all of this almost a decade ago and I just candidly as a founder who like started to do this consumer thing and then we sort of inadvertently built this v 2 b technology business I just. I kind of I kind of hated it the lack of control and ability to execute against my product vision. So ultimately the most creative solution because simpleback couldn’t do it itself because then it’s b two b customers would just tell us to fuck off right? We would be competing with them. So what we ultimately decided to do is I was going to spin out. Um, a new entity which is what better is gave simple bet 25% in exchange for a long-term license to the technology at most favor nation rates and then the other 75% ah split evenly between myself as the founder Ceo of the business and I brought in Jake Paul who I had formed a relationship with over the past few years who um, you know is is likely I would say the world’s most famous athlete influencer at this point. Um and really a content creation. Genius and somebody perfect to build this media business alongside the gaming business that I’m focused on.
Alejandro Cremades: And how did you meet him? yeah.
Alejandro Cremades: And how did you guys meet Joey. Yeah.
Joey Levy: Um, yeah in terms of ah in terms of how we met. Um I actually went to a dinner here in Miami and ended up sitting next to this guy Jeff Wu who runs he recently co-founded antifund with with Jake. Um. And they were doing a lot of venture investing but they were interested in doing company incubation and and you know this was also around the time that like barstool penn was really taking off in the stock market and Jake saw what Dave Portnoy and barstool were accomplishing and thought that he could given his unique vantage point as ah. As an influencer but also ah a world-class athlete himself. He could go after that opportunity and um and and and that was actually around the time that I was thinking through the mechanics of how to spin out the consumer opportunity from simplebet in a way that made sense because you know we could have this. As you could probably tell from from my bio and and background I have a lot of opinions and insights and conviction behind my product vision but this category is full of you know, nearly a dozen multi-billion dollar. Enterprise value incumbents with hundreds of millions of dollars or in many in some cases billions dollars on their balance sheet and customer acquisition is incredibly expensive in this in this space and the biggest question I always got in terms of thinking through the consumer opportunity was.
Joey Levy: Could build this amazing product. But how are you going to acquire customers. How are you going to compete in a market where vanduel and Draft Kings are literally giving users hundreds to thousands of dollars in free bets and bonus bets to their customers. How are you going to compete against that and you know I always thought that. If you build a great product. There’s going to be a lot of organic growth alongside it and you know I have had enough of a background at that point where I could still go out and raise capital and you know try innovative ways to acquire customers but a material step change in the customer acquisition approach would be. What if we built like a bonafide media business from the ground up with Jake and his 70,000,000 or so social media audience as an initial catalyst to bring some brand awareness. But most importantly to build a content creation engine that Establishes Brand Affinity with our audience at a grassroots level and then sort of goes up from from there. Um, so that’s what we so so that’s kind of how we met and we started speaking about this for several months and ultimately decided to do this thing together.
Alejandro Cremades: Amazing And now you know for for for the people that are listening to I mean you guys have raised quite a bit of money. In fact, you guys skipped the seed round and you went straight into the series a and it was quite ah, quite a series a so how much capital have you guys raised to date and why did you skip the seatd round.
Joey Levy: Um, so in terms of like raising 50 to start. It’s funny because like by conventional standards and I know you you know, sort of interview and interact with many entrepreneurs and investors and. When you initially come across. They skipped seed round and they went straight to a $50000000 series a and like that’s crazy. You know, but the truth is in this category. Just to give you some specific context our first market where we launched real money gaming and was was Ohio on January first which was the universal start data in that state and just in just in January just in Ohio just fan duel and Draft Kings combined for. More than 3 times our entire equity financing just on bonus credits to consumers in that state and that month just those 2 companies and that doesn’t even include the pay Ua around like television advertisements and um and ah you know billboards and everything else are doing so my point is. 50000000 sounds like a lot for a series a but it’s ah it’s a pimple on an elephant’s ass in this category. It’s nothing and I think the the correct question is are you capable of just of being a disruptor brand in.
Joey Levy: Online sports betting in casino in the United States as a consumer company with only $50000000 series a that’s the correct question so because we’re building this media business without a lot of investment because of Jake and some of the. Really talented emerging content creators. We’ve surrounded him with and the executive team that we’ve surrounded him with um who are really experts at production and content development and you know original short form content and and all of that because of that we had this thesis that 50000000 would be enough to get our gaming business off the ground and um. To prove concept that we can consistently and scalably ah take our media audience to product and acquire them for load and ocac and that validation combined with you know, being commercial in a few other areas on the real money gaming side which. You know where I I can comment on and in a couple months you’ll you’ll see some news about it. Um could get us to profitability or at least close to profitability. Um, and ah you know I think we’ll be able to sit here with a straight face eighteen months from now and better will have by far the best unit economics. And the online sports betting and casino category in the United States and then I’m going to go out and you know put a couple hundred million dollars to work in this thing and really start playing the market share game but 50000000 my point is fifty. Million is is what we thought um would be required to.
Joey Levy: Get to that point of being able to validate that we have really offered offered a differentiated product experience and a differentiated business model that results in the best unit economics in this category specifically initially with respect to low to nocac I think Ltv will catch up over time as we really enhance the product experience. Um, and we recently acquired a company a couple of weeks ago to get us from a V 0 product experience to a v 1 product experience to really increase ltv um, but a very long-winded answer of of sort of why we went with 50 and um. You know in terms of the capabilities of of raising that I mean we you know simple bet has become a ninth you know, figure valuation asset within a relatively short period of time I think investors appreciated that you know I’ve been going after the same problem for a really long period of time and you know I started. Finally seeing some real market validation that I’m right on the on the product vision side. We’re so certainly nowhere near where we want to be or need to be but there’s some initial you know, substantial indications that I think we are right and you know sure.
Alejandro Cremades: So talking about that Joey real quick talking about being right? So and also talking about the investors and division that that you shared with him imagine if you were to go to sleep tonight and you wake up in a world where the vision of better is fully realized what does that world look like.
Joey Levy: Um, so I’m going to go back to what I said ah about five five ten minutes ago when you know Vandu and Draft Kings as I said are twenty and ten billion dollars enterprise value businesses respectively. But if you stack up their monthly active users against the amount of gambling aid sports fans that they’re currently in front of they have about 2 to 3% market penetration and then if you compare that with sort of you know where they ultimately will be in front of it’s it’s even lower than that. So I used the robinhood analogy earlier. But I think this business if we’re right will be a lot bigger than robinhood because while Robinhood has executed really well in sort of building this mainstream day trading product experience day trading is. Limited to day trading right? You’re buying and selling a finite amount of public equities. But here we’re turning every moment and an infinite combination of moments and outcomes into a. Ah, a wide variety of different real money gaming opportunities. There’s a far greater amount of engagement touch points that better can offer to consumers on the real money gaming side than um, you know like a Robin hood for example. So if we’re successful on the incremental Tam front.
Joey Levy: You know and and and I’m not saying all of the you know call it 97000000 or so gambling 8 sports fans at fandola is not acquired yet I’m not saying all of them can or should gamble but let’s say there’s 30000000 ma so we could capture. By by having this incremental tam approach I mean I don’t want to like be I don’t want to be exhibit too much hyperbole here but you could do the math in terms of what the enterprise value of the opportunity could be um, not to mention not not to mention.
Alejandro Cremades: They finallyly a lot. Ah a lot of Zeros. Ah, yeah, yeah, yeah.
Joey Levy: Yeah, there’s a lot correct I mean I mean yeah, you know it’s ah it’s at least ah a $10000000000 plus opportunity particularly when you consider there’s a lot of embedded asset value through this bonafide media business that we’re building that we that we think will actually generate cash independently of.
Alejandro Cremades: Yeah.
Joey Levy: Of of the gaming business over time because we’re monetizing the media company directly celsius energy drink is signed up as a sponsor. For example, there’s um, you know I think this could be at least a $10000000000 opportunity if if we’re right? and. But it’s going to require stellar execution along the way because this is indeed a series of David versus Goliath matchups for us.
Alejandro Cremades: Nice now. Let’s talk about the past but you know being able to do so with ah with a length of reflection here. Imagine you were to let’s say go back in time you know I put you into a time machine I mean it’s incredible that you’ve been able to target you know this problem from so many different angles for.
Joey Levy: Um.
Alejandro Cremades: For all these years but let’s say you know I put you into a time machine and I bring you back in time to that moment where you are a sophomore in Columbia you’re wondering how the hell do you tackle you know like this this this problem. How how do you launch your your company your baby. So let’s say you’re able to have a chat with that younger Joey and you’re able to give. That younger self one piece of advice before launching a business. What will that be and why given what you know now.
Joey Levy: It’s so great question. There’s a lot that I would I would say um I think um, when I initially like I would say like because I reflected on the. 5 ive-year anniversary of of simple bet recently actually because we formally incorporated the company about five years ago and and the three things that I sort of came to were and these are I would say the 3 most important things. Yeah, and there’s a lot of other things. But I think it goes into through these 3 buckets to be. Ah, successful entrepreneur at least an entrepreneur with an opportunity to be successful in order of least and most important. So so you got to be smart enough to identify opportunities before they become obvious to others I think that’s table stakes to really drive innovation and and value creation and and what we’re doing here. The second thing is be humble enough to. Admit to and learn from mistakes. Um I would say this is something that initially I really struggled with when I was younger right? like when you’re going through school whether it’s high school and you’re graduating at the top of your class and then you go through college and you’re like trained to like. Read something do an exam get 99% and like get a pat on the back and it’s like it’s a very like it’s a world where where you’re like kind of I’m not doing the best job of articulating it. But it’s like it’s.
Joey Levy: There’s really this like fear of failure almost that’s kind of like ingrained and like all the work you do is like a high school and college student and the fear of failure. What what ends up happening is when you do actually inevitably make mistakes as an entrepreneur along the way. You struggle to identify that those things were mistakes and admit to those mistakes and then you let your ego get in the way and it becomes like a fucking disaster right? and that happened to me early on and um and ah I think like Jeff Bezos has a really good quote about this where he says. You got to be stubborn on the vision but flexible on the details right? as you figure out the details along the way you’re inevitably going to make mistakes but don’t let any 1 thing um, be like the hill you die on like if you made it product decision and you had a lot of conviction behind it. But then ultimately along the way it like. Marketplace is screaming at you that you’re wrong about this or you think you’re requiring customers well but then you realize you’re acquiring a bunch of like low- quality customers. It’s way better to be open to admitting with a quarter or two of data that hey wait a minute like I’m wrong about this. Right? And I’m not going to let this be the hill that I die on I don’t have a problem telling myself and my team that I was wrong about it. I admit to the mistake. Let’s learn from it and get better going forward. We. We still think our vision is correct. So let’s say that’s the second thing being humble enough to admit to and and learn from mistakes and then.
Joey Levy: The third thing which is something that you know has has never really been a problem for me. But I think is is ultimately the the most important thing is being sufficiently determined being determined enough to never give up and find a way to win. There’s going to be hundreds. To thousands of different things along the way that are going to be thrown at you that you didn’t even know existed or you didn’t you don’t know what these things are going to be and they’re going to test your your willingness to to push through it and problem solve and get to the next level and um. I think that’s the most important thing. So I guess a long-winded way of answering your question of if if I could go back. Maybe I would sort of say some of what I just said to my younger self because you know I I never really so struggled with. Points 1 and 3 but I think I a little certainly struggled with number two and I could have avoided a lot of um issues if if you know I really took that to heart at the time.
Alejandro Cremades: I hear you I hear you and also for the people that are listening. You also have put together a fund. You know you have a UM about 15,000,000 there with other founders to invest in other founders. But for the founders that are listening that will love to reach out and say hi where is the best way for them to do so. Joey.
Joey Levy: Um, yeah, just ah at Joey S Levy on on Twitter and same on Instagram and and yeah, my email address is just my first stop my last name at at better app. So pretty responsive.
Alejandro Cremades: Mason.
Joey Levy: You know, try to check most of of what we get in. but um, but um yeah always interested and in you know, learning more about ah, what What other founders are are working on. Obviously within reason we’re incredibly busy here at at better and it’s a 24 7 hand-to-hand combat here. But um. Have been fortunate enough to to help support some of the best entrepreneurs at the earliest parts of their journey through through the venture fund that I’ve been investing out of but.
Alejandro Cremades: Amazing! Well hey Joey thank you so much for being on the deal maker show today. It has been and on earth to have you with us.
Joey Levy: Awesome! Thanks so much for having me man.
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Stuart Lombard has built and sold several companies, as well as having been a VC on the other side of the table. His latest venture, ecoBee, has acquired funding from top-tier investors like Energy Impact Partners, Thomvest, Relay Ventures, and Amazon’s Alexa Fund.
In this episode, you will learn:
- Startup fundraising
- Stuart’ss tips on branding, culture, and strategy
- The three core energy trends changing our impact on the environment
- Why he doesn’t like to think about acquisitions as exits or transactions
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Your email address is 100% safe from spam!About Stuart Lombard:Before founding ecoBee in 2007, Stuart had resolved to start programming his thermostat as a way of reducing his family’s carbon footprint and saving money. But it turned out that programming his thermostat was much harder than he could have imagined.
In the age of iPhones and smart cars, why would something that’s supposed to make life easier be so hard to use? Turns out not even an Engineering degree could help you figure out how to program the average thermostat!
When Stuart and his family came home one winter day to find their house freezing, they’d had enough. He knew there had to be a better way, and ecoBee was born.
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Read the Full Transcription of the Interview:Alejandro Cremades: Already hello everyone and welcome to the deal maker show. So today. We have a very exciting entrepreneur very successful entrepreneur entrepreneurs. He recently exited you know he’s saying his company I mean exited I mean he’s still you know, pushing it. But you know there’s a very interesting transaction. There. Worth $770,000,000 that we’re gonna be talking about but again building scaling financing all of that good stuff that would like to hear he’s done it numerous times and I’m sure that you’re all gonna find his story quite inspiring so without further ado. Let’s welcome. Our guest today. Stewart Lombard welcome to the show. So originally born in Richmond in Virginia but I know that day you moved to quite a bit due to your father’s job so give us a walk through memory lane. How was life growing up.
Stuart Lombard: Thank you, Thank you for having me.
Stuart Lombard: Our life was you know it was interesting I think it was chaotic in some ways. Um you know because we moved every two or three years but it was a tremendous opportunity for me to experience. You know, different cultures and and you know really I think foreign part of who I am in any case in terms of just being able to. You know, integrate with new people and you know we lived all over the world including Brazil which was you know, probably 1 of my best experiences of my life and you know my parents gave us quite wide latitude and um, you know they didn’t expect us home from school at any particular time and you know we were kind of wandering the streets and you know doing our thing and. And that I think you know gave me a lot of um coffin just in terms of you know resiliency and and and you know the ability to to kind of manage myself and and learn how to handle situations and so I think that was you know, really helpful from my my point of view and it’s interesting because with my own kids. Have this discussion with my wife about you know how carefully we should you know monitor our kids and and certainly having a lot of latitude help me a time.
Alejandro Cremades: I Love that now I’m sure that it helped you to to dealing with uncertainty because moving you know that often you know, starting new friends. You know new lives somewhere I’m sure that was tough for you as well.
Stuart Lombard: Yeah I think certainly we probably complained at the time but some of the things you know we were able to do both in terms of like you know, being able to meet people make new friends but also learn new Languages. You know we were in you know Brazilian school and you know my parents were like if we’re here you need to learn the language and. And just that ability to realize that some of these things that you think would be incredibly Difficult. You know you were able to accomplish and and you know that I think was you know was very helpful for me.
Alejandro Cremades: So engineering and math. How do you develop the love for this.
Stuart Lombard: You know I think um, again like 1 of the things that was interesting about my my upbringing was you know my dad grew up in a small lumber town and you know one of the things you know was post. He grew up post-depression and so he was very focused on. Self-reliance and resiliency and also you know being able to make things and so he believed actually he could make almost anything and so you know while my friends were you know off having fun on weekends and things like that I was either working for my dad or building something. In the basement that we could have easily bought at Walmart for like $29 and you know, but that also created kind of a you know a willingness to kind of tinker and try things and the belief that you actually you know can make things and and that love of both the environment and making things I think we’re part of that you know.
Alejandro Cremades: Now in your case talking about trying things you tried corporate and you ended up you know with ah with a bos. There was not a very nice to you? What? what? what was that experience like what? what? what? the hell was going on with that boss.
Stuart Lombard: Growing up experience.
Stuart Lombard: Yeah I mean it’s it’s interesting. Um, you know first of all there would I had no plans to be an entrepreneur. So the fact that I’m sitting here talking to you is not because I had like a ah grand plan and you know I think if you had to ask my university colleagues. You know what I was going to be. They wouldn’t have said. You know entrepreneur? um and um and I think you know one of the things that’s interesting is I think you know where there’s chaos. There’s opportunity and and you know I worked for a phenomenal company but it had a horrible boss and he was such a jerk that literally one day I walked into his office and you know. I said take this job and shove it right? and I had a big stack of paper in my hands I remember it and I threw the papers in the air and I said like that’s it I quit and um, you know that you know forced me to. To figure out what my next career journey was going to be and actually serendipity I was walking out of the offices was 1994 you know with my all my belongings from the office and um, you know one of my colleagues said you should really check out this internet thing and this was 9094 when you know the internet was still dial up and you know. Mark Andreesen was still a student at the University Of Illinois and you know no one had really heard of the internet. The search engines were Archie and Veronica there were no web browsers and um, you know I looked it up and I started talking to people and you know.
Stuart Lombard: Ah, wrote a business plan because I was bored and you know next thing you knew we were in the internet service provider business and and you know it was all kind of serendipity.
Alejandro Cremades: I mean that was quite the the journey to now because you guys ended up building one of the largest internet service providers you know in the in the country. So so hey that boredom you know I guess that boredom you know, ended up being very productive now in this case, you know the company ended up becoming one of the largest Ipos. In Canada. So what do you think you know like propelled you know that day that level of growth and you know being able because I mean we’re talking about just a couple of years you know with this company called infforamp you know which was your first your first baby. But. What do you think you know like were some of those ingredients that allow the company to grow so fast and to go public like that.
Stuart Lombard: Yeah, we were very fortunate on the timing so we hit you know the you know right? after we started you know, ah you know Marc Andreessen released the the browser that was mosaic that became Netscape. Um you know and and the internet really took off and and one of the things that we did which. You know was very fortuitous. Is we we thought about brand early and you know in those days you know internet service providers were largely shoestring operations flyby night operations and and really catering to people who were diehard. Um, you know fans of being online and we really tried to focus on. How could we get the next group of people you know the people who were early adopters but were more professional weren’t going to be willing to spend you know all the effort and time to collect all the software and you know figure out all the issues and and so we really focused on you know, a service that was not low-priced it was you know relatively expensive given. Alternatives but really good customer service and and really high quality reliable service overall and and that really propelled the company and so we were we managed to win all the sort of major national canadian accounts. Um, you know all the major banks and all that kind of stuff because you know we were the only game in town and and that was hugely beneficial to our to our future.
Alejandro Cremades: And obviously we say you experienced to you know the public the reporting them. You know all of the admin the red tape. You know how was that experience too of of seeing a company that you found it going public.
Stuart Lombard: Well, it was bittersweet to be honest, um, you know we you know when I started you know I was going to do an Mba and so I’d saved up some money to do an Mba and I basically took the money that I was going to spend on my Mba and my partner and I you know we invested you know that money in the business and and. Um, you know and I thought like you know I don’t know if it’s going to work out or not but you know worst case I’ll get like as good an education as if I had have done an Mba and um, you know we were. We were hugely successful. Um, and the company grew like crazy and and. Had an opportunity to merge the company with 2 other companies and and go public in this go public transaction and at the time you know it just seemed like an outrageous amount of money and you know I had had such low expectations and you know there really hadn’t been many exits in canadian ah you know tech companies and so I was like okay this sounds great and you know. This is ah this is just a win. Um, unfortunately the people that we merged with were um, you know, not great operators and and and and so the the business also ultimately foundered and I think you know one of the things I learned the hard way is that you know you put so much into a business that you know. Who you partner with who you sell it to you know, an exit isn’t just a paycheck right? and and and really thinking about how you create a business that is you know built to last you know that’s going to be sustainable and and and what that partner looks like um and making sure that you have aligned values um is really really important because as.
Stuart Lombard: Nice as the money is it is incredibly painful to watch something that you you know built and cared for and you know had anxiety over and you know toiled for hours and hours and hours and hours on you know, just sort of dissipate into the sand because of you know mismanagement and and um.
Alejandro Cremades: No kidding. So obviously you know as they say you either succeed or you learn. But in this case, you know it was both. You know you saw both so that was you know quite the journey I Guess you know in this case, you know now that you had full visibility you know into the building scaling you know, exiting all of all of the above.
Stuart Lombard: You know, poor execution.
Stuart Lombard: If.
Alejandro Cremades: What happened next.
Stuart Lombard: So you know next we jumped right back into it and and you know we we started a company that allowed you to take your data and encrypt it across the internet and so extend it across the internet and so we built one of the first virtual private networking companies. Um, in the networking space and you know successfully built that company very rapidly and then shortly thereafter sold it to a company called shiva which was in the modem technology business and they were trying to move from you know, modems where they had been you know tremendously successful. They were ah. Public company. hugely hugely successful but their market was ending and so they were trying to get into the networking business and so we successfully sold to to Shiva and and you know that was a great transaction but again was one where you know we probably weren’t that well aligned from a strategic point of view and and so you know once again I kind of moved on and looked for.
Alejandro Cremades: So what was the lesson that you took away with that second journey.
Stuart Lombard: For different opportunities.
Stuart Lombard: You know I think again, you know same thing there was sort of this you know belief that you know I wanted to build something you know that was going to last that would you know stand the test of time and and that really started to change the way I thought about you know, exits and and where we would go. Um. And so you know the path we took with Ecobe I think was very very different and you know obviously with even better outcomes than we had before.
Alejandro Cremades: So what was the ah, let’s talk about echo be because what are what us smashing you know success echo yeah, ah, let’s talk about how the original idea came about because I mean obviously at this point you had 2 2 companies, 2 exits and then all of a sudden you know like it’s time to hey you know like I think that this idea has enough legs for me to take a stop at it. But before you know we go into echobe I’d like to ask you really quickly because you did um a little of a stint you know on the Vc side of things and then you know after your second transaction and you went into. To venture capital I mean you became a partner on this firm you were on this firm for about 8 years and this is before it could be and and I’m sure that you know there you were able to to learn you know some of the tradeits of pattern recognition on investments. You know what? you know things this served money what things you know didn’t and. And some of the good the bad on the ugly no I’m being on the other side of the table and watching other operators. So what did you learn? Let’s say like the 3 key ingredients from some of those companies that ended up becoming smashing hits.
Stuart Lombard: Yeah I think you know one of the great things about working in venture Capital is that um you know you get to see how hundreds of other people think about and run their businesses and so you know before I had been in Venture Capital Um, you know, really. The way I thought was kind of the world according to to me right? and and you know I think you know being in venture Capital allowed me to really look at how hundreds of other people built their businesses and really changed my point of view or opened my mind to you know all the different things that. And different ways that that people were building their businesses I think certainly in terms of things like you know, interesting new business models. New Technologies I think also just in terms of you know customers and what do customers think about and what do customers care about. Um you know that really opened my. My my mind to kind of the breadth of opportunity and how you go about really getting product Market fit. Um, you know those things I think I learned as part of that venture Capital stint which were hugely helpful for me in my ecobe experience.
Alejandro Cremades: And what about getting to product Market fit like what does that look like and what did you learn about achieving it as fast as possible.
Stuart Lombard: You know I think in the in the early days you know my my thought process was really around. You know I was building products and services that I wanted to use right? and so you know I was the test customer and and you know probably my focus was you know quite a bit narrower than it. You know it could have been or it should have been or you know or it should be so I think that was the first thing I think the second thing is really around. You know how you can you know test and iterate really quickly. Um, you know and I’m not a big proponent of the massive pivot. But I think the you know constant small course corrections are are really really important I think that’s one of the you know, really interesting questions as an entrepreneur you know do I make a big pivot or do I stay the course and you know fight your way through I feel like you know the Ecoby story is really one where. You know, despite all the challenges and everything that came along and all the people who told us that we were wrong and going to fail. You know we sort of persevered through all of those criticisms and all the challenges and that’s part of why we came out the other side you know, much better.
Alejandro Cremades: Yeah, no kidding now now. Obviously you know after about 8 years close to 9 years you know pushing on the other side of the table as Savic Eventually you realized that is time to get back out there. So how did you come to that realization because I mean the Vc route you know it’ it’s comfortable. You know like obviously you know it is stressful. It has its own things but it’s not definitely like with the fires that you would encounter as an interpretiter building the initial pipes of the business. No. So so what happened there.
Stuart Lombard: Yeah I mean it’s funny like 1 of my you know I remember when I was in venture capital you know and I had this. You know, beautiful office and I had an executive assistant and I had a parking spot and I had all these things that you know as an entrepreneur at least in the early days you don’t have and and I remember the first person to leave me a voicemail message. You know was my wife and I had my voicemail and it said like hey you’ve reached stuart lombard you know if this is emergency please press 0 and someone will help you and my wife leaves ah a voicemail message for me and she’s like venture capital emergency. What the heck is that there’s no such thing as a venture capital emergency and she hangs out the phone and you know that was. Venture capital right? It is a cushy job and um, you know I think what it takes to be good at at venture capital is part art part science. Um, you know when I’m an analytic person and I really like you know getting my hands dirty and and being involved in building something and I think you know. Venture capital is a great profession and people who do it? Well I think do a really great job. But for me I really enjoy building things and I think that was what I took away from it and so you know I woke up one day and said you know what? it’s just not what I want to do with the rest of my life. This is killing me right? and you know. Started looking for different opportunities and and that really became the impetus for how we started you know ecoby.
Alejandro Cremades: So at what point does it could be come to light. You know your radar and you’re like my God I think that this this this this problem is meaningful enough for me to jump in and take action.
Stuart Lombard: I started you know. So first of all I quit my job so that was the first thing I did and and as you know part of quitting my job as a venture capitalist I I had time on my hands and I was like okay I’m going to reduce my environmental footprint and I went out and I spent $26000 on solar panels and I was on my way to buy a Toyota Prius. And Andrea said to me you know honey like this going green thing is going to break us and you know by the way you don’t have a job so stop shopping and um, you know that sort of kicked off this like there has to be a better way. How do we create? you know practical solutions for people to reduce their environmental impact save energy and save money. And you know the insight we had was that heating and cooling is 40 to 60% of your energy use and so actually better managing your heating and cooling is the best thing that you can do to reduce your environmental impact and you know thermostats are cheap and you know the models in the market at the time were you know dumb is a doorknob they weren’t internet connected and so we said hey if we can use math and science. You know, connect these things to the internet make them phenomenally easy to use like our other consumer electronics products. Um you know, use data like weather and energy prices. You know how much better can we do and in 2009 we invented the smart thermostat and what’s really cool is you know. We estimate our customers have saved over Twenty Eight terawatt hours of power which is enough to take the cities of Chicago in Los Angeles off the grid and so it is a you know from sort of humble beginnings. It’s a massive massive impact.
Alejandro Cremades: So for the people that are listening that and to to be able to get it. What ended up being the business model of echoy. Yeah, so for the people that are listening to get it. What ended up being the business model of ecoie.
Stuart Lombard: Sorry can you repeat the question.
Stuart Lombard: Yeah, our primary business model at the start was selling products so we were you know we were selling smart thermostats and um, you know now today we’re building a service layer on top of our our hardware products. We’ve expanded into smart security which I’m really excited about. Um, and there’s an incredible nexus between security and energy. Um, in terms of you know, understanding whether you’re home or not whether you’re you know, sleep or awake. You know, really helps us automate your energy consumption and and allows us to do a much better job and so you know those 2 markets have been. You know, really really great for us. Um, and so you know we think of ourselves as kind of like a hardware-enabled service platform where we create you know, phenomenal hardware. It’s beautiful. Looks great in your home and then if you open it up the inside of our product would look much more like the inside of your phone than a typical thermostat. And so we can download software to it and it can do more things over time and that enables us to create a long-term relationship with our customers and deliver new features and services over time.
Alejandro Cremades: So tell us what kind of breakthroughs did the ah the competitive environment against you know a company like nest you know like allowed you guys you know to really push yourselves and accomplish you know, unimaginable. Um, you know outcomes.
Stuart Lombard: Yeah, we um, you know when we started. It was interesting because we invented the categories. We were first in the market and and I remember you know people would tell us how great we were and you know how wonderful the product was doing and then the company was doing well and all those kinds of things and you know.
Stuart Lombard: We had to raise venture capital and and raising venture capital was very difficult because when we went out to see the venture capitalists. They were like Stewart nobody wants to pay $200 for a thermostat right? Nobody cares about thermostats and you know by the way nobody wants to pay $200 for a thermostat and they looked at me like I was crazy. Um, you know and then nes came out. And ah and then everyone was like of course everybody wants a $200 thermostat but nest is already one and you know you should just quit and go home and um, you know the the market’s already been won and life is short and you know fail fast and you know just go home and start again and I remember. You know we’ve been rejected for venture capital I think something like one hundred and seventy times and I remember it was a really cold february day and you know you come down from one of those office towers after a meeting with a venture capitalist who told me like fail fast and you know get on with your life. Life’s too short and um, you know I was so stressed out that I i. Bummed to smoke off someone who was standing at the front entrance there not that I smoke and you know I was standing there on the corner literally like having this cigarette thinking like should I quit should I quit should I quit and I I decided I think you know then and there that you know the day that I quit is the day that you know they take the keys out of my. Dead hand and you know I was going to you know persevere and persevere through and and that you know I think was a real turning point for the company because you know one of the things we realized was that there’s a difference between you know, wanting to be good and actually being good and we were.
Stuart Lombard: We were good. We were the champions of the you know you know, whatever the minor league baseball. Whatever it is right? We were you know we were little league champions right? We thought we were playing in major league baseball but we were little league champions right? and and I think you know we realized you know what it took to actually play in major league baseball. You know and be successful in what good is and that forced us to really retool and we think about really everything we did and how to really compete in the consumer electronics business and you know we tell people we compete with Apple not because Apple makes thermostats. They don’t but because the experience that your consumer expects is the same as the experience they have on their iphone. And if our experience isn’t that good then frankly, we’re crap right? and so really like setting a high bar and figuring out what it takes to create that high bar. You know, really you know changed the trajectory of the business. Um, you know and and with seminal I think in our in our in our growth.
Alejandro Cremades: And stored 15 years and and change that you’ve been already pushing this I mean that in do years you know like being this startup I mean it is is unbelievable. The amount of time unbelievable now now how much capital did you guys raise ah prior to the transaction.
Stuart Lombard: Yeah.
Stuart Lombard: Roughly you know a little less than 200000000 I think 160,000,000 maybe
Alejandro Cremades: And what was that the journey of of raising that money. How did it go over the course of time from financing cycle to to the next one.
Stuart Lombard: I Think at the beginning it was you know it was really really hard as I said you know people thought we were crazy. Um, you know and they didn’t want to invest because they didn’t believe in the market then nes came out and you know was interesting actually before before nes they looked at me like I was crazy. After nest they looked at me with pity which was worse actually because they’re like okay you’re a dead man walking like you know we want nothing to do with you and um, you know we were fortunate actually because some of our largest customers invested in us and so you know one of the things I would encourage entrepreneurs to do is that if you are having trouble raising Venture Capital. Go to some of your large customers If you have large customers and see if they’ll invest in the business and and you know we were very fortunate that um you know we had ah you know 2 or 3 of our largest customers invest in the business which really got us through the through the difficult years. Um, and that was that was super super helpful.
Alejandro Cremades: And tell us about this transaction tell us about the acquisition. How the the acquisition come about.
Stuart Lombard: We were. You know we were really thinking about you know where to take the business and and how to take it to the next level and I think um, you know we had an opportunity to to do an ipo you know stack transactions at the time were also you know very hot and so you know we were considering potentially doing a sp transaction. Um, and and then we were thinking about raising capital privately and so I think we had sort of those 3 avenues to to look at and while we were working on the you know the Ipo transaction you know one of the investors in the in in the potential ipo was generac and and they um. You know they were excited about the opportunity. They saw a good ah you know market fit with what they were doing and their strategy of where they wanted to go and um, and really we had great. You know vision and alignment and so you know that kind of changed the dialogue from hey you know we’re interested in investing in your in your. Ipo transaction or a private transaction to you know we like to buy the company and I think you know one of the really great things about you know the combination with generac which was different than the previous. Um you know transactions I’d done in my career was that I think we really had like. Quite a few shared values and a shared vision of where we thought the world was going and what we needed to do to to be successful and and I think you know one of the things that was very different for me was really not seeing this as an exit like everyone sees it as an exit. We talk a lot about you know how we have impact at scale and if we think about our mission of.
Stuart Lombard: You know, improving everyday life while creating a more sustainable world like how do we create a more sustainable world we have to do that at scale and that meant getting into things like solar and storage. Um and really growing our you know our scale and and and generac allows us to do that and and frankly. You know, advanced our product roadmap by about 5 years and so you know really I don’t see this transaction as an exit. It’s one of the reasons that I’m still here I’m really passionate about the mission and and where we’re going and and jenerac was really a mechanism that allowed us to you know, further our mission and and in line with that further their mission as well. And so. It’s been it’s been really exciting and I think you know again, 1 of the things I would you know caution entrepreneurs out there. You know so many people, especially when you’re in the venture capital world or all all about the exit and what the dollars are and you know dollars are wonderful, but. You know you want to build an enterprise that’s built to last you know something that you can look back on and say I’m really proud that I was a part of that and I built that and and you know generac has definitely given us that opportunity and so why I’m still here and why I’m super excited about it.
Alejandro Cremades: Hey Stewart 770000000 I mean unbelievable. What did it feel like that day when you inked the deal and all of a sudden you realize hey wow I can’t believe that we built it to to this level to this type of value.
Stuart Lombard: Yeah, amazing, amazing like it’s it’s been an incredible journey right? and there was you know, clearly you know I think across the team I’m just so proud of the team and and and the work that people have put in and and really the learning journey that we’ve been on you know I tell people you know when we started. You know we were 7 people in a room and you know I was the Ceo but I was really a product manager and um, you know all of us have I think you know, kind of reinvented ourselves. You know as the business has grown and you know what’s good when you’re you know, 7 people is different than what’s good when you’re 50 people. 200 people to 600 people where we are now you know the skill sets you need to create and what it takes to be good and what it takes to compete with you know some of the largest players like Google and Amazon and Honeywell um, you know. That’s pretty exciting challenge and and you know constantly reinventing yourself and and understanding. You know what great would be and I think you know when we started. It was really cool because people said like you know, nobody cares about thermostats and what are you going to do six months from now and the implication was that you know thermostats were as good as they were ever going to be right. And we’re into it 16 years and you know we’re talking about Ai and machine learning and you know vision and you know voice and and we’re using sensorfusion and radar technology and you know it’s really just been a journey of learning and and and reinvention and we’ve really pushed.
Stuart Lombard: I think you know innovation in the category and and you know one of the reasons I think we’ve been able to to compete and and survive really well against some really formidable competitors like Google and Amazon and honeywell.
Alejandro Cremades: So obviously your your third transaction. Third company third transaction hey why what? a good batting average is word unbelievable now now now the the third time around you know I’m sure that they you were very careful. On how you went you know about choosing who you would they partner up with so what did you for sure wanted to make sure that you got that you got right on this third time around.
Stuart Lombard: I Think you know, really focusing on and understanding what the plan is going forward right? What is the plan going forward. You know what are the things that we want to accomplish. Um, how do we add strategic value to the acquiring company. And then how does the acquiring Company. Add strategic value to us and I think if you can map out those things you can understand whether you know the acquiring company is going to take you on the path that you want to go or whether they’re on a different path and you know you want to go right? and they want to go left and you know which is only going to end in you know in heartache and so. You know we spent quite a bit of time. Although you know again to be honest, like I think culturally we were very Well-aligned. We’re a very transparent culture. They’re a very transparent culture and we were like here’s what we want to? do you know?? no Surprises. You know here are the you know challenges and opportunities and they were also very clear about. You know here are the challenges and opportunities and so you know pretty quickly. We realized that you know there were a lot of things that we could bring to them and there were a lot of things that they could bring to us and and so the match was was I think really really great and you know they’ve been Wonderful. You know they’ve done everything that they said they were going to do. Um, and I think the partnership’s been. You know, really strong and and great which is not like the other experiences I had you know previously which ended in much more painful outcomes.
Alejandro Cremades: So you were talking about the excitement of words of what is to come now on on this next chapter for ey. So um, in that regard imagine you were to go to sleep tonight and you wake up in a world where the vision of ecobi is fully realized what does that world look like.
Stuart Lombard: I think it’s a world where you know we live in incredibly sustainable communities. We live in a world right now where you know energy is expensive. It’s scarce and it’s dirty and I think we’re moving to a world where energy is clean, cheap. And plentiful and that’s a very different world and I think you know it’s really being driven by by 3 core trends. Um, the first is just the move to renewables and if you look at renewables. They’re already the cheapest energy out there. You know you can buy solar on a 20 year per hour purchase agreement in California for. Two cents a kilowatt hour is by far the cheapest power anywhere and if you look at why coal and gas is being retired. It’s not so much government policy. It’s just economics. They can’t compete at two cents a kilowatt hour and natural gas costs more than two cents a kilowatt hour so even if you don’t had didn’t have to build a plant just the marginal cost of production is. Is more expensive and so that’s the first component. The second component is really around the electrification of everything and if you think about the major consumers of electricity which are things like transportation and heating and cooling you know electric cars are already better than internal combustion cars and people are going to buy electric cars. Not because governments mandate them. But just because they’re better and more fun to drive and similarly if you look at things like heat pump technology. You know a heat pump is 2 to 4 times more efficient than a gas-fired furnace and so you know why would you put in a gas-fired furnace if you could put in an electric heat pump and and so these.
Stuart Lombard: Technology trends are are turning the world to electrifying you know, maybe not everything but a lot of things so that combination of the decarbonization of the grid. The electrification of most things and then digital connectivity and digital connectivity. You know changes a lot of things and so. You know one of the things that we’re doing is you know we’re building smart appliances that understand what’s happening on the grid understand power prices understand carbon content and they’ll shift when they use energy to take advantage of low-cost carbon free power and so if you look at California right now. You know on an average midday. The price of power in California on average could be minus six cents a kilowatt hour in other words, they’ll pay you six cents kilowatt hour to use power because they have so much midday solar and conversely you know, late afternoon. It becomes very expensive. So if you’re a smart appliance if you’re ah you know a thermostat for example. You know I might say like I’ll cool your house from you know, ° to ° when power is free and I’ll let it coast in the late afternoon when power is expensive and you can create you know tremendous outcomes for people and so you know those 3 trends you know I think the the decarbonization of the electrical grid. Electrification of most things and the connection of things so that you have you know, context and understanding will really change the world for the better and and I think you know we have this this future vision of you know, just cleaner cheaper energy which is tremendously exciting.
Alejandro Cremades: That’s incredible Now. We’ve been talking about the future here. So I Want to talk about the past but with a lens of reflection. Let’s say I was able to put you into a time machine and I bring you back in time to that moment where you are still in your father’s house bore to death you know. Writing you know, pen to paper figuring out. You know, like what business plan that what’s what’s that going to look like let’s say you’re able to show up right there on the spot and and sit down with that younger self and have the opportunity of giving that younger self one piece of advice before launching a business. What would that be and why even why you know now.
Stuart Lombard: It’s a great question. Um, and I think um, you know when I when you’re small in your startup. Maybe let me start first of all I’ll start by saying you don’t know what happens on the path. You didn’t take right? so. This is. There’s a big assumption that you know this path would be a better path and and you know as I said before I think you know when you’re very small. The things that make you good. The fact that you clean out the waste basketkes that you you know work around the clock that you you know you’re the salesperson. You’re the accountant you’re the engineer. You’re like all these things you know. Are are really important when you’re a startup but you know as you grow you know those qualities won’t necessarily take you to the next level and so you know the first thing I think is just thinking about you know, being aware and reinventing yourself. The second thing I would say is is really. I wish I had to spent more time on you know brand culture and strategy and I think you know you’re so busy. You know, just trying to get keep the lights on and the door is open that you know I anyway did not spend a lot of time on that. Um the challenge is when you scale. Those things become really really important and um, you know when you’re 10 people in a room or 20 people in a room or even 50 people you know culture is easy because everybody knows everyone. But once you scale beyond you know 150 people which is Dunbar’s number um
Stuart Lombard: You know people don’t know you and then culture and values and strategy become really really important and I remember one day I was you know sitting in the office and I overheard somebody. You know, whatever at the desk next to me going like I don’t understand our strategy and I don’t know what we’re doing right and that like hit me like. You know, right through the heart because I’m like it’s so obvious to me how can we not know and and that was really you know an alarm bell that said you know we need to spend time on this but it is you know, having clear understanding of what you stand for um and your brand to customers like if you think about the brands that you. That you really admire those are brands that stand for something that that every interaction you have with that company supports those brand attributes and so you know spending time really understanding. You know what you stand for and that clearly is closely related to your values right? your values and your culture. Um, you know. What you reward you know the types of people who do well in your company. You know writing those things down is really important because you know as you you know in the beginning you might do all the hiring but as you grow you can’t do all the hiring and so you know how do you make sure that people are going to you know, support and grow what you’re building. And then tied to that is I think strategy and and you know again in the beginning when you’re when you’re just trying to get like you know, 2% share of ah of a market that’s growing really quickly. Strategy doesn’t matter that much. You know as the market starts maturing and you know you kind of think about how you grow you can grow because the market grows.
Stuart Lombard: Or you can grow because you take share from your competitors when the market growth rate starts slowing and you have to take you know growth from your competitors by taking you have to get growth by taking share from your competitors you know in the beginning you can kind of pick off the week and and again like growth is easy but you know when you have to take share from. From your best competitors. That’s really hard to do you know and when we think about taking share from Google for example, like that is hard I’ll tell you that is very hard and so that’s where strategy I think becomes really really important and so you know if you can start thinking about those things early you know brand. Culture values and strategy. You know you’re just way ahead of the game and and when you’re ready to scale. It’ll just be a lot easier because it’ll already be ingrained in the you know in the Dna of the company.
Alejandro Cremades: I love it so Stewart for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Stuart Lombard: Best way is steward at ecobe.comsturtatecobe.com and yeah, please send me any questions and if I could be helpful I’d be happy to do that.
Alejandro Cremades: Wow is he enough Stewart well thank you? So so much for being on the deal maker show today with that is it has been an honor to have you here.
Stuart Lombard: Awesome! Thank you very much really appreciate it.
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The post Stuart Lombard On Selling His Company For $770 Million: The Entrepreneur Behind The Smart Home Revolution appeared first on Alejandro Cremades.
Karl Jacob has now started and sold several companies. Including a $300M acquisition by AT&T. His latest venture has already raised $50M to disrupt and multiple trillion dollar market, thanks to the backing of investors like Richard Branson. The startup, Loansnap, has attracted funding from top-tier investors like Liquid 2 Ventures, True Ventures, Virgin Group, and Reid Hoffman.
In this episode, you will learn:
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Your email address is 100% safe from spam!About Karl Jacob:Karl Jacob is a serial entrepreneur who has been building, advising, and investing in companies for the last 20 years. He is currently co-founder and CEO at LoanSnap Inc.
Karl’s career has been focused on founding companies that solve big problems, and those companies have helped tens of millions of consumers.
He has raised 23 rounds of financing from investors, including True Ventures, Baseline Ventures, Richard Branson’s Virgin Group, Microsoft, eBay, Integral Partners, Norwest Ventures, Greylock, Benchmark Capital, FT Ventures, Ignition Partners, and Vulcan Ventures.
Many of his companies have had successful acquisitions, including; Dimension X, acquired by Microsoft; Keen/Ingenio, acquired by AT&T Cloudmark, acquired by ProofPoint and Coveroo, acquired by Zazzle.
While CEO, Jacob has generated hundreds of millions in returns to investors and over $150 million in revenue per year. In 2005 he joined Facebook as one of its first advisors and currently advises several companies.
Karl is a prolific angel investor and mentor for companies including Mayvenn, June, Healthtap, Everlane, Skillshare, Rescale, Memsql, Haven, Shippo, BUILD, Michael Mina Group, and many others.
He holds a B.S. in Computer Science from the University of Southern California Engineering School, where he sits on the board of counselors.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show. So today. We have a very exciting guest. We have a guest that has done it so many times so many times that I’ve lost track I mean it’s really unbelievable. But again you know we’re gonna be talking about building scaling financing all of that good stuff that we like to hear. So without farther ado let’s welcome our guest today Carl Jacob welcome to the show. So originally born in Missouri so how was life growing up, give us a little of a walk through memory Lane Carl
Karl Jacob: Thank you very much glad to be here.
Karl Jacob: A little walk through memory lane. Well I grew up on a ranch and my first job my first real job was actually shoveling crap so you know it’s one of those things that not super proud of but that’ll definitely make you not want to go back there and shovel crap for the rest of your life.
Alejandro Cremades: I Mean that’s pretty unbelievable I mean I guess that you get you got to start somewhere know as they as the same goes how you went to private school and you went to to private school with someone that perhaps you know the listeners may recognize who was that.
Karl Jacob: Um, yeah, so I actually started out in public school and went to public school until ah, the education failed me and my parents picked me up and sent me to private school and that’s actually John Burroughs that’s where Sam Altman went as well.
Alejandro Cremades: That’s Unbelievable. You know so I’m sure that there you guys have been able to chat about that and and he he must be busy nowadays now in your case you know I guess that when we are you know touching on the education subject. Your father was very helpful when he came to. Ah. Give you that that that push to get you into computer science.
Karl Jacob: He he was I was all set out to be a letter of arts and sciences student and my dad grabbed me and took me by the ear over to the engineering campus introduced me to the Dean and that he basically hired me or made me a student right? there on the spot. So I became an engineer within. Like 30 seconds of meeting him.
Alejandro Cremades: Now in your case you begged the Apple representative to get you there and on internship and also you ended up doing the same thing with some Microsystems which you actually went there for your first day full time job. But I guess that that gave you the exposure to to the. Land of innovation and to everything that was going on so how? Ah how was that for you.
Karl Jacob: It was amazing. I worked at the bookstore and had met the Apple rep and had met the sun rep and I thought wow this technology stuff is pretty crazy and pretty cool and so ah begged both of them to get me a job ultimately, that worked out pretty well for me. So my summer internship at Apple was. Really, really interesting and just opened my eyes to what was possible and then working at Sun I actually got to work in the group to end up creating Java and so being in a group of people that are that talented who can literally create anything was a true honor and kind of set the bar for me for my future companies.
Alejandro Cremades: Now with some microsystems you were there for a couple of years and you know eventually you decide that it’s time to pick up the phone and notify your mom of something that she would not be very excited to hear.
Karl Jacob: Yeah I told my mom that I was leaving to start my own company and she cried she said she begged me to stay in the job and told me why would I leave a perfectly good job. Ah I’m glad that I didn’t let her talk me into that.
Alejandro Cremades: So What was that process because I mean obviously see you know you came from from shoveling like you said crap to all of us Sudden. You know you’re here you know a nice you know, ah job with a steady income your parents you know, super thrilled you know with that day with that with that environment that you had created for yourself. So What was that process for for you to to think hey you know maybe this is not for me. Maybe I want to start something on my own and give my notice.
Karl Jacob: Yeah, it was pretty easy for me I I remember going to my boss at the time and saying hey I think I’m ready for the next level and he said hey I just promoted you last year. You can only be promoted so much tough. Just waited out. That’s the way it works. You’re in corporate America and I thought well. Then corporate America really isn’t for me.
Alejandro Cremades: So then show then what happened next.
Karl Jacob: Well, we started a company and you know that was a great experience. Learned a lot ended up being kind of the platform from which I started my my first real company which is to mention x which I founded actually in my apartment in San Francisco and it’s funny I remember. Having to ask for them to run a t 1 line meaning I and telecommunications line into the apartment because all I had were basically phone lines that was 1995.
Alejandro Cremades: Now What year was that.
Alejandro Cremades: I mean I’m sure that things have changed quite a bit and and and funny enough that company was your first angel investor was Ron Conway and you know I’m sure those were the early days you know for him to of of ah placing some some tickets in some company. So. How was it like to to have Ron Conway you know back you here because I know that he also played a pivotal role when he came to the acquisition of the company.
Karl Jacob: Yeah I mean Ron wasn’t ron back then I mean he was just becoming Ron and so a lot of it was. We were both learning but he had a lot of really great advice I think one of the biggest was helping me with the decision as to whether or not I should sell the company and he drew a curve on a whiteboard that basically showed. Where I was today and how much I would make and and more importantly, how much the team and the you know people who were shareholders in the company would make and then if we raise more money how you kind of have to spend the next five years building value to get back to the same place that you are. Today and so when when entrepreneurs think about raising money they often don’t think about the fact that that’s usually dilutive. Well it is dilutive and so you have to create a lot more value to realize that and that’s not just important. Personally, it’s important for your team and your shareholders.
Alejandro Cremades: And what was that journey like of um, you know Microsoft I mean unbelievable company. What was that journey like of going through that acquisition and how how it happened and what kind of visibility did it give you into the full cycle of of a company.
Karl Jacob: Yeah, well it. It was interesting because I’d Bennet’s son but I really when it came down to choosing who was going to bias I chose Microsoft because I wanted to learn Microsoft at the time was probably the best consumer software company on the planet that was about ninety ninety seven so they were pretty legendary. I learned really early. Great deal tactics I remember that both son and Microsoft were wanting to meet with us during the acquisition and I remember the guy from Sun saying hey how about if we come tomorrow Wednesday which was the day and I said I can’t do Wednesday I can do thursday. Well, he brought his entire deal team down from Redmond Washington Wednesday and was sitting in my lobby right? when sun micro systems walked through the door to do the meeting that I had basically pushed him off for super great tactic right? because. Put a lot of pressure on me and it also made son know that hey there was somebody else at the table and they better get their act together. So ah, one of the truly defining moments in my career is seeing that kind of deal making acumen right up and close.
Alejandro Cremades: So obviously you know the the deal ended up happening and you ended up getting a acquired by Microsoft so as it comes to now building scaling raisingcing money and then all of a sudden. The companies is Acqui I mean. What kind of disability did that give you.
Karl Jacob: But definitely teaches you a few lessons I think the biggest when you’re at Microsoft you realize that these big companies that have made so much impact were all startups at one point even Microsoft and so I got the chance to learn from the executives during the executive training program kind of the end of that program is. Actually get to hear the story of Microsoft from the founders which was just mind blowing to think they were that small and I think that’s the important thing for entrepreneurs to remember everything starts small everything starts with an idea everything starts with a few people and grows from there or not and so. This idea that they all start like with the success already happening or with the winds behind their backs I have never found that to be the case.
Alejandro Cremades: Now for you after the transaction happened then you became an entrepreneur in residence for a benchmark and that was the a segue that would take you to your next company Kan. So. What were the sequence of events that needed to happen for you to bring into life.
Karl Jacob: Well I get recruited by benchmark to be an entrepreneur in residence which I had no idea what that meant other than the fact that I’d always raised money from non-institutional like angel investors and so I really had heard about this vc stuff but I didn’t really know what it was all about and so joining benchmark was. My way of learning and and kind of getting to understand that industry better. The my job was effectively to get paid to come up with ideas which I remember Bob kegel a couple times said. Okay, great. Great idea, put that in the drawer and then come up with one a new one tomorrow which. As an entrepreneur I was like well wait that is the idea he’s like no no, no, you need to go through a process you need to look at a lot of different things and I don’t think many entrepreneurs get the opportunity to do that or do that and I really highly recommend that like your first idea is not necessarily your best idea or the only idea that you’ll have and. Time is really the most precious thing that you’ve got so spend it on something that you have really thought through all the different issues and are giving yourself the biggest and best opportunity to be successful before you go raise money before you recruit a cofounder or other people into the company. So that process ended with kind of an idea and a group of people we had a team already working on it at benchmark and that was kind of a unique one because they had found someone else or 2 other entrepreneurs had been working on a similar idea and we ended up putting the 2 things together which which created the company.
Alejandro Cremades: And what were skin doing.
Karl Jacob: So Keenan was interesting if you think about ebay as being for stuff that’s in your garage keen was for stuff in your head so selling everything from psychic advice to legal advice to medical advice you you name it and in fact, Jeff Sk goal from ebay was on our board. And he taught me a tremendous amount about marketplace dynamics and I also learned a little bit about sticking to your guns a keen when we started out. We really focused on transactions and in ninety nine that was really not popular at all. Everybody was giving everything away for free and hoping they’d pay for it with advertising but we stuck to our guns and ground it out through the dotcom implosion through 119 turned the company profitable and then sold it to at and t and I think it’s just a great example as an entrepreneur. Don’t follow the prevailing wins. You know, know that your true north is a little bit different and stay focused on your core values which in this case was focused on this idea that look if somebody will take their wallet out or their credit cut out and pay for the service that is value versus giving it away for free and hoping the advertising will you know.
Alejandro Cremades: And what about cycles because I mean as you were saying you were able to survive. You know they’re the dot combust. You know there were so many companies that were folding. You know at that point and the fact that not only you were able to survive but you know be able to later on you know, sell this to 18 and t a transaction that was north of 300,000,000
Karl Jacob: Save the day.
Alejandro Cremades: It’s pretty impressive. So in terms of insights towards you know market cycles and macro environments. What were your takeaways from that experience.
Karl Jacob: I think the biggest takeaway symptom I’m seeing right now build a profitable company as fast as you can runway doesn’t really matter unless it’s on the way to building a profitable company and so when you I heard the other day. A company say that they had 9 years of runway I don’t even know what that means. Right? At the end of the day. The goal is build a profitable company as fast as you can Ron Conway would would reiterate this. He’d say so you control your own destiny Steve Jobs did it at Apple and you look at the great companies. Are you know, marked it it at Facebook. Build a profitable company and then you control your own destiny and you is like the wider corporate you you’re just not controlled by investors or outsiders you can chart your own course which oftentimes is really important and counter to people’s overall feeling about where the company. Should go or their instinct. Great example that with Facebook was staying inside of colleges or or going outside of colleges and opening it up to the world that was a hotly contested decision inside of Facebook which probably would not have been well may or may not have been made depending on the investors we would have had.
Alejandro Cremades: Now for you second company second exit. You know you were on a roll. Um you know and Asana an entrepreneur always an entrepreneur. So I guess in this case, you know after this transaction to at and t why did you join another company versus.
Karl Jacob: Um.
Alejandro Cremades: You know, launchging another one over your own because you join you know the folks at the cloudmark.
Karl Jacob: Right? Well so I actually they brought in a quote professional Ceo at keen so it was a little bit of it was a little bit before the eighteen t transaction. Um, you know I was pretty young and pretty greener as my dad would say wet behind the ears and so I was just not. Yeah I was not an appropriate Ceo for where the company had got to according to the investors. Um, and so I been on a board I thought you know been working with a couple of companies cloud market being one of them and they said hey why don’t you come be the interim Ceo we need somebody. And so I did and again an example of kind of learning a lot and you know being exposed and and open to trying new things and joined vipple and and Jordan in that project.
Alejandro Cremades: And in that project I mean you guys ended up selling it to a proof point but looking back I mean what was the lesson that you had to learn because I mean obviously you know with Cloudmark it didn’t take long I mean it was like a couple of years you know before the transaction happened so during that time you know what was that lesson that you took with you.
Karl Jacob: It’s interesting. It may look like that it actually took took quite a while is about 8 years and so cloud Mark was yeah I mean another example, stick to your guns. You know that company was profitable for probably 4 years up until the transaction happened.
Alejandro Cremades: Um, oh wow.
Karl Jacob: And so it could kind of choose its own destiny and choose its own ah approach which became critical because that space the security space in the enterprise space became quite difficult over time and so being profitable was really helpful and in fact, it helped me encourage the company. To turn down the first acquisition offer which was a terrible offer. It was a terrible offer for the investors terrible offer for the shareholders and I decided that wasn’t something I could support particularly because I had a lot of friends who were still at the company and were people upset particularly the. Current investors. They thought that hey this is a great deal. They were going to make some money their funds were kind of at the end of their their lifespan but we we you know I have to say ah to our credit held our ground and they ended up selling the company for quite a bit more two years later
Alejandro Cremades: Nice now after this you took some time off and then one day you receive a phone call from Sean Parker at the Facebook tell us about this.
Karl Jacob: Um I did yes, yeah yeah, well it was at multiple phone calls actually because I didn’t answer the first few so and he said hey you’ve got to come to San Francisco I said well I’m in Cosamel.
Alejandro Cremades: Ah.
Karl Jacob: I’m kiteboarding and I’m taking time off I’m not going anywhere. He said trust me, it’ll be worth it and you know Sean had a good instinct for stuff like that and so in the middle of my kiteboarding trip I got on a plane flew to San Francisco met with Mark At University Cafe and by the time I got back to cosaml I had the agreement for me to be an advisor in my email.
Alejandro Cremades: And what did you see you know in the company and and also Mark Zuckerberg because I mean now it’s incredible like what he has built. You know the legacy and the level of impact of Mark Zuckerberg that that the world knows today. But. But what did you see there that you are like wow this is this is interesting.
Karl Jacob: Um, I think the biggest thing that I saw was Marcus Cognitive sciences that was his background and mine was biomedical engineering and we we really saw eye to eye on this idea that if you could build something that would help humans connect that you would have something special and so. I didn’t know what it was going to be I don’t really think Mark did either to be honest I think it was evolving at the time but that was the core of it. It was like just kind of being aligned on where things could be one day and that we could use technology to help people improve their social connections with each other. It turns out it was much much bigger than we thought and that’s kind of one of the things I think people forget is that every idea starts very very small particularly the good ones and the idea that people knew back then including Zuck that Facebook would be something that everyone in the world. Pretty much would use is just not true like no entrepreneur knows in the beginning they hope they dream. But the idea that that they knew that they were going to connect the world. That’s just not true. That’s one of my favorite stories I I saw some investors.
Alejandro Cremades: And why no one wanted to give the money at that point.
Karl Jacob: Or who could have been investors in Facebook and they said everybody has you know hindsight 2020 and revision his history right? So the funny thing was well. You know too bad that didn’t work out I said well you guys just turned this down It’s not too bad. It didn’t work out. You actually just turned this down. Well yeah, but you guys said you would never go outside of colleges. And you guys said this and then there’s always an excuse and I think that you know that’s kind of the interesting thing so we would say hey this is going to stay in colleges and Sean was adamant about that is adamant that it wouldn’t leave colleges and to a t that was pretty much the number 1 reason people turned us down and we pitched to everybody. The idea that Facebook just magically got money is completely ridiculous. We pitched every vc in the valley and pretty much every vc in the valley turned us down.
Alejandro Cremades: Wow. So then what? what do you? think you know needed to happen in or for something there to click and and to get money.
Karl Jacob: Well obviously Jim Breyer at excel clicked and and gave us money which was interesting because we were 1 of 2 consumer plays the fund had at the same time in excel was not doing great at the time you know they were they were definitely in ah at an interesting inflection point. In their fund which Facebook helped create over time. Um, it just took somebody to believe and Peter Thiel and Jim Breyer and they believed in I think mostly Mark and the team right? I mean I think really at that that point that was the bet and that they would figure it out and ah. I don’t think any of them do what kind of ride they were in for I certainly didn’t.
Alejandro Cremades: And obviously the rest is history now in your case, you know you continue your journey of of building nonstop you know and launching companies. You know they like the next one actually was wall up and that is a very good example of how an economic you know? ah.
Karl Jacob: In here.
Alejandro Cremades: A scenario or situation really ah pushes to do um pivot and then obviously you know like into an acquisition into a nice outcome. So what happened there with wallop and and how did that pivot you know come about as well.
Karl Jacob: Yeah, so necessities the mother of invention. My father is to say and I think that’s very true in that case I remember wall of was a social network that we built and kind of I’d learned a lot at Facebook and and they said hey we’re never going outside of college I said well okay I’ll I’ll go outside of college. And you know it’s also an example of don’t spin out r and d projects out of big companies that was a r and d project at Microsoft that we spun out which was a mistake but we’d learned a lot about people customization. People’s desire to be different so I’ll never forget when the economy hit the skids. And went to the board and I said hey this one is going to be tough to make money in this environment really tough and I actually offered a couple different options and I’ll I’ll give you 2 of them one of them that’s pretty hilarious. So one of them was customized phone covers which is what we ended up doing. Physical transactional and all that the other was an Iphone app and I’ll never forget the response that thing is just a toy. It’ll never be a real phone. Forget about it. Yeah well you know it cover ended up being great.
Alejandro Cremades: Wow.
Karl Jacob: But have been fun to build an Iphone app too before anybody else did but you know you never know.
Alejandro Cremades: So then so then in this in this case cover you guys ended up a selling it as well. So I guess saying what was the lesson for you to to take from that experience.
Karl Jacob: Well, that another lesson was really if you build a profitable company or close to profitable company then you control your own destiny and so that company could just keep on going on as long as they needed to I think Paul Graham said it best means that your your goal is to be default alive and. I think that’s very true if you’ve got a real business if you are just trying to keep something alive for 9 years you’re actually a zombie. You’re not really alive, you’re just you know, walking through the wastelands somewhat lost. With with no direction and no ability to get to that profitable company that then allows you to do the things that you’d that you’d really like to do so so similar theme. We just stuck to our guns we. There are a lot lot of different things that happened everybody went from blackberries to iphones during the tenure of that company. Just stuck to this idea that hey people want to express themselves particularly through their phones.
Alejandro Cremades: The next company that you did that was Hank time now. 1 thing that I was saying interesting. There is that you almost sold it twice and you ended up folding the business I mean I’m sure that was painful.
Karl Jacob: Yeah, yeah.
Karl Jacob: Yeah, super painful I don’t I hate losing.
Alejandro Cremades: Ah, but what what happened I mean how come you almost sold it twice that didn’t crystallize and then all of a sudden you end up, you know, having to turn off the lights.
Karl Jacob: Well I think that one was interesting because is ah a good example of a great idea I mean being able to show people what is possible to do around them from hundreds of millions of events was a fantastic value proposition for consumers. Problem was super hard to make money there right? You could try to sell tickets and take a cut of that but that industry is pretty messed up. You could try to like sell Merch again issues around that and so 2 things happen 1 be careful who you’re dependent on because we actually used Facebook as our. Base for a lot of those events and they they basically shut that Api off even to us which I think was the right decision long term but definitely hurt our business. So be careful. What platform you build on and make sure it’s a platform and on the deal front. We had one that fell through which I’m actually pretty glad that it fell through it just it. But not have worked out that company. It didn’t go out of business but Dan close and then the other one I was really excited about it. I was actually my bags were packed going to move to l a go run products for the company and I remember getting yet another phone call from the Ceo O at the time. Hey we’re we’re we’re pretty much there. We need to change 1 more thing and that’s when my deal instinct just kicked in I said yeah this is not a good environment for us to go into. Thankfully we didn’t take that deal because the stock price plummeted from there not from there on but about a couple years later
Karl Jacob: And it’s never recovered and the company’s never recovered now could we have helped maybe right because I think it would have been an interesting tie up and we definitely saw the same vision around events sometimes in deals you got to know when to walk away even though it means you got to turn the lights out and. Really let it go which was super hard for me because that that that had never really happened to me.
Alejandro Cremades: And how do you know when it’s time to walk away.
Karl Jacob: Well like my dad said the light at the end of the tunnel can either be a light or an oncoming train and that one was an oncoming train I think part of it is recognizing that at certain times in a business There’s just too many things stacked up against you and. You don’t have quote real traction. You know entrepreneurs are a funny group. They’re very optimistic and everything looks great. Everything’s always great. Well this this conversion is getting better that conversion is getting better. What I think we realized is that we had a great app. A great consumer business. Oh. Create consumer product that people love and a revenue model that wasn’t going to work and so we had to tie up with somebody else in order to make that work and that just didn’t work work out for us. So so I think it’s like knowing it’s it’s a gut instinct thing but it’s also a little bit about you know. How much longer are you willing to to try that one. We probably should have stopped earlier and we in some ways re lied to ourselves. You know we just like oh just 1 more feature just 1 more thing and when we finally turned that corner. It was too late which is really too bad and then Facebook pulled the plug on the api for us and. Then things went pretty south from there.
Alejandro Cremades: Now before we talk about your latest one you know which is a rocket ship you know during the yeah during this course of time I mean over ah 2024 years or so you’ve also been investing. You’ve been an angel investor you’ve invested in over 35 companies what are the 3 trades.
Karl Jacob: Um.
Alejandro Cremades: That you’ll find on those founders that you’re like I gotta invest in in in in in this individual.
Karl Jacob: Well that you just said it. The individuals right? So so the first thing I’ve learned is regardless of what you think about the idea invest in the individuals because they’ll figure it out and that was true at Facebook that was true at June true at Everlane over and over again even true for the ones I missed. I missed Twitter I could have invested in oio and I passed and odeio turned into Twitter and I asked the entrepreneur I said hey how come you didn’t call me back I was the one who wrote down my feedback and said I didn’t he’s like to have you ever called back? an investor who said no to you I was a. Was a good lesson. So I think that’s one I think 2 is if you do agree on the idea then part of it is market size and product not so much because you think market size and product for that particular idea are the right ones. It shows you how the entrepreneurs think and if it’s like oh well, the market’s $50000000000000 and we’re going to get point zero one percent of it that is not a market sizing that I believe in if it’s like hey we’re going to start at x and grow it over time. Here’s our conversion rates here’s our monthly active users here’s our daily active users here’s our returning users which is a more important metric here’s how many people share the product with their friends. That’s the kind of stuff that that I that I look for.
Alejandro Cremades: Nice now. Let’s talk about your latest company obviously Carley is nonstop never stopping. So let’s talk about a loan snap. So what do you guys have to with loan snap in and why did you think that the problem was meaningful enough for you to take action.
Karl Jacob: If.
Karl Jacob: Well, it’s interesting I remember the day when I realized that the mortgage industry is $13,000,000,000,000 industry and it had not been disrupted yet and thinking if I was an entrepreneur I was giving advice to I would tell them go do that right now and so I had to take my own advice. And so we started. Ah you know, kind of as you pointed out to rocket ship now. But boy. It’s not been an easy road $13000000000000 industries that haven’t been disrupted haven’t been disrupted for a reason and that’s because it’s super complicated. There’s many people in the ecosystem. And you have to solve a lot of problems at the same time. This is where a lot of my experience in the past has have come together I’ve solved the beginning of the problem. The middle of the problem and the end of the problem you know backend piece the front end piece in my career I’ve never done it all at the same time and that’s that’s what we’re doing here and until I’d say. late last year we really didn’t have it all put together now it is and an environment where most people are really struggling particularly in the mortgage space. We’re actually doing quite well.
Alejandro Cremades: So for the people that are listening to get it. What is the business model of Loan snap. How do you guys make money.
Karl Jacob: Oh we have to have a business model just kidding. Yeah, so so it’s pretty easy. We make loans. So we’re an originator and then we sell those loans to big financial institutions governments banks and and funds and so we take a cut of that transaction. Pretty simple. However, it belies the complexity there because the industry has been around for many many years and been so massively profitable. No one’s had to make it efficient until now because higher interest rates are definitely not great for your regular mortgage company. So not only do we make money that that way. Right? But we’re also starting to build the infrastructure to be able to make money at the different points in the loan process and even selling the loans and even balance cheating them meaning holding the loans in some cases. Ah, that’s where a whole bunch of the tech stack and there’s Ai involved we were doing ai theft like two or four years ago now everybody’s finally caught up. With us or I haven’t cut up but they’ve caught up with them are on their marketing front. Not not necessarily with the tech front the blockchain and there’s a lot of interesting things going on there and so it’s been interesting to kind of see this ecosystem. That’s been around for so long like insurance was before insurance and other companies. So desperately in the need of change but because they’re so profitable on the business models that they have they haven’t needed to change and until someone forces them to and that’s going to be us.
Alejandro Cremades: Now. Also for this you have raised some money I mean and you’ve now done it so many times that I’m sure it was not that difficult to raise money. But also you’ve been on both sides of the table. So I’m sure that you were quite picky.
Karl Jacob: Yeah.
Alejandro Cremades: Selecting the people that you are going to bring on board as investors. So why did you choose the people that you did on the a round that you did on the B round that you did and then also just just to start off how much capital have you guys raised too late.
Karl Jacob: Just over 50,000,000 in capital raised and you’re right I mean I’ve raised 23 rounds of financing. So I mean personally for my own companies I don’t even know what it is for other companies and so I think that the. Goal that we had when we started this company was we knew it was going to be a long term play. We knew that we needed long-term thinking investors and that’s really why we chose true ventures and baseline just two firms that have just stood the test of time and are focused on long-term benefit. And supporting companies that get back I mean our companies saved our customers $80000000 last year like we’re focused on value to consumers. Not necessarily giving them a loan that takes advantage of them I think those times are gone well I’m hoping to put an end to those times. In in the financing industry particularly in in mortgage. So we needed investors who were aligned and we would basically test them. Are you okay, with there not being any kind of outcome for 7 years or more and that’s important because it’s two years past the life of most funds. And when the answer came back. Yes, then we knew we found the the right people then it turned out that we found more and more those so richard branson put money in after that peter thompson who started thompson reuters and then a bunch of other like-minded individuals who are more focused on.
Karl Jacob: Ah, long term who understand that if you’re going to disrupt these massive markets that have not been disrupted before it is not going to happen overnight.
Alejandro Cremades: So obviously to these investors you had to share a compelling future and a vision. So imagine you were to go to sleep tonight Carl and you wake up in a world where the vision of loan snap is fully realized what does that world look like.
Karl Jacob: That world looks like a world where we’ve saved our customers billions of dollars and instead of having a loan or loans that they hate and they don’t understand they have loans that they love that have helped them achieve success in their lives. However, you define it whether that’s starting your own business or sending your kids to college or remodeling your house and in your own language meaning without all the financial jargon thrown at you. So yeah, hopefully it’s a world where your financial partner is a partner and trying to help you. Versus working against you and take advantage of you as we’ve seen in the last well 50 years
Alejandro Cremades: So obviously here talking about the future but let’s talk about the past now and doing it with a lens of reflection. So let’s say I put you into a time machine Carl and I bring you back in time maybe to that time that you were at Sun Microsystems you know wondering like what you would do of your own. And let’s say you know you had the opportunity of sitting down that younger Carl and giving that younger Carl one piece of advice before launching a company but would that be and why given what you know now.
Karl Jacob: I think the advice would be don’t stop. You know I think the thing that is hard at that point is going for it and doing it and not stopping and giving it giving it your all. Remember when I left Apple Steve gave me a really good piece of advice and I’ll just kind of like compress it for this It’s definitely not 1 of the Steve Quotes you see attributed to him. He said you know what? you’re only young enough and dumb enough and poor enough once in your life to really go for it. He said so. Go for it and I did I left and you know that was kind of the the thing I held with me in starting my own company was like hey I mean I I didn’t have a mortgage. You asked me that I didn’t have car payments or kids or a family or anything like that and so that was ah that was a big opportunity. To to be able to try something totally crazy that my mom cried over right? Ah and and have it turn out and that’s a very rare time in your life when that’s that’s possible.
Alejandro Cremades: Wow Carl very profound now for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Karl Jacob: Well I’m at Carl at Twitter which gives you some idea of how long ago I started playing around with with Twitter or Carl Jacob at gmail k a RLJACOB at gmail.com
Alejandro Cremades: Amazing! Well hey Carl thank you so much for being on the deal maker show today. It has been on on earth to have you with us.
Karl Jacob: Well thank you for having me. It’s been great to be on the show.
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The post Karl Jacob On Taking On A $13 Trillion Industry After Building And Exiting Multiple Successful Companies appeared first on Alejandro Cremades.
Keith Peiris became the CEO of his first company at a very young age. His latest venture has already raised $81M on its mission to help us communicate and understand each other better. The startup, Tome, has attracted funding from top-tier investors like Audacious Ventures, Greylock, Lightspeed Venture Partners, and Wing Venture Capital.
In this episode, you will learn:
- Differentiating between co-founders and team members in the hiring process.
- Presenting your business idea to potential investors.
- Establishing shared goals and values with your financial partners.
- Utilizing AI technology to enhance pitch presentations and exchange of ideas.
Alejandro Cremades · EP 643 Keith Peiris On Raised $81 Million To Turn Your Ideas Into Compelling Stories Using AISUBSCRIBE ON:
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Your email address is 100% safe from spam!About Keith Peiris:Keith Peiris is a Co-Founder and CEO at Tome (2020) and an Entrepreneur In Residence at Greylock (2020). In 2019, they were the Head of Product at Citizen, where they helped the company 10X its active users, reach #1 in the News category of the iOS App Store, and scale the largest contact tracer in the US.
Keith also helped redesign the product for mainstream usage, hired the product management team (0-6), and briefly ran recruiting + HR.
In 2018, they were Head of Product at Glossier, Inc. From 2016-2011, they were the Messaging & Camera AR Product Lead at Instagram, where they grew Instagram Direct more than 10X to 500M monthly active users.
At Facebook (2011-2007), they were the Manager of Product Management and worked on Predictive Search and Notifications, Graph Search, Facebook For Android, and the Rotational Product Management Program.
Keith also founded and advised the University of Waterloo’s nanorobotics team and helped them win the 2011 & 2013 NIST Mobile Microrobotics Challenge with their magnetically levitating 300-micron soccer-playing robot.
Keith Peiris attended the University of Waterloo from 2006 to 2011, graduating with a Bachelor of Applied Science (BASc) in Nanotechnology Engineering.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show so more stories today you know, building scaling financing and all the above all the good stuff that we like to hear you know in this case, you know he got started at 11 years old with his dad so talk about you know, starting and just doing it. So why. Again, you know we’re gonna find he say a story very inspiring and again you know all about the hypergrowss stuff especially on the dealmaking side too that we love to hear so without farther. Do let’s welcome our guest today Keith Perris welcome to the show.
Keith Peiris: Thank you excited to be here.
Alejandro Cremades: So originally you were born ah in Ontario canada and you know your parents were originally from Sri Lanka so I’m sure that they you know they they like cricket and all the good stuff that thing that they like you know back there but how was life growing up. in in Canada
Keith Peiris: I mean Canada was what was incredible. You know I but my parents moved there in the 80 s you know during the civil war and they just wanted me to have access to it to a good education so you know just like every good canadian kid I played ice hockey growing up. You know, learned a lot about but about life you know, ah being the smallest kid on the ice naturally and got really into computer science early just to say that. Ah my dad made it all the way from delivering pizzas early on sort of the first thing he did when he landed. To ah managing and you know sales at an it company and ah because of that you know he was always bringing computers home. You know at at that time computers were thousands of dollars so having access to to one with felt really special and you know around the age of 8 or so he he brought. Home this really powerful computer and a book on how to use Adobe Photoshop and you know you could argue that was that was maybe the the start of something new.
Alejandro Cremades: That’s amazing I’m sure that for you, you know also to see your parents you know coming here I mean here to kind of a you know new life. You know, um a better life that they were looking to to build too for for the family I’m sure that that was very inspiring to you as well.
Keith Peiris: Yeah, yeah, exactly you know we ah were brought up thinking that we have to sort of outwork. Ah, but the folks around us and fight for every inch and I think that’s it’s still true today.
Alejandro Cremades: Now now in your in your case eleven years old that’s when you know the whole business. You know craziness you know, knocks on the door. So so what happened there with your dad.
Keith Peiris: Yeah, so like I said you know he he got me this computer and ah a book on photoshop and I think to be honest, the first version of photoshop I hat was a little bootlegged and you know I I would come home after school and play around with this I would play manipulate photos I would make. Sort of websites and interfaces and at the time this is when internet forums were becoming a thing you know I think this was ah sort of early 2000 and I would put my work up on forums to try to get critique advice I’d ask them how to do effects how to do different things in Photoshop. And in flash and after a while some people started to message me on these forums and asked hey could could you make a website for me or could you make a flash animation for me and ah you know at the the time I I was doing it I opened a Paypal account I’d charge just enough to be able to buy video games and toys. And ah, you know one day. My my dad came home and and he was like well what? what are you doing I’m like I’m making a website for this person. You know I’m I’m charging two hundred and fifty dollars so I can buy an Xbox and um, you know he started to look at this and he was like wait a minute you should be charging a lot more than two hundred and fifty dollars with this kind of thing. Ah, so he he opens up my ah but but my direct messages that he realizes. There’s like 10 of these these people asking for websites. Ah so so we had a back and forth about it and um, you know my dad had already been sold on the internet was the future.
Keith Peiris: Right? When you’re selling computers. You’re you’re in these these cio groups and they’re talking about this like what is this web thing that’s happening and um it was like you know we should start a website company. You know in Canada at the time it felt very sort of rare ah to to have website companies and all of these companies knew that they needed a web presence. So ah, you know he decided he was like I should be the Ceo because I sort of brought the technical talent and you know he would run ah but the sales and marketing. So the the first thing you know he did was we ah, we we got the basement renovated. We bought some computers. We. We moved into the the basements and then you know he started to pitch um customers of the it company he worked at and you know I would start to respond to people on on forums on on the internet and we were actually able to. Ah, to to drive quite a bit of of of grum of of a website design company.
Alejandro Cremades: Now now in this case I mean at 11 I mean what? what? what did you learn about pitching to.
Keith Peiris: Yeah, it’s ah it’s a good problem to you know when when you’re an agency which is what we were. You’re you’re constantly pitching right? You’re you’re showing up at people’s offices and you need to to Dazzle and shine you know within the the first thirty minutes ah because you never want to win on price right? It’s sort of a race to the bottom. So my dad taught me everything about first of all, you have to compose emails this way you have to sort of have to um, pitch you know leading with the the sizzle first and get into the operations later. And um, you know my my dad sort of encouraged me to lean into the the novelty of the fact that I was 11 ah so we we wrote a lot of press releases around you know 11 year old Ceo’s company you know breaks ground with new web technology or you know. Ah, 11 year old ceos companies starting to work with the canadian government and I learned a lot about how do you take all of these things in your head and and and build it into an elevator pitch or or how do you like Dazzle and wow people with. With things that you haven’t built yet in in 30 minutes and and I think I I use a lot of those things today.
Alejandro Cremades: That’s amazing now. Obviously you had the the acumen now in Business. You know so as such an early stage so in your life. So. Why do you end up, you know going and studying nanotechnology engineering was there anything more challenging that you could find to study or not I mean humbely, you.
Keith Peiris: Ah, but the story leaded up to it was very pragmatic I promise you know when at this time it was 2001 2002 you you needed a really powerful computer to do any of these things to do 3 d rendering photoshopped even to even to play video games. And I was always running out of compute. Ah you know on the the cpu on the video card. Ah so you know I was always asking my dad hey when we get this next contract can I get a faster computer. We’re can I get a faster cpu and um, you know I ended up getting really into this sort of um. Lost art called overclocking where there’s this community of people on the internet where they um, they learn about the thermals of the processing units and they try to run them as fast as they can. Where they’re doing liquid cooling. They’re doing water cooling. They’re hacking these systems to get them to run faster and I sort of got into that and and then I realized wait a minute to be really good at this to get all of the processing power you need ah you sort of need to understand silicon you did notre just dead Silicica and submiconductors. Like I want to go study silicon and semiconductors and then one day I want to go work at Intel or Nvidia that would be really cool. So that’s sort of how I ended up at in you know in nanotechnology engineering in this this hope of building faster processors.
Alejandro Cremades: Well hey you you you went from there you know into something really interesting because you graduated and then all of a sudden. Obviously you did a bunch of internships you know on robotics and you know stuff stuff that could be applied to what you were studying but but you ended up working at Facebook. I mean you landed in Facebook before the ipo at the series. The you know financing and then you kind of like scaled for the ranks there and landed at Instagram where they were essentially reinventing themselves and there you were to able to to see you know ah a lot of stuff around you know more like. What sales what works what doesn’t what were some of those things that that you learned while you were there because sounds very interesting I’m sure that that shaped your way of looking at business and seeing things.
Keith Peiris: Of course yeah, the the first thing I’ll say is that it’s funny I ended up working at Facebook um, you know because I was sort of fascinated with the space. You could see all of this happening with software social networks and and search but my my grades were terrible. Ah, because I was always working on side projects. So I applied to Google and they were like your grades are too low. You know I applied to to Microsoft the the same sort of view but Facebook was at the time startup they were like as long as you can solve problems come on down. Ah you know would would figure it out and I’m very very grateful for that opportunity. Um, it’s funny at at Facebook I learned a lot about what? Um, what people are interested in and and ultimately what what what matters to people because when you when you have a user base of a billion people. Um, almost anything you put in the product works right? You can get. Ah, you can build a marketplace you can build a dating app you can build. Ah, you know, ah a way to discover restaurants nearby like and some percentage of people will always be interested in it. So I think it gets you to to be honest to be a little bit lazy right? because almost any that you ship people will use. Um. And you know I sort of needed to to recalibrate. Actually what are people interested in What’s what’s driving this company more than you just put a feature and people play with it and the the thing that that sort of came out to me was the reason Facebook works is that you know people just sort of have this this.
Keith Peiris: Predisposition to want to communicate with each other right? But the um you know it. It turns out that’s ah at the core of it just being connected to your friends seeing people that you’re attracted to seeing what other people around you are doing is what makes this gigantic company work. Um. And it’s funny I went to to Instagram and this was ah during the sort of Rebirth of Instagram you know it was was end of 2015 when the company was growing. You know we had good sort of earnings calls. But inside. We knew we were sort of losing market share to snapchat. You know we were ah young people in America were migrating over to snapchat we we were afraid that we were going to be this product for the olds you know and as a result we we sort of needed to to reinvent. The company and I um very I feel very lucky to have been a a small part of it. You know there was ah a new brand being built but we were also sort of inventing direct messaging at the time we were inventing the the sort of augmented reality camera and um. You know I was learning a whole lot about the way people communicate. Ah and and this is ah sort of 1 of the most interesting topics to me and and maybe why I got into tone because everybody communicates differently and nobody communicates the way that you want them to.
Keith Peiris: Which is to say I had this perspective on what you should use the camera for how people should use text messages in the product how they like reshare memes and and we were always surprised that no one ever used the products the way we wanted them to so ah you know it kind of got me. Enthusiastic about this this idea of open-ended communication tools because I think the ones that are most flexible, highest fidelity most expressive end up being the ones that that survive um and ah, you know it got me thinking sort of in the background. How could I build this really powerful. Open-ended communication tool for for ideas. But you know more on that later.
Alejandro Cremades: And we’ll talk about it in just a little bit but you know it sounds like you were having a good time. So why? All of a sudden giving your notice and coming to New York city what were you thinking.
Keith Peiris: Ah, well the the grass is always greener on the other side and um I would say one of the things that I absolutely loved about Instagram was that I was learning so much from being around the founders you know, um Facebook was this giant company at the time thousands of people managers on managers and managers and. Instagram is still small. You would still review ideas with the founders. They would still be like I like this I don’t like this take that and because of that the company was very creative. It moved fast and you know I could tell that the ah the founders were ready to leave and yeah I wanted to go. I wanted to be a founder I wanted to be in that small company world where you’re fast and creative and as they were leaving I was thinking I should go do something else. Um you know and at the time I was looking over at New York thinking um wow that’s like a completely different world ah completely different people. It’s not It’s not run by tech I should go experience something. New. You know so I moved to New York um I was looking for a job and I actually ended up joining ah a startup there working on on very different subject matter.
Alejandro Cremades: So obviously you were doing there. You know a little bit of safety. No and and basically on on the app that they were building but you know you were not there for long you know for long until you know you really got the idea and of Tom coming coming to mind. So. So what happened there and also show why did you think that it would be a good idea to incubate it under the umbrella of a venture capital firm like Grayroft sorry great look gray look gray look gray look.
Keith Peiris: Yeah, so it’s a good question. Lucky yeah, ah, all good I mean I learned a lot from ah from citizen and and I would say that one of the biggest things I learned was um, you know you sort of have to be careful with the markets that you. And the the problem spaces that you start with ah you know citizens a really hard company to run. It’s ah the the tam is small because it it it really only ah is engaging in in in dense cities. Um the the willingness to pay is sort of challenging. Ah, when you have a free consumer product that’s unrelated to to being productive. Um, and it’s just like it’s ah it’s a really hard company to to run I think the the founders is doing an incredible job at seeing it through but it got me thinking about what’s the right problem space. You know I want something. Sort of geo unrestricted and I definitely want to work on something that helps people you know achieve their goals and be productive such that they they pay for it. But you know I left citizen and I started to think about this idea and the backdrop was that this was sort of um phase one of covid if you remember phase one of covid and in New York city ah we weren’t allowed to leave our apartments. You know? Um, um, when you go to the grocery store you end up buying ah a box of clorox to to sort of wipe off your groceries for like $50.
Alejandro Cremades: Oh yeah.
Keith Peiris: And um, you you know you you can’t really see your friends right? or you can’t really talk to people so you’re at home watching Tv right? Ah, figuring out like well what what’s going on reading on the internet and um, there’s just this like crazy flux of ideas being passed back and forth on the internet right? like should we wear masks. Should we accept this vaccine. You know should we clorox our groceries. Ah should we talk to each other and um I know it’s sort of funny. Ah when when talking about that period most people talk about the social media bubble. Right? If you’re on Twitter and you only see people that believe the same things as you um, but I think the other side of it was that we we don’t have great tools to talk about these ideas right? Um, and just to to say that’s ah the the new generation of folks that they’re not reading Longform white papers. And um, you know on the other hand. No one’s compelled by one hundred and forty character tweet but about a different topic and I was like oh this this sucks you know someone needs to build a really sort of expressive tool to talk about stuff in our heads. Um, you know, just as much as. We we were building expressive tools at Instagram to talk about you know what? you’re doing with your day or sharing your face. Um, so I started looking around and like as someone builds um like ah like a visual multimodal sort of take on like substack or medium.
Keith Peiris: Or or Twitter and I couldn’t really find anything. Um, so you know I decided to to join graylock because I had had a good friend Seth who who worked there ah who who had just moved to Greenwich Village and I was like you know I’d I’d like to work from your apartments. Ah he’ll. I don’t think he loves this detail but it was Johnny Depp’s old apartment. So. It’s a very inspiring place to be um and I was like I want to work on this idea but I need to think through the go to market and how I would make money you know which is to say that it’s very hard to make money building something like medium. Ah, because as a writer you want reach and distribution. But you also want to get paid right? So those things are sort of at odds. Um, and like in the end I think this could be you know a replacement for documents and powerpoint. But the challenge with that space is. It’s very hard to go into a company and sell someone a replacement to the office suite right? So like I need to sort of figure out this this go to market and make sure there’s something there. Ah so I just started to work on it with with with Seth and and with with Reid Hoffman at Graylock you know week over week
Alejandro Cremades: I mean that’s saying that’s unbelievable like being able to work on something with sathan with read Hoffman they cofound I mean the cofounder of Linkedin I mean that say you can’t treat that lightly how how was it you know, incubating an idea you know with the caliber of individuals like that.
Keith Peiris: So I’d say a lot of it was just being naive. You know I wasn’t thinking about how impressive the person Reid was I just had this graylock email address and I was sending him an invite invitation every week being like hey could you work out this idea with me and. And I would say for for the first little while he was like sure. Okay, you know I’ll have some some meetings with you and you know at. But first I was starting with the space being like how has nobody built something here. You know just to say that I think expressing ideas. Visually is such an an important thing and you know everything has changed since those tools from from the 80 s like powerpoint and word right? We we have mobile devices. You know we we have data in the cloud. Ah there’s all of this like. Foundational ai being built. You know why hasn’t anyone done anything here and and and Reid was always like um I agree that there there should be something here I don’t think you know what it is but he’s like but I think that there’s something here and you should explore it.
Keith Peiris: Ah, so you know I just started to explore week over week and very quickly I realized actually I don’t need a cofounder that can build this. This is actually a very sort of common trope I think of startup founders whenever you meet vcs. They tell you you need a technical cofounder that can write code. And it’s like no I think we actually need to think about like well what do we want to build. We want to make sure that people love the thing they’re interested in it I think once we have the product or at least the idea of the product then we can hire someone to um to to sort of build it. So I started looking for like I would say like a product design sort of founder cofounder and um, you know I went on all the the co-founding date dates. You know where you you meet people on Zoom, you pitch them your idea and ah eventually I met Henry. Ah, like co-founder he was. He had actually worked with Seth um, ah at Facebook and I’d known of Henry it’d be ah, everyone sort of knows him at Facebook as this sort of brilliant visionary. That’s also very stubborn and hard to work with ah you know and I think that’s sort of the the perfect profile of a cofounder. Right? as ah as a founder of a company. everyone’s telling you you’re wrong everyone’s telling you that your idea doesn’t deserve to exist so you sort of need to have ah ah you know a degree of stubbornness and and hubris to sort of push through. Um so I met Henry we were talking about the idea felt very natural.
Keith Peiris: And um, at the time he was like you know I’m thinking about this or do I go take another job. Ah and you know I think he thought about it for a while. It’s like no another job sounds terrible compared to to doing this so then we started having Zoom calls with read with Seth every week. Where you know Henry was sort of concepting the idea of tome you know he was like drawing it and building prototypes and we were showing it to people and and eventually we we found people that were like this seems pretty good. You know if you guys built this ah we would absolutely pay for it. So then you know ah sort of convinced Henry to to quit his job. Yeah, he had to have some long conversations with his wife and and and then you know we started to to look for engineers to hire and then by the time we had found a couple of engineers. We were like I guess we have to pay these folks.
Alejandro Cremades: No kidding.
Keith Peiris: Ah, so then we we decided? Yeah, ah we we should maybe raise some money and that’s when you know Reid and Seth were like you know we think you guys are ready. Ah, you know how much do you need you? You should go start this. There’s no point incubating this any longer.
Alejandro Cremades: That’s how basic. so so I guess for the people that are listening to get it what what ended up being the business model of Tom. How do you guys make money.
Keith Peiris: Ah, good. Good question so we ah right now we we grow using our free product. Anyone can try tome for free and they have limited functionality and then if you want to use um the Ai parts of tome. Ah you. We we we charge you for a pro plan. Um, and that’s going really? Well, we’re scaling up monetization but the the big place that we’re going to go to eventually is that I think this is a really powerful enterprise product. You know where you can train homes ai on your data. You know your Google drive or your. Ah, data warehouse and then we sort of generate content trained on the things important to your company and that’s that’s where we’re we’re headed at the moment.
Alejandro Cremades: Now going back to the point that you were mentioning earlier where readid you know is like hey guys I think that it’s time to to make this thing fly and to raise some money How much capital have you guys raised to date and how has been the experience of going through through that journey to.
Keith Peiris: Yeah, so we’ve raised I think 81,000,000 ah to to this date. The first round was around 6 and you know it’s it’s been an interesting process. Um, which is to say that I think um, a lot of founders get tripped up. In this, you know in the sense that it doesn’t matter how good your idea is you’re always going to have a bunch of vcs that don’t understand your idea they don’t understand where you want to go. They don’t believe you? Um, and um I think my my current take on it after having fundraised 3 or 4 times is that um, it’s actually. More important to find people with the same core beliefs as you than it is to convince someone of something they don’t already believe which is to to say that we know we we have incredible investors who who we found who actually believed the same thesis as we did around building. And enterprise company first with a consumer. Go-to-market sort of using artificial intelligence using mobile tech like hiring consumer people into an enterprise space. Those were all sort of core principles of tome the company and um, you know if you find like an off the shef. Enterprise saas investor none of this makes sense to them. They’re like what do you mean you’re you’re hiring all of these consumer people to build an enterprise company that’s crazy. You’re going to invest a lot in technology. That’s also crazy or um, you know I think tome is a very broad product right? It works for everybody from students to.
Keith Peiris: Parents making children’s stories all the way up to founders making pitch decks and that’s sort of um, blasphemy right? Most early startup people tell you you should build for 1 person and do 1 thing for them really well and scale up and we’re like no, that’s not an interesting company. You know we want to build this. Really powerful tool for lots of people so we went through our string of rejections. But eventually we we found people that that believe the same thing as us and ah and I think it’s it’s sort of really nice they’re they’re on the journey and they’re aligned.
Alejandro Cremades: When when do you when do you know that you have that alignment in place.
Keith Peiris: I Think um, it’s It’s sort of funny. This is this is true of recruiting and fundraising which were maybe the same thing I think there’s always this predisposition to want to sell the company in the rosiest way possible. Right? You’re like I’m trying to convince this head of engineering to join our company I need to make it look like it. We’ve made further progress or ah, you know with an investor you want to make it you know, instinctively you want to make it look like you’re further along or your thinking is sharper than it really is but um. Found for the most part just being really honest about where we are and really honest about the path. We’re going to take um the the people that aren’t into that self-select out and you know who the the people that you’re left with usually ah are really really aligned.
Alejandro Cremades: And then in that in that case I mean obviously you know to all these investors for raising all that money because Keith let’s face it. You know the eighty one you know million bucks that you guys have raised. You know it’s a lot of zeros you know they come obviously with a lot of expectations. And obviously you know like the the alignment tool. You know it’s an alignment around a vision that you guys have created for this now that compelling future in which you guys are living into so thinking about that you know just for a second here if you were to go to sleep tonight. Keith. And you wake up in a world where the vision of tome is fully realized what does that world look like.
Keith Peiris: Um, it’s a good prompt. Um, you know one of the things that I I tell at the company. All the time is that you know tone. Ah, right now is inventing. Ah ah, a very specific communication format. Right? It’s this thing that replaces documents and slides and canvas. But um, you know we’re we’re a multi-format company. This is just our first product and it certainly won’t be our last product when I think about spiritually what tome is trying to do you know we’re trying to sort of build. Um. This really high fidelity communication channel between people so they can understand each other’s ideas you know I think in the future we would want to build something like neralink you know, maybe where you can connect your brain to someone else’s brain and completely understand what’s on their mind and their ideas. Um. Because I think if we can sort of advance understanding of ideas and advance understanding of each other we can work on things faster. You know we can go and agree on energy climates. Ah, politics much faster and then just go make progress on them as people and that’s sort of the fit the future I’m excited to build and we just hope that that our technology plays a small part in that.
Alejandro Cremades: My god that looks like a exciting future for sure now imagine Keith that you know we werere talking about the the future here but I want to talk about the past but doing it with a length of reflection. You know, let’s say I put you into a time machine. And I bring you back in time you know maybe to that basement where you were you know pitching and wandering through forrooms you know with your father you know your first stint that they are taking a look at what you know building creating value and extracting value could look like and let’s say you were able to have a sit down. With your younger self right? there on the spot and give that younger Keith 1 piece of advice before launching a business. What would that be and why given what you know now.
Keith Peiris: Ah I would say the maybe the most important thing to to me is that ah, whether you are selling people on buying a contract with your company or selling people on joining your company or selling investors on fundraising for your company. Um as a Ceo as a founder. Ah, you’re going to be spending most of your waking life selling people on your company right? selling people on you on your idea right? and and and I think that because of that um you need to be really really excited about that idea and um and and it’s sort of. Interesting I think people that are really deeply passionate about the work that they’re doing have this unfair advantage. Um, and and I think that that’s actually in contrast to a lot of the advice that that that that startup founders get you know a lot of startup founders. Get this idea that you should. Choose a really easy problem that nobody else cares about um and then you should do that really well because nobody else cares about it and you’ll take that market and then you’ll land and expand and go to the next market in the next market. Um, and that’s like pragmatically true but you know you you have to build a company made of people. Right? And so you need to inspire great people to come and work on this idea with you for it to be worth anything and and I actually think that you you sort of have this you and build the superpower of recruiting. Um, if you choose to work on something really hard that you’re passionate about and and I actually think that’s why.
Keith Peiris: Some really hard ideas even though they look hard on the outside might actually be easier to pull off because you can sort of attract incredible people into it.
Alejandro Cremades: Wow, that’s very very profound. So Keith for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Keith Peiris: Yeah, ah so I read all Dms on all communication channels but I would say you know go to tome dot app play with the product and then you know if you’re interested send me a note Keith that tome page I read every email. Or reach out to me on Twitter excited to hear from you I’m Keith Perris
Alejandro Cremades: And what is your Twitter handle. That’s it you see enough Keith well hey, thank you so much for being on the deal maker show. It has been an honor to have you with us today.
Keith Peiris: Likewise really enjoyed the chat.
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The post Keith Peiris On Raising $81 Million To Turn Your Ideas Into Compelling Stories Using AI appeared first on Alejandro Cremades.
Adam Nathan went from working in the White House to launching a tech startup that has raised sizable seed and Series A funding rounds. The venture, Almanac, has attracted funding from top-tier investors like Leore Avidar, General Catalyst, Indicator Ventures, and Floodgate.
In this episode, you will learn:
- Managing your fundraising process
- Oversubscribed funding rounds
- Productivity
- How Almanac is making a difference
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Your email address is 100% safe from spam!About Adam Nathan:Adam Nathan is the CEO and Cofounder of Almanac, a cloud-based platform for professionals to create and share open-source work documents.
Founded in San francisco in 2019, they already have the world’s largest library of customizable business documents and standard operating procedures, with specific versions of documents that users can copy and customize.
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Read the Full Transcription of the Interview:Adam Nathan: A cliff.
Alejandro Cremades: Alrighty oh everyone and welcome to the deal maker show. So today. We have another founder another founder. You know he’d say raised unbelievable seat round. Ah big, big big series a 2 so he goes from 1 big round to another and but we’re gonna be talking about. Ah, basically you know building scaling financing and all of that good stuff that we like to hear so without further ado. Let’s welcome our guest today Adam Nathan welcome to the show. So you’re one of a can.
Adam Nathan: Thanks so much. Glad to be here.
Alejandro Cremades: Of a kind item because you don’t get to meet you know, a lot of people that are born. You know and raised in New York City you know New York City is kind of like a big united nations so you are definitely one of a kind so give a walk through memory lane. How was life growing up in New York city
Adam Nathan: Yeah I mean it was great I I guess I’m a stereotype of a new yorker and that my parents are also from New York ah we are jewish um, you know in my mind, there’s a classic New York new yorker cartoon of like basically everything past the Hudson River being oblivion and in the same way I think growing up New York was the center of of my universe. Um, but it’s a pretty great place to um to grow up as a kid because there’s so much culture so much diversity so much stimulation I think it led. My ambition to run wild and my parents are entrepreneurs themselves. They run a small business and I think taught me and my brother the values of hard work and persistence and um, you know, really putting in ah, putting your all into the things that you dedicate yourself to. Think the idea of responsibility and giving back and making the world a bit more just a bit more right were were values that I’ve I’ve taken with me into my adulthood.
Alejandro Cremades: And what was that day that experience of seeing your own parents going through the ups and downs of the entrepreneurial journey. How about how was that for you.
Adam Nathan: Well I didn’t really think much about it at the time but seeing that both my brother and I have started our own companies that I think have been quite successful and in different ways means that there is something in the water for us growing up with my parents. You know I I remember my mom sitting on. Her bed late at night with just paper sprawled out around her and she would always eat like Minen’s and candy while watching Tv and doing the accounting paperwork for my that the business that she and my dad ran and I think the idea of um, the kind of self-sufficiency and self-reliance you get when you own your own. When you’re on your own destiny was something that has always been really attracted attractive to me. Um, you know I went to to college and another big idea for me has I been around social justice and making the world more ah more the kind of place. We all want it to be and I think for me combining that idealism that was I think just in my Dna that I got taught in school and in in temple along with this idea of um, owning your own future made me like a natural entrepreneur and I think it’s the perfect career for me I I think if I had done anything else for. For too long. It would have been a career limiting move to some degree. Um, when people always ask me like should should I start a business or should they sort of business I always say no unless there’s nothing else you can do ah or an idea that keeps you awake you know five to 10 hours a night and I think.
Adam Nathan: Um, starting a company founding something is something you do only when there’s when nothing else is possible and I think seeing my parents work so hard and and succeed and thrive because of their efforts was help me identify that it was probably the right path for me too.
Alejandro Cremades: And what about what about skiing? How do you get into skiing.
Adam Nathan: Yeah, my ah my dad was a big skier and grew up so basically spending most ah, a lot of weeks during the winter skiing. Um, you know I’m someone I love moving fast and racing is something where you have to essentially you know, check hit all the. And all the polls check all the boxes going as fast as you possibly can it involves a high amount of risk along with a lot of precision and balance and so um, you know I feel like I pulled a lot of those elements actually into my day-to-day life now even when I’m not racing all the time. But um I don’t know what came first my love for. Ah, starting things are my love for skiing. But I think it’s the same preferences my same in 8 many and a preferences that drive both my passions.
Alejandro Cremades: And very competitively. So so how competitive are we are we talking about? you know you took skiing.
Adam Nathan: Yeah, um, well I was on the junior national ski team for 8 years I eventually left to go to college instead. But I I spent most of my high school day seeing.
Alejandro Cremades: And why why? why? why? why? Why? why? not going professional why not going to the olympics or stuff like that that maybe you had dreamed of you know during those 8 years that you were there.
Adam Nathan: Yeah, ah skiing is an individual sport and it’s you know when you Ski you’re competing not only against people from other teams. But even your own teammates and you’re really only as good as your last race a couple of seconds. Ah. Your results can change where you stand on the team and and your spot and your qualifications and I’d say so it’s it’s it’s intensely competitive all the time and I think I just got burned out by that one of the things I love about running a company now is that it’s and well well the founder journey can be very Lonely. Um. At its best. It is a team sport and it’s about to succeed it really does take lots of people different talents working together and and I think just kind of being that that competitive for that Long. Didn’t stop being fun at some point and you know I So I still ski a lot now and I’ve. Kind of redefine my relationship to the sport I’m still very competitive with myself when I Ski and I I think still Ski really fast, but it’s more about being in the moment um enjoying ah the sunlight and the snow and the world around me skiing with friends than it is about trying to win something and. Yeah I prefer I prefer my life whiskeing now than I’m than before.
Alejandro Cremades: So I guess when it came to ah competitiveness how do you think about that when it comes now to your life when it comes that to business. How does that you know translate into things.
Adam Nathan: I’m still intensely competitive and I hold myself to very high standards I hold our team tie standards I think one of the reasons people come to work at almanac is because they want to take a big swing and push themselves harder than they would anywhere else and. So I think it’s actually part of our value proposition to our to our team members the the standards that we hold each of the two that the competitive drive that fuels our efforts but at the same time I think I’ve also learned how important intrinsic awards are. Ah, you know, internal learning and growth getting better on your own developing mastery over things and doing things because you think they’re right and they’re important to you over just things that are important. You know, externally to the market and I think um, you know both both my internal value system. Um fuels my work. It’s almost disconnected from anything that’s happening externally with a business along with I think a strong desire to achieve and make an impact and change the world and so you know I still draw on a lot of that competitiveness. But I think you know competitiveness on its own can be very empty and you see you hear stories all the time about people who set some kind of goal and even when they achieve it. Um, you know it doesn’t hold any of the that there’s there’s none of the satisfaction they thought that they would get when they got there and that’s because I think having a reason to do something that’s important to you outside of anything else. The world is saying is is also critical for the level of energy and the amount of persistence. It takes to start and grow. A.
Alejandro Cremades: Now your case you went to duke and then you know obviously after the the skiing you know like didn’t didn’t pan out the way that that you had hoped for or you know perhaps you know you got burned out as you said, but you went to Duke you did your studies you got excited about Social justice.
Adam Nathan: Ah, business into something really big.
Alejandro Cremades: And then all of a sudden you find yourself at the white house. So especially you know working there with with president Obama at the time. What what did you get out of leadership. What was what was what what what kind of definition did leadership. You know like get. You know for you, you know during that time. How was that experience for you.
Adam Nathan: Yeah, well just to set some context you know I um I remember getting a call. Ah maybe during the last couple weeks of my senior year at Duke I know I think it was from an unlisted number and it turned out to be the white house and they asked me if I wanted to come first. Join as an intern and this was in ah 2010 so’s about a year into the Obama administration or or actually more like six six months since inauguration and so this was the time that president Obama was trying to pass um health care reform. He was trying to pass what became. Ah, Dodd -frank the financial regulatory reform bill. Um, the the recession was still ah, very much a topic around. How do we get out of it and so I think president obama came into office with you know more challenges than really any modern president since maybe fdr and I was asked to. To kind take a work at the white house and I was 21 and had never had a full time job before and 1 of the interesting things about the white house is um, a lot of the people who are you know doing the work all the principles like ah advisors to the president and the people who are managing the work are all. Ah. People like me. Ah you know, young people with a lot of time on their hands. So it’s almost like a reverse pyramid whereas in most companies, you know the people who are managing at the top at the white house. The people who are managing and supporting are are at the bottom. Um, and you know it was an amazing first job because ah.
Adam Nathan: It really set my expectations for what work could be what what making an impact could be you know at a lot of jobs you go in and they limit what you can do at first and you know like someone has to read your emails before you send them and you can’t speak up in meetings and there I was at the white house interfacing with ceos of major banks. And people who ran you know huge advocacy organizations as a twenty year one year old and you know even small things when you work at that level of government carry a lot of impact like and I was in charge of like inviting people to meetings with the president and and helping them manage. Um our work around. Ah the economy and so I think it. Um. You know it showed me what kind of impact I could have we could have when um when you really give your all to something everyone there worked incredibly hard and and like today you know spending an hour more on your work actually did lead to more impact and I think it’s some people think oh well. Doesn’t work hard work doesn’t really matter giving something my all doesn’t really matter because it won’t lead to some kind of result and I think I learned early on at the white house that working hard does make a difference. Ah, not just for me in my career but for for other people for even the the city of the world and I was young and I i. Probably didn’t have like you know that I was just one of many people working really hard. There. But I think um, you know working in a place where I could have so much impact at a young age set the bar really high for me and I think nothing’s really come to rival it except starting something on my own and and really being someone who can.
Adam Nathan: Really being in a place where I can drive my own my own destiny.
Alejandro Cremades: So obviously after this you did some consulting and then you did your Mba at Harvard I’m wondering like you did your Mba at Harvard and it sounds like you know that’s like the perfect you know shift or ah.
Adam Nathan: Yep.
Alejandro Cremades: Ah, gear shift you know towards starting your own company, especially if you had you know your parents you know as entrepreneurs. Why didn’t you start your company out of Harvard you know because obviously after Harvard you know you went to a few other companies like lived and. Envaral money and crossby. You know for a few a few more years before you started almanac so what were you waiting for.
Adam Nathan: Yeah, um, it’s a good question and just just for some context I was always interested in complex systems I I design my own major when I was at Duke as an undergrad and it was around leadership and systems change and developing economies I was really interested in how. You know 1 individual or a small group can actually change the world. Um, especially in environments that are ambiguous or fast moving and the the couple things I did before going to business school like working in the federal government working with large nonprofits working at an airline where really like practical exercises happen. How can how can one person. We’re going to really messed up complex ah space and and actually make things better and you know airlines and nonprofits and and governments are all examples I think of relatively dysfunctional markets and and often companies and I was just fascinating by how organizations work. Or or don’t work and so when I went to business school I was still really interested in this topic of like organizational behavior essentially and I did consider ah after business school starting my own company. Um, but i. You know I hadn’t never worked in tech and it it was clear to me that if you want to change the world make an impact the best way to do. It is to ah to work in technology and work on the internet you know software is eating the world has been for some time now and if you want to be part of changing things improving things for the better.
Adam Nathan: I started to think the best way in was to um to learn how to build and sell and service technology and so I had had no experience in tech before and so working I interned at Apple and then I worked at Lyft where I ran pricing and I just wanted to get some experience in understanding functionally. Like how do you build software and how do you run a saas business. Um, you know, even at Hbs there was ah a focus on tech but you know Hbs I don’t think really knew at the time how to teach tech. It’s not like they had people whose founders who had started of big tech companies. Really. Um, there as professors it almost felt like the blinding the blind and a lot of the tech classes. You know, really I think to learn how to be a product manager or a marketer or an engineer you have to go to the source of the knowledge the practical knowledge which is is here in Silicon Valley in San Francisco
Alejandro Cremades: So then in 2019 what what felt different you know at this point because you know you gave your nodes at Croby and then you get going with almanac so what felt different what what What was that the switch or that. Light bulb that they you were waiting for? yeah.
Adam Nathan: Yeah, well for me, it was kind of this idea that I I couldn’t get out of my mind and as I so mentioned you know I have ah my brain works in in a systems thinking kind of way and I have always been someone to quickly analyze how how people how processes how structures are working together or not. And you know when I um, when I worked at Lyft and avaro I worked as a product manager and the job I thought I was hired to do is to help build products but when I actually got into those organizations. What I actually spent my day doing was sitting in back-to-back meetings constantly trying to stay on top of slack and emails. Um, following up a people to see if they even read the proposal I sent or what they thought about it. You know work that I consider not to be work just like overhead tasks and it often felt like even trying to get simple things done like getting approval on documents would take my entire week as like pushing a ah ball through mud. You know it wasn’t the job I thought I was hired to do wasn’t the job I woke up in the morning to do and I had this contrast with the engineers I worked with who were using a tool called github which basically allows for engineers to collaborate on code. Um, even when they’re they’re not together and. These engineers who are on my teams were a lot more productive than me and actually getting stuff done and seemingly happier and so you know I was outlift and at first I thought well you know, maybe it’s one organization and so when I went to work out other places I started to see that this this feeling of like dysfunction and like the um work feeling.
Adam Nathan: Doing work spending your days doing work that that wasn’t work wasn’t something that was endemic just to one company or even 1 industry. It was something that was happening across all types of companies and and even in like the what should be the fastest companies in the world like native tech companies and so I started thinking about this idea of. Um, that some people these engineers I were working I was working with were living in the future and the rest of us were like stuck in the past at using processes and and tools that were designed for for work from the 1950 s and at the time I didn’t really know much about like what the seeker was behind how developers collaborated but. I started thinking that there was there was some opportunity there and so it was for me less. Ah but it was more that I was ah start to get obsessed with this idea um of what if knowledge work could all be like um how engineers work together. Ah that made me want to quit my job and.
Alejandro Cremades: So what happened next.
Adam Nathan: And launch myself into a venture. So yeah, you know I this is 2019 maybe January Twenty Nineteen and I was thinking about this idea and I um you know had met ah someone who became? ah. My cofounder who ran our engineering team through a small consulting project I was doing and this company that this other company we’re working for wanted to hire both him and me to be full-time and I remember saying to him you know I have this other idea and you know would you be interested in maybe trying it with me and we can give. Yeah, this consulting opportunity like a couple weeks to see if that takes off and we can also you know, spend half our time on what became almanac um and we’ll see what kind of horse race these ideas and see which one took off and I remember almost instantly when we started working on almanac we got traction. We you know people. Customers were interested in paying for our product investors were interested in giving us money and it just it. It felt like this like massive pull. You know I think within like a week or so we had to tell this client that we wouldn’t be able to work with him because um, almanac just started it. It got that immediate. Traction so quickly and that was January Twenty nineteen and you know from there. It was clear that ah we had a real a real idea a real business on our hands and we started thinking about you know this? maybe this maybe we should start raising money to help us.
Adam Nathan: Hire a team developer a small team of developers so that we can actually build a better product than the essentially prototype we had.
Alejandro Cremades: And for the people that are listening to get it. What ended up being the business model of almanac. How do you guys make money.
Adam Nathan: Yeah, so at the time we built what was called the the first version of the product. We called the almanac core and it was essentially an open source repository. Ah best practices and so very similar to stack overflow and the developer side essentially was user contributed content that was free. Um. That helped people understand how to do best practices in tech you know there are all these spaces like product management and product marketing devops that really didn’t have codified best practices yet but were kind of the the fastest growing technical roles anywhere around and so at first we were thinking okay like let’s help people never start from scratch some. And find a template that they could copy and customize in their organization that was you know really created and validated by experts and what we the feedback we got that that worked really well actually but people started asking us hey we don’t just want the template. We actually want um like better rails for. Collaborating on that work for approving that work for sharing it. But but people start saying to us is we don’t want stack overflow. We want Github and and github is kind of the core operating system for how developers collaborate on code. Um, and so what we started building after we built this templates gallery was a document editor that had. Um, a bunch of workflows for getting structured approvals on documents for putting them in handbooks that then automatically updated over time. So that essentially you could create and collaborate and share information without needing to meet and this was in 2019.
Adam Nathan: And you know we we looked at github often and say like oh well, what are the kind of killer features of Github and and github there are these things called pull requests which essentially allow you to ask for feedback or approval what we didn’t realize was what makes github really powerful is that these pull requests these structured approvals enable engineers to work. Across time and space without needing to meet they enable engineers to work on distributed teams and engineers have been working in remote context you know for 20 years before the rest of us did and as we started building our product and 2020 covid happened and what we realized is we we weren’t just building. Um, like github for documents we are building a platform for structured collaboration that could power remote teams and then all of a sudden it wasn’t just a small group of early adopters that needed our product. Everybody needed something that would help them work faster without meetings.
Alejandro Cremades: So so obviously you know in this case, you guys raised for money how much money have you guys raised today now now now very interesting the way that you guys have gone about it because.
Adam Nathan: Think over $50,000,000 across yeah
Alejandro Cremades: Always making this big splashes. You know on each one of those rounds you know seat round How about how much was the seat round and then the series a how much was there series a I mean it’s a some really big rounds. So so why.
Adam Nathan: It was $9,000,000 it was $40,000,000 yeah
Alejandro Cremades: Why so much money in in in those rounds and and how did you guys go about really putting that together because I mean it’s It’s not easy to raise those those big rounds.
Adam Nathan: Yeah, and so ah, our seed round. We raised in 2019 and I remember as I said we we got immediate traction for the first version of our product I remember talking to my cofounders saying like should we raise money or should we just try and bootstrap this. We. Agree that raising some amount of money would help us hire some developers and accelerate our progress but we didn’t want to overraise and I remember talking to 1 of our advisors just trying to figure out the right amount and the right valuation and his strong advice was just go out and raise you know a couple hundred thousand dollars at a um. And a modest valuation don’t overraise don’t over optimizime for fundraising because that’s not the point of starting a company. The point is to you know, build a product people love and then grow the hell out of it and so you know initially fundraising it was it was not ah it has never really been a focus of ours. But I think we initially targeted like $300000 I thought it would take us. 3 to six months to raise I think be raised in like three days um and then you know with a lot of grade fundraising processes. There’s I think often. Ah a snowball effect where I like to compare it to um, like thermodynamics where often there’s a difference between um, you know? a. Ah, fire in a room and a room on fire and firefighters actually talk about this inflection point where when you like basically the whole um the way like air and and heat work in a room changes when the fire starts to just overpower things. It starts to just consume more and more and more oxygen and.
Adam Nathan: You know that’s why often you see like oxygen getting sucked into rooms when there’s a really powerful fire inside. You know I think we were able to leverage the effects of fomo with investors where um, our rounds became a hot round. People started to hear about it investors who had committed started making more and more referrals and so there was this almost compounding that happened where we got increasingly more and more intros every single week that the fundraisers opened and so and I think this is this is a dynamic in in many successful fundraising rounds where. Ah, you know for us it happened pretty quickly. But sometimes you can go weeks or months with minimal traction then and then all of a sudden as soon as you get an investor or series of investors who are willing to really back the deal like things can take off quickly and and in our case that happened really immediately and I think you know, ah.
Adam Nathan: I think we rate we structured the round really well, that’s the advice I always give to founders is you know, pay attention to how you set up your round and how you manage it because that’s just as important as the idea you’re pitching. Ah, but even the idea itself of like building a you know core productivity offering that’s designed for the internet and for the internet age. Ah, it was a big idea two and a half of the top 5 most valuable companies in the world are productivity companies. So huge huge market um and and you know to your to your question on how much we had to raise it often takes a while to build ah companies like this. Companies like notion and airtable and figma. All all amazing successes now took about 8 to 9 years to actually reach their inflection point and so I knew that if we wanted to really build something like github that isn’t just a product people use a couple times a week but is a product people spend their entire days in you know it would it would take. Years of investment.
Alejandro Cremades: And obviously when it comes to um, getting investors you gotta share with them a compelling future a compelling story. You know, imagine you were to go to sleep tonight Adam and you wake up in a world where the vision.
Adam Nathan: Depth.
Alejandro Cremades: Of almanag is fully realized what does that world look like.
Adam Nathan: It’s a great question I I think it’s a world where we get to spend our days doing work that only we can do yeah so much of our days are spent on excuse my french but bullshit ah you know doing tasks. Ah, sitting in meetings consuming and sharing information that all could be automated and you know even in this age of Ai. Um, so much of collaboration how we work together is deeply human even you know the ai tools that that we’re building an almanac and that other companies have built they all access data. About what has happened in the past but nobody can predict what’s going to happen when humans sit down together to solve a problem. Um, and you know even even on basic types of collaboration like getting your feedback or getting your approval or sharing out knowledge. Um, they’re they’re extremely manual and extremely time consuming. You know we. Um, did a survey recently where we asked thousands of white collar professionals how much of their time they spend sitting in meetings responding to messages and and looking for Files Mckinsey asked the same question ten years ago and the answer then was 68% which is already pretty high ah today in 2023 on average white collar professionals spend 95% of their working hours just on those basic 3 activities meaning they have no time to do their actual jobs and and I don’t think those hours are fun hours. They’re not fulfilling hours. It’s not the kind of work that ah you know calls to our our highest abilities and.
Adam Nathan: You know I want to live in a world where I wake up excited to do my job every morning where my creativity is is leveraged and I get to work with people I trust and respect not sitting around in back-to-back Zoom calls and I think if we lived in that world not just would people be more fulfilled but um, our innovation and our productivity would go up. Um, we would solve bigger and more complex problems together. You know I think anything’s possible when we put our minds to it. it’s it’s amazing it’ll go back and look at headlines from the sixty s and the 70 s about things that we thought would end civilization that we basically just solved through. Like technology and engineering and innovation and I think a lot of the problems that we face today are are solvable problems so long as we don’t get mired in the muck of all this overhead work. Ah, and I think it’s our it’s really about the systems that we use and the tools that enable them that will either allow us to you know solve. The the biggest opportunities and challenges before us or or get bogged down by them.
Alejandro Cremades: Now we we were talking about the future. So let’s talk about the past but doing so with a lens of reflection imagine I was to put you into a time machine and I take you back in time you know maybe to that point where you’re wondering. You know what you are going to do you know at Crossby you know you you you got the ad now you wanted to do something of your own it was it was time. Let’s say you had the opportunity of going back in time and and giving that younger Adam one piece of advice for launching a company. What would that be on why given what you know now.
Adam Nathan: Yeah, ah well I think to your earlier question I would have told myself to to do it sooner. Um, you know I don’t think that entrepreneurship is for everybody I think it’s often portrayed as a ah you know, really sexy role. That’s full of like fame and glory and riches when the reality is that. Ah, it’s an extreme exercise and persistence and Grit. Ah,, there’s a lot of difficulty and self-doubt and pain involved and you know I think life is pain and work is pain and there’s often that the choice really is what kind of pain We. We want to take every day you know it’s painful to. Be a middle manager in a big organization where it takes a lot of work to get your ideas heard and politics to get stuff done in the same way that it’s painful to be a founder toiling an ignomy hoping that your idea gets to product Market fit and scale. Um, so I think really the choices that we all face every day is what kind of pain. Do We do? We prefer. And you know I I think I I wish I had recognized even earlier on that for me. Um, you know I’m built to be a founder. It’s the right job for me. Maybe it’s the only job for me I think a lot of founders and startup ceos come to the same conclusion and and I wish um. In some ways that I had started sooner. Ah you know I I don’t regret spending the time I did working in amazing organizations building my networks um probably getting skills and experiences that helped have helped me avoid mistakes later on you know, mistakes that I might I might have made if I had started as a company right out of school or something like that.
Adam Nathan: Ah, so I I don’t regret at all the path I took and if anything I think it’s it helped me identify this opportunity that was the seed of the idea in almanac that’s helped it be such a success. Um, you know I may not have figured that out because without the experience I had in the working world. But you know if anything I I. If I could tell myself something knowing what I know now it would be to um to put off the fear know that no matter what I do is going to be hard and just jump in sooner.
Alejandro Cremades: I love it now for the people that are listening Adam what is the best way for them to reach out and say hi.
Adam Nathan: Yeah I think my dms are open on Twitter I’m at I think Adam P Nathan and ah come check us out at almanac io um, and we love to see what you do with our product.
Alejandro Cremades: Amazing hey Adam thank you so much for being on the deal maker show today. It has been an on earth to have you with us.
Adam Nathan: Thank you.
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Kurtis Lin has been involved with several successful startups that have had great exits. His latest venture aims to disrupt the way our credit and borrowing power is valued, by using more data. Pinwheel has acquired funding from top-tier investors like Indeed, Coatue, First Round Capital, Upfront Ventures, and Franklin Templeton Investments.
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Alejandro Cremades · EP 641 Kurtis Lin On Selling His Last Company To Volvo And Raising $77M To Redefine Credit ScoringSUBSCRIBE ON:
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Kurtis is currently based in New York City, United States, and used to work at Volvo Group and SKF.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmaker show. So today. We have a really incredible successfully exited founder. You know he’s done. It. You know multiple times successfully and today we’re gonna be talking about what he’s doing with his rocket ship. You know the the new baby now that he’s launched not long ago. But but again you know the whole thing of building scaling financing and exiting you know which we like to hear we’re gonna be covering it in detail so without further ado. Let’s welcome our guest today Curtis Lin welcome to the show. Thanks.
Kurtis Lin: Thanks Ajara! It’s quick to be here a longtime listener and excited that I finally get to participate in the show.
Alejandro Cremades: Well, we are excited to have you Curtis now in your case hey you were born in the bay area but born to immigrant parents. How was life growing up.
Kurtis Lin: I Think it was like a lot of other immigrant kids in that I feel like every day was a challenge of how do I further assimilate myself I think about like a lot of the things that I was into like ah streetwear getting Jordans. Ah you know like trying to. Read all the same watch the same shows that my friends did to kind of fit in but there was always this kind of feeling of like having to really prove myself that I think is kind of a common thread to the rest of my my life.
Alejandro Cremades: Now in your case. Um you had this energy going on and they thank God you know to pokemon carts. You know they you know had a had a difference had an impact in you. So how how how is that.
Kurtis Lin: So first of all I have to apologize to my parents because they were even though they were tough parents. They were good parents and I put them through how like in fifth grade I set the record for detention hours. For the school like in the history of the school. It was like one ah hundred and fifty de attention hours and it was because I was just like so I feel like I had all this chaotic energy where I was like you know I want to do stuff I want do I want wanna sit in this classroom and just be told what to do right? And so. And needed to find a way to translate that energy into something that was actually productive and for me I’ve always been someone who once I set my eyes on something I’m like I have to have that right? So for all my ninety s kids out there. The thing was pokemon cards right? and the like holy Grail of pokemon cards was. This charzar card the holographic one that was like the the cremeda the crema pokemonk cards I had very stingy traditional asian parents who were not going to spend any money to buy me packs and the way you get them is buy these packs and you hopefully you you get that card. So I had to figure out how to get there and what I basically did was every day I would take my lunch and I would trade it for pokemon cards and that’s so I started with like a couple like really bad ones like the you know the normal peach choose scrollr. Whatever once and then is over time I kept on trading up and trading up and across.
Kurtis Lin: Ah, span of about a year I eventually traded my way into after many days of empty stomach and and and you know lack of lunches ah to my to ah the polographic charge art card and that was like the.
Kurtis Lin: Crowning achievement of my childhood and I still have that card in my like childhood bedroom on the wall. So. It’s like something that I’m like deeply proud of but also. I didn’t realize this but the value of those cards are now like pretty high I gotta eat. They’re like fifteen thousand for one of those cards. So like it actually ended up being a great long-term investment too.
Alejandro Cremades: Well, yeah. I mean I’ve seen that there is even some pokemon cards that go in the millions I mean I mean unbeliev unbeli now now in your case you know you ended up going to Uc a and still you know like.
Kurtis Lin: Yeah I unfortunately work one of those but one day
Alejandro Cremades: You were still in school. You know now you were like even thinking about launching stuff and in fact, you launched you know your your very first company there so where did that on entrepreneurial drive come from.
Kurtis Lin: Yeah, so a couple things I’ll say number 1 is the college experience I think is different for everyone but I had a really ah inspirational football coach when I was in high school who basically told me listen there’s a lot of lessons. You’ll never learn in the classroom. And I really internalize that because throughout I think with a lot of other children, especially immigrant children. You’re kind of like told by your parents like you got to get straight a you got to do all these things like that’s that’s the expectation and so I did all of that throughout high school and like you know gone to a great college that I’m you know deeply proud of to have gone to. Once I got there I realized I was like I don’t really like want to spend as all my time in the classroom I actually want to like build more social skills I want to be like somebody who’s more holistic and so I really spend a lot of my time in pursuits outside of the classroom and just like tinkering with stuff right? And so um. I think about what we were doing I’ve always had these ideas of like I wonder like what would happen if we tried this or tried that or like I think the world should really work this way and it was the first time that I actually had you know a lack of pretal supervision to actually do something so I was like great like let me go play around with that and so my two friends and I started this company that basically. Built a piece of hardware that would attach to your bike frame to prevent bikefab. So like think lojack. But for bikes right? This is like back in 2011 when the technology was like not fantastic, but what we basically did was ah built this thing and frankly.
Kurtis Lin: I like to you know, playfully call it a dumpster fire of a business because my two co-founders were amazing technically and I was the quote unquote business guy and I had no right being the business guy like if I had the expense that I have now going back. In fact, that could have been a totally different business and could have. You know, been huge, but basically I cut my teeth on just like learning like what a p and l is like how to sell to enterprise customers what channel distribution meant and all these things I’ve just like tried to figure out how to make something from 0 to one but we eventually ended up selling the Ip to Verizon and. Just that whole journey really showed me hey like you can really make something of yourself if you just kind of take an idea you have and just try your best to actually make it happen and it’s really as simple as that once we did that like I was hooked from that point forward I was like all I want to do is just do startups from now on like I just want to continue to create.
Alejandro Cremades: So 1 thing there that that I thought it was really interesting that you ah you you and I you know we’ve we’ve talked about it of line is how first time founders they think about product in second time founders they think about distribution. Why do you think that’s that happens.
Kurtis Lin: I think when you’re a first time founder you’re which is by the way. A great thing. You’re very idealistic right? You have this view of the world that you want to make a reality and you should never lose that that vision is like so critical to being a good leader and people people come to a company because they believe in your vision that you’re selling them. With that in mind you are like most people think about vision from a product perspective right? Like what does the world look like when we’re successful when you ask that question. It’s really hard to think about how does distribution get you to that any vision. It’s always about like what are we building that makes that reality happen. And so I think it’s only with all the scar tissue of having done it multiple times that you realize that the world is full of people. Society is full of people and the way that things go from 0 to one are that people have to decide that they want to use it and people have to use your product and then share it with the world. And so the distribution becomes a much more compelling thing to get to the true outcome that you’re looking for and I mean I’m sure a lot of b two b founders can relate to this I’m a consumer guy generally by like Dna I have had so many bd b deals done. Where the lesser frankly crappier product was picked because of the relationship because of the you know dynamic that exists between the businesses and it just really underlies the point that it’s not just the best product wins in the market. It’s just not true.
Alejandro Cremades: Now now in this case for you I mean you guys you know at least obviously I’m sure that as you were saying you guys would have done things differently there. Um, you know, but you ended up you know at least you know selling the ip and the technology which you know hey first say company first day outcome. And 1 thing led to the next you know you you find yourself in in San Francisco and eventually you know after being of always some startups there. You know you end up founding looks so how was that journey of of you know. Coming up with the idea you know the team and then all of a sudden you know you guys finally bring it to life.
Kurtis Lin: Yeah, so I will just clarify that my cofounder Curtis was really the like progenitor of the company and I and I joined him on that journey. So I fortunately can’t take the credit of being you know? ah 1 of the original founders of the business but the. The idea so I met Curtis through mutual friends and as we started to kind of talk and understand the business. The idea was just so compelling right? like you know when ah, there’s that famous Brian Chesky framework around like the 11 star experience right? and it starts with saying. What is a 2 star or is a 3 star. What is a 4 star or is a 5 star. Um, and let’s just not stop. There. What would an 11 star actually look like and very few products I think out there in the world really deliver that magical experience that make you truly say oh my god like that was amazing right. And so I remember actually trying the lux experience for the first time and for those who aren’t aware. Lots was basically on-demand valet parking so you’re driving around town. You can’t find a parking spot somebody drops or you drop a pit and a ballet comes to pick up your car for you and park it in a nearby garage and then whenever you want your car back whether it’s there or anywhere else. Just drop your pin again, they’re bring a cart back to you and that is a really magical expense if you can execute it well right? like I remember on our website we had this like wall of testimonials but we just had all these tweaks and there were like some of the most influential people in the valley were like oh my god like I tried watch. So first time this is incredible like this is real magic.
Kurtis Lin: And so I think if I just so felt too compelled by that experience and I was like I really want to be a part of this journey and so it was one of those you know fairy tale stories early on where we raised a bunch of we raised the seed at a and a b in very short order in about a year and a half um and so we learned so many incredible. Lessons there but 1 of the key ones I think is ah the experience while magical only gets you so far where sooner or later you have to pay the piper in the sense of it. You got to build a really foundational business that has great union economics and you know. As a lot of folks who work in on demand will tell you on demand business models are they’re tough. They’re like twenty four seven the margins aren’t great and you really have to like grind just to get them the the operational positive margin. You need to be successful. Um, but I I have such tremendous respect for all the operatives who build those types of businesses because they’re just sore right? Ah, ended up raising over 70,000,000 between the c the a and the b.
Alejandro Cremades: And with with looks how much capital did you guys raise.
Alejandro Cremades: And how I I mean we see the the first rounds of financings that that you were exposed to you know in this case, how was that journey especially during the first day. The first rounds.
Kurtis Lin: So I think ah because the experience was so this was kind of like you have to remember the context this was like ah 2014 or 2015 right? So this is like the uber for x era where everyone was really not sensitive yet to. Profitability it was more just like run the uber playbook at the scale and so between having this magical consumer experience and then having this huge tam because parking is a problem everywhere in the world. It was a really compelling story that like you know wasn’t necessarily one that was hard to to see and so I feel like. Frankly, the fundraising part was the part that was kind of part and parcel and pretty easy. The execution of the operational piece ended up. You know, being the the really hard part. But I mean you can you can sell that vision to a fifth grader right? It’s like imaginal world where you never have to worry about parking ever again. And everyone like I think like the key insight for us was you know how you always like to start with like the problem and then you talk with the solution. It was a problem that was universal to everyone even if you didn’t own a car as a kid. You know you’re sitting in the backseat. You think about your parents driving around and like oh there’s no parking spots and you just circle with a block and they over and over right? like that’s a problem that everyone can identify with and so it’s really easy to be able to say like we’re we’re solving that thing right.
Alejandro Cremades: Now in this case I mean obviously it ended up being a nice outcome. You know Volvo ended up buying the company. So at what point does volvo come into the picture and what was that the process like of of going through that acquisition.
Kurtis Lin: Yeah, it’s a really great question. So one of the things that we talk a lot about amongst you know my founder friends and I is this idea that companies are not ah sold. They’re bought and what that means is. You know if you if you’re going around shopping your business like that’s usually a bad time because the best deals are done because there’s a relationship built and somewhere along the way the buyer realizes that there’s such a strategicerative to you know. Acquire that business because it’s going to help them get to their goals much faster that it always is is preemptive or or largely organic right? It’s not like you’re like going around and saying somebody please might right? Those are never the best outcomes and I think ah, the same was was true for us where. All of these big auto oes have been reaching outuch for a long time. They get partnerships like we had 1 partnership with pche and Bmw and other ones and so we had built these relationships with folks including the ones at Bolo we were saying hey like imagine a world where any Volvo owner across the whole world can utilize this platform to get. Car picked up in service. They get their car washed. They get their car had to get like dry cleaning done and brought back to them, etc, etc. Grocery delivery. The the vehicle is an object that can do a ton of tasks. Especially if you’re not the one who has to be with it and there’s so many things you can do to create add-on services.
Kurtis Lin: And so I think they really bought that vision early on and then the key was really just continuing to show progress and the advancement of the platform to the point where they felt like one day they were like we really need this to fulfill our vision of the world and you know that is eventually when things start to come together.
Alejandro Cremades: So the acquisition ended up happening and what kind of clarity that give you into going through a really nice acquisition through ah you know with a nice you know acquire like Volvo I mean that’s ah you know some serious business when it comes to to a big corporation.
Kurtis Lin: I think I think it’s a great question because every founder I’ve talked to has gone through the exhibition process like you’re so tired by the end of the journey right? because you’ve been burning it at both ends for years and years you know seven days a week ah most waking hours of the day that the first moment that you actually get the deal sign and you’re just there is just like trying to unplug not unplug. Let me I think the best way to frame that is to just like step. 1 level back from that level of just like redlining all the time and once you can finally do so I think you started to like actually internalize the lessons that you learned along the way I think the the biggest thing was just ah, think about the average product cycle for vote. It’s. From inception to production release of a car is on average 7 years versus a software company where like that’s a couple hours right? So the whole like ethos of the way that the business is run is so fundamentally different. Because you got to get right? The first time and so they just this all these checks along the way versus the like super fast iterative motion that most startups go through especially if you’re a software solution and so it was really like ah a jarring culture shock for a lot of us like coming in and being whoa like this is a.
Kurtis Lin: Totally different way to operate but what it was also great. Is it kind of made us realize that ah there is a lot of operational excellence in big companies and so being able to get a dose of that and balancing The two was was really great and frankly I Think. Just seeing that platform take off and go global in a way that we we’re never going to do on our own was really cool to see too. So it really rewarding and it was a good closing of the chapter for for that to happen.
Alejandro Cremades: So Then let’s talk about closing of the chapter because after doing the typical vesting and resting you know for for Samis more resting in them for others but I’m sure that here it was hard work. But after that integration happened you know, Basically you know like you ended up. You know, coming up with your next idea with Pin Wheel. So How did the you know the idea come about here you know with your cofounder and how did you guys? Why did you guys think it was meaningful enough to take action.
Kurtis Lin: Yeah, so the first thing I’ll say is I have found this to be true of most founders that I’ve talked to I find myself to be what I call constitutionally unemployable meaning when I have a boss things. Don’t usually go well right? but. I don’t agree with what you’re saying I don’t agree with this approach. We gotta do it this way and you know for better or for worse I think I found that feeling of Oville too right? where it was like there were some amazing people there but I was just like wait. We gotta go this dimension guys come on and I’d be like well no, we have this plan let’s just follow the plan I was like I got I have this fire I have to you know, ah put out or at least feed I should say and so ah, when Curtis and I were at Voville we have both received hsa’s helped savings accounts for the first time and these whole savings accounts you realize are these super powerful financial vehicles. Because they have the triple tax protection and what we also realize is that they’re so hard to use. They’re often run by kind of like older incumbents that don’t really optimize around the consumer experience and people just often don’t have the money to actually prefund the account and use it so we realized you could actually solve that problem. If you just automated the whole experience. So basically what we did was we had people connect their spending accounts with an aggregator like platter finicity or what have you and then we built an algorithm that would monitor their transactions and whenever they made a qualified medical expense. We would flag. It.
Kurtis Lin: Go in their payroll system and just handle all the complexity so that they just got their tax savings added to their paycheck every month without doing any work and what we saw was you’re adding a thousand and two thousand dollars of free money into these people’s accounts every year that’s the difference between. Putting food on the table or making rent on time for a lot of people right? So we’re like we gotta this thing has the potential to really make a positive impact and on the world and so we took that and really kind of ran with it for a while and then interestingly one of the things that we encountered very early on was. We were spending all of our engineering hours. Not actually building product but just building integrations because we would have all these customers coming to us and saying hey this is an awesome idea I really want to use this but my my my company uses Adp or paychecks or workday or one of these other systems. You guys support us and we were like no have this very jenky beta with gusto that’s like duct tape together they’re like well can you you know, build support for us and so we’re looking around. We’re like there’s got to be some api up there that allows us to connect into all these payroll systems to make this thing happen automatically and then we realize that there wasn’t. So we built it ourselves just to power our own app and then this first really major inflection point came about for us where we realized that. Ah there were hundreds of thousands if not millions of other businesses out there both like 1 person fintech startups in their garage or the biggest banks in the world.
Kurtis Lin: That all needed programmatic access of the payroll systems because just think about what’s in there right? There’s such valuable information about who you are how much you make where you work what you pay in taxes. What your health benefits are imagine if that data was portable and could be shared with the consumer’s permission with the bank. Just think about all these you can do right? You can improve verification improve underwriting. You can do real-time use cases you can switch direct deposits the list goes on and on and once we had that realization. We’re like wait a second let’s kill the the hsa app and let’s just focus on becoming that infrastructure provider. Enabling all the players in financial services big or small to build the future of financial services. So it’s an Api and so the way that we make money is much like other apis in that there is a per api call or what we call a transaction fee model.
Alejandro Cremades: And how do you guys make money.
Kurtis Lin: And then we also have because a core part of the business is real-time use cases. Ah,, there’s also a component of it where there’s a subscription model where people can keep an account connected and monitor the account to see hey like is there been a change in their income is there a change in their employment, etc, etc. And that we charge a subscription fee Plus transaction I’m tough to So. It’s a really good question because I feel like anyone who is honest about fundraising in that time this was like.
Alejandro Cremades: Was it easier this time around to raise money.
Kurtis Lin: 19 to the beginning of 22 I mean this was like the the golden era for for founders right? and I think they had to be honest with yourself I would like to believe that I’m like an okay fundraiser but the truth of it is in that market like if you had a decent idea and you were you know Ah, a decent founder. it was kind of hard not to raise right like it was like and so I do think that while I don’t try to dispense advice because I think my experience on that was unique. Ah it goes back to the what we learned at locks which is it’s the storytelling piece right? like and 1 of the things that I just think is so under. Under Understoodd as um, a word but I guess misunderstood I should say is that selling as a skill is a universal thing that people don’t really realize right because think about what you do as a Ceo you have all these constituents you have your employees. You have your investors you have your customers. You have your partners you have you know all these other people in the ecosystem every single one of those folks you are selling something to you’re selling your employees the vision of what this could be become and the value of that equity in the long run you’re selling investors on the story and what their. Investments can return. You’re selling customers on this product working well and they’re making a big impact on their business. You’re selling partners on a shared business outcome with you. Both make a lot of money and and a really product a deep product synergy and for the but market you’re selling that the company is going to be this amazing outcome.
Kurtis Lin: And the number of ceos that I’ve met who you know don’t continue to refine that skill with each step. It’s kind of surprising to me because like that’s literally all you do all day long Year. You’re just selling right? And so I think very luckily because of what I’ve done in the past there was some element of just. Naturally and doing a lot of that that I helped with the fundraising process. But again it was ah it was a unique time that may never happen Again. We’ve raised 77,000,000 to Date. We raised the seed round from our great friends at Fresh Round capital.
Alejandro Cremades: And how much was saying how much have you guys raised late.
Kurtis Lin: Um, and Josh Kaelman for the folks in the and the market who know him along with our friends at upfront as well and our good friend. Greg Benelli there on the series a was from co 2 and the head of the fintech practice Michael Gilroy and then on the b was with ggv. Um, with our great friends Jeff Richards and Tiffany luck. So all amazing partners. Um, we have been really lucky that in our entire journey. We’ve been preempted and I’ve never actually done a real process before but I think again it goes back to what we talked about around m and a when you build relationships and you build them the right way. Ah. You’re constantly feeding your your your pipeline in a way that doesn’t require you to have to actually run a process if you I think do it? well.
Alejandro Cremades: Yeah, no kidding now. Obviously you know to all these investors. You know they saw clearly a vision that was compelling enough for them to you know offer you to lead you around and and to get around done now talking about that if you were to go to sleep tonight. And you wake up in a world where the vision of Pin wheel is fully realized what does that world look like.
Kurtis Lin: That is a fantastic question because we actually just talked about it again as a team at our all hands earlier this week so every single person on the team joined because they have a personal connection to the mission and something that I’m deeply proud of having as a central. Thread across every pitgilly on the team. So when you think about the world today especially in the financial services world. There’s this idea of credit bureaus and these credit bureaus are antiquated because they take ah a single number your Fico Score and they determine everything in your financial life with it. The problem with the bicos score is that it’s basically ah a record of historical performance right? And so when you think about any credit product. There’s 2 questions you always have to ask what is the customer’s willingness to pay and what is the customer’s ability to pay. We talk about.
Kurtis Lin: Willingness fico has been a like proxy for it and it’s okay, not great, but no one has ever actually tried to answer systematically this question of what is the customer’s actual ability to pay and the ability is actually way more important from a risk and undermining perspective and so when we think about this. Our long-term envision is to say we are trying to build the fourth bureau the income bureau so put aside Fico what really matters is answering this question about ability to pay and the way that we do so is by partnering with all of these different payroll providers to say you guys have this information put it into the hands of the customer. And allow them to make their like to bring it to the financial provider and get better financial products right? And so the example I always give is there are like teachers and nurses out there who have really stable jobs who’ve had the same job for four or five years and they have really really. Solid borrowing behaviors but their fico is like five fifty so anytime they go apply for a financial product. They get rejected automatically right? And what we’re saying is give them the information they’ve about the how much they make and how consistent it is give it to the lender at the point of decision. And they could be like actually these people even though they have a fico at five fifty because of the stable income are actually much closer to 7 50 in practice and we should actually feel comfortable lending for them and what we’re trying to do is fix this really broken credit system with a bureau that actually answers all the other questions and builds these really complete profiles.
Kurtis Lin: Versus trying to make all these decisions off of a single number that just doesn’t make any sense.
Alejandro Cremades: Beautiful, beautiful now we’re talking about the future here. So let’s talk about the past doing it with a lens of reflection. Let’s say I put you into a time machine and I bring you back in time I bring you back to that moment where you were still in new cla. You know, wondering what the hell you are going to do with your life after graduating but let’s say you know you had the opportunity of you know, having a sit down with that younger self and being able to give that younger self that younger Kurt 1 piece of advice before launching a business but would that be and why given what you know now.
Kurtis Lin: Wow, that is a really good question I feel like I have like a hundred things I want to tell them right? Ah, but I’m not gonna cheat I I think the most valuable piece of advice. I could say is ah just start I think I historically have always kind of struggled with this thing of like had this idea I overthink it or like oh was no way that’s going to work or whatever. And I’m a perfectionist by nature and so so much of myself is just like if I want to do something I want to do it right? and I think what makes a really good founder is someone who prioritizes progress over perfection like it’s better just to get something out. Just to learn and see and iterate and to be shameless about having a half baked thing out there than to sit there and say I’m gonna spend another six months on this thing to really make it happen because by the time it does the market has passed by someone else has done the same idea or you just don’t even. You have those ideas in your head that you haven’t even validated with customers and I think a lot of people some of the most exceptional people I know are perfection is by nature which is what makes them so good right? like their bar for what they consider to be a deliverable product is so high that it actually hinders you from being able to do anything.
Kurtis Lin: And I think like unlearning that um has been really hard especially because I’m sure a lot of the folks in your audience can relate being raised by. You know these 2 immigrant parents. They set the bar really high I remember I joke with my friends like when you bring home a a poor card full of a’s. The first question to my parents always asked me was like well why aren’t those a pluses and I’m like first of all, there was no a plus right like I got the highest score I could have gotten but it was just that mentality of like excellence is the expectation and I think that is good in many ways. But if you don’t unlearn a part of that. Then it actually prevents you from being able to be a really good entrepreneur and a really good leader.
Alejandro Cremades: I Love that you know I had a similar realization the importance of building on data versus building on assumptions and and look I think that you’re you’re right on on that now for the people that are listening. That would love to reach out and say Hi. What is the best way for them to do so.
Kurtis Lin: Ah, feel free to find me on Twitter at Curtis K U R T S J Lynn L I N um and also feel free to I love getting emails from anyone literally anyone and it’s current at pinbullapi.com
Alejandro Cremades: Amazing! Well hey Kurtis thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Kurtis Lin: Thank you! The honor is online.
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The post Kurtis Lin On Selling His Last Company To Volvo And Now Raising $77 Million To Redefine Credit Scoring appeared first on Alejandro Cremades.
Even with dyslexia, Peter Majeranowski has invested in building companies all over the world, worked with the Pentagon, and has gone on to raise tens of millions of dollars for his clothing tech startup. The venture, Circ, has acquired funding from top-tier investors including Breakthrough Energy Ventures, which was started by Bill Gates.
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Your email address is 100% safe from spam!About Peter Majeranowski:Peter Majeranowski is the CEO at Circ. Prior to that, they were a Partner at Windmill International Limited from January 2004 to May 2010, where they helped execute private investments in early-stage companies and projects throughout Southeast Europe and the United States.
Prior to that, they served in the United States Navy from June 1998 to October 2003 as a Naval Officer in the Surface Warfare Community.
Some of their notable assignments during that time included Surface Warfare Officer School, Newport, RI (1998); Damage Control Assistant, USS OLDENDORF, San Diego, CA (1999-2001); Fire Control Officer, USS PRINCETON, San Diego, CA (2001-02), EA to the Special Assistant to the Secretary of the Navy, Pentagon (2002-03), and Military Liaison for DEPSECDEF Special Mission to Iraq for Arabization (2003).
Peter Majeranowski graduated with a Bachelor of Science in Applied Economics from Cornell University. Peter then went on to earn their Master of Business Administration with honors from Duke University’s Fuqua School of Business.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show. So super excited about the guest that we have today I mean he is building this rocket ship is unbelievable. You know talking about timing too. I think we’re gonna be talking about all of that stuff crazy stories cutting the honeymoon. Short because you know one of the investors you know, ended up not coming through runway you know the good stuff and the crazy stuff that we like to hear building scaling financing and all of the above so without further ado. Let’s welcome our guest today Peter Ma Jeron no ski welcome to the show. So.
Peter Majeranowski: Thanks so much. It’s great to be here. Thank you.
Alejandro Cremades: Originally I mean obviously you’re you’re a first generation american born to 2 polish immigrants and they were 5000 people in the town that you were born so you know I’m sure that that felt a little bit different. You know to certain degrees. So. Give us allur of our walkthrough memory lane. How was life growing up.
Peter Majeranowski: And yeah I mean I’ve had ah a great childhood.. Really wonderful town. Unbelievable emphasis on education but I did feel a little bit like an outsider and and and so that that posed some challenges and on top of that I had. Slight this learning disability of Dyslexia and so you put that all together and I think I had some some early challenges I had to deal with. But fortunately I was able to overcome those. So.
Alejandro Cremades: Well hey you know you were able to overcome those challenges and and Dyslexia you know, ended up you know propelling you you know when you really you know, learn how to deal with it. So what would you say that that this taught you you know when you really learn how to ah attack things from a different angle.
Peter Majeranowski: So never give up. That’s the key. You just never give up and surround yourself with good people that’s key.
Alejandro Cremades: Now in in your case, you know obviously you you learn how to deal with it and you ended up going to cornell you know I mean who would have thought you know going to cornell. So what? So in this case, you know what you did is you studied applied Economics Why applied economics.
Peter Majeranowski: Wrap.
Peter Majeranowski: Yeah, because I wasn’t cut out to be an engineer. That’s the really answer. You know everyone tells you Oh you’re good at math and Science. You should go study engineering and it just wasn’t a good fit for my my interests or my personality. And I started talking to my friends that were doing applied economics and it just seemed more strategic. Maybe as the right word and and less detail oriented but definitely more visionary and so I love that aspect of it. Um, and a lot of the the hard skills you learn from doing math and science applied very well to finance and and economics. So It was ah it was a good fit for me.
Alejandro Cremades: So the navy obviously you know helped with with covering the bills when it comes to studies but but how how do you come across the idea of you know, maybe the Navy you know being as as as a good option for you. So.
Peter Majeranowski: Yeah, my my father was ah an army veteran. He was a lot older than my mother he escaped Poland during the war joined the polish army in France and then France was occupied. He joined the british army and so he. Used to really always emphasize that the military was a great learning experience for him and that you thought it would it would be for me and so he encouraged me to look at the service academies as well as the rotc scholarships I really wanted to go to. Ah. A regular civilian university so r otc seemed like ah a great fit. Certainly it made a lot of sense economically. But also it taught me a lot and you know people probably yeah who work with me are sick of all my navy isms and and and all my lessons learned from the navy but I think it really made me.
Alejandro Cremades: Now for you I Guess Dyslexia you know was say you know a key ingredient um of learning to not give up and I think that that comes in very handy. You know when you’re an entrepreneur and and we’ll talk about the entrepreneur journey that you’re in now. Ah, but then the other thing is your parents do I mean.
Peter Majeranowski: Who I am today.
Peter Majeranowski: I.
Alejandro Cremades: Immigrants coming to the Us seeing them. You know the grinding you know and hustling you know to be able to make a better living you know for for their family I’m sure that that was quite inspiring for you as well. First.
Peter Majeranowski: And yeah, and and I’m an only child and so I think you you throw that in the mix as well and you become a very tight unit and you really lean on each other and support each other and I had unconditional love of my parents and tremendous support and they would give me everything first ahead of them and so. That was a big big plus for me.
Alejandro Cremades: So the navy also working for the pentagon. You know you served in the pentagon you went to Iraq. Ah there you were working on the reconstruction and that is where you got kind of like the the bug for for business. Why is that.
Peter Majeranowski: Absolutely it was just fascinating for me to see in real time. How business can be a force of good and how the invisible hands of supply and demand can can align well with policy and and try to propel and rebuild a society. Um, and being over there in that role I got to see all kinds of businesses and all kinds of entrepreneurs and and some trading families that had been trading in that region even before Iraq was Iraq when it was still an ottoman empire and so. It was just fascinating to me and and I really got excited about the potential of business and and yeah as you said it was the bug and I got hooked and.
Alejandro Cremades: So then so then after all of that stuff. You know you actually really got into it. Ah, you joined Windmill international and there you were investing you know in all types of countries in the eastern european you know region and and there you combine you know a few different things like real estate infrastructure. So.
Peter Majeranowski: Yeah, yeah.
Alejandro Cremades: I Mean those are like quite some really interesting sectors I mean what? what were some of the aspects that you got from being on the investment side and doing this kind of deals. So.
Peter Majeranowski: And yeah, it was a little bit like the wild west we spent a lot of time in particular in Romania and you know at those days they had just joined Nato they were soon going to join the eu there was not a lot of outside investors and so our thesis was that. We were going to manage a perceived risk that wasn’t quite there because they were on their way to join the eu and and were putting in place the right laws and so we we had all kinds of opportunities that country was in rapid growth mode and so. And there was not a lot of specialists either and so for me as ah as a young man. It was a wonderful way to learn all aspects of business and wear multiple hats and oftentimes in some of our investments I was in the c-suite taking you know preactive jobs rolling up my sleeves and getting into the business and so.
Alejandro Cremades: So the nba why why? I mean it sounds like you were already like really into the weeds you were doing good deals you were in it. So the Nba at what point you know came knocking and and and and why was that a good time to to kind of like put the pause on on the professional side and and.
Peter Majeranowski: I Learned a lot. So.
Peter Majeranowski: Yeah.
Alejandro Cremades: And and learn a little bit more.
Peter Majeranowski: Yeah, well I was really intrigued by a program at at Fuqua Duke University that was a globally focused and Mba and since I was doing a lot of global business in Eastern Europe but with often foreign partners. It just seemed like ah a great fit and the next the right next step.
Peter Majeranowski: And also just expand my my toolset and expand my network and because it was a globally focused and Mba tended to have ah a cohort of of older students so they were a little bit more advanced in their career and I still lean on that network all the time and so I’m very glad I did it for.
Alejandro Cremades: Now talking about network. You know one 1 person that you ended up getting an introduction via your family is the person that invented the polio box in and there was a conversation there that you had that changed everything for you.
Peter Majeranowski: Yeah I was having dinner at his name is Dr. Hilary Karosky and just outside Philadelphia and at that time he had a plant sciences foundation that was making vaccines and plants and he said you know we got. Kind of frustrated with how long it was taking the the medical world to get comfortable with that so we started looking at industrial applications and he developed a non-smoking tobacco plant that could be used for biofuels and he just had his patent. Granted he was starting to get some press and. And he he needed help on the business side. He wanted to commercialize it and that time it was right on the peels of the great recession I wasn’t doing much in Eastern Europe at all and and I needed something new to do and I love the challenge of building something and especially building something that I thought would be good for the planet. So.
Alejandro Cremades: So then what happened next.
Peter Majeranowski: So speaking of networks again I reached out to a few of my classmates from my business school class that had experience working in in Biotech and had a ph d or a good science background. And really only 1 person answered my email and that’s my cofounder Julian bobe and so we started talking with Hillary and and before we knew it Hillary said. Let’s start a company and and let’s do it.
Alejandro Cremades: So then why did you think that they were the right cofounders for this. Okay.
Peter Majeranowski: Ah, Julian had a ph d in chemical engineering. He worked in a biotech startup I think his employee number 4 in Japan all the way to ipo so he had that background hiary koovsky had. Scientific chops and the resources and the network and so we put those things together in one of the worst times possible to raise early stage hard tech capital. And and we were able to somehow find a way to put some capital together to to get the company off the ground. So.
Alejandro Cremades: Now for the people that are listening. You know to really get it. What is the business model. How do you guys make money.
Peter Majeranowski: Well back then we were going to be making sugars and oils that could go into the biofuel industry what we found out though was that as we were scaling a clean tech 1.0 reached its end. And we could see the end of the earth for our company and we really had to quickly find a new application. We tried a lot of different things and it was by chance that someone asked us to see if we could get anything of value from running a t-shirt through our process and sure enough we work. And so today we’re now rebranded and I joke that we’re not a startup but a restart and we’re called circ and that’s short for circular because we’re very embedded in a circular economy for fashion and for textiles and so our business model is a waste of value model. We take old end of views textiles. Um, the ones that nobody really has a use for mixed color polycotton blends which is over sixty percent of what’s produced today. We break it down in our process separate and purify them so that the polyester can be remade back into polyester and the cotton can be remade back into fiber and so we sell those fibers. Back into the very beginning of the supply chain so they can be made into new clothing.
Alejandro Cremades: So also you know to really because I mean doing all this type of stuff. Obviously it requires to raise some money is Capital Capital intensive and so how much capital have you guys raised to date.
Peter Majeranowski: Yeah, yeah, as a ah we’ve raised over 60,000,000 of at-risk capital and then we have probably another 10,000,000 on top of that from non diluted sources. So.
Alejandro Cremades: Okay, got it now now in this case I know that you have some crazy stories one that involved you being in the honeymoon you know so I know I mean this is a crazy story and and you know there’s nothing like like having a very supportive and loving you know partner. That really supports you you know on on on taking the leap of faith and and being on a entrepreneur because I mean people think that this is like being on the magazines and you know is glamorous, but but there’s none of that Stuff. You know it’s It’s a tough Journey. So I Guess how what what happened there on the on the honeymoon right.
Peter Majeranowski: That day and okay. Yeah, you know I have all the scars that I think a lot of entrepreneurs do and you’re right? It’s not all the gland that you see especially in the early days and our honeymoon was right around the transition from biofuels to textiles and we had we we were we were low in capital. Um, we had an investor that was ready to invest I had a board meeting a few days before the wedding and one of our observers basically spooked the investor and and we had no money we had maxed out the credit card I was the personal guarantee tour on that. And my wedding was July thirtieth that was also payroll. So I I ended up wiring the company a lot of money for me just so we could cover payroll and I didn’t want to tell my wife immediately because I didn’t want to ruin the wedding for her or for me and so I had to really compartmentalize. Fortunately I was able to loan the company some money. So I think it’s also important for entrepreneurs to to to save and be eyes wide open in terms of what it means to to start a company and so fast. Forward. You know I cut the.
Peter Majeranowski: The the honeymoon short. So I think three days and we’re floating in the waters of key west and I explained to my wife the situation that we know we’re really in the hole for the company and she had total faith in me and I think having a supportive spouse when you’re an entrepreneur is a superpower and. You know I think that that’s not emphasized enough when you you read the books but I think it’s something that everybody should think about long and hard before they start a company.
Alejandro Cremades: Ah, hundred percent and they obviously you know one thing that you mentioned they’re a board observer I mean typically the board observers are those that are able to attend meetings but they’re not able to vote or or any of that stuff. But you know people don’t know this but they have just as much influence because they can actually talk. And be part of the conversation. So what happened with that board observer. What? what? the hell did that bor server say or do to spook that investor that was coming in.
Peter Majeranowski: Yeah, you know I think ah from a psychological point of view I blocked out a La to be honest from what I remember there was something that the board observer had to sign or agree to or maybe just objected and it. And it it spooked the investor thinking that there could be some legal liability or something like that and so that that you know turned it off and that’s normally wouldn’t be that big a deal if it weren’t for the fact that we we had no runway and so that that’s what really turned on the.
Alejandro Cremades: Now. Fast forward to now I mean you’ve been able to make a killing I mean you guys are like writing this rocket ship. It’s tremendous What you guys are doing and you’ve been able to attract money from the likes of bill gates.
Peter Majeranowski: Pressure cooker.
Alejandro Cremades: Or a man zerorotega. You know be ah the vehicles that their companies and the vehicles that they use for this type of investments. How how have you guys been able to do that I mean we’re talking about some of the most powerful people on the planet getting behind this company.
Peter Majeranowski: Um, yeah, ah sometimes I have to pinch myself a lot. You know a lot of hard work I mean a lot a lot of hard work and for us as a company. We really had to do a little bit of a reset in terms of our culture and it was.
Peter Majeranowski: My C O O Connor who who said look you know? Ah, we have some toxicity here. We don’t talk about our values. We don’t we don’t articulate. What are our values. We don’t talk about our mission enough and we use the very little dollars we had to bring in some outside help and really. Reset our culture and reset the way we did business and I attribute that as really the turning point for our company. It’s it’s when we really started to come together as a team and I can’t explain it. There’s something intangible. But. We started knocking down all the milestones we needed in order to to convince investors and it wasn’t overnight. It was step by step 1 of our early investors was was patagonia tin shed ventures and that helped us a lot. And then we were able to scale the technology and and do what we said we were going to do and that helped us build credibility and those wins keep building wins and so that’s another important thing of our journey and something I say all the time to our team is that we have to just keep winning.
Alejandro Cremades: Now 1 thing that is very interesting here that that that you really recommend or get behind is being able to take every call and email sometimes you know some of those emails. You know that look too good to be true are actually. Very good and they are true. So so tell us about this.
Peter Majeranowski: But yeah I hope Rand’s not going to kill me but he sent us a note on Linkedin and he was from a new new outfit called 8090 and we didn’t know I mean his resumes Linkedin almost almost look too good to be true and. Unfortunately, there’s a lot of noise out there on Linkedin, especially for entrepreneurs and so I wasn’t sure if it was real or not but our our Cfo at the time who’s now our cbo loop said no I think this is real I’m going to pursue this and he did and I’m so glad he did because. 8090 they’ve been a great investors. They’ve allowed us the the runway and the bridge capital in order to get breakthrough energy ventures. That’s the fun bill gate started as our lead for our series b and without 8090 we probably would not have been able to do that and so yeah, take those calls you you mentioned. Dorotega started company into tax and that investment also kind of came from ah ah, an email that looked more like somebody just trying to understand the landscape of circularity in the fashion business but it led to an amazing partnership and so yes, take those calls take those emails.
Alejandro Cremades: Now now that we’re talking about people because obviously investors you know there are there are people and this is all about surrounding yourself by the right you know individuals. What about what are your thoughts on spending you know more and more you know on culture whether it’s resources time. Whatever that is more on culture.
Peter Majeranowski: You never know.
Peter Majeranowski: Whatever you think you need to spend in terms of time or money or resources you provide to exit because it all comes down to people it all comes down the team and when you’re venture backed and you’re still relatively small and you’re trying to disrupt entrenched players.
Alejandro Cremades: Why.
Peter Majeranowski: Every person has to be a heck? Yeah, um, and and I heard that from another now very successful entrepreneur but it’s absolutely true and culture helps you see somebody as a right fit. Some people are outstanding. Performers. But in the right environment in the right scenario and and it might not be right for you and your culture and so I think it’s it’s It’s very important to spend time on that. So.
Alejandro Cremades: And toxicity. How do you? How do you identify that? How do you know if someone in that culture that you’re trying to embrace and to protect so much. How do you know when someone is not a fit and how do you act quickly.
Peter Majeranowski: Yeah I think honestly in the early days I didn’t act quickly enough with that and and and you just know it when people stop being open and honest in their communication. When people stop taking ownership for the decisions they made good or Bad. We’re all Human. We’re all going to make mistakes. But when when that stops happening those things stop happening that. Those are good early warning signs that you have some toxicity and and the best thing to do is to just jump in the fire and address it immediately and.
Alejandro Cremades: Now for the people that are listening to really you know, get it to how how big is the company today anything that you can share in terms of number of employees or anything that you feel comfortable sharing. Okay.
Peter Majeranowski: Yeah we’re almost 50 people now and that’s been a pretty rapid growth for us. We didn’t close our series b ah less than a year ago and at that time we were maybe 14 people and so when you onboard that many people. It’s really important that it’s not you know an exercise where people show up and and nobody’s prepared to receive them and they don’t know where their desk is or a computer or have an email. You know we’ve we’ve spent a lot of time again investing in culture making sure that they they feel welcome. But that we bring them up to speed because the sooner we can get people onboarded and up to speed the the sooner they can help the company on its mission and.
Alejandro Cremades: And talking about the mission I mean I think that the wind you know it was definitely. You know, blowing behind your guys’ back because you know back then I don’t think that the consciousness around protecting the planet you know was so um, you know. Clear and and and and now you know with climate change and you know all of this stuff happening at the same time. How do you think that that has benefited you guys because I mean you got started with the company a long time ago so way before that consciousness was there.
Peter Majeranowski: Yeah, yeah, our mission is to protect the planet from the cost of clothing and I I think ah, you know unfortunately, we’ve just had a lot of climate disaster especially the last four or five years whether it’s hurricanes fires flooding. Um. You know when when I’m talking to the traditional venture capitalists out in Silicon Valley and they can’t let their kids outside to play because the air quality is too low from fires I think that starts to really resonate with people and and that combined with with other factors as well. Um Gen Z. doing a great job of of voting with their pocketbooks and I think big business is is noticing that and additionally we’re also seeing a lot of regulatory changes particularly in in europe in certain parts of the United States like California and so when you put all those things together. Investment community sees a real opportunity here I think too many times people think protecting the the planet is ah is a cost instead of looking at it as an economic opportunity and it is for sure a major major opportunity.
Alejandro Cremades: So as we’re talking about opportunities here and and where things are heading imagine you were to go to sleep tonight and you wake up in a world where the vision of Circ is fully realized what does that world look like.
Peter Majeranowski: You think.
Peter Majeranowski: Yeah I think it’s gonna look ah a lot different than today right? So today we think a lot about our clothing as something you know you buy it you you put it in your closet. But the reality is most of the stuff and it sits in our closet unused. And so we like to talk about new models where you know clothing is is first of all designed for circularity is designed to be reused the the cradle to cradle philosophy is there that. The brands have a relationship with you but it’s not like you just sell. It’s almost like you’re leasing the molecules and we just keep recirculating them so you’re wearing the same molecules for life and the way to do that in a very practical way is is to have recycling hubs all over the place using technology like search. Having a robust collection system linking this all together and I think digital has a huge place to play here in tracking this stuff connecting consumers with all these ah these collection points digitally. And then getting into facilities like r so can be recycled over and over again. So.
Alejandro Cremades: So and back then too I mean as we’re thinking about you know where things are heading. Obviously we can’t forget you know the past and and and some of the great things that you guys were able to do and and some of them that were very nerveracking as well because you guys did a Rebrand and.
Peter Majeranowski: So that.
Alejandro Cremades: Rebranding is not easy is just is super challenging I mean we’ve seen many companies literally and going bust because they didn’t You know they mismanaged that rebranding process. So How did you guys go about doing it and doing it effectively. Um, so that you know. You were able to to continue pushing.
Peter Majeranowski: First yeah, very important part at the point because the rebranding was just as much for us internally as it was externally. We didn’t look at it as just something for a website we wanted it to really reflect those our our core values and and speak to our team. And speak to future hires and so we use professionals. We we created an ah rfq for various marketing and branding firms. We made a short list. We spent a lot of time with them and and one stood out to us Baldwin Ann and Raleigh North Carolina and we just knew it was a good fit. And we joke that it felt like group therapy for about eight months where they really got to know our space. The company. The people that make up the company but also the industry and what the challenges the industry was facing. They used.
Peter Majeranowski: Surveying data among fashion executives as well as regular consumers to just understand where their mentality was so it was a pretty exhaustive process but I’m very happy with the way it turned out. Well worth it.
Alejandro Cremades: So so imagine you know we’ve been talking about the future and and now we were talking about some of the things that happened in the past. But now let’s talk about the past and doing it with a lens of reflection. Let’s say I was to put you into a time machine and I’m able to bring you back in time.
Peter Majeranowski: Opens.
Alejandro Cremades: I’m bringing you back in time to that moment where all of a sudden you are doing your and Mba and thinking about maybe doing something of your own and let’s say you’re able to sit down that younger Peter and be able to give that younger Peter one piece of advice. Before launching a business. What would that be and why given what you know now.
Peter Majeranowski: And Wow No One’s ever asked me that before and that’s a tough question. Um, you know I think as starting with with culture I was maybe too practical and jumping into just trying to start solving problems and. You know as you know in the beginning. There’s just a ton of problems and you get into problem solving mode and and you start firefighting and when you’re Firefighting. You’re not being Thoughtful. You’re not reflecting. You’re in the business not on the business and so I think that would be the advice I would give is to be really thoughtful. And meaningful about the culture you’re building and the values because after you have that set and in place and well-communicated everything else starts to fall into into line.
Alejandro Cremades: So I guess just to double click on that what does culture and values. What do they look like at cerc today.
Peter Majeranowski: Yeah, so you know our mission is to protect the planet from the cost of Clothing. We like to say that we we’re only solving big Problems. We have sharp heads and soft parts. That’s a very important one Because. Ah, we we we want to ensure that we’re very thoughtful about what we’re doing both up here in your head but also in here in your heart. Um, and and so that’s that’s that’s a super super big one and we we don’t want to do any Harm. We.
Peter Majeranowski: Value our environment. We value our people we value our partners. Um, we we want to make sure that that all our partners feel that and it’s really rewarding for me when I talk to partners and partners is such a broad word but that could mean. Our our legal team. Our marketing team. It can mean some of the brands we work with some of the engineering vendors. We have very warm relationships with them and I think when you when you do that? What happens is they become your your allies and they they start going above and beyond to help you and that’s really. Key for entrepreneurs and where you really don’t always have all the resources you need and you have to stretch things and make 1 plus one equal 5.
Alejandro Cremades: I love that so Peter for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Peter Majeranowski: You can find us at wwwww.circdot earth we’re also on Linkedin Instagram and Facebook and those those are the best ways to find us. So.
Alejandro Cremades: Amazing. Well hey Peter thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Peter Majeranowski: Thank you! It’s been an honor to be here. Thank you.
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The post Peter Majeranowski: The Dyslexic Visionary Turning Waste Into Gold That Raised $70 Million For A Sustainable Clothing Revolution appeared first on Alejandro Cremades.
Andre Glezer and Alan Glezer brought their take on fintech to support and fuel a massive market. Their startup, Agrolend, has attracted funding from top-tier investors like Lightrock, Barn Investimentos, Provence Capital, and Verde Asset.
In this episode, you will learn:
- Lending in the agricultural space
- How they’ve managed to secure great partnerships for customer acquisition
- Financial arbitrage in lending
- Andre Glezer’s top advice for starting a company of your own
Alejandro Cremades · EP 639 Andre Glezer And Alan Glezer On Their $43 Million Fintech RevolutionSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Andre Glezer:Andre Glezer has been working as a Co-Founder & Chief Executive Officer at Agrolend for 2 years. Agrolend is part of the Finance industry and is located in Brazil.
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Connect with Andre Glezer:* Crunchbase * LinkedIn * SignalHire * RocketReach
About Alan Glezer:Alan Glezer is the co-founder at Agrolend, a fintech that brings bureaucracy-free credit to Brazilian farmers.
Connect with Alan Glezer:* Crunchbase * LinkedIn * RocketReach * Apollo
Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the dealmakerr show. So super excited today. We have 2 brothers 2 brothers co-founders. You know they’re really building a rocket ship there in barcell and we’re going to be learning a lot about agriculture blending in with banking you know again building scaling. Financing all of that good stuff that we like to hear so without furtherdo. Let’s welcome our guests today Andre and Alan Glisser welcome to the show. Thanks.
Alan Glezer: Thanks pleasure to be here.
Andre Glezer: Thanks pleasure for you. Thank you very much. Thank.
Alejandro Cremades: so so guys let’s do a little of a walkthrough memory lane here. So let’s say let’s give give give me a give me a sense of how was life growing up there in Brazil why don’t we start with you. Alan.
Alan Glezer: Yeah, sure. So basically I came from like an engineering background I was born here in sa Paulo. He started engineering at school mecharonics engineering and then I moved to the financial markets started my career working for a local hedge fund here in Sao Paulo then I was transferred to Singapore in Asia so I had a very good experience. Living in Singapore and cooverver in the markets in the southeast asia region basically invests in credit structures basically structured credits in Southeast asia then I moved back to Brazil back in 2011 I spent like a few years working on the south side here in Brazil covering meows and mining poop and paper. So basically a good experience working on the sell side covering commodities then I move again to the buy side I work for hedge funds here in Brazil to other hedge funds in a more startup kind of style of hedge funds and then we decided to start agro land a very unique model of creating a digital bank for the agribusiness sector in Brazil. Combining my knowledge and res knowledge and then knowledge knowledge of other like 5 3 cofounders to create a very unique model here for us.
Alejandro Cremades: And we’ll we’ll talk about that in in just a little bit. You know I’m wondering you know like for the 2 of you guys. You know how was how was life. You know like they’re being born and and raised in Sao Paulo I mean anyone in the family that was an entrepreneur or or how did they say. You know buck come about and maybe Andre why don’t why don’t you jump in here.
Alan Glezer: Ah, yeah.
Andre Glezer: Yeah, so like our our family they had businesses So Our our parents who were in the tickty of industry. My father started ah a riteo and the industry that used to Manufacture pants jeans. Basically so so he used to be an entrepreneur. Ah, more for lack of alternatives than for for for seeing an opportunity here. So but that’s it I think that’s that’s what we have as intern entrepreneurship in how in our family.
Alejandro Cremades: I mean that’s that’s pretty amazing. Alan you know as well. You know why don’t you jump in here and and tell us how was that experience of seeing you know, let’s say your dad you know, operating the business and going through the ups and downs of being an entrepreneur as well.
Alan Glezer: Yeah that’s a very good point because back in the old days here in Brazil we had like a lot of volatility in the country so we had like a massive inflation the politics like changing every day. So our father was an entrepreneur at that time where we had like a lot of volatility like this scenario changing every day. Kind of like block all the money in the bank accounts. So it was a very unique scenario so we saw like our father building a business and they’re like a very very volatile kind of environment so it was very unique to see and watch him like operate under those conditions. Very stressful conditions but he managed to still keep. Like a very nice space be like calm be with us in a very nice way. So it’s very unique for us to watch that kind of like construction of like a company over that time.
Alejandro Cremades: Now in your case Andre you know, very similar to Allen you know, also from the financial service base you know which is what what you ended up going after but you know in this case, you know more on the investment banking you know advisory as well as private equity. I guess from having you know that experience especially as an investment banker. You know seeing m and a transactions helping on capital racing efforts what were some of the patterns that you were able to see from companies that had what you know they needed what it took versus the ones that. Did it.
Andre Glezer: Ah, that’s that’s a very good question I think well one of the most important part of having um, a good business is ah is a team of founders a team of leaders with with complementary skills so in order to build a company, a durable company with sustainable competitive advantage. And nice Margins. You have to be able to perform in several different areas. So I think one of the most important aspects that we saw in companies in investment banking and why I was an investor at a private equity was the profile of the founders. The profile of the leading Team. And if they were complementary if they were multidisciplinary I think that’s that’s one of the most important aspects that I saw while in my previous previous career.
Alejandro Cremades: Now after you know all that investment banking that private equity experience all of a sudden you know things come together and agro len comes to life. So what was that process like Alan you know, like walk us through what was. Who called who who came up with the a the and what was that journey of getting the 5 co-founders to jump in.
Alan Glezer: Yeah, Andrea was the first one that saw the opportunity he used to work for like a private equity firm here in Brazil focusing the agribusiness sector. So basically there was a thesis of consolidation of retailers in the agi input space here in Brazil. But the real problem was not the consolidation and a unique brand behind the retailers was actually the lack of a proper bank focusing that kind of niche so we decided to put together our knowledges here Andre with a very strong knowledge in the aribes sector and the m and a spectrum here in Brazil. Myself good knowledge on the credit space and also analyzing commodities. Then we had Valeria very strong knowledge from like a compliance illegal background. She’s actually a lawyer then we had little pauldo vettter tech guy. Very good knowledge of developing tech inside the regulated entity by the brazilian central bank. And then we brought Carlos the Agribus guy he he was doing credit in the sector for a long time. So that’s how he managed to put together this amazing team of cofounders to tackle this massive problem. We are talking about 30% of the brazilian gdp in the agribusiness sector brazil is a global leader. The production exports and the cost. So. It’s a very important sector that was lacking a proper digital bank to address its needs but the idea originally came from Andrea that was investing in the sector and had a brilliant eye to spot this very unique opportunity for us.
Alejandro Cremades: So what was that the moment the Andrea like when you spot this opportunity and you are like my god I gotta make those 4 phone calls to get those people to join me.
Andre Glezer: Yeah, it was basically when I was at the fund like we were trying to invest in the agricultural space in Brazil and the idea was never to invest in farms. But to invest in in the supply chain or and the value chain of the farms because that was growing quite fast. And there were spaces where it could reach much higher returns than than farming businesses. But when we look to the supply chain all the companies like the industries that used to manufacture chemicals seeds fertilizers and also their distribution channels. The retailers. That sold to the millions of farmers in Brazil all those companies that we wanted to invest. They had the same problem and and even though they were very nice growing businesses. All of them. They had to finance their end clients. So like there were industries and retailers carrying 1 year payment receivables terms. Ah, because they were financing the crops for the farmers and and that that was cost because there was lack of a bank. So as farmers did it have a bank to provide credit for them. Ah, the responsibility for doing that it was passed to the supply chain industries to the retailers and the suppliers. Of agricultural inputs to the farmers and that was a very bad problem because when you look to those companies even though they were growing. They were notgerating cash the free cash flow was very low because all the money was being sucked up into their receivables into working capital.
Andre Glezer: And and it was a problem for the fund. We decided to not invest in any of those companies given given this whole situation and as as I kept seeing this happen again and again and again in all the companies in the segment we had the idea even still by the fund. So if that’s the problem we should invest in a bank. You know our agricultural bank. So let’s start searching for a bank in the brazilian segment ah who so solving are trying to tackle this problem and there was basically no one so it was impossible to find any company any financial institution trying to solve this specific problem. And and then we had idea I think we started discussing. We saw that this a big big problem. The problem was going to grow. So as Brazil Agricultural industry grows this specific problem was growing even more. So so the Henry had idea to let’s jump stop everything that we’re doing. And then start a company to solve this very specific problem. But.
Alejandro Cremades: And and and you were alluding to it. You know the fact that you guys are five co-founders I mean 5 co-founders is quite the number. So I guess say allen how do you guys go about managing egos so that you guys you are able to really work you know and in parallel and do things effectively.
Alan Glezer: I guess each of us has like a very unique skills and very unique knowledge about a specific part of the business as we are building like a digital bank for the agribusiness sector. We need like a knowledge from like a tech perspective. We need a knowledge from the agribusiness perspective. We need our knowledge from like a compliance legal perspective and with knowledge from like financial markets. So let’s say we balance ourselves very properly to avoid. Let’s say going into another another founder area of knowledge as we know that the other founder has a better knowledge for instance Valeria has a great knowledge about compliance. And the legal aspect of the business. So we we respect very much her knowledge about that area and we don’t interfere with her opinion on that side. So that’s how we balance the ego so we are splitting ourselves in order to create the first ever digital bank in the sector here in Brazil and you need this mix. But you are correct like no, you have to you need some kind of like no conflict to disrupt a market. So this mix of very multidisciplinary kind of like backgrounds creates some kind of like conflicts but they help us to create like a disruption for this market but this is. This is how it’s working for us and.
Alejandro Cremades: So Andre why don’t you jump in here for the people that are listening to really get it. What ended up being the business model of agro len. How do you guys make money.
Andre Glezer: Oh perfect. So we work like exactly like a bank. So. Our business model is we land to farmers to small and medium-sized farmers at our rate close to 23% per year. So that’s that’s how we make money we’re providing loans to these farmers charging 23% per year interest rates. We don’t go direct to farmers. So we have a distribution channel we have a network ofric agricultureal inputs retailers who are on a day-to-day basis selling seeds fertilizers chemicals to these farmers. And these companies they bring the clients to us so when a farmer goes the store to buy any any of those products. The store is going to push the farmer introduce the farmer to aggreland engage the farmer to get a loan and with us if the farmer wants and is approved by our credit model. Ah, his signs are a law on agreement. Everything gets giile everything runs through his mobile through the whatsapp after the loan signed we send the money not to the farmer. We send the money to the retailer. The retailer gives the farmer the product and the farmer is going to pay us back pay the loan back. Post harvestvest. So the average duration of the loans is close to eight nine ten months that enormous harvest time that that we finance so so this is half of the business. This is the asset side of the business then you have the liability side of the business. The other half. So how do we get money cheap money.
Andre Glezer: Back these loans so we land at 23 we do the finding at close to 13 % per year. That’s the basic the current basic interest rate risk-free rate in Brazil so we are a financial restit institution. We are regulated by the brazilian central bank. And we have a license that allow us to raise time deposits like Cds and these cds this time deposits they are guaranteed by the local fdic so we have ah our organization called Efficiac in Brazil and they guarantee deposit it’s time deposits. Up to two hundred and fifty Thousand Hai so like something close to $50000 so we issued this time deposits as they are guaranteed. We decreased a lot of our cost of funding and on top of that as we are financing farmers. We have a specific type of type deposit called. Elilysia lca and this time deposit. It’s also tax-free for the investor he doesn’t have to pay income tax on the income on this time deposit so we are able to decrease materially our cost of funding and again we like a lot the b two b two c model so we don’t have distribution to retain investors that’s not our model what we do is we raise what we call broker deposits so we sell deposits to like platforms investment platforms something equivalent to Charles Schwab Td in the Us.
Andre Glezer: We sell the deposit to these massive companies who have millions of clients in Brazil and they resell the time deposits to their client base their retail client base. So with that we can raise money close to thirteen thirteen and a half percent interest rate per year we land at 23 and we have this 10% net interest margin after that we pay for non-performing loans. We have losses as any credit business we pay for our whole company and and we expect to end a year around five six percent as a total net return over our asset. Asset base. So this is the model raise cheap capital land at a higher interest rates and and cover our npo and operating expenses and that’s that’s how we run the business.
Alejandro Cremades: Now you guys are trailblazers here because as you were saying you know like you guys are merging the banking side of the but the banking side with the agriculture side but you were the first ones to do this so you know obviously part of. The challenge too is not only educating yourself but being able to educate you know future employees being able to educate you know investors you know and and anyone else. So how did you guys go about doing that Alan yeah.
Alan Glezer: So yeah, something that is very important for us is the diversification of the portfolio. So everyone that is joining the company understands that we have to diversify our portfolio of loans. So for instance, we have more than 1000 farmers a single farmer. Doesn’t represent more than point five percent of our portfolio we have more than 100 active retailers helping us to originate loans. The biggest one is like around 8% of the portfolio we have presence in like 15 states a single state. Not representing more than 20% of our exposure and we have some large exposure to soybean crops here in Brazil but still like around 60% and this is manageable so for us managing risks is very important for our culture. And we try to tell everyone that is joining the company that diversification is the most important mitigation of the risk so that’s how we work here and we try to teach everyone that risk is the most important important metric for a bank and it must be well managed.
Alejandro Cremades: So Andre what was the journey of racing money because you guys have done several rounds. How much capital have you guys raised too late and how has it been the experience. Okay.
Andre Glezer: So we are ah we are a young company so we are two years and a half old so we have raised up to today 3 rounds a seed round a seriesion a series b and we have raised close to $43,000,000 so our seed round was one and a half million dollars one one one point six million dollars and it was more like a feine friends around so we brought in close to 30 investors including 4 institutional investors but it was a small investment for for all of them so it was a complex round giving the number of investors. But we’re able to bring a lot of people who we care who we liked and who helped us to to start a company from scratch. So so that was really in the early days so two months after we founded the company raised that round then we raised a series a round of $14000000 have our leading venture capital company in Brazil who is actually based in the us called valor capital and and then in in late last year we raised a series b of twenty seven million dollars which was led by lightrock a very large growth equity fund. Corn invest in profitable and already proven companies and and also we invited a lot of corporate venture capital firms to invest in that round as well. So now we have a very poverized capital base with well-known investors who help us a lot.
Andre Glezer: So so that’s that’s the history up-to-date. We continue to raise capital so we like to think that we are in a capitalto-intensive business model if we even though we are profitable. We need a lot of capital to grow the business that that we are running and and we like we like to say always that all all the time that we have raised money. Always like to tell a whole history to the investors. So after that we finished raising the series b round we have already started to raise the series c so now we have our list of close to 56 investors who we think would lead our series c round we expect to raise a series c round by the end of the year and we already we are already telling the investors. The history of the company and what we’re going to do in the next few months the next next six seven months before we go after them to really raise that that wrong raise that capital. So so that’s it. That’s that’s that’s how we have done up-to-date.
Alejandro Cremades: And typically I mean a company would raise around every 18 to twenty four months I mean here it sounds like you guys are like going very fast. So when it comes to running an effective fundraising process. What have you guys learned alan.
Alan Glezer: It’s important to tell the investors about the movie. So if they only see like 1 picture. They don’t get it So we tell them we’re at point a we want to go to point B Then we get to point B from Point B to point C they must understand that we Deliver. We tell them what are the plans we deliver the plans. This is very important and in addition to that being like a profitable company. Very unique unit economics clear path to profitability and the combination of clear Playf to profitability and the fact that we are. We’ve been Delivery. We tell them you go from point a to point B we go to point B There’s no change of Plans. So I think those are important factors that have like help us to bring the confidence of the investors and raise their rounds.
Alejandro Cremades: And also you have about 50 investors. So I mean that’s a lot of investors. So how do you go about managing them in a way in which integrity is present in which trust is present as well. So that they can continue to support the companies. You guys continue to execute Andre.
Andre Glezer: I think people the the investors that we have they trust a lot about us and basically because we we are always doing what we say that we’re going to do so people have built out of trust in how we execute about the company. We have a board of investors. So which were the largest investors participate. Maybe the 5 largest institutional investor that we have join our mindfully bored meetings where we provide a more structured update about the company and how the business is performing and we also provide to the whole 15 investors. Ah, ah month the monthfully but a quarterly in may update and we also do an annual investors meeting with all the investors that want to join and we send an annual letter with much more details about the company. So so that’s that’s how we do I think we we try to update to everyone. On on, not ah or either on a monthly basis on a quarterly basis with how the business is progressing and people are very comfortable with that with this model.
Alejandro Cremades: So imagine in a world where you were to go to sleep tonight and you wake up and in that world. You know the vision of agraland is fully realized what does that world look like Alan.
Alan Glezer: I believe that the aro business sector in Brazil is massive as I mentioned like know one third of the brazilian gdp we estimate that the market size today in terms of like outstanding loans in the sector we arere talking about $100000000000 or like 500000000000 billion reis if we had like a market share of like five ten percent of these amounts. So let’s say between let’s say 50000000000 Reis of loans in the sector with like a very profitable model I think this is a great vision. So we’ve built like the one and only digital bank in the Agribu sector. Like a massive portfolio market share between 5 to 10 percent of the market and very profitable and we’re running a very slim model very slim team profitable relevant market share and running in a way that is like smooth always counting on our partners. B two b to c model both ways. Big business very profitable. So for us profitability is the key here and it’s our dream to be profitable and big. So that’s the combination that we have here as like our vision for the future. So.
Alejandro Cremades: Andrea would you like to expand on that.
Andre Glezer: I think on top of that like our whole vision is now we do credit and we have 1 specific credit product I think when we look many years into the future. We want to become a more complete ah bank offering much more financial solutions to our clients. So on top of credit. We plan to offer credit cards checking accounts insurance products. So basically farmers can buy insuranceers to crop risks and and other kind of risks hedging solutions to our clients to protect again against the downturns in soybean prices. Exchange rates so we see ourselves now we do credit to farmers in the future. We want to have a massive client base maybe 50000 clients and offering a whole complete set of innovative financial solutions on top of our tech platform. Which basically help us to serve a massive amount of clients in a very easy and simple way with a low-cost structure that makes us very profitable. So so that’s our long-term vision really building a digital bank to farmers in Brazil. As they and and now we go to their vision like to how we see the angrybus industry in Brazil as they grow as our clients grow they want to be there alongside our clients as they continue to grow continue to invest and Brazil continue to dominate.
Andre Glezer: The worldwide agricultural industry.
Alejandro Cremades: And you know obviously building a company is not is not easy. Ah, you know obviously in this case, you have additional uncertainty that you’re dealing with I mean not only the fact that you guys are building a hypergroiled business but then also the fact that you’re building this in Brazil. And also you’re dealing with the regulatory you know hurdles as well of of of building a digital bank. So so how do you guys? you know, think you know in this case about reducing the risk on the path that you have in front of you Allen why don’t you jump jump in on this one.
Alan Glezer: And I think that we are building the risk with a very conservative Pace. So It’s not like an exponential Growth. We go alling and we kind of like lend all the money that we can. We are ah triing the growth in order to be conservative And. We have a chance of learning on the Way. So Basically we are going in a pace that is comfortable to us and we can adjust the path along the way so this has been very important so far so we are not going the maximum risk that we can and we’re going to be more conservative in terms of leveraging. Our financial institution because we understand that as you mentioned there are many uncertainties There could be like regulatory uncertainties weather climate kind of uncertainties price of commodities uncertainties so we have like many different kind of like sources of Volatility. So for us, it’s better to keep a pace. Is not the max pace that we can support but it’s a pace that we can adjust the path along the Way. Ah me make sure that we don’t make mistakes that are not revertible here. So That’s the strategy for managing the pace and the risk of our model.
Alejandro Cremades: Now imagine you had the opportunity. Let’s say I put you into a time machine and I bring you back in time I bring you back in time to that moment that you know maybe you guys were thinking about doing something. And let’s say you know I have the opportunity of of of giving you that chance of of sitting the 2 of you with your other cofounders or just maybe just the 2 of you because maybe you you didn’t you know, know your cofounders yet and let’s say one of you has the opportunity. Or the 2 of you have the opportunity of giving that younger self one piece of advice before launching a business. What would that be and why given what you know now Andre.
Andre Glezer: And that’s a very good question I think there’s just 1 thing that I would change if I could go back in time I think when we so ah I would started earlier I think we had the idea we we have seen the situation. The problem. We had see how we’d structure the company and then we started I think it took us close to six months to really start the company. We tried some things to to work part-time and not full-time developing the company we try to maybe decrease the risk. Of starting a business and and then we learned that that was impossible and if we wanted to do the business we would have to go full time and really take the risk and build a business. So maybe we lost six months seven months in this in this Ah bad start. And then when we fully started the business. The business really worked and then we started growing the business. So if I could change one thing I think I would have built a business the same way that we did I would just have started six months earlier and not lost. This initial initial time.
Alejandro Cremades: And Allan what you but would you tell your younger self.
Alan Glezer: So I agree with Andrea of course like no, that’s a very good point. But my point would be about people make sure you bring like great people that can challenge you that are smarter than you that will go like no to the limit and make sure that they challenge you to the limit. So building. A company is also about building a great team that can you know address the problems the best way possible. So bringing great people would be my advice to my younger self I think that we’ve been following this but I I cannot like no forget to mention this because this is very important. And I think it’s like a key for the success here was to bring a great group of people with like very complementary and different kind of like no multisciplinary backgrounds that combined created a very disruptive model for us. So it’s about people and.
Alejandro Cremades: So for the talking about people for the people that are listening that would like to reach out and say hi. What is the best way for them to do so Andre.
Andre Glezer: You mean to to talk to us the right now.
Alejandro Cremades: That’s right if they would like to if they’re like listening right now they’re like my god you know these brothers they’re amazing. You know how can I get it. How can I get ahold of them. You know like what is the best way for them to reach out and say hello to you Andre.
Andre Glezer: So I think the best channel that we use to communicate with clients and and the whole network is using Linkedin I think we we we do a lot of marketing on Linkedin and like we built a lot of content. To to talk to people to engage our audience our clients our investors and and and everyone in Brazil especially but that’s the best channel to talk to us I think we’re always there talking to to the whole community.
Alejandro Cremades: Wonderful, well easy enough. Well Andre and Alan thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Andre Glezer: Pleasure Our thanks all over. But thanks, Thanks! Very much for inviting us I think it was great. One of the best shows that yeah that we have ever ah participate participate in. Thanks.
Alan Glezer: So pleasure on our side as well. Great. Thanks a lot Aleandra it was a pleasure.
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The post Andre Glezer And Alan Glezer On Their $43 Million Fintech Revolution That Is Transforming Brazil’s Agricultural Landscape appeared first on Alejandro Cremades.
Jack Greco built one of the first unicorn startups in a tier-two city. After taking that venture public, he has gone on to become an angel investor and VC fund manager. His VC, Far Our Ventures, has invested in startups like Bounce Imaging, ShearShare, and Patient Pattern.
In this episode, you will learn:
- Jack Greco’s top advice when launching a business
- Growing marketplace startups
- What he’s looking to invest in now
Alejandro Cremades · EP 638 Jack Greco On Building A $2.7B Company That Went PublicSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Jack Greco:Jack Greco is a Co-Founder and serves as Chairman at AireXpert. He is a Co-Founder and serves as General Partner at Far Out VC. He serves as Board Member at Jack Greco’s Furniture and Moove.ai.
Jack is also a recovering angel investor. He served as Board Member at Forsake. He served as Chief Financial Officer at Efferent Labs. He also had some success with Tackle.io, TCG Player, and Roofstock and decided to take that energy and launch a venture fund (farout.vc) investing in early marketplace and B2B vertical SaaS companies.
Jack served as Board Member at Azuna. He also served as Venture Partner at StartFast Ventures Management. He is the Founder and serves as the Chairman of the Board at One Link Ventures.
Jack served as Executive Director at Techstars. He also served as the Advisor at 3AM Innovations. He serves as an Advisor at CloudInsyte. He serves on the boards of several startups, as well as for the Monroe Community Hospital Foundation, the Beta Phi Alumni Association of DKE, University Heights Tool Library, Olmsted Center for Sight, and Niagara Falls Memorial Medical Center.
Jack is a former unicorn founder (NSDQ: ACVA), an experienced investor (120 direct investments 2017-2021), and LP (50 funds). He serves as Advisor at Impellent Ventures. He is interested in marketplaces, primarily B2B, and technologies that create efficiencies in traditional industries.
Jack served as Advisor at Agape. He earned an MBA in Business Administration and a BA in Economics from the University of Rochester.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show. So today. We have a very exciting guest. You know we’re going to be talking about his say a journey you know as an operator his journey as you know someone that has worked for other companies do and then also his journey as an investor from every single. Angle of the table that you can think of and I I find that you know we’re going to find his story quite inspiring because he’s done it. He has built you know a pretty successful company. You know unicorn you know in a tier two city. You know. Also we’re going to be talking about that but without farther ado let’s welcome our guest today. Jack Greco welcome to the show so born in Rochester but you grew up in a farm town so give us a little of a walk through memory lane. How was life growing up.
Jack Greco: Thanks a lot for having me appreciate it.
Jack Greco: Sure, absolutely yeah I grew up in Rochester New York and then when I was getting right? Android grade school my family moved to a little a farmtown in theinger lakes called Candaa it was a big change from the city. Um, but I enjoyed it a lot. You know it was. A slower pace of life but it was my my father was an entrepreneur he had opened a store out there. You know and it it gave me kind of ah a unique view of what it’s like you know, an urban very urban moving to a very rural environment. So um, you know, grew up working for my father. He was an antique dealer. Um. You know also worked on a farm for a little while so those kind of you know the real solid the earth type techniques and um, you know morals and values that you learn you know, bail and hay and being on a dairy farm. You know, kind of shaped me and put me in the trajectory I think it is a hardworking guide that. That I am today.
Alejandro Cremades: And what about being able to experience your father being an entrepreneur entrepreneur I mean how was that you know also for you to see the ups and downs. You know that that he was perhaps you know going through himself. So.
Jack Greco: Yeah I mean you know I didn’t just see it I I felt it right? I mean you know there were you know rich ears and there were lean years. Um and and you notice that by the number of presence under the tree or you notice it by how how much he was there versus working. You know so being a dad myself now I’ve I have a 7 year old son. Um and in a good relationship. You know it’s it’s interesting seeing that um we are all human right? and but these things that happen there is no. There is no division between work and and personal life when you run your own business like. You could try to compartmentalize how you spend your days but they directly affect each other so much so it was good and you know I do so much work with really stage companies. You know, ideally Vc backable startups. You know you still realize they really are also in addition to that small businesses I mean every business starts as a business of one or. 2 or 3 of you have co-founders. Um, and so I saw what it was like my father never had any partners I happen to have take a different mode in life. Everything I’ve done I’ve usually done with somebody else I learned a lot of that because I saw when the times were tough. There was nobody helped share the yoke and.
Jack Greco: So just experiencing that grown up and and that being able to be part of it from the ground up and in in his in his store and in his business really gives you appreciation that you know it takes everybody to contribute to be part of this.
Alejandro Cremades: So you’ve been a hustler your whole life where does that drive come from.
Jack Greco: I think he came from my father you know I mean he was an antique dealer originally and it’s a very much ah like a hustle-based business right? I mean you show up with a pocket full of cash and a brain in your head and you hope that at the end of the day you end up with a pocket full of more cash and a brain in your head is pretty much intact still right? so. Was a game of connections. It was a game of networking you know I grew up in the late eighty s early 90 s I was borned in 83 it turned forty later this year. So you know if you look at the chronology of technology. You’ll know that you know I grew up as like cell phones started to come out. My father was one of the first ones that had 1 right? But just it. It didn’t replace that pure need to be able to network and build be able to know where to go as an antique dealer. He was a middleman. So I mean it’s funny. You know I do a lot of marketplace work and and marketplace is really the difference between people to have something to get rid of and people that want it. Um, and my father was just ah, you know an earlier traditional version of connecting those 2 so that kind of that the hustle and drive just comes from being able to see the opportunity between two things that aren’t already related and aren’t already connected and if you do it the right way, you’re able to make a living you know, really.
Alejandro Cremades: So in your case, you ended up a studying economics and quantitative finance and then after this, you know like you you know 1 thing led to the next and you end up you know in the in the venture world not being a consultant. So how do you land? you know there? What was that the experience in.
Jack Greco: Bridging the gap between them.
Alejandro Cremades: And what happened next.
Jack Greco: Yeah I mean you you pretty much try and say yes to every opportunity you see you know I didn’t start off in economics I started off going to school to be an architect um and it just turned out I actually had to spend a lot of time working my dad’s business in the. And undergrad running it for a little while I actually end up running it for a year and a half while he was out of commission and you know you you cant you cannot. You cannot graduate with a degree in science if you’re not going to make it to any of your labs so you know economics brought me to quantitative finance I got my Mba. You know at same place I got my undergrad to create the university of rochester and for me I wanted to be able to have a practical toolset. You know I had seen so much so many people right? just being around small business small business owners around each other and they lack this fundamental understanding in a lot of cases of kind of the physics behind the way. Cash moved right? I mean it is the blood flow of every single business. So when I went to school for quantate finance. It was kind of going to school to understand the diagnostics of the way cash moves and financing and leverage and debt and everything you know, um, and really when I was getting my Mba at Simon. It’s business school. You are I learned what venture capital was and I was used to being a risk taker right? I was the kind of guy that had bought product in the first time I went down to New York city and was selling you know fake oakley sunglasses and Novada watches at lunch at school because I thought it was opportunity to make money. Um, and I said all right I said.
Jack Greco: I said venture capital is just if this really is the wild west if this really is where like the biggest ideas are coming from this meshes together. The reason I originally wanted to be an architect which is to be a creator with what I’m really good at which is understanding businesses. So I jumped into it basically functioning the equivalent of. Like think of a poor man’s consultant from Bain or Mckinsey except working with a regional vc um in the upstate New York area you know um again you just keep saying yes to everything so I said yes to basically being willing to work there for six months for almost no money. And then I said yes when they were bringing on. You know, an international portfolio. Um commercial the commercialization of government and military technology out of great Britain and so you just keep saying yes and you keep taking shots in you know in my twenty s that took me around the world gave me experience and. Ah, handful of industries that are completely unrelated like material science and optics and photonics and um, you know and biotech and you know you you take all that and then you start to you know in your mid and late 20 s for me 11 years into it to understand what you really like. And what I had realized was you know this is all great I’d build this massive amount of very unique vari inperiences and I was ready to focus on something you know and then that’s what you know at the conclusion my twenty s and beginning my thirty s that’s what kept me from instead of focusing on 10 things as a consultant focused down to become a founder.
Alejandro Cremades: So then let’s talk about you know what that looked like because that was quite successful. You know with Acb Auctions so how did the idea come together and how did you meet the cofounders.
Jack Greco: Yeah, so I mean um, when I was doing the work I was doing in my twenty s I kind of I realized places like Buffalo and Rochester and you this theme later. Um, you know they they were great cities entrepreneurial in in their essence. Although those 2 cities are very different in the way they. Become entrepreneurial in their vision and their long-term goal but they didn’t really have the connection to the rest of the venture community right? I mean this was in the the mid and late two thousand s going into the early twenty ten s and so for me I kind of played this role as anybody that was starting anything I was willing to talk to. Was single throughout my twenty s so they had afforded me a lot of time to be able to get to meet people over breakfast lunch dinner drinks didn’t matter. Um I I learned early in my life. There’s no excuse to take a meal by yourself. Um, so I kind of really embedded myself with what was going on in the buffalo and Rochester startup communities which is. Where I had family which is where I spent time. Um and you know I had met a founder a guy with an idea Joan Eman um that just lined up. It felt like it hit so many different places from what I’ve always done right? It was in the automotive space and though I didn’t have experience in automotive. It was in wholesale and I did have experience in wholesale. You know, basically the the b two b interaction that happens. Um, you know price and goods so like I understood that and the idea was hey could we digitize the physical wholesale auctions of cars. So basically when a dealer sells a car to another dealer.
Jack Greco: And I thought this is the same thing as an antique dealer selling another an antique to another antique dealer like yeah I’ve been around physical auction my whole life I’ve been to a couple car some antique some fine art cattle all sorts of stuff and this intersection of this like economic mechanism which was an auction. It really excited me. And I didn’t know what what it could become but 1 of my good friends who ended up being the third cofounder Dan Mansevsky like he I knew he sat in a cat bird seat seeing a lot of different tech and it just happened to be at a time. It was a time when I you know I I started a family you know, um, ah like as I a dad a seven a half year old boy. Um, I knew I wanted to focus down like my grandmother lived down in Buffalo I was her primary not her primary but very active caretaker. Her I said why not give it a shot. So again, it was just saying yes to an opportunity. Um, and you know 3 of us in November at 2014 kind of agreeing to do this. Then began to actually grow and we had a lot of lucky breaks along the way and that’s you know what? ultimately resulted in the company going public in 2021 and being the first real tech uniticor and in in Buffalo.
Alejandro Cremades: And and we’ll talk about that you know in in just a little bit but you know just for the people that are listening to be able to really understand it What ended up being the business model of acb auctions. So.
Jack Greco: So you know it’s um so you know everybody experiences marketplaces right? Amazon ebay any place where there are a handful of people on both sides of the table and a piece of technology exists in the middle that helps connect now. So but most of the most of the marketplaces we see like I just mentioned are b to cmarketplaces. It’s the way you know ecommerce if there is a handful of different sellers on the backend could be considered a marketplace you know Um, so what does not exist that much. Is b two b marketplaces so the way a business connects with another business are still done very traditional ways you know Um, so the automotive ah the the wholesale automotive landscape you know 30000000 cars get traded into a dealer every year you know you buy a car and they take your old 1 and they give you some you know they give you a discount off the new car for it and you know of those 30000000 let’s say a third of them end up getting transacted to another dealer at some point and a lot of that was done at either a physical auction which was slow and incumbent and expensive and didn’t really utilize technology. They were very much you know it was it was part of you know, regional monopolies or national dualopolies. There was really 2 2 you know, 2 different businesses that are 2 different companies that did that um and so there wasn’t a lot of competition in a lot of technology but it was a massive market right? like.
Jack Greco: 10000000 cars times I don’t know what the average car is now $15000 apiece made a really big market that nobody had really touched and you know again, 1 of my cofounders or Joe from acv like he said he was a use cardi learning felt this pain. You know he was gone all the time he was. He was not able to run his dealership because he was at the auction trying to buy cars and everybody had to do so much work to understand what was wrong with them. They’re all use cars right? They all have issues. They all have histories. So we said why don’t we make a platform that levels the playing field on the information people have to bid on cars. You know we’ll put actual people out there that know how to look through a vehicle and create all the information that everybody gets to see ubiquitously and then why don’t we let them buy and sell on their phone instead of going to a physical location to do it and that simple elegant idea is the premise the backbone and. You know the entire business model of of Acb which you know you could look it up. It’s publicly traded on Nasdaq now. Um you know it’s it’s a successful company but it was really an evolution on what was going on. It wasn’t revolutionary and it didn’t need to be um and I would say it was the fact that it was just.
Alejandro Cremades: Yep.
Jack Greco: Ah Slight It was incorporating technology into an existing business that ah people already Understood. You know we weren’t trying to reeducate we weren’t trying to change the way the world ran we were trying to add efficiency we were trying to add you know clarity to what was going On. We want the transactions to be smooth and simple and start to take advantage of some of these other digital products that were out there financing companies to start to offer digital products. You know there were different types of digital products that allowed you to do inspections on vehicles Better. We thought why not pull this together on 1 Marketplace. You know and that’s what Acb options is. It’s a place where dealers go and buy and sell inventory. You know between each other in an auction platform.
Jack Greco: But did I hope.
Alejandro Cremades: And obviously the rest is history I mean as you were saying the the company right now is trading you know Nasdaq you know the market copy is two point five billion so you know pretty pretty impressive stuff now you know when it comes to marketplaces. You know there are. Really really tough because it’s like launching 2 companies at the same time I mean obviously you know you’re ah seeing this now as well on the investment side and we’re going to talk about that transition. But when it comes to marketplaces you know building really that supply and demand you know so that people can find that liquidity in it so that they can find what they’re looking for in a short period of time. How was how was that you know experience of really figuring things out to make sure that you know it worked you know with Acb. Yeah.
Jack Greco: So I mean look it’s it’s a lot of handholding in the beginning in the beginning. Um, and you’re right? It’s like running 2 different businesses at the same time I actually think it’s like running 3 different businesses at the same time because a good marketplace. You know there’s a reason why buyers and sellers. You know are interacting. There’s a need but that relationship between buyers and sellers still has to exist and you have to forge in a relationship between you and the buyer and you and the seller in order. So. It’s really a triangle to some degree. Um and as opposed to a normal business where you know like let’s say a. A saas business where I build a product I meet you maybe it’s an enterprise sale. Maybe it’s a monthly sale but like I sign you up and now we’re doing business. This is very much like trying to throw a party or trying to get you know it’s a chemistry. It needs to be the exact right proportions at the exact right time. So what’s unique is it’s as much psychology. It’s as much you know you know like you want to look at the anthropological aspects of things right? because these are people these are human making decisions on both sides. So you know how do we. Change the platform so it makes it seem like I mean when we first started I don’t remember maybe we put a couple hundred cars across the system. The first month which we were lucky to do that and that was because we had spent really five or six months building up interest in this event that was going to happen.
Jack Greco: And we had gotten some good advice from you know a couple mentors and advisors early on like make sure it’s a vent make sure you concentrate the activity. So it looks busy. You know I mean if you or I went to a grocery store you know and we walked in and it was the first day the grocery store ah opened and the aisles were basically bare but they had some product there. You wouldn’t look at what they had you would look at what they don’t have and that’s what commonly happens in these marketplaces I want to be able to go and at least see enough quantity right? that is that is real right? I mean like and I’ll explain what real means in a second but like. You want to be able to see enough of the shelves being full aka the shells being full that you’re interested in staying and when I say real you know it needs to be items and products that are the right items at the right price with the right availability you know with the right understanding of what it is. You know? and so you really have to curate these again. It’s like throwing parties you have to curate both aspects of the environment. So you know I’ll be honest in the early years you know we were working very hard at making sure you know that. Hey you know what we would call up Ray and say Ray we know you love pickups there’s 5 of them coming on the system we’re trying to launch them along the right time you know I’ll give you a call right before the auctions come live and we were doing everything we can were to get people’s attention on it. You know and that’s really the way that you have to get these things up and going we were lucky and that we were regional.
Jack Greco: So like again, we launch in Buffalo New York and like our buyers and sellers were both from Buffalo new york so it made it easy. It made you know us helping with logistics easy if there was a problem we could actually go there and see it. But once we got that built up. We started to do and we had an adjacent market. You know strategy. Where we would then say okay, how do we bleed outside of this. We didn’t go from Buffalo to you know Chicago l a Dallas and Miami you know we went from Buffalo to Rochester and Syracuse in Albany and Pittsburgh and and Cleveland you know we were aware and understood that our product was big and heavy. You know it was they were difficult to move and they were expensive to move and so we knew that dealers we wanted to give them as much access and variety to what they had as close as possible to make our lives a little bit easier. So I think the best marketplaces find ways to. To create that second and third tier relationship. We don’t just better the relationship between buyer and seller. We get the buyer to have a relationship with us and the seller to have a relationship with us and the weakest relationship is between buyer and seller because in order for us to control and curate the environment. We want those relationships running through the 2 of us. You know? So sometimes that means that ah you know, maybe a ah buyer doesn’t pay us but we make sure the seller gets paid you know and sometimes it means that you know the car wasn’t what we thought it was going to be to the buyer. So while we handle it with the seller. We take care of it to make sure the buyer is happy.
Jack Greco: That’s what I’m talking about and decoupling the relationship so that they both actually have relationships with us.
Alejandro Cremades: so so 5 years in you know I mean the company was rocket ship. You know as we mentioned you know went public two point five billion you know, right now we’re 2000 employees I mean 5 years in you decide. You know it’s time to turn page. Why.
Jack Greco: I had a young son I really wasn’t spending a ton of time with him. Um, you know I buffalo though I spent a lot of time in it is in my home and you know I I just made the decision. This has gotten to the point you know this is being big and successful. We had been actively tried to hire I was the cfo co and by and large head of you know, strategy and Data Analytics you know for the majority of my time there and I realized my existence as a founder was blocking the company from bringing in specific. Good talent in each of those positions. You know I could have done one of them. Well you know I could have probably done one of them. Great. Ah, but I couldn’t do all of them and I just saw that for some reason the recruitment process wasn’t going great on a executive level and I said all right like. Maybe the only way to fix this is just to completely remove myself I want to be able to spend more time at home I’d saved up a little bit of money and I said I’m also a founder. Maybe I’ll go start something else. So it was really being able. It was a hard decision but it was making the decision like I know the environment I want to be in. And I have the success of this has created a climate or an environment which is outside of where I really flourish. So you know it was. It was a decision to you know I I stayed on until they until they brought in an outside Cfo They hired a Ceo shortly after that um and the company has done excellent.
Jack Greco: You know I won’t take any credit in that. Um, but I will say that I think I remove myself as an inhibitor of growth and it’s a weird thing to think right? like you know you you think of yourself as as a requirement and a necessity for this business I always thought of myself as the heart of it and you know it really. It really took a lot of convincing you know and a lot of support from people around me that you know my family and you know friends and even a couple coworkers that that really cared about me to say no like this will this will be Okay, um. It was tough decision but it ended up being the right decision I’ve really enjoyed what I’ve done since then.
Alejandro Cremades: And you just said it now I mean you’re a founder so being a founder you know, Obviously you know as a result you know for you, You know what? what you did is you started you know like getting more involved with tech stars you know mentoring startups and and also investing you know like. Why going to the other side of the table.
Jack Greco: Well because I didn’t like the ah the way the other side of the table was plan right? I Hate you know like it’s ah you know like any like any entrepreneur I saw an opportunity I thought you know I went through the experience right.
Jack Greco: Not cradle to grave but cradled to pretty close to grave you know from founding a company all the way to exit and I just said there is a ton of opportunity like we’re not getting ah no offense to any of the investors I’ve been around but I thought there were better ways to help support. You know like it didn’t seem I always wanted an investor that was. In it with me and so like I’d seen that with angels angels get that way right? Angels are unsophisticated. Don’t know how to price deals typically don’t carry the clout needed to like ensure the success of the next follow-on round but angels were willing to put their own skin into something right? and I’m a founder obviously like. Live in the world of all my skin being in the game and so when I left I originally started being an angel investor right you know I was like all right like I want to help these founders. You know I want to this is what I was doing before as a consultant but now I have some money and I’d rather create. The next great Ceo Cfo Ceo I want to be a kingmaker um you know and ultimately you know write some of the disadvantages I think we had was in a tier two city. You know when we were raising money at acv. We didn’t know what a good valuation was because we needed peers that had gone out and made mistakes for us to learn from. We were the ones that made all mistakes I mean we made a ton a ton of mistakes and so I said all right I said if I start investing. It’s really my way of saying I want to put some money to build yeah in on this relationship and also.
Jack Greco: You know I hope that it’s a good relationship where I can at least share the war stories I have so you can learn from um so investing was almost just like 1 thread of a chod right? Oh I vested I became active some of them I would take an active role a lot of time I would just be a mentor or advisor and it allowed me to start to build this. You know. What I really wanted to be which was just a connector right? like I love working in marketplaces because I think of myself as like a human marketplace just a lot of the same ways. My father was right like seeing the buyers seeing the sellers being able to bridge them and hopefully being able to make it moved past the point of me but wanting to make a living. It was me trying to build an engine that was bigger than me. So ah I really enjoyed investing I think um I’ve angel invested I’ve cut over 200 angel checks and probably 12130 companies 51 different geos I’m super proud of that. Um you know and it’s with people that I all had that that. All.
Jack Greco: I’m pretty easy to give trust but they haven’t lost it. Um, and they’re worthwhile they’re they’re taking a worthwhile endeavor and they’re I think they’re the right person to do it. Um I did also do a lot of fund investing because I thought this is crazy I’m going to blow my money angel investing what if I’m horrible and wrong at this right. Even a man with my amount of confidence isn’t that stupid so I started investing in other funds also and at this point I think I’m in close to 60 funds while I’ve well I’ve wound down angel activities when we started far out which is the preceding seed venture fund that I’m a you know, um, general partner in when the. Of the founding partners in um, I’ve I’ve kind of maintained a fund to fund investment strategy strategy personally where I’m going into other funds and honestly it’s to make friends and to learn from them. You know like it’s you know Ah, hopefully in 10 years they’re going to give me my 3 to 4 times my money back which will be wonderful. But more so over those 10 years I’ll build a relationship and learn from them. So it was you know versus what it cost everybody else to go to college you know I thought well this is I’m getting I’m going to make money and I’m going to get educated and I think as much as you understand the other side of the table I just didn’t think there were a lot of these people in there’s brackish water. Between founder and investor you know and I wanted to be the one that kind of bridged that gap and could walk both worlds. So um.
Alejandro Cremades: Now Now as an investor on the angel side you have much more flexibility than when you are vc because that’s right.
Jack Greco: Yeah, you can do whatever you want right? I mean it’s you know I ah one of my first angel checks if my buddy Colin Hurds listening to this right? like I met I I switched a swap seat to the guy that was in an uncomfortable middle seat on an overnight flight. Um. And the guy ended up saying next to Collin you know I thought I was going to sleep on it I didn’t we ended up talking the whole time he was in the middle and negotiating the sale for his business. It was one of my first angel first real angel checks I cut him a check. Basically when we walked off the plane this is a guy had never met before you know a 6 digit check it wasn’t small. You know I live in a $200000 house and drive a 2005 gep right? This is ah this is a big check and you know you’re able to do that like I can’t even do that in the venture world right? You know like if I take money from you like I’ve taken money we have about you know a little under 20 a little less than 20 investors in our fund right now I can’t take their money and be that liberal with it and I need to be more judicious. It doesn’t doesn’t matter my gut was screaming do this. It’s the right thing to do. But yeah I mean as an angel I’ve covered um probably. I don’t know at least platform type almost every type of platform company. You could be in I think I’m in over 100 unique industries. Um, so a lot of people would call that generalist I just think that I make my decisions different than the industry and the platform.
Jack Greco: You know I do a lot of marketplace stuff I lot I do a lot of saas primarily b two b um so I trust that my my knowledge set my experience at growing a particular type of platform. You know? Um, but yeah, you have a lot more flexibility and you get into creative stuff too. I mean I bridge companies I’ve given you know let money to companies on debt. I’ve lent money the companies on a handshake right? It’s all great stuff. You could do as an angel and the conversion from that you know, really over the last year and a half I’ve I’ve transitioned fully and now I’m a Vc you know so the majority of the investments I’m making you know is me investing in my fund. And then they have fun going into companies. But now I’ve got boom you know I got an investment committee two very experienced complimentary guys to me that keep me from doing some of the dumb stuff. That’s an angel. Don’t get me wrong sometimes the dumb stuff ends up being the best but more often than not weighted average is not um. But and this goes back to that you know I I think that when you focus on 1 thing for me when I focus on one thing and I have a team around me that I’m you know equal partner in like things end up going better I do think 2 heads or in this case, 3 heads is better than one.
Alejandro Cremades: That’s amazing now. Imagine if you were to go to sleep tonight Jack and you wake up in a world where the vision of your fund is fully realized what does that world look like.
Jack Greco: Um, you know if for the fun to be fully realized it means that we are able to invest in so we will have built a portfolio of great companies. In places where we were able to add unique advantages to right? like yeah I mean we’re all great. All all 3 of us are as founders. So maybe we’re able to help the company itself but all 3 of us came from you know townships of less than you know 20000 right? Like not that we’re necessity and not that we’re necessarily going to you know small town America but like we’re not overlooking anything so I would say the vision means we are investing in founders and not because they’re the hottest sexiest thing in the world. But because they’re building practical fundamentally solvent business models in places that are somewhat overlooked. We do a lot of what I call n of 1 investing so you might be a market divining technology. You know it’s doing things different than anybody else. Um, and we really like that you know and obviously if this if the fund that we have can. We can start stringing them together into a firm and help you know be that poster on the wall of other firms like ours you know I think that’s what success looks like you know it no longer becomes you have to go to x to get funded I think that you know x should come to you.
Jack Greco: And that’s honestly what we’re trying to do with far out ventures.
Alejandro Cremades: So imagine if you were to get into a time machine and you go back in time to that moment where you were 30 and thinking about you know, launching something of your own if you could give that younger Jack one piece of advice before launching a business but would that be and why given what you know now. Okay.
Jack Greco: Yeah, um I would tell him you know, don’t forget how confident you are on what you’re doing um but don’t let that confidence turn into Hubris or stupidity right? You know? Um I think I think it’s easy when you’re doing something. You know entrepreneurs are great at quickly pivoting on new information kind of like a skier can bounce around moguls when they pop up but you know I don’t always I think there are times when you have to cut against the grain too and you have to make you have to know when to when to be aggressive. And cut into what’s existing and then when you kind of got to go with the flow to and I would say be very careful who you take advice from because just because somes willing to give you their time doesn’t mean that you should be giving them yours.
Alejandro Cremades: Got it now for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Jack Greco: Um, so I mean we we have a ah website far out Vc um, everything goes directly to the partners. Um, so you can you can go through there I’m on Linkedin happy to do that I’m ah you know i’m. Very good, very responsive on any the messaging that goes through that those are 2 really good ways to do it I will tell you don’t lead with hey I’m trying to raise money for this like do a little bit and this goes for any intro you’re trying to make to especially an emerging manager like me. Like try and find something either from what I just talked about or any of the other stuff out there that you can relate to and make sure it is a good connection. You know, um I do a lot of job I do a lot of work in ecosystems. So if you happen to be a connector or or well connected within you know. Ah, city that’s got maybe 1 or 2 professional sports teams but not all 4 of them right? like reach out to me I’ve I’ve found I’ve built really great relationships I want to invest in people I have in a relationship with and I build really great relationships amongst people that share common interests and common threads. Like any other friendship in the world.
Alejandro Cremades: That’s incredible. Well Jack thank you? So so much for being on the deal maker show. It has been an on earth to have you with us today.
Jack Greco: It’s been great. Thank you very much I appreciate it.
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The post Jack Greco On Building A $2.7 Billion Company That Went Public And Now Investing In Over 200 Startups appeared first on Alejandro Cremades.
Pushkar Mukewar is helping small and medium-sized businesses on three continents survive and scale with his growing fintech platform. The startup, Drip Capital, has acquired funding from top-tier investors like Raison Asset Management, Accel Partners, Sequoia Capital, and TI Platform Management.
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- Finding product market fit and scalability
- How Drip Capital’s financing products work
- Having cofounders in different countries
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Your email address is 100% safe from spam!About Pushkar Mukewar:Pushkar Mukewar is the CEO and Co-Founder of Drip Capital. At Drip, he is responsible for defining the strategic direction and managing product, business development, and operations of the company.
In his 13 years career, he has worked across various geographies and has an in-depth understanding of the global financial services industry.
Pushkar realized the huge potential of addressing the working capital gap for SMEs in emerging economies like India by using technology. This turned out to be his inspiration behind the foundation of Drip Capital in 2015.
Drip offers a unique trade financing product targeted towards SMEs engaged in cross-border trade by making the underwriting and financing of international B2B transactions seamless.
In the past, Pushkar was a venture capitalist at Saama Capital and was involved with a number of high-growth startups, including Snapdeal, Bluestone, and Paytm.
He has also been a Consultant with Oliver Wyman in the US, UAE, and Switzerland, where he advised a number of financial services clients on strategic and operational issues.
He started his career at Capital One, where he developed credit risk analytics for the subprime consumer loans business.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the dealmakerr show. So today. We have a very very exciting guest. You know we have an exciting guest. We’re gonna be talking about all the good stuff that we like to hear building scaling financing all of the above but without farther do let’s welcome our guest Today. Pushkar Mukaur we’ll come to the show how you doing.
Pushkar Mukewar: Great Alejandro Glad to be on the show.
Alejandro Cremades: I so originally born in India so how was life growing up there. Give us a little of a walkth through memory lane and.
Pushkar Mukewar: Ah sure. Ah, so yeah, born in India I kind of grew up in a secondier small town called Nakur which is right in the center of the country. Um, and you know I come from a community of of businesses business small business, a small business.
Alejandro Cremades: Um.
Pushkar Mukewar: Families and growing up. You know I just saw the challenges with small businesses face when it comes to access to credit and that kind of stayed with me. Um I went to college so moved to the us for college and then kind of you know also worked in the us for a. Ah, for a few years so I did my undergrad and in computer science. But then I sort of switched gears and moved to financial services. Um, and then also ended up doing my me in the us before deciding to move back to India. Um, yeah.
Alejandro Cremades: And why why? I mean we see in this case, you know you had as you were saying you know your family. Um, you know you saw there the issues with the lack of access to to credit. I mean it sounds like business. You know was something that you know you wanted to do I mean you were seeing people you know around you having their own companies. You know left and right I guess 2 questions here number 1 is why not you know, studying business right? away you know, obviously you know you ended up going to work on which obviously you had it in mind. But. You know, sounds like computer science was the first stop. So why was that the first stop and then the next question that I would like to ask you you know based on what you just shared. Is you knew that you wanted to launch your own business. So why did you go and work for other companies like capital one. So let’s go with the first one you know why did you study computer science instead of business.
Pushkar Mukewar: Sure, um, so I think um, you know India is a very traditional kind of society and I think typically most people opt for 2 1 of 2 career options. it’s it’s either you become a doctor or you become an engineer and of course you know there’s there’s a host of other options. But. In general I think the the community I grew up in you know education was a big focus area and and I don’t think during during that time studying business at ah at an undergrad level was something which most people did um and I and generally enjoyed mathematics and you know and. Kind of everything to do with mathematics and I think computer science at that point was supposedly like a hot area and I and I did kind of enjoy whatever computer science exposure I had right? So when it came to kind of. Picking my major for undergrad I thought computer science would be very interesting. Um, obviously I wouldn’t go on and say that I had to foresight that technology is going to become like you know enabler for a lot of other things over time but but at that point computer science just seemed. As a very interesting area something which because I loved math physics and most of the mathematical sciences I think I felt like that was kind of in line with you know my interests while the idea was to always start a business I thought that.
Pushkar Mukewar: Having a technical undergrad would would generally be helpful and would be would be something which you know, um, which is which is which would be something which would be sort of stay with me, you know whatever I choose to do in my career eventually. Yeah. And then I think your second question was around. You know if I wanted to start a business. You know why not jump in right away why why go through sort of working with other companies and so and so forth. Um, so to me I think having grown up in India I think a part of me always um, believed that I should get. Global exposure I should also spend time abroad. Um lot of my distant relatives had ah were already in the us and I think part of me always sort of wanted to step out and kind of experience. You know, living and working in ah in a completely different cultural setting. Um, so when the opportunity came by I decided that it made sense for me to first initially sort of move to the us for education and then also get some years of experience behind behind me. Um, something which will just expose me to business right and working in a larger organization just build help build skills which would be relevant even as I went to business school and then eventually launched my own business. So so it was something which you know while I wanted to always start my business eventually I felt.
Pushkar Mukewar: You know, kind of working in a larger organization for some time would be would be a good good step towards that journey.
Alejandro Cremades: And obviously warton. You know it’s a phenomenal school. You know they are great. You know you even have like so those competitions and you know they ask you to put together a business plan for something you know as the end project. You know, like really really interesting stuff and and great initiatives there. You know which really pushes people into.
Pushkar Mukewar: F.
Alejandro Cremades: To build in their own companies. I mean there’s incredible companies that have come out of there know like whereby parker and and a bunch of others. But 1 thing that here that thing that really strikes me is you know at this point you know you are in the us you know you fail come to the land of opportunity pursuing the american dream. Ah, and. You decide to go back to India you know versus you know, doing something of your own here in the us. So why going back to India.
Pushkar Mukewar: Yeah, so um, I mean to be honest I I never really felt at home in the us I think for for me, it was always like I wanted to go to the us sort of work there get some experience there. But. Part of me always wanted to be back home and do something back home in India. Um, so so for me, it was always very clear that eventually I wanted to return back and you know, um I think business school seemed like the right kind of ah you know juncture in my. Professional journey where post that I think I had an opportunity to return back to India and I sort of capitalized on that. Um now. Um the other thing which was also badly happening I think as you know as kind of you know things progressed was that when I went to the us back in 2003 2004 um, there were not enough opportunities in India right? So if you if you kind of ah pursued you know higher education went to a top business school like Wharton There were not many opportunities back home on neither on the startup side nor on kind of professional side which were ah which were um you know ah sort of paying well enough and and and the right set of opportunities for somebody who had actually gone through that kind of a professional journey. So um, so part of me I think so so 1 thing which also evolved over the ten years with which I spent in the us is that.
Pushkar Mukewar: A lot many more things started happening in India right? The the financial services industry overall evolved in India you had a lot of um you know foreign institutional investors we started setting up shop startups kind of you know, started emerging in India um, of course there were not. Enough successes by then but we had already started seeing a number of venture capital firms coming to India a number of startups emerging and starting to grow in India. Ah so I felt like if I was to take a bet on my career longer term and personally I anyway wanted to be in India um, it just seemed like India would be the right place. Place for me to be um so I did initially move back joining um a venture capital firm so that I could just get exposure to the market and really I understand because since I never worked professionally in India um, in order to spend some time kind of really understanding the market. Um, and then. You know, but at some point um felt right that it was the time to take a step step back and like sort of you know, take the plunge in entrepreneurship.
Alejandro Cremades: So at what point did you feel he was right.
Pushkar Mukewar: Ah, so because I think the eventual goal was always to start my own venture as I started working in the venture capital industry. Um, you know I felt like ah the the role was a lot more about. Dealmaking and not as much about actually doing operations or building something. Um, so so I started thinking about what what could I do right? and I think one of the inhibiting inhibitating factors at that point was I didn’t have a cofounder you know so I didn’t have I wasn’t. Neither did I have like a narrowed down opportunity that okay this is what I’m going to go do once if I do take the plunge into entrepreneurship and neither did I have a co-founder. So um. I connected with I reconnected with actually one of my close friends from Wharton who was in the valley at that point and he had postwarton joined Cisco cop Dev um, so he was also sort of working there but but he was also kind of inching to you know, take the plunge. And we started talking and given our backgrounds both of us had spent a number of years in finance and were’re were technologists by background. We. We started exploring opportunities within fintech and I think at some point both of us felt like hey you know the only way we are going to make anything happen is if we.
Pushkar Mukewar: Our full time jobs and and go all in. Um, so yeah, basically 3 years after working for 3 years after business school I felt it was the right time for me to ah just to step back like you know to take the plunge.
Alejandro Cremades: It’s well taking the plunge drink capital. So um, what is drip capital for the people that are listening. What is the business model of Drip capital and how do you guys make money.
Pushkar Mukewar: Sure, ah, so we are essentially um, you know so our mission is to really so sort of you know, enable small and medium size businesses to realize their full potential and we focus on offering working capital solutions for small and medium sized businesses. Um. We um, we essentially offer 2 kinds of products you know because working capital is a big challenge for businesses either. Their capital is stuck in receivables or they need to make payments to their suppliers. So in payables so we offer 2 kinds of solutions to small businesses. 1 is a receivables financing solution where. Ah, business who is approved on our platform can essentially submit an invoice and get paid instead of waiting 60 Ninety days can get paid upfront for a commission or for a fee which they pay to us the other product. We also offer is a payables financing solution where. Instead of the business making the payment to their supplier. We make the payment to the supplier on the behalf of the business and a business can get flexible payment terms but be 30 60 90 day terms. Um, so essentially what this enables the businesses to do is that? um. It enables them to unlock working capital which they can use to buy more inventory manufacture more goods sell more and hence grow their business and working capital is one of the biggest challenges with small businesses have not just in emerging market but also in developed market.
Pushkar Mukewar: And that’s the product or that’s the solution we are looking to really solve for um and that’s the core business. However, I think being working with a number of small businesses. What we’ve realized is that when it comes to trade or when it comes to kind of growing their business. But Beyond working Capital businesses have also other kinds of challenges right? and we’ve also now ah started offering a forex solution because a bulk of the business we do is more Cross-border in Nature. We’ve also now started offering a forex solution on our platform and over time the idea would be that can we add. Other kinds of products and services which just makes the life of a small business. Easy.
Alejandro Cremades: And what were some of the early days challenges that you are that you were experiencing and especially compared to having seen you know some of those companies some of your friends you know at work on that went on. Perhaps you know to start their own companies. What were some of those challenges to that were a little bit different because you were in India.
Pushkar Mukewar: Yeah, ah so we um so when we decided to launch I think my cofounder was in the valley I was in India so we on day one itself had like kind of a cross-border team and presence. Ah, which pose its own set of challenges because we obviously had to. Um, you know, spend a lot of time traveling. We had to kind of communicate with each other. We were also not exactly sure what specific while we had a broad idea that we wanted to do something within fintech and within fintech we were more excited by credit because that was an area which also capitalized on our strengths my experience in capital one. My cofounders experience having worked at Blackrock and and done a lot of work on credit market um, within credit as well. We were not hundred percent sure on what opportunities made sense right? Um, so a lot of the initial time was really spent on experimenting with different ideas right. Um, and you know small business was exciting. But then you know within small business. What specific product do we offer what segment do we go after ah was something which we were still kind of you know, ah figuring out right? and a lot of what we did I think as first time entrepreneurs first -time founders was also doing things literally step by step right? We walk great shows. We tried to talk to a lot of small businesses we. We we started with a product which then we realized was just difficult to scale up, you know and so on so forth right.
Pushkar Mukewar: And then combine that with the fact that both of us were in different geographies. You know, um, made things even more challenging. But I think 1 thing led to another and you know within small business segment. We had launched initially with a product which was focused more on us small businesses. Ah, but then realized that it was just difficult to acquire customers in the us at scale and that’s when the kind of model pivoted to focusing on indian small businesses which are exporting and and you know that’s where we started seeing a lot of traction and that’s where we launched our product and capitalize. It. Is today really started with that being the segment of the market we focused on in initialia.
Alejandro Cremades: And then in terms of um regulation due you know how does it work you know because obviously you know here in the Us you know as we know it you know fintech companies. You know they’re heavy on the regulator regulatory side so you know obviously as you were saying you know you had you know different day. You know, ah people in different you know sites of the world. You know So How does that work Too. You know from a regulatory you know? um, ah perspective.
Pushkar Mukewar: Yeah, yeah, ah so we started in India and the focus was so the first focus was can we work with small businesses in India which were exporting and essentially do ah receivables financing product for them which I said is one of the core products we offer. Um. Now. Of course as we started in India and we started kind of acquiring customers in India we also did a fair amount of work on really understanding the regulations governing this kind of a business model in India for to begin with um. And and I think after seeking like their opinion from the right set of lawyers and and advisors we are comfortable that this model obviously ah was something which was blessed by them and you know the current regulations in India allow us to to sort of continue operating this right. And that has been a big focus area for us given the space we are operating in so beyond india this next market we entered was Mexico um, which was the second international market which we launched in and again there as well. We did the relevant regulatory work required to to get the. Get the right regulatory licenses and everything in place to be able to operate in Mexico and the third market was us us was a market we already missile in you know so we were already a licensed entity in the us which made it easier for us to sort of scale up in the Us. Um.
Pushkar Mukewar: As it stands now we operate in these 3 markets which is India mexico us and the focus will given that the the opportunity in these markets itself is very very large. Um at least over the course of the next twelve eighteen months the focus is to be continuously going deeper in these markets. Um, and and as we kind of look at other markets. We’ll also obviously have to figure out the right regulatory you know, ah regulatory compliance which we need to ensure we ah, we are in compliance with yeah.
Alejandro Cremades: And from a fundraising perspective. How much capital have you guys raised to date for the company.
Pushkar Mukewar: So um, we have 2 kinds of capital we need for scaling of a platform like this right? So on the equity front. Obviously the equity capital is required to of course scale up operations and and kind of build a business and then ah. The raw material for us is really the the debt capital or the capital which helps fund the assets which we originate now on the equity front. We have raised 4 rounds of institutional funding about 100 close to Ninety Ninety five million dollars so far. Our major investors are excel partners sequoia capital. Um, there’s a fund called wing um Ycombinator was one of our early backers initialized capital ah, last round. We also had a couple of strategic investors come in. You know our ti platform and you know ah Kopel so this is the equity side on the. Debt side or on the asset financing side. We’ve had a mix of both institutional and non-institutional investors. Um, we’ve worked with a bunch of high net with individuals family offices, certain smaller credit funds but on the institutional side. We have 2 major partners 1 is a community bank called Eastwest Bank and the second one is barclays and you know these are the 2 major funding partners. We’ve had who we kind of onboarded in the last about last eighteen months or so um, and yeah and I think that’s the site which we continue to scale up as we originate more and more and we continue to engage with all.
Pushkar Mukewar: All different banks and you know other kinds of institutions which are interested in the assets we originate? yeah.
Alejandro Cremades: And on the deb side. How much have you guys raised I didn’t I didn’t catch that.
Pushkar Mukewar: Ah, yeah, so in terms of capacity or or debt capital raise. It’s upwards of $5,700,000,000 yeah
Alejandro Cremades: Okay, got it and that you mentioned that that capital Obviously you know the equity site for the people that are listening is more for you know the business. The employees the operations but the debt capital is more for the actual business model not to be able to. Ah. Facilitate The the basically the services that you guys bring to to the end team. The customer Know. So um, so very very cool I mean obviously we see I’m sure that data has you know changed a little bit as you guys were you know getting getting you know, even more polished and polished as a company. But. But my God you know getting the people that you mentioned you know involved like seoia or a excel I mean we’re talking about some of the best investors in the World. You know for Startups. So How were you able to get those you know, especially since you know the operation was a little bit far away from the headquarters of these of these firms.
Pushkar Mukewar: Yeah, yeah, ah so the the good thing has been that you know, um because we were a global company I think for us. Um and some of these funds are global. So ah, we we actually had both their India and a Us team engage with us. Um, which I think kind of is the best of both worlds. We. We get both the perspectives. Um, so um, so I think ah, really the I mean you know obviously we went through the fundraising process like every startup does you know meeting a bunch of investors along the way. But I think um. What really in my view stuck with some of these investors is the is the scale of the opportunity we are going. We are going after right? I mean we were talking about small business credit. We were talking about global trade and we were looking at multiple markets and I think. Ah, that was what was perhaps the most exciting thing for them and I think combining that with the fact that you know both me and my cofounder had years of experience working within financial services as an industry. Um, you know, um, you know, sort of sort of headed right? And. Um, and yeah I think they’ve been great. Supporters. Great partners as we’ve kind of you know, embarked on this journey. They’re very actively involved in the company and have been advising us and ah been like great. You know, great folks to bounce off ideas.
Pushkar Mukewar: As we scale up the company to the next level. So.
Alejandro Cremades: So I Guess say as you’re now you know thinking about scaling the company and and taking it to the next level. You know obviously to all those investors you had to sell them on a vision you know and a compelling future that you were living into and um so imagine you were to go to sleep tonight push car and Team. You wake up in a world where the vision of Drift Capital is fully realized what does that world look like.
Pushkar Mukewar: Yeah, ah so um, the vision would be to really be the platform of choice for small businesses in in multiple markets to. To be a 1 ne-stop solution for addressing trade needs for these small businesses of course working capital is the core Dna. We have. That’s the business we’ve we’ve built and we continue to scale up. Um, but over time the vision would be to perhaps add other products and services which just makes the life of a small business easy. Um. Want to be continue. We want to continue building our global presence as I said the focus at least in the short term would be to continue going deeper in the markets we are operating in but we see opportunities multiple opportunities to expand. From our presence in let’s say Mexico to parts of Lattime South America we also see opportunities within Asia us itself is the largest buyer in the world. So you know there are obviously opportunities to to grow there. Um, but yeah that that would be the vision that you know if you are able to enable many many businesses small businesses to realize their full potential I think we would have been. We would be successful. Yeah.
Alejandro Cremades: And when it comes to scale. You know, especially I mean you were you were alluding to now that basically you guys have done like multiple runs of financings. You know when I think about a run of financing is basically you are bringing the right people that are going to help you unlock the next lifecycle of the business.
Pushkar Mukewar: Yeah, yeah.
Alejandro Cremades: So as you have you know gone from one cycle to the next with drip Capital I mean how how have you seen you know those challenges shift from one cycle to the other.
Pushkar Mukewar: Yeah, ah so you’re right I think initially you know we we wanted to get investors who were um who were at appropriate at that state. So for example, going through ycombinator was a great experience. They’re one of the best accelerators incubators. And it is great for us to sort of participate in that program. Um, and then I think as we went along. You know, getting more venture capitalists involved who are ah you know who are seeing the potential in in the opportunity we’re going after. And I would say more recently I think we’ve been engaging more with strategic investors who could help us unlock the next phase of growth and the kinds of investors we’re bringing on board so ti platform is one of the investors who were significant investors in our last round and they ran 1 of the largest. Lp platforms right? to connect it to a lot of insurance companies lot of institutional investors and that is is really one of the key areas for us to continue growing as we can we unlock more and more um investors on the supply side because ultimately you know that is. Also one of the constraints to growth that can we get more and more investors who are interested in in our kind of assets. Um, so bringing them on was super helpful. We also brought on board. Um a very large family office from from Mexico which will help us.
Pushkar Mukewar: Um, expand within Mexico as well as the broader Latam and South America region so I would say that as we think forward and we think about who would be the right set of investors for us I think. Yeah, the investors who would be right set for us will be some people who will be helping us on either the supply side or the demand side unlocking opportunities for us. Um, you know, um, those would be the right sort of investors. Yeah.
Alejandro Cremades: And then in terms of um in terms of so also of you know, taking a look at the at the past you know and and taking a look at the past with with a lens of reflection. You know if you know you see now you know incredible the wealth of knowledge. You know what? you guys have been able to accomplish with the business. If you were able to go back in time you know, let’s say I put you into a time machine and you’re able to go back in time perhaps to to have a sitdown you know with that younger pushcar that is you know coming out of one of those classes at Wharton and thinking about what kind of company you were going to build you know in the. The venture world and and that excitement ah of of living into that future. But let’s say now you’re right there with that younger push car and you’re able to give that younger push car 1 piece of a advice before launching a business. What would that be and Hawaii you know what? you know now. Okay.
Pushkar Mukewar: Um, interesting. Um, so one piece of advice would be definitely um, ah, kind of ah starts sooner. Um, than later I think. Ah, part of me, you know if I reflect like 10 years back I I just sort of you know, um I was too kind of afraid to take the plunge right? and and I kept procrastinating that decision on when to launch and what should I have before I launch right. For 3 4 five years I just kept thinking about it right? I think the ideal time for me to start would have been right to start during Wharton and I think the second key piece of advice I would give is that ah, the the most important and the best thing to do when you want to launch is just talk to your users right? I think. Lot of times. Um, you know us and mbas and ex-cons consultants you know tend to focus a lot on reading research reports or preparing pitch tech or market market studies right? and lot of it is I element at the end of the day I think what really matters is are you making something which which people are willing to pay for right? And only way to find that out is actually launch fast and if it’s okay, it fails right? But launch fast and talk to your users and I felt that during the early parts of trip. Um, we did spend or waste a lot of time you know doing things which didn’t really matter much you know.
Pushkar Mukewar: And what mattered really was the time we spent with our users. So.
Alejandro Cremades: I Love that now a push card for the people that are listening that would love to to reach out and say hi. What is the best way for them to to do so.
Pushkar Mukewar: Ah, so they can reach out to me on email pushka at dripcapitalital.com um yeah that would be the best way.
Alejandro Cremades: Amazing, Well easy enough push car. Well hey, well thank you so much for being on the deal maker show. It has been an honor to have you with all of us. Okay.
Pushkar Mukewar: Great. Thank you, thank you and Android’s been a pleasure.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Pushkar Mukewar On Raising $525 Million To Transform SME Growth And Trade Financing Worldwide appeared first on Alejandro Cremades.
Greg Bailey has now been involved in an almost dizzying number of startups. Now with his latest venture, he is aiming to help you live healthier, and for longer. The startup, Juvenescence, attracted funding from top-tier investors like Longevity Vision Fund, Foresite Capital, Fastforward Innovations, and Grok Ventures.
In this episode, you will learn:
- What Juvenescence is working on
- Tips for living longer and healthier
- The advantages of ketosis
- His top advice when considering launching a business
Alejandro Cremades · EP 636 Greg Bailey On Creating $28 Billion In Shareholder ValueSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Greg Bailey:Dr. Greg Bailey, MD, a co-founder and the CEO of Juvenescence, is a physician, financier, and biotech entrepreneur with extensive experience founding and financing healthcare companies.
Dr. Bailey is driven by the important opportunity to truly modify aging based on rigorous science. The goal: to use his track record and drug development expertise, and that of his partners, to find compelling products and raise the extraordinary amount of money necessary to fulfill the promise of Juvenescence.
Dr. Bailey is also the chairman of Portage Biotech, Inc. (PTGEF: OTCBB), a publicly-traded oncology drug development company. He was a former managing partner of Palantir Group, Inc., a merchant bank specializing in biotech and intellectual property, and he was the initial financier and an independent director of Medivation, Inc. (MDVN: NASDAQ), acquired by Pfizer in 2016. He also led the seed financing of Biohaven Pharmaceuticals Holding Company Ltd. and joined the board in 2014.
Previously he founded or financed Ascent Healthcare Solutions, VirnetX Inc. (VHC: AMEX), and SalvaRx Group PLC. Dr. Bailey has an MD from the University of Western Ontario and practiced emergency medicine for 10 years prior to becoming a serial entrepreneur.
Greg has embraced a healthy lifestyle that includes biohacking, a proper diet, and a comprehensive exercise program: high-intensity training, weightlifting, aerobic exercise, and yoga
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Read the Full Transcription of the Interview:Alejandro Cremades: All alrighty hello everyone and welcome to the deal maker show. So today. We have a very exciting founder with us. You know we’re gonna be learning a lot about building and scaling I mean I got to tell you I almost lost struck with all the companies that this founder you know has been part of but I think that his journey is remarkable and we’re gonna find it. very very inspiring so I guess without further ado. Let’s welcome our guest today Greg Bailey welcome to the show.
Greg Bailey: Thank you Alehandra A pleasure to be here.
Alejandro Cremades: So born in Toronto canada you know, give us a little of a walk through Memory Lane Greg how was life growing up there.
Greg Bailey: Um, it was good it you know cold in the you know Canada has 2 seasons July and winter. But it was so good and you know have very good education system. You know a kind of a comfortable place to grow up.
Alejandro Cremades: So At what point you know, do you decide that perhaps the um, the Healthcare or medicine is going to be you know for you because that’s what you know the career or perhaps like the path that you chose to go with you know in terms of Study. So. Ah, what point he became evident that was you know the right path for you.
Greg Bailey: 2 aspects to that andra one was my mother had always wanted to be a doctor but she was a child protegey in music so she went down. She ended up being pushed down that pathway and the second one was when I was six years old the little girl who lived 2 doors down from me. Ah, developed meningitiss and they took her to the hospital and she died and as a 6 year- old I couldn’t fathom how her going to the hospital had ended up with her dying and my mother tried to explain she unfortunately was allergic to the antibiotics would have saved her life but it was unfathomable to a 6 year -old so it. Probably left an indelible mark Mark certainly has dictated my latest company.
Alejandro Cremades: And we’ll talk about your latest company just a little bit I guess say for you right? after you know, studying you know medicine you know and you went to medical medical school.
Greg Bailey: Again.
Alejandro Cremades: Um, you decided to go into emergency medicine. What does it mean emergency medicine and what were you doing during this time.
Greg Bailey: Um, basically you know any accident sudden um pathologies that prefall somebody you come into the emergency department at the hospital and so you’re the first person the first doctor that sees them. If they’re not specifically for an existing physician so car accidents heart attacks. Um all sorts of you know the miscellaneous things we do to ourselves so I did that for 10 years
Alejandro Cremades: And at what point do you realize that they maybe there is something else. You know for you.
Greg Bailey: Ah, the problem with being an emergency room doctor is 20 to 30% of everyone you see after Eight o’clock is drunk. They hurt themselves and they’re obnoxious so it was I was losing my empathy so it was time to move on and happily I’d been successfully creating a career. In business along with practicing medicine.
Alejandro Cremades: So then in in this regard I mean you also got your feet wet when it came to syndicating real state. Ah you know stuff I mean medical medical buildings. So how did this initiative come about and and what was this exactly.
Greg Bailey: So when I was practicing medicine and a large number of friends who were in the real estate market. It was very hot real estate market back in the 80 s in Canada and so I got brought in and we saw buildings that we thought we could turn into medical buildings. And so we syndicated those opportunities back to physicians um and basically created a portfolio that we subsequently sold.
Alejandro Cremades: That’s amazing now you know, obviously you know there’s a ton of companies that you’ve done you know and I want to make sure that you know for the listeners you know were able to give enough time to what you’re up to you know with juvenience. Which he’s saying pretty interesting stuff you know and there’s some really interesting questions there that I like to ask you too on how to live better supplements and and things like that I guess you know why don’t we do this. Why don’t we go company by company and you tell me what was the biggest lesson learned and also what ended up being. The outcome of that experience and perhaps you know you give us like ah 30 seconds on on what you guys were doing with that company that you found it. So first one ascent healthcare you know back in 9096 where you got started there and you were also not only on the founding team but then also a board member.
Greg Bailey: Um.
Alejandro Cremades: What were you guys there doing there and what was the lesson learned and also the outcome.
Greg Bailey: Yeah, there was a fabulous situation and basically we would buy the equipment that hospitals were throwing out and like laparoscopic scissors and andosry and we’d clean it up and we’d sell it back to them so you would. Basically buy it for pennies and sell it back for dollars. It was just a fantastic business model. No barrier to entry which is very very important was a valuable lesson learn. It was my first Vc deal. Um, basically they came in and they changed the price last minute when they knew they had a gun doer head from $2 a share. ¢50 so it was my first and last vc deal. So no, basically it’s sold for five hundred and twenty one million the five hundred and twenty was for the vcs. The 1000000 was for me. So don’t do vc deals was the takeaway on that one.
Alejandro Cremades: And and in that case, you know Obviously you also on this one had full visibility into the full cycle of a company right? like racing and exit and all that stuff what kind of what kind of clarity did you get from.
Greg Bailey: Monument.
Greg Bailey: Um, they live.
Alejandro Cremades: From that from achieving the finish line of of the cycle of a business from from inception to to to really exit I mean what kind of what kind of access or or education would you say that gave you to know that you could do that again.
Greg Bailey: Um, basically you learn it takes 4 times more money than you thought it would do and it takes 4 times longer Those are my rule of four that I learned from that business. It just takes so much time it always happens much slower than you anticipate deals have their own chronology and despite whatever you want you. Can’t accelerate them. They’re going to evolve as they evolve so that was my biggest takeaway from that The other aspect was that I felt that I was comfortable finding opportunities that were financiable. You know and that I was able to. Dictate the level of conversation so that a person who wasn’t medical could understand what I was saying to get investors.
Alejandro Cremades: And the next one the next rodeo ah vernet x you know that you did you know in 2005 there you were a founder and and. And there was quite a few lawsuits there that that that were happening too. So why? So what happened you know with those lawsuits and and then also you know what? what were you guys doing and what was the outcome.
Greg Bailey: There was another one just before called meditation which we started in 2004 but I wasn’t a founder but moving circle back to that one if you want because I learned an awful lot from that one. Um where we created the number 1 drug in the world for prostate cancer. So basically vernetics.
Alejandro Cremades: Yeah.
Greg Bailey: Was interesting. You know that you would be able to tie up a technology that was very exciting but you know getting people to license it particularly if they had an existing project. You know, ah particularly in the United States was fraught with legal complications. So we notified you know Microsoft at the time that they needed to license our product. They told us to go away and we eventually had to unfortunately sue them and happily we won and $200000000 and then we had next up was apple who was using it for facetime. Should have had a license from us and we are now 18 years later and they still have not settled with us. They continue to fight with us because one of the courts awarded us a half percent of the sale of every ipad and iphone sold in the world and that works up to $300000 a day. So.
Greg Bailey: Apple is going to fight this and my grandchildren probably won’t see this money and um I don’t have children yet.
Alejandro Cremades: Wow, That’s incredible like how typically those those those legal proceedings you know take so long. Unbelievable Now. Let’s go back to to Motivation motivation there. You were the. Financier and then also um, an independent director. Um, you know, definitely prostate. The country is a really really big Problem. So How was that journey there with motivation.
Greg Bailey: Yes, it was what taught me if you’re going to do biotech you want to do 10 projects and try to be right on 1 and if you do that you’ll deliver an extraordinary return for the investors. So we started out with 1 product in alzheimer’s disease and we added the second product for prostate cancer. We had the best results the worlds at the time had ever seen an alzheimer’s disease and phase 2 and then failed in phase 3 but happily had the prostate cancer coming along. We had the best. Results or we had comparable results to a competitor in our prostate cancer drug as well and it was because we had two. We had this portfolio that we were able to survive the other thing that I learned is you know to work very very closely with the Fda and the regulatory bodies if you pre-empt that so they know what you’re doing in advance. It’s a much smoother journey and so happily it worked out well. Prostate cancer was incredibly successful. Did four point five billion in sales last year and unfortunately it is such a big problem for men over 250000 men will be diagnosed with prostate cancer this year
Alejandro Cremades: Wow and when it comes to um to investing in in biotech and and projects like this I mean what? what? what are your thoughts there on the ingredients. You know the 3 main ingredients that get you excited about you know? ah.
Greg Bailey: India in Europe.
Alejandro Cremades: Deploying Capital in a biotech company and and why.
Greg Bailey: Yeah I’ve been really fortunate you know and in a despite even the statement I’m about to make will clarify the number one point I’ve worked with extraordinary people so that my biotech companies have gone through $25000000000 in market cap and so one is work with extraordinary people. Second male element is to have a portfolio at bothion and subsequently in biohave and now juveesence you know we have multiple products and you know on this thesis that if you do 10 you can be right on 1 what’s really important and most people go I don’t understand biotech I can’t invest but it’s very similar to mining. You know you put the money in you, you run your clinical trial and if it’s successful. You’re worth 10 times what you were worth the day before and if it’s unsuccessful. You’re worth half of what you were worth before. So it’s an odds game your chance of having a successful clinical trial that will have that 10 x increase in valuation. Is usually at phase 2 your chance with successful phase 2 varies historically between 22 and 54 and I appreciate. That’s a huge delta so it’s 22% for cancer and autoimmune because placebo does really? Well so it’s hard to differentiate. And it’s fifty. Four percent for antibiotics for insulin because we worked in phase one. It’s going to work in phase 2 but if helejaro if you and I can be right one out of every 3 times and you made 10 times your money. How long would you play at a table in Monaco if every third hand you won 10 times your money but you can’t make just one bet. So.
Greg Bailey: Goal is to have this portfolio approach work with extraordinary people and have uncorrelated assets so that you don’t sink or swim with all ten and I think that you can do incredibly well in biotech.
Alejandro Cremades: I Love that Now. Let’s talk about portage. You know we change which you were there involved as a found cofounder and then also Chairman that you know ended up. Ah you know, having assets worth 900000000 And obviously there’s all types of dividends that were paid out to investors and all of that stuff. But but I guess you know the question here is what were you guys doing there now. What really ended up being the outcome on the lesson for you.
Greg Bailey: So you know as you’ve gathered from my conversation dig multiple products so we we took over the company and reconstituted it in 2013 and basically went to make 10 bets worked with extraordinary people had a gentleman named Jim Mallon who’s of polymath. And ah Declin Dugan who is the Ceo who’s the former head of drug development Pfizer. So we went out to get the 10 projects and as one of my allies. Alex Pickett said 1 of our children ate the other ones it became so obvious which asset we’d invested in was key. So we ended up investing $7000000 in ah in a company that Declan started and I became a board of director and used the money from portage to finance called biohaver and as you say we invested $7000000 we dividended it four years later to our shareholders which basically was worth about two hundred and twenty million dollars had they held those shares today. They’re worth over 900000000? Um, and so again, we bet with bio behavior we were betting on great people. They had a multiple portfolio entity and. And even at portage we did that and subsequently after doing the dividend we acquired assets from another company that we started called salvvaex in immuno oncology and there we’re building the portfolio currently, we have 3 different products at portage.
Alejandro Cremades: And then you know the the last one that I want to ask you before really getting into you incence is Chelsea I there I know that chelsea avin daily is a still ongoing. You know it has a raise some cash. So what’s the deal with with this one? yeah.
Greg Bailey: Yeah, so this was definitely straying outside of you know my sweet spot as I said you know the lesson I learned from biotech and from the predecessor company ascent healthcare was not to deal with vcs and to deal with extraordinary people. Ah, came ah again, ah across a savant in the and in the industry nylash viani in in in insurance and I thought that this is an extraordinary person so I threw a great deal of capital behind him $25000000 and we started to build this insurance company and reinsurance company and nalesh has just done an extraordinary job building the company. Um, where we have just beat the industry odds dramatically by creating our own software to assess risk in property and casualty. And subsequently we’ve raised you know, further $50000000 from third party investors in a small round of before that of of $20000000 so it’s actually more that we raise.
Alejandro Cremades: So then let’s talk about now about the juanescence you know your ah your latest baby and here you are the the Ceo as well and one of the co-founders. Ah, what point do you become interested into aging and you know lifestyle and you know and all of that stuff I mean at what point that’s the idea come knocking to you.
Greg Bailey: Um I looked at getting into the vitamin supplement industry in the in the 90 s and couldn’t find a place where I could differentiate. It. So I’ve always been sort of inclined and then being a physician just paying attention. You know to articles that are coming out. Began to you know, go on my own personal journey to try and you know stay healthy stay fit eat properly in twelve ten years ago now I met a guy named Luigi Fotana Luigi is the number 1 person in the world on caloric restriction. 1800 calorish men twelve hundred calories women and you will live longer and you’ll stay healthy the next year I met Volter Longo and volter and his research at Usc had found out that you could almost get the same result without having to do it every day if once every three months you did five days eight hundred calories and if you do that you mimic a very similar response by your bodies if you’ve been starving yourself for the full three months so that that was interesting the next person I met was Walter Bortz who is then head of gerontology at Stanford and he said if you’re fit you mentally and physically decline at half percent a year unfit 2% a year well that’s a heck of a delta you know to do that and I guess my epiphany at that moment was there’s nothing magical about exercise or diet. You know. Basically they must be doing something on a cellular level and.
Greg Bailey: So then I started to dig in and found out the scientists were discovering the four major pathways that cause your cells to age and so one thing I know about scientists if they know the pathways they’re going to figure out how to tinker with it. So I started bombarding my two partners Declan and Jim from portage and Biohaven. With articles showing how the scientists were sorting this out and you know and Jim five years ago six years ago picked up the ball and said I’m going to write a book about this I’m going ah meet the top people in the world I’m going to go to the number 1 institutions in the world and you know. And put together this book and he basically gave Declan and I a roadmap of all the people we should be speaking to to build a company to truly modify how you age so we have 11 products right now that hopefully. We’ll pan out in clinical trials where we will be able to slow halt or reverse aging.
Alejandro Cremades: So alter and reverse aging I mean that sounds like I mean if if you were to actually achieve that What would it look like.
Greg Bailey: You know I mean it. It has enormous and profound consequences to humanity. Um, the 1 thing I’ll say a handroid’s going to happen so much faster than your viewers think these products are going to come to market very quickly. You know we launched a ketone esther. We know that you know the University Of California Berkeley found that animals that were in ketosis on a chronic basis lived 25% longer protects their heart and their brain. So here’s a product you can get today that could potentially materially change how long you live. Have another product we license in from university of Michigan and the people who have this pathway turned on live long 8 to 10 years longer healthy in January six we published our scientists published that they cut off the limb of a living entity and regrew a functional limb. It was in a frog. And they’ve now reproducing the model in a mouse so science fiction is becoming science recently David Sinclair’s lab out of harvard said that they were able to epigeneically which is basically change your genes and your Dna while you’re alive. We’re able to reverse aging in mice. So as I said happens so much faster than you think this has just been an amazing journey for me to see what’s coming and to work with some of the smartest people in the world addressing 1 of the biggest issues in the world.
Alejandro Cremades: And no kidding.
Greg Bailey: You know Longevity healthy longevity.
Alejandro Cremades: And in terms of um Capital I mean you see this is capital intensive to be able to achieve all this stuff How much money have you guys raised today.
Greg Bailey: Um, juven essence is raised 249,000,000 today
Alejandro Cremades: And how how did you go about racing this because obviously you had the lessons learned from raising venture money on the first rodeo. So how did you go about raising money now for this one.
Greg Bailey: I know this is going to come to it as a shock to you and to your viewing audience but wealthy people want to live longer who knew so our first financings were a lot of ultra highh ne worths who were betting on us to find the drugs that would allow them to live longer healthy. Have a couple of biotech funds. We have an insurance company as well and the founders have put in $75000000 so we’re in the midst of a raise now one hundred and fifty million dollar raise with barclays and our goal now is to bring in more of the institutional investors. To prepare for a public offering in the next twelve to twenty four months market willing I think.
Alejandro Cremades: That’s incredible that’s incredible now you were talking about those products those 11 products that you’re working on I mean typically what is the process of getting one of those products to market.
Greg Bailey: There’s 2 paths you can take surprisingly and it was interesting because I always used to get in trouble with people saying why don’t you do more natural products and not realizing that some of the biggest blockbusters in medicine are actually natural products. Aspirin is a natural product. Digitalis is a natural product. But so we found a lot of natural products that that actually materially change how long you age and so with those because they’re safe. You can go a pathway with the regulatory body called generally recognized as safe and you can get them on the market in under 2 years. So we have indeed done that with some of our natural products. That’s how we got the ketone ester onto the market you know in just under 2 years then there’s others that are more conventional. You know there’s regular pharmaceuticals like the one out of university of Michigan where you literally need to do the 7 to 8 ight years clinical trials phase one and phase 2 phase 3 and can cost up to $100000000 to bring them to clinic and then the regeneration. The regulatory bodies are you know, regrowing the limb are still sorting out the pathway for something like that. So you have to be particularly creative. And how you work around the regulatory body if you and I had a product today that allowed people to live 10 years longer healthy. There is no regulatory pathway to get it on the market. They haven’t recognized aging as a disease the world health organization did in 2018 so it’s coming.
Greg Bailey: And it’s going. You know the regulatory bodies will catch up but it’s still a work in progress happily all the drugs that I live longer generally treat the chronic disease of aging as well.
Alejandro Cremades: So obviously Greg you know it sounds like you know it’s gonna take some time for me to be able to go to like you know my my nearby you know pharmacy you know or store and and and buy the product. You know to help me live longer I guess you know if you were in my shoes now and I’m like hey i. I want to live longer. What should I do right.
Greg Bailey: So um, couple of things you know the number 1 lifestyle thing you can do I agree with Walter Bortz and Stanford is fitness. You materially change by 4 x your mental and your physical. Generation as you age as you you know if you look at 60 year old seventy year olds who are fit versus the ones that aren’t I mean it’s night and day they look like they’re from different planets. So that’s number 1 number 2 lifestyle thing is obviously diet. You know. We now know out of a study that came out in January Two Thousand and eighteen there is no perfect diet. It’s ethnocentric white japanese people can eat white rice without getting diabetes of you and I at the same amount. There’s a very good chance we become diabetic. The Mediterranean diet for most you know Caucasian people from Europe is. Is probably the best diet 10 to 12 servings of vegetables 3 to 5 servings of fruit Scott Simpson at the Perkinson Institute says you massively over eat protein that protein should only be 15 to 20% of your diet healthy carbs should be 70% in the relf should be healthy fats so diet would come next. As far as drugs and supplements I do think being in ketosis regularly and you can get products that put you into ketosis today will materially change how you live and then as I’ve said there’s going to be 3 or 4 more natural products that come down that will directly affect.
Alejandro Cremades: And really quickly for the people that are listening that are like what is Ketosis What what is ketosis for the people that are listening.
Greg Bailey: Your aging process.
Greg Bailey: Yeah, so basically if you stop eating Today. You probably have about 36 hours of blood sugar in in your body and you have to eat through it first use it up as cells after that you’ll begin to break down fat. And when you break down fats they become ketones and when they break and the liver turns them into something called bhb that your cell can then use as energy what we’ve learned the last few years is bhbketones are a much better food source for a lot of your cells than using sugar. You know sugar is obviously to become glucose a bad actor. So the more times I can be using ketones and phb the more advantageous it is to my health. What we’ve learned in the last ten years is I don’t have to starve myself to get into ketosis we’re a drug development company. So we discovered this ketone they reader discovered when we inlicen this one from the buck institute what we did was we found out you take a drink of ketones our ketone ester within 15 to 30 minutes you will be in ketosis your ketones will have it. Nice robust level in your blood system. So your cells can use it as an energy source I don’t have to starve myself to get there I can do it simply by taking this drink so this has been a big deal and it’s you know, basically the the science is all sorts of.
Greg Bailey: Different universities have validated the key you want to be in Ketosis on ah on a regular basis and it’s much easier to do by drinking something than starving yourself or a Keto ketogenic diet which is also difficult.
Alejandro Cremades: That’s incredible and and just you know out of curiosity you know for the supplements you know any a specific supplement that you think you know like should be a must.
Greg Bailey: Yeah I think that there was a study that came out this summer that said, if you’re on fish oil Omega 3 and vitamin d 3 and you’re fit you decrease your chance of cancer by sixty six zero that’s a huge percentage.
Alejandro Cremades: Wow.
Greg Bailey: Study needs to be repeated I don’t think it was a perfect study but vitamin d 3 and omega 3 are you know, incredibly safe and fitness is just generally good. So there’s no sort of downside to following that regimen right? Why not.
Alejandro Cremades: Yeah, ops a hundred percent
Greg Bailey: We do know that vitamin d 3 has all sorts of wonderful benefits same with omega three effect on inflammation I would also Mayo Clinic has begun to promote folate vitamin b six as a very important one that potentially is anti-aging. Lots of people talk about tumeric kirkoman the you know the herb that everybody in India uses in ah plentifully um so those are you know? Nice safe, easy ones to take and then you can get into more esoteric things. There’s a. Drug you can buy over the counter in Spain italy and portugal called metformin and people who are on metformin seem to have a lower incidence of cancer and alzheimer’s disease einstein university is in the midst of running a clinical putting together a clinical trial to see whether metformin is legitimately an anti-aging drop and. I’ve been taking afraid to 9 years now metformin um so there’s big gun.
Alejandro Cremades: Wow, that’s amazing now now Greg question here. Imagine you go to sleep tonight and you wake up in a world and this is gonna this is gonna look beautiful to you this world in a world where the vision of juven essence is fully realized. What does that world look like.
Greg Bailey: So our goal we started. The company was not to increase how long you live was how to to increase how long you live healthy. We have a huge crisis about to face the world Alejandro we do not have enough money to afford to take care of the elderly. We have an inverted pyramid. Not enough young people of the base to support financially the older people and we’re living longer but unhealthy so we have to get them to live longer healthy. So my world of juvenessence is right in the near term to be able to do this gives you an 85 year old who’s still. Participating in life. You know has a sense of purpose is healthy because we know that 95% of the budget of socialized medicine has spent on the last five years of life it wouldn’t it be great difference between when you are healthy and when you die now is 10 years difference between health span and lifespan. Would be great if it was one week one day 1 hour you were healthy up until the end interestingly and I don’t know why and everybody asked Denmark is 3 years between when they’re healthy and when they die so that was always our aspiration mind you if we do this, you’ll clearly live longer. But that was ah so my world of June in essence if we were to realize this dream is to do this It’s also not only the slow cellular aging but I also need to prevent the degeneration of tissues because of you went out in the sun or you hurt your knee skiing or playing tennis. So can I regenerate a knee.
Greg Bailey: And so that’s why we’re also doing the regeneration where we regrew the length.
Alejandro Cremades: Wow now. Obviously here we’re talking about the future. But imagine if you were able. You know if I was let’s talk about the past here imagine I was to put you into a time machine and I bring you back in time and I bring you back to that time you know, perhaps in the 90 s. Where you were you know, thinking now about leaving emergency medicine and and going more and and tackling the business side of things and you had the opportunity of having a sit down with that younger Greg and being able to give that younger Greg. 1 piece of advice before launching a business. What would that be and why given what you know now.
Greg Bailey: Um, um, good question tricky question through 1 piece of advice I give you I guess work with extraordinary people. You know. There’s been lots of quotes you want to be the dumbest person in the room and you’re in the right room you know because then you have the greatest opportunity for success and so it took me a little bit to sort it through but that unequivocally there’s lots of great products that have never seen the light of day because it didn’t have good managers. And there’s lots of companies that had very average products but they had great management and the managers landed on their feet and made extraordinary businesses so that would probably what I would tell myself.
Alejandro Cremades: That’s amazing, very profound now Greg for the people that are listening. You know that and that will love to get in chat in touch and say hi. What is the best way for them to do so okay.
Greg Bailey: Yeah, internet email is probably the best. It’s ah Greg g r e g at juov labs and joov labs is j u v l a b s dot com so Greg at juvelabs.com
Alejandro Cremades: Amazing, amazing! Well Greg thank you so so much for being on the deal maker show. It has been an honor to have you with us.
Greg Bailey: A complete pleasure Ale Handra thank you very much for having me.
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The post Greg Bailey On Creating $28 Billion In Shareholder Value For His Companies And Now Raising $249 Million To Reverse Aging appeared first on Alejandro Cremades.
Federico Travella went from turning his childhood hobbies into businesses to launching a fintech start that has transacted well over a billion dollars. The company, Novicap, has attracted funding from top-tier investors like Fasanara Capital, Techstars, Partech, and The Net Street.
In this episode, you will learn:
- Working capital for your business
- The differences between startups in Europe and the USA
- Market timing
- Startups as a career
Alejandro Cremades · EP 635 Federico Travella On Raising $200 Million To Revolutionize Small Business FinancingSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Federico Travella:Federico Travella is a Belgian-Italian technology entrepreneur and Founder & Executive Chairman of Novicap, the OS for Working Capital.
Prior to founding Novicap, he was Managing Director of Rocket Internet for which he headed the rapid expansion of Internet ventures throughout Asia Pacific.
Federico’s most recent success at Rocket internet is thesuccessful scaling of e-commerce marketplace Lazada with a combined funding of millions of USD and successful exit to Alibaba Group.
He holds a BSc and MSc in Geology from Ghent University and is a Young Talent Fellow at IESE Business School.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show. So today. We have a really exciting founder. You know like yeah, we love to talk about building scaling financing and all of that good stuff. So again, you know the episode today is gonna be very inspiring. We’re going to be listening. You know about you know the good side of things you know about? perhaps you know like providing companies with money and and you know the fintic side of things and some of the restrictions you know also growing up. You know they’re Europe ah, and and again you know like everything that has led him to really build what he is doing. Right now which is a rocket ship so without further Ado Federico Trabella welcome to the show.
Federico Travella: Thank you like I know happy to be here today. Yeah.
Alejandro Cremades: So Federico walk give us a walkthrough memory lane. How was live growing up in a middle class family in Belgium.
Federico Travella: I indeed grew up in Belgium in ah in a small town called Bruche which is pretty much this open air museum and rightfully a prominent unesco world heritage site and it’s also ducked the venice of the north it receives. Hundred times more tourist than the amount of people actually living there and as you can imagine is the poor opposite of a tech hub say like San Francisco and so growing up consequently I didn’t really know many entrepreneurs there. Let alone tech or or internet businesses are entrepreneurs. There are not much inspiration and I think. We all know we need inspiration and and role models and so success in in my family and the families um around me really meant being a strong student um doing to study the great masters at a top university and securing a stable job. And it’s in many ways that quintessential middle-class recipe. We know for success in Europe and while I don’t really know if it’s future proof. It is what it is today and so growing up there I think there’s also a lot of of risk aversion for instance, um, just to name one. Example there was this recurrent story at family dinners about failure at 2 uncles tried to build some company. They both failed and this came up over and over again and I think that risk aversion is a very strong impediment to entrepreneurship. Um, perhaps this is because.
Federico Travella: The worst that really can happen to you or to to a middle class family is sliding down into that lower class and once again, there’s nothing really wrong with this malt but it becomes what I would call a little bit the middle class trap and if you add to that first job out of union mortgage. You really much kill entrepreneurship and so I do think that’s the mold that works for most people. It’s ah it’s this middle class. Um and path that forces a certain discipline provides stability but I also now in hindsight realize how much luggage we all carry. Ss founders or entrepreneurs because of our upbringing or our childhoods and this can really limit us in life and sometimes we need to let go of our luggage in order to succeed and and become successful.
Alejandro Cremades: Now 1 thing that I find really interesting in your journey is how you started to really be press into strategy and how you like strategy and you know from from something so so random like magic cards I mean I played magic cards too. So ah. So what what? What kind of exposure did that give you or what triggering points that perhaps you know, served you well later.
Federico Travella: So my interest in entrepreneurship as as it wasn’t really inspired. Let’s say by by by my albu upringing was was really it was gradual pivot. Um, and as spark was indeed training card games First address you know. Pokemon and then eventually magically gathering which was was a more serious version. Let’s say of of pokemon as well. Elementary schools I I realized that um you know kids were starting to play Pokemon and and they wanted to be up to date about the latest Pokemon News wanted to know about their charries are their peach sho and I was lucky enough to have access to to a computer with a dial up internet back then a printer and so I started as selling this this weekly paper based newsletter for what is today probably like fifty Euro cents or so. And you could also place orders for cars which you know I would know where to find by trading and that was very much the upsell if if you like to to visualize it as as a pitch deck and so essentially I was taking auto kids lunch money and to no surprise. School shut down my little business and I went to look for something new and in 9095 um I I learned about this this trading card game called magic gathering. They had just released a new set of cards called ice age and I would.
Federico Travella: Start playing this game for 10 years straight and country to pokemon um magic the gathering was and and still is played by primarily adults. Um, you need a big balance sheet eventually to be successful at the game and I quickly learned that adults are of course a lot more easier to monetize. Then than school kids and so being a very capitalless card game. You need you need a lot of cars to to to become successful in it. Um, as a teenager I was trying to play the game competitively as I was competing with Ls with those. Bigger balance sheets and consequently I really want to trade as many cars as possible to fund my own game now this hobby became very much. You know this sort of informal business and I must trade it ten thousands of of cars during a decade or so and during that that. Experience I think unconsciously um I learned some really interesting business concepts um, one of them was obviously information symmetry because I had access to to data I was training so actively, um, especially ah online I knew better than anyone else. What the cars were worth Another um, let’s say business. Um concept that I learned was was pricing arbitrage. For instance, the the magic cards were a lot cheaper in the us and so I was eventually buying them and reselling them in europe sometimes even making a profit and because of foreign exchange and there’s obviously all with my mother’s credit card.
Federico Travella: Um, and for instance also in terms of of business models back then something I found out was drop shipping. Um, which was essentially buying goods in my case and trading cars and shipping them directly to my end customer in Europe pocketing again. Um, an additional margin on on the on the shipping.
Alejandro Cremades: That’s amazing Now you know, even though you had that they had developed already that love early on for business. You went on and you studied Marine geology. So why.
Federico Travella: Yeah, it wasn’t an easy choice Ali Handra because I remember being very jealous of my high school friends who they knew exactly what they wanted to study at uni. They knew they wanted to become a surgeon they knew they wanted to become a biology teacher or or ah or a vet. So myself I had truly no clue I had very diverse interest and eventually I take that box off of geology on the enrollment form of of ghent university in Belgium and people keep asking me. Why did you study geology just like you just did and. So I felt back then somewhat attracted to this international career exploring the world. The adventure of searching for say gold in some jungle you know, ah Indiana Jones style the opposite of a desk job very much and so you know. You see people here making up all sorts of reasons why they take a certain path in life and for me was really about the tri the adventure. That’s it and if something like the thial fellowship will have existed back then I would definitely have ticked that box. Um and probably as entrepreneurs. Career paths are a lot less and linear you have to figure out a lot of things in your life your business as an entrepreneur and you need to find pretty much your own product market fit and I realized this. Um, when only much later of course after you know having build businesses but also.
Federico Travella: The appeal of of um of geology I read this this fantastic quote in a book called the um matthouse at the end of the earth. It’s it’s an incredible account of um, the Nineteenth century belgian Antarctic Expedition Speaks of the obvious dangers of such exploration such as mutiny, a diet of raw seal meat and it’s it’s a hell of a story and and the quote that caught my attention was of George Mallory the british evereste explorer and and he said sometimes science. Is the excuse for exploration I think it is rarely the reason.
Alejandro Cremades: That’s incredible Now you know, even you know with all this going On. You know you ended up obviously getting the degrees and you ended up you know in the startup world in the venture World. You know with Rocket Internet. You know and obviously that took you in different directions. You know until you know what? you’re doing you know nowadays but Rocket internet. How does the opportunity come knocking.
Federico Travella: It was 2011 I had graduated with my masters in in Marine geology and remember sitting down with someone really senior of a big oil company and he was showing me this chart with a typical career pad of a geologist. And I can’t write it. It was a beautiful chart I can still see it in front of my eyes. Um it set out how you could go from Junior geologist to senior to Geology Manager. Um, and then probably obtaining some some sort of director position.
Federico Travella: But what I was much more intrigued about was that the x-axis which set out the time which was extending up to 25 years and then it hit me hi Koramba I’m not going to study um dead animals and and rocks for the next twenty five years um don’t get me wrong I have so much respect for for scientists. First of all I my my university peers that have built up fantastic careers in the field but I was no longer that career pad and in industry I was very much looking for and instead I I’ll learn about this rather controversial venture builder called rockettra internet. Startup clone factory of the the german zamra brothers and I was intrigued. They had built this ebay clone. Um and they sold back to ebay for 50000000 in a hundred days I mean this this was exciting and and so I was I was very much thinking this this can be my Mba in entrepreneurship. And I sought an introduction to rocket and following a 15 minute conversation and I can’t really called an interview especially because I still remember that the person on the other side of the line was slurping noodles throughout the call. Um I accepted an offer I packed my backs and I pretty much lived out of suitcase for the coming years first out of Sydney and then eventually out of Singapore and we built ecommercetir leaders in emerging markets including laada in in Saudi as and so looking back on the experience I think um.
Federico Travella: Europe would would never have offered me such personal growth opportunities and back then europe and especially tech was a slacker Silicon Valley was obviously exciting perhaps China but it was a much much much less accessible to me.
Alejandro Cremades: And obviously you know for those that are listening. You know that are interested to dive deep into the story of La Salta we had Maximilian Bitdner you know as well. You know in the past as a guest but 1 thing that I want to ask you here if they is you know as part of seeing all these different businesses rolling out those. Maybe like those replicas or those say you know ah e-commerce a businesses. What were some of the patterns that you saw that differentiated the ones that would eventually succeed from the ones that would eventually fail.
Federico Travella: I think market timing was was a very important one. Um, if if I draw a page from from the Lazada Success story I think market we we. really got market timing right? um. And I was actually discussing ah with with a former colleague. Not not too too long ago and and he summarized that we we just showed up that we showed up at the at the right time we obviously had a capital advantage having raised a lot more venture capital than than local players but we also really got. Um, market timing right? and so in in Saudi Asia specifically um you have to think that thanks to the introduction of cheap Android smartphones that this nascent consumer base could adopt mobile commerce a lot more rapidly. And so eventually that market leapfrocked from. Um, you know, largely offline commerce to mobile commerce skipping all the legacy in between that. For instance, we have in the west and this meant this this this led to incredible growth rates which were um, not not possible in in more ah developed markets and so. You had to show up with the right team at the right time and I think that that is that is what what we managed successfully to do and I think auto businesses that that rocket start um, perhaps in other markets.
Federico Travella: Um, took a lot longer to to obtain that product market fit I’m I’m thinking about know juma or or Lio um that those markets were were just moving much slower than than than we had in in Southeast Asia but still I think in many ways rocket you know, generate this. This mafia right of this network of of entrepreneurs and I think that that is something they really you know create and and we can be thankful for I don’t think creating’ network was necessarily the purpose of the zaamres but they except accidentally. Hand up with one of the biggest startup mafias.
Alejandro Cremades: I mean I gotta tell you I’ve had so many people on the show that they are now building unbelievable companies that also you know all of them came out of rocket. So I totally agree with you is just unbelievable. The. The the universe of founders that they you know have come out of that. so so yeah you’re absolutely right now in your case moving to London you know and and and obviously you know branching out of la sala moving you know to London and really you know that will lead you to no wakeup you know. How was that day transition. You know at what point do you realize hey I think that you know I’m I’m kind of like ready to to for change.
Federico Travella: It’s a great question and and I’m one of the rare entrepreneurs who resisted for almost three years a rocket and many did how but I really started to feel the itch to package all those learnings and leverage them to build my own business. From scratch outside that rocket internet umbrella and eventually I think being a successful entrepreneur is about the ability to track resources and I felt that I could now finally track the necessary resources like the financial capital. The the human capital that you need to the team you have to build and and and venture out of lazada to start my own business and naturally and you know a huntra you’ve spoken with many entrepreneurs here on the podcast podcast um you and so this will resonate with you the best. Way to build a business is to start with a problem and then build a solution around it. The opposite way is is very hard and so one of the problems I had witnessed at at Lazada is some of the struggles those small businesses go through when it comes to managing financing the working capital. We were providing the platform to sell. Um, goods online in the southeast asian market and nonetheless long payment terms for instance on on the supply or an immersion site led to problems for them and so that is when I decided to to to leave us out I wanted to redress those struggles that those small businesses go through with a b two b.
Federico Travella: Working Capital Fintech um with the goal to provide and to end working Capital solutions to ases Market corporates and public administrations and that became very much No vcap.
Alejandro Cremades: So I guess hey just for the people that are listening. You know to really get it. What ended up being there the business model. How do you guys make money.
Federico Travella: Or our business as I mentioned we we want to be end to end when it comes to working capital management and financing which means that we have a number of credit products which are obviously um, fully digital. These products are not necessarily new. So they focus on receivers finance ables finance and working capital loans. These are projects that the banks have have been providing to their customers for many years nonetheless um what what we’ve seen is that especially in the s and me the s and b segment.
Federico Travella: Economics are very difficult for banks to get right? The cost income ratio there typically doesn’t doesn’t work and a such better technology can can can help to provide those those products in a in a profitable way and now we have a number of payments products which very much help the Cfo. To optimize our working capital in a holistic way and the way we make money is is at a very you know 50000 food level um is is twofold one we have an interest margin on our cost of capital and b we have a subscription revenue for for a platform.
Alejandro Cremades: And now in terms of the early days you know for this and dealing with regulatory restrictions. How do you guys? go about it.
Federico Travella: That that is where for instance also Europe is is more complex than the us market. So europe is a patchwork of different regulations and depending on the sort of of payment product or lending products you develop. You have to comply with different regulations. We were lucky enough that we came out of a accelerator program with Barkeley’s bank in London and so they managed to provide some of the early um payments and um, Imani. Um. Infrastructure that we needed for instance to saveguard client money and so that was a very important first step. So we we operate and we still operate under their umbrella for certain parts of the business. And then yes in in ah in the continent markets like like Holland and Spain are unregulated when it comes to for instance re receivers finance and as such we we did not need to prove apply for license there nonetheless one area where we’veinvested a lot is to ensure we have the same. Compliance standards such as banks. Um, and I would even say in many cases better when it comes to kyc so know your customer antimony laundering these are the areas also where again a lot of the margin for banks evaporates because they’re doing those things in in a more pedestrian way.
Federico Travella: And we’ve been throwing a lot of great technology at at that.
Alejandro Cremades: Now What about the capital racing side of things you know because ah component like this is is capital intensive too. So how much capital have you guys raised to date.
Federico Travella: Yeah I’ll I’ll split my answer in 2 parts one is the corporate equity is very much the equity raised at the no v kept level to pay salaries make make investments in technology and and so on. And then indeed given we have a number of credit products on our platform. We also need to raise that like instruments to to fuel those those products so on the equity side. Um, and here I think we’ve been a little bit of an outlier. Um. Thanks to smart pricing strong execution. Very strong financial discipline. We only erae 3,000,000 inquity we broke even very early in the journey and continued that profitable path since so that’s been a little bit peculiar during a few years especially during you know the last years that. Tech bull market but it’s a very strong position to be in today then on the side of the platform funding as I would call it there. We work with a number of institutional investors to fund those credit products so these are mostly pension funds. Ensures credit funds with which we typically sign long-term agreements which goes back obviously to our asset liability management. We cannot just provide funding to our clients if we don’t have the the funding in place and so typically there we sign what we call forward flow agreements.
Federico Travella: On Um, multi-year basis with certain eligibility criteria. So we know very well what sort of assets we can originate what sort of receivers or pays we we can finance.
Alejandro Cremades: Now in in that case I mean how is different. You know how how when when you go about racing it like process methodology Psychology How is it different. You know from one end to the other you know when you’re thinking about you know, getting that capital in place.
Federico Travella: Yeah, on on the on the equity side that that’s where you will you know? in our case, we targeted french capitalist. We raised 3000000 led led by part ventures here in Europe and that that’s a very different animal than what I would call credit investors. So. It’s a different due diligence. It’s a different obviously both both investors care about the the asset performance and and the business and the ipu build up but are looking for different um, different things. So venture catys as we know are are looking for that you know. 10 x one hundred x return on on the technology investment and so they’re the the ipu buildup the growth rates and so on are are are obviously clear clear drivers. Um for a investor that is funding or platform. Um, and for instance to. Just give an example fuzznora capital which which we have ah transacted um more than a billion with to date and we close the 200,000,000 forward flow agreement last year in q 4 they they’ve been working with us since 2017 so we we, they’re definitely satisfied with the track record they have with us and so they will be monitoring, especially the the performance of of the book of the portfolio that you originate so think about loss rates think about how do you collect.
Federico Travella: But also what is your reporting like and I see a lot of especially early and fintech lenders. They very often have difficulty to ensure that the reporting standards are are um, in line with with what ah a credit funder is is seeking for.
Alejandro Cremades: So fairly imagine you were to go to sleep tonight and you wake up in a world where the vision of noviup is fully realized what does that world look like.
Federico Travella: I Love this question. Um I I will be waking up to a world in which cfos and novi kept the keys to their business. Let us manage their working capital in a holistic. And automate way. This means novi kept dynamically optimizing your existing and nov kept credit products optimizing your receiverss and payables your dso your dpo and we needed injecting much needed working capital and so this will have a very strong impact. Naturally on those businesses. Um, but also public administrations and all their stakeholders.
Alejandro Cremades: Now when it comes to um you know also executing on that vision. You know you need people. So I know that you know you’re there, you know in Europe and you know Europe is obviously a different day I think that things are changing. You know a lot. Ah, but then when it comes to talent. You know it’s A.
Federico Travella: I think that this has indeed changed a lot as as you already hinted that when when when I start I still remember that that there’s a lot of pushback and and the successful career path just like I have seen a little bit growing up in Belgium. But also for instance in markets like Spain where we have offices and and and the Netherlands. Um I would think a lot of parents would want their children to go into a big corporate or into a law firm and so that was that was definitely different. Um. Um, when when I started and and restart hiring in in 2015? Um, so that’s that’s a positive I think people are really starting to see technology and especially startups as as a real career path. Um I also think that this is somewhat cyclical.
Federico Travella: We we may now also see a moment where for instance, think about I don’t know Mba graduates. Um, they may go back more to more secure employers like like corporates because eventually there is less startup funding is less Vc funding and as such it’s deemed more risky. Um, so there’s definitely there a and an effect at play which is related to to markets and and just you know where where people are able to find jobs. Um, for me I I obviously recognize the the importance of surrounding yourself of the best people possible. At any given stage to to build a business like novikep and and many others I’ve seen what I would say is that placing yourself, um in a great hub and and for instance sort of we we like Barna for that reason. Um, it’s it’s great hub to track talent. Especially on a product and and on the tech site we have so many nationalities here at novicap and we see that being based in one of those tech hubs is still something which people really appreciate even post pandemic even in the in the remote remote work world.
Alejandro Cremades: Now obviously we’re talking about here. You know where things are heading also towards the future but I like to ask you you know about the past but doing it with a lens of reflection you know because you’ve been involved too with so many different companies as well and and you’ve seen different business models different things that have faith. Taken off different things that didn’t so if I was to put you into a time machine forday and I bring you back in time I bring you back in time to that moment where you know you were now joining rocket and internet you know or you were being part of asalad you were seeing all these different friends of yours. Going at it on their own starting their own companies and those were the moments where you were starting to incubate the thought of doing something of your own one day if you could go back in time and have a chat with that younger self and give that younger. Federico 1 piece of advice before launching a business. What would that be and why given what you know now.
Federico Travella: That that that’s obviously a very a very tough 1 um I think 1 thing which which we got really right Um, in Saudi East Asia as I mentioned those market market timing that is something which. I didn’t get so so right when it comes to newbycap. Um, so started the business very much had the hide um of the Ecb’s quantitative easening program. There is a lot of liquidity in the market. So from that perspective in many ways. We were swimming against the tight for quite a few years because there’s a lot of credit in the market banks were passing it on um in in a very efficient way and so as such that Creditd gap when it comes to the demand know for for alternative finance for for fintech lending.
Federico Travella: Was a lot lot smaller than I initially expected and I I was doing this obviously because I thought there was an opportunity and and funnily enough when I was speaking with you know, a lot of consultants like you know from ah I won’t name them but many many big brands. Firms out there. Everyone was telling me the same. Yeah you you should go to Spain you should. You should start a business there and is a me lending the market is deprived of of of credit and there’s just great. Great need for that. Um, and so I I should have challenged that a lot more. And and trying to to also obtain feedback from on the ground um nonbank lenders because I think the data was was very different in in reality.
Alejandro Cremades: I Hear you so feday for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Federico Travella: Either Um, a warm introduction or a true Linkedin with a personalized note that always is also great. A great avenue.
Alejandro Cremades: They say enough. Well hey, thank you so much for being on the deal maker show today. It has been on on earth to have you with us.
Federico Travella: Thank you Hanna for having me. It was great. Fun.
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Michael Bronfein got his start as a butcher in a family supermarket. Since then, he has built a billion-dollar business, runs a multibillion-dollar private equity fund, and is now operating a growing wellness company with an emerging portfolio of cannabis-based products. The venture, Curio Wellness, will invest in over 50 startups backed by women, minorities, and disabled veteran entrepreneurs.
In this episode, you will learn:
- Starting a business with family members
- Cannabis and its many health and wellness applications
- Building your operations and model right, before scaling and expanding
- Balancing your propensity to go fast, with what your team can handle
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Your email address is 100% safe from spam!About Michael Bronfein:Michael is a highly effective business executive with a track record of creating businesses of scale and market leadership focused on innovation, competitive advantage, and best-in-class operating metrics in healthcare services, healthcare technologies, healthcare products, software, and distribution.
A true visionary, Michael is known for assembling highly effective management teams that result in market-leading, high-growth organizations with clear brand propositions and strong financial returns.
He has founded, co-founded, invested in, and rapidly grown a number of leading healthcare service companies, including NeighborCare, Remedi SeniorCare, Sterling Partners, and Curio Wellness.
Michael was awarded the Ernst & Young Entrepreneur of the Year award in 1994 for his development of the NeighborCare business model and brand. Prior to founding NeighborCare, he led commercial finance lending for Signet Bank.
Michael served as the inaugural chairman of the Senior Care Pharmacy Coalition, a Washington, DC-based advocacy organization representing long-term care pharmacy groups.
He formerly served on the advisory board of the Bloomberg School of Public Health at Johns Hopkins University and the Harvard Medical School.
Michael has been integral to the success of two initial public offerings, VISCIU and VOCUS, and served as a public company director upon completion of the offering.
He also served as Director of Bioscrip (Nasdaq) and was a member of a team that successfully turned the company around, positioning it for a highly successful merger with Option Care creating the largest Home Infusion Company in the U.S.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So super excited about the guests that we have today my god he’s done it so many times on every single angle on the table that you can think of you know, even he started as a butcher you know, like in his uncle supermarket. But you know we’re gonna be learning quite a bit you know with this conversation. So.
Michael Bronfein: Um, if we get.
Alejandro Cremades: Again, you know building scaling financing you know and also exiting because he also has you know those success under his belt so without furtherdo Michael Bromfa welcome to the show.
Michael Bronfein: Thank you Andro Glad to be here.
Alejandro Cremades: So Michael give us a little of a walk through memory lane. How was life growing up in Baltimore Maryland.
Michael Bronfein: Actually it was great I grew up in a very ah, kind of middle middle class neighborhood across the street from my elementary school and my junior high school and there were lots of kids we played lots of sports and at an early age I decided that one of the things that I really liked was independent. So. I literally started working when I was 10 years old cutting lawns and then at 12 went to work for my uncle in his supermarket as you mentioned um and never look back and you know I find creating businesses and with competitive advantage and great people just a lot of fun and so. It’s really kind of both my vocation and my avocation.
Alejandro Cremades: And where is that drive that drive for independence that drive for building businesses. Where’s that coming from.
Michael Bronfein: Unquestionably my mother you know she used to tell all 3 of ah 3 of us that you can accomplish anything you want as long as you’re committed to it and and so I believed her when she told me that and in fact, by the time I was five years old she was a little frustrated with me because she would say why don’t you ever listen to me. You only do what you want to do. I said mom because that you you told me to do so so it started around 5 and it’s just gotten worse since.
Alejandro Cremades: Now in this case, you know like for you I mean accounting you know, sounds like something that you picked up, you know, even though you never dedicated yourself us. Ah, as an accountant why? why accounting out of all things.
Michael Bronfein: Well I think accounting is is kind of the basis for understanding the flow of funds and the and the activities in business and it’s almost like the plumbing in the electrical infrastructure in a building right? And so if you can understand how everything works really? Well you can make more informed decisions quicker. 1 of the things that I was fortunate to be trained on very early in my business career was finance at not just not just Accounting. Um, and so I’ve been fortunate to develop an ability to look at an an opportunity. Um. For the income statement and quickly translated into a balance sheet and capital requirements and so Forth. So It’s just a great underpinning for understanding and operating businesses.
Alejandro Cremades: Yeah, yeah, amazing all right? Michael so here we go let’s go. Let’s get. Let’s get back into it so all right? So so in in your in your case Michael you know something really interesting that I think that really shaped up. You know your your your career you know and and your way of thinking about business too is being able to work with your uncle. You know there you literally you know helped out on every direction in the supermarkets. You know that he had so so how was that for you.
Michael Bronfein: It was extraordinary I had both an uncle and a cousin who was like an older brother and they were both fabulous merchants and there’s a difference between just being a business person and being a merchant they thought about the customer and everything they did and they thought about how you build your business maintain your business and grow your business. Through the eyes of a customer and that’s really was the thing that they they gave me that was a real gift because everything I do is focused on how do we delight the customer in a way that’s more advantageous in it than our competitor whether it’s the quality of our product. The quality of our service just just the way we assure that. People know we care about how they do and what they do and and it makes a real real difference I think too often today people get internally focused and in my organization. There’s only 1 thing that matters delighting the customer period.
Alejandro Cremades: I mean in in your case when you even became the butcher. You know there I mean it’s incredible now I Guess you know you were talking about this. You know like being able to interface a lot with people and really helped you understand you know what really matters when you’re building a business I Guess about people What did you learn. Throughout that experience.
Michael Bronfein: Well I learned that first of all, if you ask them what they want. Authentically they’ll tell you and and if you give them what they want they will beat a path to your door and they and they won’t be easily pried away by competitors. Um, and so mutual respect understanding. Kindness and and really ah, empathetic listening are really important and I spend a lot of my time talking to customers because they tell me kind of what’s on their mind and and what they need in order to be successful with their customers. Ah or it could be directly with patients or. Consumers of our products that we also talk to and little nuances ah come out all the time and when those nuances come to the fore and we ask about them or I ask about them. It always provides a lot of clarity and it becomes very clear what people want what they don’t want what they’ll pay for what they won’t pay for. And when you can have that kind of data and input particularly in a real-time way. It’s a very powerful tool and as ah as I you know like to tell my team let’s just ask the customers what they want and give it to them. They’ll be happy and and I think our number 1 market position in Maryland for. Five and a half straight years is the best evidence of that it really doesn’t matter what I think it matters what they think and and they vote with their feet in their pocketbook every day and every week and we’ve been fortunate to be the biggest recipient of that in the state now for as I said five and a half years going into adult use I think that’s going to even accelerate.
Alejandro Cremades: That’s incredible now now 1 thing here that that I found interesting is that for you. You know after the supermarket experience you went at it you know and you went into banking but before really launching your first company I mean you had that independence in you since like you were saying twelve years old
Michael Bronfein: Um e.
Michael Bronfein: E.
Alejandro Cremades: What do you think? took you so long you know for for you to go through this experience then banking and then to say hey you know what now is my time to start my own business. Okay.
Michael Bronfein: I remember very clearly I was about 23 years old working for my uncle full time now I was out of college and um finished the cpa and um and I was observing different ah executives I would meet that he would do business with or I would observe him and I decided that I wanted to be a Ceo. I thought someone who was able to drive the strategy division the operational results and overall you know influence. The company was an exciting place to be because you know if you think about it, you’re in control. You’re independent right? So it kind of fed into my desire to want to follow my own. Ah, trail in my own light and um and so I then really focused on what am I going to need to do to really get good at this and and build skills and one of the reasons that I decided to become a banker was because I thought that would be a very good way to learn about a lot about businesses and a lot of businesses because. When you extend credit to someone first of all, you need to understand the drivers of their success or the drivers of their failure. You need to understand how to structure transactions that align the the loan with the business needs and the business capabilities. Um, and then you observe management behaviors. And you could see there could be 10 you know paper distributors all doing the same job and in a marketplace 2 were outstanding. 2 were failing and 6 were kind of okay in the middle.
Michael Bronfein: And so I spent my time and energy studying the two that were outstanding and and understanding what made them different and better and why they were succeeding versus their competitors who weren’t succeeding as well were not at all. Um and it was a great education I guess for. Close to 5 years I chaired a loan committee and um, you know literally heard thousands of loan requests from my loan officers and those stories always are are enlightening they provide context but they also educate you about you know, kind of mistakes people make successes they have and. Things that you can learn from that that help you make better judgments.
Alejandro Cremades: So then let’s talk about pharmacy services. You know which is your first baby. How did that come about.
Michael Bronfein: Yes, it is ah that was really that was because I became a banker. So ah when I first became a banker my my oldest daughter Wendy was born just months before I became a banker and um and my wife and I were talking about the job and the opportunity. And I kind of felt like you could make a nice living being a banker I didn’t really understand early on how lucrative it would be ah but I felt like I needed to start making some investments to put money away for college. So ah, my ah, my have a brother in law who was a pharmacist I found about an opportunity to open up a pharmacy in Baltimore City and um I went to him and said you want to go into business with me I’m going to do this deal and but I don’t know about pharmacy I know about retail merchandising and store operations. So he said? yeah so we opened up a single drugstore in Baltimore City on December Fifth of 1980 um, and I left the company nineteen years later and it was doing ah one point one billion and making about 120000000 and in operating income.
Alejandro Cremades: That’s absolutely incredible Now in this case, you know the company you guys ended up selling the business is that right? yeah.
Michael Bronfein: Yeah, we we sold we sold it in 9096 to a New York Stock exchange company in lieu of a public offering and then and then took that platform that the public company gave me and took ah what was then 200000000 and turned it into a billion one. Over the next three and a half four years it was very fast.
Alejandro Cremades: My God now now in this case for you I mean being able to go through a transaction like that I think that it probably gave you access to full visibility into how the financing cycles or the cycles lifecycles too of a company. You know, really really work from ideation to scaling to. Ah, to obviously reaching the finish line not getting getting it acquired So How was that for you having that visibility. So.
Michael Bronfein: Ah, well it was great because um, you know having been a banker um prior to to taking on neighbor care full time for many years I was a part-time Ceo during that frankly from 81 to 91 when I was running and working at the bank. Ah, you know I was I was a part-time Ceo but all along the way it allowed me to understand the matching of the assets to liability short-term to longterm making sure that the liquidity was properly planned. Um and that we looked at various ratios that were consistent with our business model that would allow us to. Ah, continue to borrow funds for expansion in a way that was safe. Didn’t bet the farm but also took advantage of big opportunities and we were fortunate because frankly back in the 80 s the commercial lending laws and the commercial lending attitude were different than they are today. So today. There’s a lot of private equity and a lot of venture capital that goes to early stages back then I could still you know basically talk people into lending me money and so I didn’t have to give up any equity.
Alejandro Cremades: Now in your case I mean the outcome was pretty pretty nice for you guys I mean it was a $55000000 exit you know on your end. So I’m sure that you were able to more than cover the school for for your daughters for Wendy and and others. Ah.
Michael Bronfein: Um, mean? Yeah, yeah, that yes it it all it all worked out fine but it also it also just inspired me to want to do more and to want to do it again and to find ways to. Create businesses that help people but also had very strong returns. So ah in in the health care field I’ve made any number of investments that have been very successful including one called Visiqueue. Um, and um and then we started another company called remedy senior care. Which today is about a $500000000 pharmacy company. so so ah not not quite finished with pharmacy yet and um, and really um, went into went into our current business. Ah, really kind of as a lark. It wasn’t something that I had planned nor did I really have any interest in until my oldest daughter Wendy. Who at the time was a Tv producer kind of talked me into it.
Alejandro Cremades: And we’ll talk about that in just a little bit now one of the things that you did is going to the other side of the table as a private equity investor. Why did you do that stop.
Michael Bronfein: Well I one one I thought that given the fact that I built a couple of businesses and understood financing and understood operations and and the intersection of both that it would be a place where I could apply my skills I could help others I could mentor people and I could make a lot of money doing it which is always a good thing. It’s never should be your first thing. But if you’re going to work hard. Why not do it where you can make more money than less and so um I knew the private equity world. Well and um and some friends of mine came to me and said ah you know we’re going to take our family office and convert into institutional investment firm. We’d like to come and join us and and you know how to do institutional investing and you’ve run a bank so you you understand portfolio management. We don’t have those skills but we’re very good investors and they and they were and are and so we we partnered up and we raised our first fund in 9099 and then through the through the next. Ah, 10 years. We we raised 7 more.
Alejandro Cremades: Now for the private equity firm I mean you guys ended up going from like 0 to like 4,000,000,000 in assets under management which is fantastic but 1 of the things there that and that I like to ask you is having been on both sides of the table now you know when you’re on the investment you know, seat. You know what were some of the patterns that you were seeing on those companies that had the magical ingredients versus don’t those that didn’t.
Michael Bronfein: People and a willingness to ah, really challenge the competency and the and the results of the people in a way that was aligned with the needs of the business and so instead of favoring people because they were loyal they favored but people because they were competent. And they would achieve their goals in prescribed timeframes and would move on to the next goal and so forth and you know one of the challenges you see in highgrowth companies is the people that started you and and and maybe got you started up may not be the people to get you to the next phase of gross or the phase after that. But. Quite often. Those people that were there with you early. You have some affinity to and so you’ve got to be able to separate your emotional ties from your intellectual, honest, assessment of is this person going to be able to perform these duties adequately to meet the needs of the business. Going forward you you can’t live to manage the business out of the rearview mirror. You’ve got to be looking through the windshield all the time and so you have to make hard decisions and um, you know one of the things I’ve seen is great executives a guy I work with named Rick Rudman I thought was one of the best ceos because he was not afraid to to make a change. Um, if someone wasn’t getting to the to the promised land if you will or if they were kind of running out of steam. They were somewhat of a one-t trick pony and as the business evolved they needed a multidimensional approach and and they didn’t have it and and Rick was always kind about it but he was he wasn’t tolerant of non-performance.
Michael Bronfein: And um, we took that company public with him and it was a huge success and he’s now building a new company that I’m sure is going to be a huge success because he just understands that you you’ve got to you got to put the right people in the right seats. Ah but those seats change and you’ve got to stay ahead of that and make sure that you’re. You’re mentoring them and coaching them but also holding them accountable and if you do that? Well first of all, you’ll build a high performing team and secondly your team will just ah, you know they’ll out hustle the competitors because they’re just working smarter not harder.
Alejandro Cremades: So in this case, you know for the private equity firm. You guys ended up getting you know 6 times the return on the amount invested so pretty good. You know it sounds like you were ready to go to the caribbean and to you know, have ah have a nice you know retirement there.
Michael Bronfein: Um, but.
Alejandro Cremades: But you know 1 thing led to the next and you receive a phone call from your daughter. So what happened there.
Michael Bronfein: Well, it was ah I retired at the kind of the end of ah 12 and was down in Florida my home there and kind of playing golf and managing some real estate and I got this call and she said dad I want you to go into business with me and I said we call her wb I said wb what do you mean to do she goes. Want to go into the medical cannabis business I said what do you out of your mind like why would I want to do that you know I’m in the pharmaceutical business and ah and she goes well I think it’s going to be a big opportunity I think there’s ah, a lot of things we can do to make a difference in people’s lives you understand pharmaceuticals you understand how to build businesses. I understand branding and marketing and I think the two of us could do ah a great job together and um after that that october of 13 call it took until about March of 14 that I started to really take it seriously and that occurred when I called a neuroscientist that I knew that I was on a board with. And I said have lunch with me and I want to chat he did I asked him about cannabis he said it’s a miracle plant and the only reason it’s not in wide use is because the federal government has falsely vilified its qualities and hasn’t allowed proper research. And that was really that that from that day on I started spending my time talking to doctors and scientists and horticulturists to figure out what to do ultimately put together a team of 5 people. We did research around the world for about twelve months and then we built our business plan.
Alejandro Cremades: And how was it like you know going into business with your daughter. Yeah, yeah, yeah.
Michael Bronfein: With my daughter. Yeah yeah, it was ah exciting. It was enlightening. It was frustrating. It was all the things you would expect between a father and a daughter we have a very close family. So I’m very close with my.
Alejandro Cremades: So.
Michael Bronfein: 3 grown children and have been their whole lives and they’re close with me so part of the the challenge is you know when you have to tell one of your children because all 3 of them are in the business now that when Rebecca our middle daughter and David our son have joined the business over the years in key positions and ah but when you have to tell them that. You’re not pleased with their performance. It’s always a little bit tricky and as good as they are and as competent as they are. They’re still ah based on my experience pretty young, right? I’m a lot older than them and have done a lot more and and now I’m asking them to step up into new roles and do things they’ve never done before. And they’re very bright and they they will work. You know endlessly but making them work smarter and understanding nuance and developing whisman areas is a place that you know I’ve tried to spend a lot of time with them and they’ve rewarded me with just great performance. But you know it it is it is challenging and but. Candidly I believe that if you have my last name you have to work smarter than harder than anybody else if you want to be part of the organization because you’re a reflection of me and b you got the opportunity because of nepotism. Yeah let’s let’s be honest and ah, that doesn’t mean you’re not worthy of it doesn’t mean you can’t do the job. But I believe you have to be held to a higher standard and and I’m proud to say that all 3 of my fully grown children who are part of this business are among the top performers in the company and I think if you interviewed anybody off the street and you said you work at cura wellness and you asked about 1 of the the 3 of them. They’d say they’re just great. You know they just.
Michael Bronfein: They do their jobs really really well and they’re very committed to the sex the mission and the success of the company.
Alejandro Cremades: And you know there is this Book. It’s called the founder’ Dilemma. It’s a great book and on that book the author talks about you know the trickiness of going into business with family members just because. You know sometimes you don’t want to hurt you know their feelings and in the end you know by not giving that tough love or or really being authentic or or transparent with what’s going on you know to avoid Hurting. You know their feelings then you know in the end you know that could be catastrophic too. So I mean anything that you’ve learned. Maybe. In the communication side of things you know with your children. You know when being in business with them.
Michael Bronfein: Well I think yes, very much. So First of all I think you have to be very honest with them about what you like and what you don’t like and you have to give them the underpinning reason why what they have done or haven’t done is not in the business’s interest or in their self-interest. Um, and you have to Then. Kind of help them understand where they need to go and why and and then how to get there sometimes you need to give them some additional resources to train him or develop them and sometimes that’s better off not being you Um, but honesty is always the best policy and it’s not to be delivered kind of in a. Ah, nuanced matter that you may have to interpret. It should be very direct very clear but very polite and so you know when anybody who works with me knows I’m very direct but I’m very polite and so I can tell you you’ve done a terrible job but I will do it with a smile and in in a very courteous manner but you know, um. I Had a boss once said to me, you know, like if if ah if ah, you don’t do your job. It affects me and I don’t want to get fired So Go do your job right? and so that’s kind of what I say to them is like if I got to do your job I don’t need you So Go do your job and um and one of the things that we do.
Alejandro Cremades: So.
Michael Bronfein: I think particularly well as we said, very specific objectives and metrics for what that means to do your job for pretty much everyone in the organization.
Alejandro Cremades: So for the people that are listening that will love to get an understanding on on what core wellness. You know it’s all about what’s the business model. How are you guys making money. Yeah.
Michael Bronfein: Ah, we are. We are a science based ah producer of innovative products derived from cannabis that’s different than being a cannabis company because our focus isn’t cannabis our focus is health and wellness and using all of the magical qualities of the of the cannabis plant. Ah, in ah in a more traditional scientifically derived manner. So we have a large scientific board. We have a very significant product innovation team with pharmacologists computational chemists analytical chemists ah other other biologists people that understand chemistry in the plant and. Um, and we work hard to determine how the cannabinoids in the plant can be isolated applied to a particular health indication or need um and then measured for effectiveness. So all of our products are first scientifically derived then clinically tested. Um, and I’m proud to say right now we have 4 patents pending one’s about to get issued and 3 others but we’ve really made some breakthroughs that are making the use of the Cannamina is more effective. For example, we have a ah Ibd or ibs pill. You know, irritable bow. Ah that is a pulse release. Of cbg cbd cbns t hc and some other other plant-based materials. Um, and it’s very very effective and it’s competing now with biologics you know which are very expensive and which have many other side effects. Ah.
Michael Bronfein: The the nice part about cannabis is it plays very well in the physiological sandbox. It doesn’t have negative effects on kidneys or liver or lungs or hearts or really anything that that I’ve been able to see or or or our science has discovered that doesn’t mean it doesn’t exist but it it may take a much longer period of time. But I can tell you that it does have a very powerful ability to affect inflammation and pain. Um, and and also to some extent reduce anxiety so we’ve we’ve seen some very very fine results with sleep products. Ah, with topical pain products for joint pain and arthritis for gi products. So so we’re building a pretty large portfolio of products right now I think we have about one hundred and forty different individual Sk use in our portfolio. It’s by far the largest in Maryland but it’s all about. Wellness and and we’re very true to that and even as we move into adult use. We want to be known as the wellness company that you can just get anywhere because you don’t need a card now.
Alejandro Cremades: Now now obviously for this operation you guys have had to raise some money So how much capital have you guys raised for this.
Michael Bronfein: Um, I’ve raised 52,000,000 in common equity to date in 2 raises original a $30000000 one another 22 and almost all of that money has gone to physical assets. We haven’t burned very much cash at all. In fact, we’ve been profitable since. October of 2018. So once we once we got through startup we opened up in in December of 17 and approximately ten months later we were profitable. We’ve been profitable ever since we’re actually about to ah or we actually have launched a $10000000 preferred round. Um, to fund our expansion into missouri we were the first company that I’m aware of in the united states that actually got traditional bank financing for mortgages so we were able to get a $26000000 mortgage for our expanded manufacturing and cultivation facility in maryland in 2021 early 21 and then ah cfg bank who is a wonderful bank has given us. Ah ah the same type of ah financing for our move into missouri so we have ah we have 100 so sixty five thousand square foot cultivation facility in maryland and a fifty five thousand square foot manufacturing center which is gp certified. Meaning that it meets all the fda requirements for for ah food or drug manufacturing. We’re building a um, 130000 square foot facility of equal quality and certification and competency in missouri which will open up in september so we’re very fortunate. We’re the only company I and would know of.
Michael Bronfein: That is actually in Maryland and Missouri at the conversion to adult use. Um, and we also have ah 2 dispensaries here in Maryland both very high volume one up in the northeast corner near the Delaware border and 1 not far from our offices here in Towson Maryland ah, both do both do very well and are in the top. 20 dispensaries in the state. Um, and fundamentally we have always built our our businesses on scale. So my my playbook has been the same for all of my businesses envision a competitive advantage. Ah either through product or service or both. Ah. Build a economic model that you think you can produce that marries to an operational model validate all of the underpinnings of that prior to building it in terms of as much as and best as you can obviously demand is one of those things that you you have to estimate build the model fund it and build it which we did um and then. As you apply scale to it. Ah observe the metrics that you achieve versus the metrics you forecasted and once you get that to a very predictable model then you stamp it out quickly wherever you wherever you want to? so you know while others in the cannabis industry were buying licenses left and right and trying to figure out. You know, kind of how to get up and running we spent all of our time in one market really learning how to be very good operators in this business. How to create new products that are innovative how to get operating leverage out of incremental revenues. How to bring lean management systems and tools to the whole cannabis industry and make it much more.
Michael Bronfein: Like a traditional manufacturing company. So if you came came to see our facilities here or the new ones in Missouri you would look like you. You think you’re in a Johnson And Johnson manufacturing lab they looking the same ah very clean and and um, very hygienic and gp certified.
Alejandro Cremades: I Love not.
Michael Bronfein: And really ready for what comes next when the Fda takes over regulation of cannabis which we believe and have since the beginning they ultimately will.
Alejandro Cremades: Now imagine if you were to go to sleep tonight Michael and you wake up in a world where the vision of courier wellness is fully realized what does that world look like.
Michael Bronfein: Well, it looks like we have the number one wellness brand in the country. It’s respected for its safe safety. Its its effectiveness and its reliability and from dose to dose So It Whatever it tells you it’s going to help you improve it does improve ah people trust it. Um, and ah, we’re able to manufacture it regionally and distribute it and not have to build plants in every single state. That’s that’s a long way off. So That’s really a dream So until then you know we’ll we’ll continue to ah to build out manufacturing capability increase our retailing Capability. Ah, but really focus on ah distinguishing ourselves as a leading brand um in the in the manufactured products that are derived from cannabis.
Alejandro Cremades: And now you know as we’re thinking about the future to talk to us about state versus federal when it comes to all this stuff that is happening around cannabis right now.
Michael Bronfein: Well, you know there’s a real There’s a real conundrum you have 42 States now that have legalized cannabis 22 of which have given it adult use designation. So there’s only 8 states that have no no cannabis at all yet. The federal government continues to kind of. Fight the war on drugs. It’s like they’re fighting yesterday’s war ah cannabis should have never been a scheduled drug and interestingly even though today I don’t know if you if you’re familiar with the schedules. But I am because I’m in the pharmacy business schedule 1 is basically a toxic compound that has no socially redeeming value or medical value right. Well, we’ve now proven that that not only does cannabis have medicinal value. But there’s a prescription drug epidiolects that the Fda is granted approval to ah to be used as a legend drug so you would think that given the fact that there’s a legend drug ah in the market from cannabis. That the the schedule one would have been lifted but because of political reasons it hasn’t um and so the fact that safe banking wasn’t passed last year has really had a paling effect on the industry from an investor perspective and ah and a capital perspective and I think now the congress is waking up to that they have to. They have to allow for cannabis to be treated like any other product in the United States I ultimately believe that the federal government will deschedule and but it’ll be a states rights business like alcohol and tobacco and so each state will decide how it wants to govern it how it wants to regulate it and will it.
Michael Bronfein: Whether it will allow it. Um, and I think until then you’re going to continue to see this. You know, kind of walled off state by state approach where it doesn’t really matter how big you are as a company. What matters is how big you are at each state right? So that’s why we haven’t gone out and done a whole bunch of licenses and. Have small operations and a whole bunch of state. You know we’re we’re number 1 in Maryland and by ah by a large percentage and we feel like when we go to Missouri we can immediately become a a very significant participant there because of the differentiation of our products. No no one has products like we have um in addition on the flower side. We focused on a lot of plant science and discovery in a way that has resulted in ah a very high percentage of high t h c high turpene strains. Ah which are viewed as we call them exclusive but they’re really a premium product so in the flower side. We’re looking for quality over quantity. And the manufacturer products we’re looking for indication specific and because of the the fact that we run factories with automated equipment and all the things that you would expect in a drug manufacturing plant. We can generate enormous quantities of a product at a very high level of qualityity and consistency.
Alejandro Cremades: Now we’ve been talking about the future. So I just want to talk about the past real quick with a length of reflection if we were to go back in time you know I put you into it this time machine. Michael Bronfein: .
Michael Bronfein: Are specific.
Alejandro Cremades: And I bring you back in time to maybe you know that moment that you were still in the supermarket. You know you had made the decision that at some point you know you’ll do something over your own but let’s say you’re able to go back and be able to sit down with that younger Michael and give that younger Michael.
Alejandro Cremades: 1 piece of advice before launching a business. What would that be and why given what you know now.
Michael Bronfein: Oh unquestioned would be make sure that the the organization can keep up with your ideas and your chaos right? because when you’re when you’re somebody who has developed an ability to ideation. Very rapidly and with a lot of fervor around new ideas and and new um new concepts you can drive people crazy because they can’t keep up with you and I I remember in neighbor care we were growing at 100% a year organically and I was killing everybody because they couldn’t keep up with it. And and the reason we were growing so quickly was because we had figured out a system that no one else had figured out for gaining large quantities of customers in the pharmacy business instead of getting them one at a time and we also had a different model that was that was ah very cost effective and efficacious in terms of the delivery of pharmaceuticals and so. Ah, part of part of the challenge is always balancing the ability of the organization to perform against the opportunities that are right in front of it. Ah, but because of either constraints on capacity or constraints on people or constraints on capital or other things. You’ve you’ve got to kind of slow things down a little bit to make sure the organization could catch its breast and and be with you and like for example, we’re going through an enormous inventory building process right now so that we can learn from what we observed in Missouri we’re building Twenty Five Thousand cases of product.
Michael Bronfein: For the launch of adult use here in Maryland on July first in addition to our regular production. So so in order to do that. We had to say to our our product innovation folks guys. We need you to kind of stand down and do work on things for about one hundred and twenty days that don’t require integration into the labs. And into the manufacturing space because we need every single person we have focused on quality control and output and and you know it actually it actually made life a little bit easier. They got a chance to catch up on some things and research and other things and it made it ah less intrusive to the manufacturing folks to just. Know that they were focused on pure production day in and day out and they didn’t have to do problem solving in the in the lab or or in some formulation activity or or whatever it takes to create a new a new product because it’s there’s a lot of working product in product innovation.
Alejandro Cremades: I love it so Michael for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Michael Bronfein: Ah, they can they can email me at Michael bronfeatcuawellness.com that’s probably the easiest way to to reach me and um, welcome their their their emails or their commentary. Ah as I said we are in the process of a ah. Preferred equity raise and I think our existing investors are going to take ah I know they are going to take a large share of that but there will be a small amount available to some new investors and you know we’re always looking to expand our investor base. Although um I would tell you that I don’t think we’re going to need to raise any more capital before either a public offering and exit. At the end of 25 or early 26 because our cash flows are very significant and now that we’ve got adult use in both of our two states. Um I think it’s just going to accelerate so you never know but it doesn’t look likely at this point it looks like this will be the last capital we raised before we hopefully can. Get the the feds to change their view and allow the New York stock exchange and the and us capital markets to open up that would that would really be our preference. We’re not, we’re not interested in the canadian markets.
Alejandro Cremades: Amazing. Well hey Michael thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Michael Bronfein: Well thank you I Really appreciate the opportunity and look forward to chatting again soon.
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The post Michael Bronfein: From Butcher To Billion-Dollar CEO And The Remarkable Journey Of Success In Business appeared first on Alejandro Cremades.
James Tan has gone from startup founder to operating an $80M venture capital fund to fuel the growth of other early-stage ventures today. Now on his third fund, he’s already helped create four unicorn companies. His investment company, Quest Ventures, has funded ION Mobility, Carousell, Carro, and Hepmil.
In this episode, you will learn:
- Network effects
- Fundraising and pitching investors
- How to pitch your idea to James Tan’s latest fund
Alejandro Cremades · EP 624 James Tan On Taking His Last Company Public And Investing In 4 Of Startup Unicorns In AsiaSUBSCRIBE ON:
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Your email address is 100% safe from spam!About James Tan:James Tan is Managing Partner at Quest Ventures, a top venture capital fund in Asia. Prior to this, James was co-founder and COO of 55tuan, a NASDAQ-listed e-commerce group that grew to more than 200 cities and 5,000 employees across China.
James is a board member or angel investor in top-tier startups in Asia, such as 99.co, Carousell, Carro, Ethis, Glife, and Shopback.
James serves on several non-profit organizations. He is Chairman of the Action Community for Entrepreneurship – Singapore’s national voice for entrepreneurship; and the Social Impact Catalyst – Southeast Asia’s largest youth network for social impact.
He is a board member of the Applied Innovation Institute – global leaders in industries, government, and academia for business transformation; and Sports Excellence Business – helping athletes excel in life after sport transition.
James is a former Chairman of the Business Angel Network of Southeast Asia – Asia’s oldest angel investment network.
He has been a guest speaker at Asia-focused and private equity events such as ITB Berlin, Private Equity Insights, Stanford-PARC Digital Cities, SWITCH, and World Islamic Economic Forum. He has guest lectured at universities including Fudan, IE, NTU, Tsinghua, and UC Berkeley.
James was recognized as an outstanding overseas Chinese by the Overseas Chinese Affairs Office of the State Council of China. He is a recipient of the Alumni Award from the University of South Australia.
He received scholarships from both Beijing and Singapore governments for his MBA from Tsinghua University in partnership with MIT. During the first dot-com era, he studied and dropped out of computer science at NUS to work on two-sided markets.
For leisure, James enjoys photography and has been featured in ComputerWorld, Readers’ Digest, and commercially represented by Liaison Agency. He backpacks Asia and volunteers in marine conservation as a PADI scuba-diving instructor.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the dealmakerr show. So today. We have a very exciting guest. We’re going to be talking about going to both sides of the table you know from being a repeated entrepreneur several times building scaling financing and exiting now to investing in. Over a hundred companies. You know very interesting you know also the unicor that they have as well as portfolio companies. But I think that we’re gonna be learning quite a bit and we’re gonna find this very inspiring I’m sure so without farther do let’s welcome our guest today James Sta welcome to the show.
James Tan: Thank you very much for the invitation Ali.
Alejandro Cremades: So born in Singapore so why give us a little of a walk through memory lane. How was life growing up.
James Tan: Ah I witnessed a lot of changes in the last ah 3040 years Singapore is really really change and really from many of our neighboring countries is a combination really of the hardworking people that we have. And then a lot of opportunities that came out we and asked capitalizing on it.
Alejandro Cremades: I mean no kidding I think that over the course of time I mean Singapore right now there’s a lot of innovation going on in Singapore so I think that what what do you think I say feel that I mean obviously you grew up. You know, being part of that too.
James Tan: Um, Singapore wasn’t really in the radar at all twenty years ago as an ecosystem for startups much less venture capital or any of the tech stuff that we now pretty much take for granted and so we have really been putting a lot of effort into growing this ecosystem. And so it is done by a combination with a combination of startups and institutions of higher learning like schools government agencies coming together to remove impediments to growth andro, encouraged growth or so corporates coming in with proof of concept or corporates coming in with their corporate venture funds. And last but not least the few that I’m currently in risk capital the angel investors and venture capital firms that are investing so all these 5 pieces have to come together and I’m very proud that Singapore has ah made these 5 pieces come together. Um, effectively and so we are now the number one ecosystem in Southeast Asia. And easily top 5 in the entire Asia.
Alejandro Cremades: Now 1 thing you know that is very interesting here for you is that you know as part of your studies you did combine not only computer science but then also the business side of things you know I find that those are the best things you know and when you are able to find someone that masters both you know he can be very dangerous when it comes to business. So how did how did you come up with the ad or or why did you thought that combining those 2 you know would be a good way to go. So.
James Tan: I will hesitate to say that combining means that we are masters of both Sometimes it can means that we have masters of none or we just really script the surface of each one I think is it is important. Not then as it is now that computing. Ah, doesn’t function by itself. We need to know what’s the market value and so the business aspect is extremely important and then from the other side if you are just a business ah major businessman with no technical skill set or operational skill set to really call your own then I think it’s also a scary place to be in. So I think company combining both. Not just computing and and and and business or maybe psychology and economics and so on you get a mix of 2 2 sectors that can interact with each other and hopefully some sparks come out of it.
Alejandro Cremades: Now for you two I think that you trouble quite a bit you know, ah you were studying I mean you went to Australia you came here to the us you were in Singapore in China so what do you think that opened up for you in terms of um, you know perspective and way of thinking. Okay.
James Tan: Ah, coming from Singapore the number 1 thing that really opened up for me was the myset shift in terms of not just doing something for 1 city or 1 country but really going out and going to a large market or if it’s disparate markets like Southeast Asia is or Europe is. Then 1 thing or have the myset to want to go beyond just your comfort zone your home market and to go into the bigger region itself that is the number one my myset shift I would say the number 2 thing is to really be open to and the trips. And the exposure to Silicon Valley and to maybe the overall broader us market were really eyeopen and inspirational back then when you saw first stock com boom and then fast forward to asecond.comboom it really was inspirational and really resulting me doing what I’m doing right now.
Alejandro Cremades: So then and we’ll talk about that in just a little bit because I mean that switch you know going from one part of the table to the other is quite interesting but I guess you know one thing that you know is true is that you dropped out of school I mean that’s that’s pretty unbelievable, especially you know like there where the culture is very much about. Partying and you know and and and and going to a corporate job and and very conservative in that regard I’m sure it was not an easy you know conversation with your parents.
James Tan: Oh yeah, it was not an easy conversation I with with the parents I will say that for the first ten years after I did that. Ah it was ah continuously being hop upon and you gotta be my dad I have a really reasonable first exit and ah but he is still hop upon. And as an asian is is something that I think we have to deal with um I remember when I left the university and there was a stack of a mariculation cards is a stack of cards which cuts so few in the entire university you know know so I like to think back and say that I was courageous. But maybe then there was a mix of just a bit of maybe optimism plus foolishness that really result in me taking that step to say okay, it’s time to tap into the.com boom and not missed. It.
Alejandro Cremades: And it was a good step because I mean first company first exit. So what were you guys you know doing there with the business and then at what point you know that’s you know, ah getty images. You know, come knocking to ah get the company acquired.
James Tan: So we are in what we call a 2 wo-sider market so we have something on one side that people want to sell and then someone on the other side wants to buy and so in ah creating the marketplace that we did international marketplaces came into southeas Asia looking at opportunities in Southeast asia the broader region and said that. We want to be here. How do we be here and we were very nicely positioned at that point in time as an acquisition target for them.
Alejandro Cremades: So then tell us about that process at all I mean what did you learn and and how how fast how quick and because I mean it was your first fixxi your first process and money process. So I’m sure it was nerverfracking.
James Tan: Um, it. It was ah it was nerve-racking. It was also quite a fast process. Um, we started a company during the.comboom but we also saw hit during the.combust so it was ah and you you got to remember remember Twenty five twenty years ago in Southeast asia there was no viable venture capital scene or startup scene and so to raise capital would have been impossible and since we are functioning as a marketplace in Southeast Asia and therefore if we were to pitch the same story to a european vc or a usvc chances are they will not understand it anyway and so we were pretty much on our own and so it was a pretty quick process also primarily driven by us wanting to make sure that we have a good outcome looking at the the bus that was going on around the world starting from Silicon Valley and second thing that we really really learn is that we are not equipped to scale a company to a super huge size like what we are familiar with today with uber and carol cells that we have and so on so we were not and despite the fact that now we are very. Comfortable with backing young startup and thinking that they can scale to huge companies at a point in time as someone running a startup with no heroes to look up to in this region and no viable case studies and so and you know everything was true pc magazine if you recall Cnec there wasn’t tech crunched inspirational stories like this.
James Tan: We were filling the stones as we crossed the River as ah of our one of the more famous Politician would call it. So yeah, use the learning process.
Alejandro Cremades: Hey well you know, no money raised. You know all exit all money for your guys is pocket for the founders I’m sure that you know getting that money. Especially since you started this company in your early 20 s feel pretty good.
James Tan: It felt good but don’t forget that we talk about how in the first ten years of of my life after I left ah your university. My parents was still hopping on it despite the exit. So.
Alejandro Cremades: And well I well I’m sure that they were happy when you invited them for dinner. So let’s let’s let’s let’s switch gears here to the next thing to the next company that you did so five five so how did the idea because I mean as they say once an entrepreneur always an entrepreneur. So once the transaction happen. Then what were the sequence of events that needed to happen for you to to go out it again with five five
James Tan: Yeah, so five five is a story that took place in in china now rather than singapore and so the the learnings from this experience ah was that I needed really to be in a much larger market a market that also has a viable. Ah, ecosystem that support us in terms of risk capital like vc firms and also I went there because I wanted to study. So remember the hopping and so I took a scholarship over and and went over to tim hu university in china and mit to get my masters. And along the way from my fellow co-founders who are interested in the 2 side of marketplace again and so with the reemergence of another dot com boom in when 2009 2010 and that was when we started five five
Alejandro Cremades: And what ended up being the business model of five five how are you guys making money first.
James Tan: So ah, in short it started as a groupon and became a farm table so well, it’s a long journey over several years before it became what it is um as a marketplace or as a 2 wo-side market. We are doing something that we have been familiar with. Someone wants to sell something on 1 side in this case is so familiar discounts and so on and people on the other side wants to buy something and we provide a platform that ran across a whole China to provide yeah such services to consumers.
Alejandro Cremades: And and also 1 thing that is very interesting here I’m sure that a lot of people are going to be um, wondering because marketplaces they not easy. You know it’s like starting 2 companies at the same time, especially if you have the 2 wo-sided as you were alluding to. You know, a lot of people. You know they talk about that is the chicken and the egg right? and and I and I’ve been building you know marketplaces too in the past and is I you want to you want to shoot the chicken and step on the egg. You know that’s the frustration that sometimes it creates to build those now I guess in this case for you. You know how? especially for the people that are listening. How did you guys go about having that liquidity in the marketplace. So that people were able to find what they were looking for in a short period of time to really create that retention.
James Tan: I think I think you’re absolutely right that we are trying to do 2 things at the same time building 2 companies at the same time and then getting things frustrated on one or the other and then also trying to figure out which one will really move the needle and and create a fly wheelel effect. So for us. He was really on provisia providing the dukes. That people really want. Um so the deal that really kickstar the whole thing for us was because avatar the movie. The first. The first movie was launch at a time and everybody wanted to catch it and we managed to get super fantastic dukes and so that really created the the ball rolling.
Alejandro Cremades: So at what point do you realize hey I think we’re into something here.
James Tan: Ah, when when we roll something like say avatharas or something else and we realize that he was being step up within 1 or 2 days sometimes even faster and then there was a first indication that we are doing something right in the city that we were in which is beijing. And then we of course started the experiment with you know? yeah 400 cities in China so we started the experiment experiment with other cities and we realized that there were and a good word of mouth and so on people familiar with the kind of our business model and. That really got the bar ruling in replicating the business model to other cities.
Alejandro Cremades: And how that’s typically like people talk about this a lot on on Marketplaces Network effects you know what? what were the network effects that you guys were seeing and then also how do you define a network effect.
James Tan: So for us really is whether within the first three months ideally within the first three weeks but we’re the first three months of operation in any city is it able to pay for itself. Um, so when in expansion and now from the yada side of the table as a Vc. While we are avocating fantastic grove and and going to new cities and new countries I’m very very mindful that we also got to control the amount risk that we goes into expansion and so the risk that I undertook and that we control at that point in time was about how much do we spend on getting a city really. And so they functions by myself. That’s a fly view. People are calling in to want to be featured and so on so for us timeline basis. It was based on 3 monthss and then cost basis or financial basis. It was based on cost recovery. Can we cover the cost of those people that we hiring in the city marketing guy operational guys and so on within three months Oftentimes it took faster than that because there were more used and then then we called pushup per day and there’s just a lot of people who want to get a good deal in China.
Alejandro Cremades: So so in this case being ruthless when going against the competition. What can you tell us about that.
James Tan: Yeah, so I think entrepreneurs maybe now part of the world in Southeast asia ah tend to be more gentleman and ladylike when they are dealing with their fellow competitors I mean on stage and in a environment where it’s public. Of course be be be nice about it. But in the business world. Ah, competition is like being on ah and a better few and this is ah this is ah idiom that’s been around for a long time because people tend to forget that if you are not a number 1 or number 2 or even number 3 then you are pretty much going to lose and when you lose it’s not just about you losing. Vcs lose whatever they’re put in and your staff your hundreds and thousands or thousands of staff are now wondering why are they our job and it’s totally up to you.
Alejandro Cremades: So I guess that the that brings me to the question of work life balance. What are your thoughts on that.
James Tan: World balance is ah something wow is important. But I think if you are a founder running a startup a you show of course encouraging your employees but as a founder running a startup you can only either make things cheaper than your competition which is generally a large corporate out there. Ah, you do something faster than your competition again your large corporates out there and so they don’t work these large corporations don’t work on Saturday and Sunday they definitely don’t work you know on night to nine on or and two nine pm or late and like that’s where you can come in and you work harder and you work faster you work longer hours and. If. All everything comes together and you’re going iing. You are definitely in a better position than the corporateperts they are trying to disrupt.
Alejandro Cremades: And what was that the what was that process of capitalizing the business because obviously with this company. It was a little bit later on and I’m sure that the ecosystem was a little bit more developed. Ah so what was that way of capitalizing the business prior to taking the company public.
James Tan: Ah, we were the system ecosystem was definitely much much much more mature and being in China itself. It was definitely much more mature in terms of venture capital funding and also private equity funding. So all our funding rounds for venture capital. Ah, before we took it public on this day.
Alejandro Cremades: And and how much capital did you guys raise prior to the ipo.
James Tan: We raised about 40,000,000 um in total.
Alejandro Cremades: Okay, and then and then why did you decide that it was time to take the company public and especially in Nasdaq you know being in China. Yeah.
James Tan: So um, naste is the mecca for tech companies around the world and for chinese companies with foreign capital the logical places to go public would be the us markets or markets like Hong Kong and even Singapore. And so it was very natural for us to consider nasteck as an option because it’s the mecca and because of foreign capital in terms of why we decided to take it public at that point in time I think many people fail to or many entrepreneurs fail to understand that there is a window of opportunity when your. The industry that you’re in and the company that you’re doing can be well understood and well covered by the market at large the analyst and the new Joe Public who buys the the equity of your company and once you miss that it’s going to be a tough sell because now you’re up against the new trend. So anyone going public right now. Have to deal with say an upcoming trend of Ai and so that window ahs are strongly encouraged to understand and and understand where the window is and to well have an exit event ah during the window.
Alejandro Cremades: So I guess you know the yeah we we were talking about it earlier too on fundraising. What is that mentality of no one Owes you anything when going through the fundraising process.
James Tan: So um I when I was in China and I’m in Singapore and by berf. So when I went to China there were some um, actually many of the Vc funds. There were run by Singapore ins and Hong Kong and so on. And so ah, 1 thing that really struck me was that it doesn’t matter whether you’re from the same country or same hometown. Your business must work at the maximum that the guy or the lady from the same home town will take a courtesy meeting but otherwise everything is still back to how good your company is how good your team is and so on. But really no one knows you’re living. And so when we are now on the other side of the table looking at the use and whether they are from Philippines or whether they are from Malaysia it doesn’t matter whether they are from the same home now. The business must work.
Alejandro Cremades: So so so in this case, you know for you I mean it sounds like the company was doing pretty well you know I it’d speak. It was a 500,000,000 valuation which is incredible. Ah, but eventually you know like you you you really start to think you know about. Something else, you know which is getting to the other side of the table and and really making investments I mean you you made domain investments. But 1 thing led to the next and then all of a sudden you know you’re here you know leading quest ventures which is the venture firm that that you started so how did the idea come about. Ah, and yeah and and and and what are you guys doing with quest ventures.
James Tan: So quest ventures started also in Beijing. It was during the time of five five when we were going out to do merger and acquisitions to also do roww apps into five five and so it was used pretty much as a vehicle for that and when we went outside of China. Ah, it was a modelt that really didn’t work as an operating company trying to use a Vc firm to do acquisitions because there’s no rollup to be done and so when cres ventures really function as a normal vc firm outside of China itself and today I’m based in Singapore using this same vehicle. To do investments and we are lucky to have had the backing of so sovereign well funds into our main Vc funds and along the way several other vc funds to invest into the potential of this region.
Alejandro Cremades: Um, how many how how how much money do you guys now have on their management.
James Tan: We have closed ah about 80,000,000 I hope that we will pass that very soon. Um and so cross ah tree funds.
Alejandro Cremades: And you said eighty eighty million Eight zero okay 80000000 okay got it now in this case, you know for you guys. What’s the um, you know how how did you develop an investment thesis for the for the operation.
James Tan: Yes.
James Tan: Um, our Tcs has stayed the same in the last ten years where something mass web events obviously so the companies that we look at must have the 3 following characteristics and the characteristics are scalability. So. The first thing is ah can if you can work in a place like Singapore. Can it grow from $1000000 to say $10000000 and if you know and if you the second one will be replicability. So can this same thing from singapore be taken over to another place like kaollopo manila and and do the same thing one to $10000000 and how many of such cities are there because. Doesn’t make sense to just have as singapore and coal lompo and that’s it it needs to be beyond just this few. Ah first year cities so that’s replicability if we can take it to other cities and last but not least a large internet community and so while this last center soundite isn’t everybody on the internet nowadays. ten years ago it wasn’t the case ten years ago we were looking at can xiaomi come and deploy or sell moreship android phones so ten years ago there was that um today we are less concerned about the pervasiveness of the internet and availability of people. You know, getting on the internet. Um, now we are more concerned about their ability to spend and how what do they want to spend on so these tc sets are more or less ah guided us in the last ten years we have done about 100 plus investments.
Alejandro Cremades: Um, and how many investments have you guys done too late.
Alejandro Cremades: How many unicorns out of those.
James Tan: We have 4 unicons out of them so pretty proud of the results. But it’s also really because ah we were early in the game you think I like to think that we understand this this region well enough and so even until today my passion really lies in the early stage. Companies and the founders coming to meet us rather than the late stage b and c and d kind of firms that come in me because the early state confirms which we back ten years ago eight years ago and so on not today uniconns and while the challenge is always in us and the kick and the excitement is really us to Can we find the next unicon you know in a year’s time 10 years ‘ time.
Alejandro Cremades: I mean out of a hundred you know plus investments for unicorns is a pretty good day hit batting batting average. So I guess for finding for being able to identify those unicorns early on. I mean now that you have 4 right? and and and I mean it’s not like one I mean once you’re lucky as they say twice, you’re good. So when you have 4 I’m sure that you’ve been able to see a pattern now with within all these founders that they had or the market or the way that they were going about things. What were those 3 you know, perhaps top 3 ingredients that you saw repeating on those 4 unicorn companies.
James Tan: Okay, um, I’ve been following your show so a lot of it actually is similar to what your um, all your other guests are are talking about so number one is the team itself. Ah, but the team is ah fineless unless I define what the team does the rooflessness. Desire to get things done no matter what comes and so whether it’s against competition against regulations so that they can get a job done and being in Southeast asia or even Asia itself you can imagine. This ah, especially the one ah going against assisting bureaucracy or regulation is something that is tough to do and so the tenac tenacity really what we boil on to ruthlessness to get things done and the third one would be really just work hard. Um. The founders that we are back. There are consistent that that of the the unicons ah consistently those guys who at they are working hard at 5 am m or they are still pinging at one two a m and so on I don’t I don’t advocate that you sleep late and so on I’m sure they sleep got 6 hours and 8 hours it’s just that. Every available minute neurals. They are thinking about how to make their business better because it translates to can can they provide a better working environment. A better company for their company for their employees who trust them and follow them so team rooflessness.
James Tan: And really just being hard working.
Alejandro Cremades: Amazing. Well hey I guess for many founders that are going to be listening that are going to be. You know, ah excited about the idea of pitching you you know, maybe an idea for them to is to schedule the email they emails to send automatically at 1 a m. Ah. There we go there. We go a good tip there guys now now one thing here you know obviously on the on the other side of the table being a Vc. Ah, it’s it’s much harder to raise money than raising money for your own company. Why is that the case. Okay.
James Tan: Um, for Vc firm. Um, yeah I think the the mentality is definitely not that of a startup founder where you are trying to raise funds every eighteen months or so and if you fail and you know you fail as a founder but for a Vc firm. We need to raise funding that lasts for 10 years so you can imagine investors or lps into us have to lock in for 10 years and they are pretty much trusting that for the next foreseeable future 3 to 5 years of active investments. Their quest ventures can spot the right things because it’s pretty much a blind pool. That they imagine that you have to you have to identify the right hec or have the right theses have a potential pipeline of maybe not even the next few years but maybe just the next one year and then you do the same good job again for a second and third and forfi and 50 and so on. So it’s much harder. And for investors to keep coming back and say I will support your second fund I’ll support your third fund and so on these are necessarily entities or people with deep pockets and so the usual injur investors or high level of individuals usually don’t cut it beyond the second or third funds that we run and so we are ah blessed. That we are supported by a fairly large institutional investors and so email funds.
Alejandro Cremades: And and 1 thing there that you’re alluding to is that you know on the deal flow side on the pipeline. You know those those lps those limited partners that are typically investing in your in your ge’s funds. They’re looking for for an advantage when it comes to that. Pipeline of dealflow I mean that pipeline that is going to give you access to this unicorns that nobody else is going to gain access to I mean how do you guys think about pipeline and creating those channels so that you’re able to gain access to those deals before anyone else.
James Tan: Um, after having been in this business for 10 years I the best companies really come from Referros is refers mostly from fellows less so from vc firms although they are as important and then the last of obviously will be call emails so the on the side.
James Tan: I’m very very proud to say that whether the founder has failed or has succeeded with us in the last ten years we are still in touch in some way and we do community events to continue to engage our entire ecosystem of founders. Ah, hundreds and hundreds of them not just in Singapore but in you know in jagata in in Philippines in Malaysia in Vietnam and so on so that they are continually plucking to what we do and you know when they if they fail and they start the next thing I’m very proud to say that so far we have also been able to support them. In their next journey because the departures have somehow also been quite amicable and then of course least when people talk to them and new entrepreneurs talk to them. The refers come out with so that’s that’s a very very important source with us and remember I go back to the you you go back to my passion area which is engaging with young founders. And so even as we are all growing old and then you remember that we all grew all together that kind of connections and memories is just not not possible to find if you are you know, but 1 brand new fun coming in. So I think we have a natural advantage there just because we are early in this. Ah. What is pretty much the world’s fastest growing region.
Alejandro Cremades: And imagine you were to go to sleep tonight James and and you wake up in a world where the vision of quest ventures is fully realized what does that world look like.
James Tan: Wow. Okay, um so vcs in this part of the world is pretty young if you look at ah established companies like sooa they are 50 years old I don’t intend to work 50 years before we become what is. What is so pretty much a household name where entrepreneurs are concerned I think currently we are as household as you can get in some key markets in Southeast Asia we are also as household ni as you can get in parts of central asia so my idea will be. We are household nim. For sure in these 2 big regions and then hopefully we are also somewhat household names in the other potential regions that we want to expand into.
Alejandro Cremades: So then so then I guess you know you see now different experiences that you’ve had multiple companies that you’ve started um multiple companies that you have invested in tons of unicorns as well that you’ve seen.
Alejandro Cremades: If you had the opportunity of go back or of going back in time James and I put you into this time machine and you’re able to go back in time to that moment where you were dropping out from school and you were having that tough chat with your parents and let’s say you were able to have a chat with your younger self. And you were able to give that younger self one piece of advice before launching a business. What would that be and why given what you know now.
James Tan: Do it earlier drop out earlier. Do the thing earlier raise funding earlier. Yeah, don’t have the distraction or something else in my case, the distraction or so studying. There was a distraction so just focus on it. And perhaps you have been a much big outcome.
Alejandro Cremades: I love it. Well James for the people that are listening especially for the founders that will love to pitch you. What is the best way for them to reach out and say hi.
James Tan: Ah, we are conductible on our website wwwresers.com or you can email me james.panatrejust.com
Alejandro Cremades: Amazing! Easy he enough? Well hey James thank you so much for being on the deal maker show today. There has been an honor to have you with us.
James Tan: Um, thank you Ali! Thank you.
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The post James Tan On Taking His Last Company Public And Now Investing In 4 Of The Biggest Startup Unicorns In Asia appeared first on Alejandro Cremades.
Muddu Sudhakar has already enjoyed several of his companies being acquired for hundreds of millions of dollars in value. His latest startup, Aisera, has already raised well over $100M and is on its way to disrupting yet another industry. Which may also be one of the few companies out there that are currently hiring, and in every department. The venture has attracted funding from top-tier investors like Webb Investment Network, World Innovation Lab (WiL), True Ventures, and Thoma Bravo.
In this episode, you will learn:
- AI and automating workflows
- Disrupting the customer service space
- Products versus platforms, and product roadmaps
- 2023 as the ground zero for AI
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Your email address is 100% safe from spam!About Muddu Sudhakar:Muddu Sudhakar is a successful Entrepreneur, Executive, and Investor. Muddu has deep Product, technology, and GTM experience and knowledge of enterprise markets such as Cloud, SaaS, AI/Machine learning, IoT, Cyber Security, Big Data, Storage, and chip/Semiconductors.
Muddu has strong operating experience with startups as CEO (Caspida, Cetas, Kazeon, Sanera, Rio Design) and in public companies as SVP & GM role at likes of ServiceNow, Splunk, VMware, and EMC.
Muddu has founded 5 startups, and all of them are successfully acquired and provided 10x returns for shareholders & investors. He loves to mentor, coach, interact and collaborate with both early-stage or late-stage startups and entrepreneurs as an advisor, board member, and investor.
Sudhakar holds a Ph.D. and MS in Computer Science from the University of California, Los Angeles, and a BS in Electronics & Communications Engineering from the Indian Institute of Technology, Madras.
He is widely published in industry journals and conference proceedings and has more than 40 patents.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the dealmaker show my god you know the guest that we have today is a legend I mean he has so many companies so ;’l;many exits I mean I completely lost track I mean unbelievable. But I think that we’re gonna be learning quite a bit you know through all these different companies that he did build. Gad Finance exited and then also he is up to something super exciting nowadays with his latest company so without further ado. Let’s welcome our guests today mudu suakar welcome to the show. Thanks.
Dr. Muddu Sudhakar: Thank you Ajandro Very excited to be with you and I enjoy your podcast show. So you’re doing a great service to the community. So thank you.
Alejandro Cremades: Thank you so much mudo so give us a little of a walkthrough memory lane. How was life growing up in India. Thanks.
Dr. Muddu Sudhakar: Oh great man I mean I that’s my hometown my home country when I grew up so I love india and I love everything about India.
Alejandro Cremades: So so so how was life growing up there because I’m sure it was a little bit different than being here in the us I mean eventually you came here for studies but but you know it took a little bit. You know you went through there you know getting the you know the studies. The. You went to a I you know there I mean what’s the what? what were what were you doing all the way up until you know coming to the Us.
Dr. Muddu Sudhakar: Yeah, no look India is like I come from a small town in India called Kainara so you have to look um, growing up in India. It’s also it’s a humbling experience right? It’s ah I’m a middle class family person. My dad is a professor we grow up there and my. And it’s it’s like it’s it’s a good working in a India is um and studying and growing up inda is a great experience for me I went to schooling till Twelfth grade and then I went to I to do my undergrad. Um I is a very great place right? It’s one of those places where. It’s one of the smartest of every city every um, ah so city and every state will come and and you have to compete and do well in the schools and colleges. So I yeah learned a lot I mean it’s probably my for 2 years as a human being going to college like for all of us and also learn and staying in a dom and interact with people and. Social aspects as well as the aspects of how to ah evolve in the for in the calm in your life. Oh um lot I mean like going to it like it was brain drain in India back then rights like in late eighty s so all the all of us are train. 1 thing is like.
Alejandro Cremades: So what block push you to come to the Us. So.
Dr. Muddu Sudhakar: Study well in India and and then apply for higher education us was the place to go do masters and ph d so it’s the number 1 dream right? American dream was for us is to come to America to learn and learn in terms of doing masters and Phd and start a startup and we live the la american dream. So that’s what drove me to come here.
Alejandro Cremades: The american and dream you got ah you got to respect that I love that and obviously in your case you came to to yale to do the studies and then after that you went to ucla and then you know like you went into different companies like Ibm Bell Labs Silicon Graphics but this was the most immediate step to getting started with your first company. So how was that process like of all of a sudden you know like things start coming together and and and you make that decision of of giving your your notice that leap of faith and. You came to the us already so you had made it. You know you like you were making a good salary I’m sure it was nerveracking all of a sudden you know to to give the notice and and going into the unknown. So.
Dr. Muddu Sudhakar: It is it is as well like two things so I can give you the going back to like it was ninety nine I was at cellconographics remember it was a pickup the dot com era things were booming like hell right? ah stocks were a thousand dollar stocks of every company. So I think look. Leaving silicon graphics to start a company. You’re right I mean once you leave something you’re resigning from your job and you have no pay. But and then that’s what I tell people is look. You cannot do double duty. 1 thing I tell people is if you want to start a company you got to go all in. You can’t say I’ll stay in the company and then I’ll do this. That’s a disservice to yourself and the company and you’ll never do full so you have to be like a like a poker you got to all go all in if you’re not to do all in. Don’t start a startup so you’re right by throwing that it creates a necessity so your time starts now. So it’s not like you have all the time in the world right? so. Then at that point you have 2 three months to create your project plan. You have your ideas then you go pitch that to investors meantime you’re trying to create write the software hardware. My first company itself has both software and hardware so you got to pull together your resources put your own personal capital build a hardware software. See the value first understand what’s the problem you’re trying to solve talk to the customers right? What’s the business case. Where’s the value prep. What is a burning need how much people will pay. So I think you’ve got with like I never run to Mba school but starting a startup if you do that you don’t need to go Mba school. That’s what I to entrepreneurs if you do a startup and is successful.
Dr. Muddu Sudhakar: You don’t need an Mba after that you’re the Mba you can teach other people.
Alejandro Cremades: And and and why do you think you know have skipped you going from one company to the next I mean where is that drive coming from.
Dr. Muddu Sudhakar: Drive for me personally look everybody has differently for me. The drivers were solving a problem I’m very much driven to solve industry problems. So once we see a problem I feel like solving it and that’s what happened so when I was at so um, so Silicon graphics the problem back then was you want to go solve a.
Dr. Muddu Sudhakar: Networking problem but it’s so networking right? at the big. You have the biggest server companies that you have sun Microsysm oracle your silicconic Graphics Ibm Hitchpe. They all have servers and storage. But there was no networking connecting servers and storage I mean that was is it a problem to be solved or is it. It Nice to have. Servers and store need to talk to each other was there any what is a type of new application that you going to evolve right? Remember That’s when internet is happening ecommerce was happening. You’re able to provide Nondi Disruptive compute environment and storage that drove that whole networking Era right? So I Really enjoy that. So every time I look at a problem and say look. If that problem can be solved.. Can we go win that market. Can we solve it can we make a change and that’s the crime.
Alejandro Cremades: I love that and you know before we go into the companies that you’ve done in the lessons learn I got to ask you here because I mean you’ve you’ve you’ve you’ve done through it. You’ve gone through it all I mean through the.comboom.com busst. So prime you know? ah. Financial crisis you know wait you know now obviously with the venture boom venture bust you know silione valley bank you know other banks you know behind you know the macro environment. You know, not the same as as we had you know a year or two ago so what have you learned about going through those cycles to us an entrepreneur.
Dr. Muddu Sudhakar: I think persistence determination don’t give up that every company will have challenges every year there’ll be challenges every comm will be different right? You’ll have so I think like even covid I thought I’ve seen everything but 2 years by covid happened right? So every time the challenges are different. I always tell that to even investors. Don’t think that like innovations think that okay just because you have done it once or twice the people will know it I even I’ve done it five six times I still don’t know what right? every time you’re learning right? that something is your with that and it has be datad driven see particularly now that we are talking Ai and data. My approach is look. And the end of the day you have to have a cutfield you’re the product. You’re the owner you’re the founder of the company you use your intuion but your intuitionion should be grounded with some data right? and not all bets are med equal but you got to make a bet stay with that bad be persistent. Don’t give up.
Alejandro Cremades: I love that now. Let’s go 1 by 1 and what I want you to tell me is what were you guys doing in each one of those different companies and what was the lesson learned. So let’s start with sonara systems.
Dr. Muddu Sudhakar: Um, sure.
Dr. Muddu Sudhakar: Yeah, so so as a center is a storage networking company storage networkancy that one side of servers and one stage you have storage and you connect them like you think of like Cisco like and and we were acquired by Emc back then right? So so we build a. Sandswitches for them. So this will be for every bank like today. Also if you’re drawing any money from any financial institution. Any large company you’ are going to a sandwich that we built bank there in frontiers bank so itll be deployed coming like Goldman Jp morgan bank of familka whereas on large telco travel networking. That’s the problem we are solving it. What is a lesson we learned look that is the time I learned through Nine Eleven happened that was the shock right? till then nobody knew what? like um I was I was like that was a shock completely. We don’t know how to operate everything was shut down wallshit was shut down the barrier was shut down people could not go to the office for a couple of months right we are to recover from the whole right and lot of companies died because of that and sometimes the luck right for me during that time luck happened. We stayed with the company we tried to push the company as much as we can and we came out really winning on that market right? But there are a lot of people who shut down companies right? after 119 shut down either. They didn’t have the lack of funds or they are good companies with fund but look There’s could be a lot of reasons why companies may not succeed a lot of good companies. Don’t succeed to but sometimes you just have to understand and change your dynamics you got to deal with the what I call life is like a box of chocolates.
Dr. Muddu Sudhakar: You don’t know what you’re going to get once you open the box. You may get milk chocolate dark chocolate. You can eat a brown chocolate. You got to take that you have your limitations and within those limitations you got to do your job.
Alejandro Cremades: So so 1 thing that happened here is obviously the first thing you know company first fix it so not bad at all and I guess why do you do all of a sudden I mean there you guys you know, got acquired for like 2 5300000000 I mean you’re coming from a very you know, humble background come on. Did you buy a car a house. What did you do.
Dr. Muddu Sudhakar: Ah, look once you have a wife and kids. Um, my wife now is sunila and she and me and we are our first baby back then so look life has to still continue right? Um, why did I do it look. It’s very interesting. Yeah, we sold our company are we got acquired actually I but I never sell companies that’s number 1 once you put a sale on your thing. You’re like a loser if somebody want to buy me, let them come to me but I never sell. So once we got acquired like I got this like 2003 I think maybe late two thousand two two and 3 um I was talking to Goldman Sachs Goldman was on my. Board at soera I was talking to Goldman Sachs guys and I was talking to red point ventures guys and menlo guys your understand back because of the nine eleven and after that a whole bunch of scandals have happened right? So people wanted to create a security risk compliance they wanted to go into your backup tapes. They want to go to your documents. Want to go through your emails to search. There was no search back then like there used to be Google searches an appliance there used to be a company called verity right? But there was no companies will go through your emails backup and search and if you have to get a lawyer you have to call your lawyer and lawyer will go through manually right? All the micro participants. So that’s when we created what we call an enterprise search company called caion right? It was a problem. So as soon I saw it I saw all this storage Goldman comes to me and iu can you search all my documents and emails can you do some problem here immediately. We started a company backing by Goldman Red point and Menlo called Kasian there we are.
Dr. Muddu Sudhakar: By 2003 late and um, again back running another company um with my cofound of christstos and that’s it. So again, you’re back to normal 2 people in a room write the first lines of javascriptva code first lines of your ah ah your your um javascript code. Right? That’s other thing that I enjoys building from day one and that’s also scary right? So when you start something you really don’t have anything else. You’re writing a first prd amadi your user interfaces. Youre to think through it and most people don’t think that studying company is about powerpoints. It’s not about your business plans and word document. You have to have a vision as to what’s a product look like what is the lines of code looks like what you are building. It. So it’s scary and also it’s yeah also creates lot of innovation during that time.
Alejandro Cremades: So now cast on us again. You know also acquired by Emc now now here you know one thing that is interesting is that you decided to stay for a few years. What? What? What do you What? what? What drove that because I’m sure that now after having built scale sold to companies. I’m sure that vesting and resting period you know was not that fun. But.
Dr. Muddu Sudhakar: Not necessarily look it all depends on what you look I usually I live to the choir since this is ah your deal podcasting. It’s you always as an entrepreneur Ceo. It’s up to the ecquirer if if they want you to stay. You should stay if they don’t want to stay. You should not when it comes to the Ceo or C4 usually the those 2 roles. It’s up to the acquire what they want to do right? Um, definitely the so at cash on time emc Joe which she was a Ceo then Joe said with you, you got to stay and become a general manager to run this business right? And what are they want to do you got to do that that point right? at that point. You that’s still your baby. You’re stillating and integrating through their organization. But you’re also running it to make it part of the picker sales in and go to market so you got to do that I really enjoy that for me I learned a lot under 2 2 days like who’s who was there everybody right? you had ah Paul Murji was the Ceo of vmere back then. Your Dinah Greenen still there your art coviola was there from ah Rsa Pat Galsinger just came from Intel to join us as a c to you are Frank S Lutman came from data domain acquisition right? I mean it’s everybody so with like Dave Dewald was there from documentum so I was like a small time. Ah. No name company c was sitting in front of like it’s like have you seen the godfather movie it was like god for the movie right? like Joe took you be behind on the table and everybody got to smoge his hand right? right? Yeah, the guys are the small guys. Ah, but I learned a lot how to run the qbrs how to do this.
Alejandro Cremades: I Love it.
Dr. Muddu Sudhakar: Go to market. So I learned a lot under Emc. That’s a second time they’re buying it so I’m pretty loyal to them and have they’ve been nice to make very nice in secret.
Alejandro Cremades: Yeah, no kidding I mean second second purchase not bad now now in this case, you know, like again, you know once an entrepreneur entrepreneur always on entrepreneur entrepreneur. So see us is the next opportunity that comes knocking what were you guys doing there and and what was the lesson earnarned. So.
Dr. Muddu Sudhakar: Yeah, so look I think that one was a very interesting one because remember back to like how cha gp is just happening now right with the whole world of Ai and automation back then the issue was ah people cloud was just happening. It was just in god release cloud s 3 and ectwo so the question was how can we dump the data into the ah cloud and how to do analytics on the cloud as a Sas play right? So the requirement from the customers was I did not want to run analytictics on in my own data warehouse cloud became the data warehouse red ship started happening. People were putting data out there hadoop started happening their big data if you remember whole big data and so people wanted analytics to be run on the compute in the cloud analyze it provide a what I call visual. Yeah interact to visualizations right? You wanted to do dashboards analytics drill down. Um, everything. Um, from an automation from a data variable to olap to everything in the cloud that is the problem as soon as we heard we thought look this got to be done in the cloud and we did it pretty quickly that and by them we are done and started doing the go-to market and selling it I think it was like maybe less than 2 years. We may came in aqui us.
Alejandro Cremades: Unmoli now obviously third acquisition. What the what have you learned ah about acquisitions I know like you know before you were saying I never sell a company. They always get acquired. So. At this point you know with a 30 transaction. What kind of patterns. You know, did you did you see I mean as a founder What did you learn through going through all these different processes so that you can come out. You know of a transaction like this you know on on a high note. So.
Dr. Muddu Sudhakar: Yeah, so I think the key for all these look at is persistence lot of people think see it takes very long time to build companies long time to build products first version of the product will be barely good enough then once you go to the second version. It’ll be good enough to do product market fit. By the time you’re done with the third version of the product we are doing early go to market by the time you do fourth and fifth will be the growth engine and kicking in so there’ll be lot of phases of the product evolution I always tell people by the time you are done. It’ll take 9 to 8 versions of your product before you start eating the scale of the product. So whether you do it as a standalone whether you do it as a part of the acquired company. You got to stay and build a product and consistency in personson that something is like you should be the last person trying to turn the lights off on any product or a company as a founder. So I think that something is. I definitely learned that you got to stay with the companies make the companies build and got to build it for scale. A lot of people build it for 1 1 single feature and say I can add other features. You cannot once you are born as a dog you’re going to die as a dog very really, you are going to become a cat. So. It’s very hard and this is something a lot of investors. Also don’t think that they think oh let’s start off a company in one area. 1 feature. Let’s go deep into in that focus areas if you do that you cannot change it to the next one. It’s not that easy to build on right? So as a startup. So unless you are a good product. It has a good platform.
Dr. Muddu Sudhakar: You cannot scale to what it is but at the same time when you build a platform You can’t go to market with a platform. Nobody’s going to buy a platform people buy problem solutions to a problem right? Ajandro you have a problem I Want to solve the problem right? You cannot say I need a hammer but you go go by a screwdriver So understand the problem and the solution. But underneath if you have a good platform then you get to grow that’s other lesson that I’ve learned is make sure you design a good platform good product so that it has legs to last generations like my first Companyana switch products are still used after 25 years every bank transaction. But it’s used it as a part of a standalone company as a part of a acquirer the priority is in production and being used that gives you a lot of satisfaction.
Alejandro Cremades: No kidding. So obviously you know in this case after the transaction with Vmware you stayed there a little bit and you worked for people to do in conjunction. But then you know again like always another idea comes knocking so that was caspy that so why. Another a great exit you know for about 300000000 you know acquiredwise splunk so what were you doing at caspida what was the lessonsa learned. So.
Dr. Muddu Sudhakar: Yeah, so I think caspi I was a cyber secret now. 1 thing you can see in my team like I don’t go after in the same space every time I do something I want to solve some fundamental problem in a new space right? So this is 2014 I think um, the problem was cyber securityity the advantage we ran into is the issues that are. The at that time the problem is how do you detect external attacks and insider attacks. It’s right. It’s called the user behavior. How can it study the behavior of the attacker and see if if somebody’s lurking in our environment in your networks in your applications in your in your data center. Right in your cloud environment. So our goal is to detect bad actors. Bad behaviors Proactly. You’re never going to be perfect. You’re going to miss some There’ll be false positives true positives false negatives. But if you can do any prediction that is even 10% better than it’s better than having no no prediction at all. So the you ubi was created called user behavior analytics as a category. We tro the and as said splunk came knocking on the door to acquire us right? and I like splunk a lot back then because workslunk was a leader in what we call the it services market. They just don’t have. They’re just launching what we call sim now. It’s called secret security information management I think ah and that and that helped me and I became the first general manager for spluk.
Alejandro Cremades: That’s fantastic and obviously you know like there you did splunk you did service now as well and then what happened then what happeneyou were encoud another opportunity comes knocking and that is the opportunity that you’re pushing today is Sarah so why did you think that the problem. You know that ntering or that you were envisioning was meaningful enough for you to start isra. So.
Dr. Muddu Sudhakar: Yeah I mean I’ll tell you era is a very interesting way how it happened right? Um, for me is look as as one I was at service now just now talking about 2016 your understanding is look if you are meeting and if you’ve been to alehando you are your listeners or have been to. I advise them to go revisit call centers right? and the world has so many call centers everywhere which our country are in it could be us India China Costa Rica philippines once you go to this call centers contacts and you can see it. There are manned by humans right? there. These people are taking all our calls whether it is for your re review not working what says your Tv issues your your comcast issues to your bloomberg gridbook issues now these people are solving day and day out the problems and this is one highly lot of human people are involved to solve it. It takes time. You have a problem you make a call somebody talks to you. It’s a multibody involved with lot of friction. My goal is can we streamline the whole thing right? So in two Thousand seventeen eighteen when I started seeing this and when I visited those those customers and the problems it was obvious that. There was no chat gp back then there was no ai back then it is still latest. All we had is what we still call natural language processing Nlp Pipelines there was to be iron never understanding andll you was getting involved. There was no language model set there were models called birth just as happening. So our goal is can we understand human requests.
Dr. Muddu Sudhakar: When a human makes a phone call or an email or he or she chat remember there was no Microsoft teams back there. There was no slack was just early days to those so question is how can we provide a digital experience. Voice experience right through? Whatever channel you may come into text maybe sms text right is understand the request. Like understanding the meaning and intent of user request and trying to solve their problem if I can do that even for thirty forty percent that thirty forty percent request will not go to agents. It doesn’t go to humans by doing that you improve the user experienced red user improve the productivity cut down the cost. Agent is happy because agent can do higher order items. So a lot of people don’t understand people in call center they don’t want to wake up and take a call from you on a huntro how much you want to talk to them. They don’t want to talk to you. They want to solve complex problems right? and they also want to move up in life. They want to be forecasting through yours they want to be go to Disneyland right. So the world has not given the chance for people in call centers to go up in life to me that was a great calling for me. This is not going to be easy. There. Everybody in the world. All the big guys will want us not to succeed because that is a status quo you still want to open up ticket manually. You want to give it to. Your saas providers and you want to buy their software and you to humans I want to ship the whole model your total shift left where give the problem and solution to the users empower them provide a self-service like think of the uber model until uber came in. We only had the taxi medallion business they came and change the revolutionize. So these.
Dr. Muddu Sudhakar: Industry shift will take years to make it. But I think right now when we started we thought it’s going to have happening very well and it’s happening and with cha gpty there’s tail wind and us right everybody in the world wants use gender to Ai models charge gp models andll las that became like a common language like. If. You don’t know that in elementary school people look down upon you right.
Alejandro Cremades: Yeah, so so so then in this case I mean up on isra you know as as you’re saying you know like this program that you guys are solving now I mean up until this point I mean you had sold now for companies I mean we can. We can safely say that. Over $600,000,000 you know, easy right in in in acquisitions. You know, just on the tool that where at least disc closed ah then probably much more on the other ones that you’re not spilling the beans here with us. But then. But at this point you didn’t need really investors a model. You know you had done pretty well for yourself and I’m sure that you could even finance this thing but you decided to bring on board people like costla ventures first round capital and and menlo ventures. I mean we’re talking about you guys have raised what about 164,000,000 is that it. Yeah why I mean why? Why did you get these investors. Why did you bring investor those investors you know to begin with and specifically the ones that you brought in why first.
Dr. Muddu Sudhakar: Something either depth right.
Dr. Muddu Sudhakar: Yeah, no, very good question. Actually 1 of the best questions you asking me is the reason that it look first is as an entrepreneur. Everybody has a multiple ways to build my way of building companies is with venture capitalist I go to the el leave venture capitalist what you call the early funds. These are like fast drawn capital. These are true ventures Manlo ventures northwest. You mentioned we know, coastla coastla ventures these guys out the did who did my series a series b right? then I went to icon ventures then I went to Goldman Sachs for my last one along with Tomma Brower growthfriend that reason’t to go to vs to me is. It actually creates a very discipline very what I call the very good audit very makes it transparent company. You have a transparent financials. You have you have auditors coming in. You’re make you’re running the company for with the people checks and balances right? There are a lot of people want there are a lot of other ways to build in. My approach is to go build it with races because these things takes not only capital large capital. It also takes long time. It doesn’t take with one person to solve the problem right? So I knew back then if you really want to solve this this is going to take a 5 to 10 year horizon takes many years and more important text many investors large capplan you won need a right right? investors to to your point I went back to always I go back to the people who know me well because if I know you well on andro I will always work with you. There’s no reason not to go back similarly if I made money for you. You’ll also come back to me so that’s a menlo is a repeat investor.
Dr. Muddu Sudhakar: True ventures a repeat investors right? that if you see in my thing most people are repeat investors on how we are good. Goldman Sachs is a repeat investor these a fourth time I’m doing with Goldman sites right? So that’s a commonmarality that I look for is you also want to bring in a crossbo list of new investors who know the market plus you want to have some existing people that you know you know you? well.
Alejandro Cremades: And you’re like you you be mentioning the word you know people a lot so you know whether it’s people on the investment side whether it’s people on the team side advisor side. What do you look for in people when you’re surrounding yourself. You know with with these folks.
Dr. Muddu Sudhakar: Knows the company. Well.
Dr. Muddu Sudhakar: Um, fight.
Dr. Muddu Sudhakar: I think I think strong italy look people. Ah most people that I like to see is that I want people that we hire our good leaders. Good experts people who have determination who want to win and this is going to be and you have the stomach to go Append. Um. I think I tell people the startup is not for everybody startup is not for everybody at at any point in time right? So you ought to figure out is this a startup I want to join today at my point of career and is it something that me and my family want to support you got to make the decision for your son but it’s an all in game. It’s working at a startup and. Is so different than working in a large company because it exposes you. There is no fat in the system. So whatever work you do can make the company good or bad. So if you are not aware of that you can’t hide behind the facts. So I think people who are were good at doing. Drill down able to run their things can scale up scale down, you got to be good at everything you can’t say I’m only good at scaling down but not scale up similar. You can’t say I’m good at scaler but I can’t scale down. You can’t say I’m only good at managing people but I won’t be able to write code or I won’t be able to write my own marketing plans or I want them to do my own product management right. You got to be a journalist right? You ought to be an athlete and you also have a determination and persistency to stay in the game for long.
Alejandro Cremades: So model you go to sleep tonight and day you wake up in a world where the vision of isra is fully realized what does that world look like.
Dr. Muddu Sudhakar: I think the role of icera is copilot world man I think what Microsoft and open Ai and Chad gpd have done is well this ai should start happening. It. Everybody needs a copilot I only what for the next port caho you should use I as a po coiler to tell you who you should interview you may still reject. It. Should be a handra copilot for you right? Everybody should have a copilot use Ai to it to better our every department right? Well I t customer service a human there will be co-ilot aar for you which will go talk and take your own meetings right? So that’s a future world that I’m seeing is but we won’t know where ai will take. But next ten years will be 1 of the cool ages that I can think of right? It’s going to happen people will come with new Application New Services we are just starting I think I think 2023 is like I call it Ai ai inception. It’s like the ground 0 of this year so The next ten years will be like 1 of the best golden ages that I can think of in Ai.
Alejandro Cremades: I I love it I Love it I mean without a doubt you know he’s ramping up very very quickly Now we’ve been talking about the future here Mulu We’re gonna talk about the past but we’re gonna talk about the past with a lens of reflection. So imagine I’m able to bring you into a time machine back in time.
Dr. Muddu Sudhakar: Okay.
Alejandro Cremades: Um, bringing you back in time perhaps to that moment that you were in yele and you were perhaps you know living in Hartford and let’s say you are able to have a chat have a sitdown with that younger self that younger mulu and you’re able to give that younger mulu 1 piece of advice before launching a company. What would that be and why given what you know now. So.
Dr. Muddu Sudhakar: I didn’t just do what I just did I think that same thing look I was at yale in 1990 or what are at new heaven just be hungry I was hungry to learn I think just keep doing the same thing. What I did man, there’s nothing different. So if I were to do it all over again i’ do exactly the same way the playbook right. I Punta asked it again sometimes I got lucky along the way at yale I met one of the best professors I met great producer is youcla one of my professor got turing awards and then I met people like professor David Patterson and Professor John Andy like these are industry legends. So for me. You can’t make a pluck the so that says that if you have to do it all over again. I’ll pick luck anytime.
Alejandro Cremades: And you create luck because lucky is preparation meets opportunity and in this case model as they say once you’re lucky twice you’re good and not only you’ve done it but you’ve done it now 5 times 4 times already successfully model. What is the best way for people that are listening to reach out to you and say hi.
Dr. Muddu Sudhakar: Oh please? Yeah, please reach out to me, go to wwisra.com go to my Linkedin page please reach out I’m ah we are always always hiring. We’re hiring in every department. So if you are out there looking to join isra please reach out to us if you’re a customer you want to try the product please reach out. More importantly, listen to alejara’s podcast hopefully give us a feedback and give him and me so that we can do next time. Better.
Alejandro Cremades: Amazing! Well mood. Thank you so much for being on the deal maker show today. It has been an on earth to have you with us.
Dr. Muddu Sudhakar: Ah, it was my pleasure and my honor to thank you.
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Rob Biederman has gone from founding his own startup to leading a $100M plus venture capital firm that is eager to fund great entrepreneurs, even at the pre-seed stage. The firm, Catalant, has attracted funding from top-tier investors like General Catalyst, Morningside Venture Investments, 40 North Ventures, and Highland Capital.
In this episode, you will learn:
- Fundraising is fast and easy; hiring is not
- Dropping out of Shark Tank
- Finding product market fit
- Being transparent with your investors
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Your email address is 100% safe from spam!About Rob Biederman:Rob Biederman is the Founder and also serves as Managing Partner at Asymmetric Capital Partners. He is also a Co-Founder and serves as Chairman at Catalant.
Rob serves as Board Member at Torc. He serves as an Advisor at Impellent Ventures. He is an angel investor. Prior to Asymmetric, he co-founded and served as co-CEO for eight years of Catalant Technologies, the market leader enabling companies to frictionlessly access and deploy talent, ranging from employees to over 70,000 elite independent consultants and 1,000 boutique firms.
Rob is also an Executive Fellow at Harvard Business School and co-author of a book titled, Reimagining Work: Strategies to Disrupt Talent, Lead Change, and Win with a Flexible Workforce, which lays out a vision and path for a new relationship between global companies and talent.
Rob is also co-author of a book titled, Reimagining Work: Strategies to Disrupt Talent, Lead Change, and Win with a Flexible Workforce, which lays out a vision and path for a new relationship between global companies and talent.
Prior to founding Catalant, he was a private equity investor at Goldman Sachs and Bain Capital, where he focused on the healthcare and high-tech industries. In these roles, he served as an advisor to and collaborator with both public and private management teams on topics including organic growth, competitive strategy, mergers and acquisitions, capital allocation, and financing strategy.
Rob is also an Executive Fellow at Harvard Business School in the Entrepreneurial Management unit, co-teaching the Scaling Technology Ventures course on funding and accelerating the growth of disruptive internet companies.
He graduated from Princeton University with an A.B., cum laude, in Economics and Finance, and from Harvard Business School as a Baker Scholar.
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Read the Full Transcription of the Interview:Alejandro Cremades: So all righty well welcome to the dealmakerr show. So very very excited with a with the founder that we have today founder investor in everything you know I think that we’re going to be enjoying you know quite you know a bit this conversation. You know from you know, being you know the helm of his business. You know that he started you know for. I mean obviously now a decade you know he is still involved. You know now more as a chairman but he was you know cosio there and now he is a el leadinging the chart you know with his new firm. Ah you know his Vc firm that he’s been at it now for a few years. So it’s going to be interesting to really you know hear from his experience. You know how. It looks like you know when you do that transition but without farther ado let’s welcome our guest today Rob Peterman welcome to the show.
Rob Biederman: Thank you, Thank you so much for having me great to be on.
Alejandro Cremades: So originally born in New York City so how was live growing up you know around the New York city area and then also chapaqua.
Rob Biederman: Yeah, um, you know it was a great It was a great place to be a little kid. My family lived pretty close to central park. Um I think when I got to be about 4 we started. You know the apartment started to get a little small for ah for a child that liked to run around. Um, and so we moved out to chapoqua right? before my sister was born. Um, and so it was it was kind of cool to have 2 perspectives growing up of having you know, obviously lived in 1 of the most consequential cities and on the planet and then also in a kind of wonderful suburban town with great public schools.
Alejandro Cremades: So in your case, you know what did it look like like getting into because I mean you ended up going to Princeton but in your case I mean how how how do you end up, you know, like going to Princeton I mean why out of all the schools that you had because obviously you know like you had the opportunity as well. You know to be in the city to be close to the city. You know, like all the the stuff going on like why Princeton and then also economics why economics.
Rob Biederman: Well, it’s funny I actually really wanted to be an engineer in college and I really leaned in a lot to math and science in high school I think when I got to college I learned that what I’d enjoyed a lot about high school math and physics was it was really around solving puzzles and it and it felt like playing games almost. And then I got to undergrad and I think I found that it was way more technical and that economics was actually really the ah the puzzle solving and so I think it was it was actually a pretty continuous thread in my life from always being obsessed with getting to solutions and um. Absolutely love the Princeton Economics department and I think that’s really more than probably anything other than my family. What pushed me down into the business world was I remember first semester freshman year I was an engineer but I took economics one on one and I just found it to be this this kind of magical world of thinking about ah markets and business in a way that I’d never.
Alejandro Cremades: Now obviously the typical route you know when you study economics and I find that very helpful too when you become an entrepreneur later on is having on one in the investment banking experience which you achieved with Goldman Sachs to be able to really understand how how it works you know good companies, bad companies.
Rob Biederman: Never done before.
Alejandro Cremades: But then also you know the other the other part of it was being capital. You know which is you know is he more investing into a little bit more earlier stages than what you would typically see at a Goldman Sach so what what experience would you say gave you. Being at Goldman Sachson then at Bain to really understand what separates the good from the bad. Yeah.
Rob Biederman: Yeah I mean I took really important messages and and lessons away from both experiences. Goldman Sachs is a ah company. That’s just so obsessed with excellence in everything it does and I found that everybody I worked with there was incredibly sharp, incredibly intense. Worked really hard obviously and it was really my first foray into into kind of the formal business world. Um, and and that’s really where I learned I think the core nuts and bolts of kind of finance just as much as as an undergrad and then when I moved up to Boston to work at Bain Capital after 2 years probably without a doubt the most intellectually rigorous group of people I’ve ever worked with unbelievable analysts of businesses. A great culture really had a family feel I think a lot of the time the private equity industry gets a really bad rap for you know, um, mistreating management teams or or ah. Letting a lot of employees go and I think being capital was this incredibly noble place where we you know? God’s honest, wanted to improve the companies we bought and not not just by terminating employees but by by growing the revenue side I think we had this this belief there that I think we’ve we’ve kind of continued at asymmetric which is that. Everything if you have sort of economically attractive revenue growth. Everything good comes from there and that’s that’s kind of the first step in any good business outcome is having a product or service that the customer wants to buy at a reasonable price and making sure that that’s a defensible value proposition and and.
Rob Biederman: It was a it was the the two years of bank capital were just an unbelievable business training.
Alejandro Cremades: And the 2 year Mark because at at Goldman Sachs you did 2 years at Bain Capital you did two years and then you go into business school. What the hell was going on with that two year Mark and then you know why business school.
Rob Biederman: Um, you know being capital at that time was very focused on sending folks to business school and I’d actually applied to harvard business school and gotten in when I was a senior in college. Um, and they were very very gentle and kind and letting me defer twice 2 years to work at goldman 2 years to work at at being capital. Um, you know I think Bain Capital is trying to turn folks into very um, serious professional board members. Um, you know for the time after business school and I think they they believe and I certainly agree with this I help teach a class at Hbo now I think they believe that. Supplementing your on the job business training with some actual rigor that you might get in an academic environment is really helpful and I also think business school comes at this wonderful point in your career where you have enough surface area to think critically about everything you’ve done but you’re not too late in your career to kind of be past the point of learning.
Alejandro Cremades: So then in this case, you know for you, you go to um to business school and you know you do the shifting of gears. You know so to speak and and I think that that give you some visibility and perhaps you know access to ah, an incredible network like Hps does that perhaps pushed you.
Rob Biederman: Um, yep.
Alejandro Cremades: Into the world of entrepreneurship. So what was that like what was that like.
Rob Biederman: For sure. Yeah, you know it was funny. Um I had no intent of starting a company at Hps I you know Bank Capital Very very graciously paid for my my time at Hbs and I was meant to go back there when school was over. And um, you know I basically went to school to try to learn as much as I could and also start playing basketball again which had which I’d done at undergrad and I didn’t know much about entrepreneurship in my head I’d always wanted to start a company as a kid I’d started some you know pretty small tiny little businesses. And I think what I learned at Hps was entrepreneurship was a lot more accessible than i’ had assumed it was entrepreneurship felt very black box and very intimidating to somebody who was not. You know, ah, a designer or a software engineer never sold anything and I think in in a really positive way Hbs really demystified entrepreneurship for us. And it was actually the the company I started cattlement which which began life as our only nerd was originally founded as part of a class project. Um, and I think had I never had that class project I’d probably still be back at Bain Capital today
Alejandro Cremades: So then tell us you know how did the idea come about. You know what was that the incubation you know ideation all that stuff and then all of a sudden you’re running a company but.
Rob Biederman: Totally totally so it was it was ah it was a great program called field 3 um where the school gave us $5000 and about 6 to eight weeks to start a company and I think that there was ah a bit of a preference for starting businesses that were able to get to revenue reasonably quickly. And so a lot of our classmates started selling t-shirts and other things like that I think we looked at our unique brand of assets as as folks that had substantially worked in banking consulting private equity and said you know what do we? What market? do we know better than anybody else and I think that the 2 markets we knew that merged to form hourly nerd essentially were. And Nba students had a bunch of spare time on their hands and they needed to finance their trips to Costa Rica and and their their rent obviously and their tuition and then we also knew that small businesses were substantially locked out of the consulting market that was actually quite difficult to um. You know’d be able to access consulting if you were a smaller company so we created an online marketplace to blend the 2 and and this was if you think back to February of 2013 uber was only in probably a handful of cities certainly taskrabbit and and upwork and. Elan odesk were were very small compared to where they are today. So it was. It was quite revolutionary stuff and it certainly was revolutionary to doing be doing it with business tasks I think what we we found over the course of 2013 and 14 was a tremendous amount of inbound use from enterprise customers. So we’d we’d originally designed this as a pure small business product.
Rob Biederman: And all of a sudden we had arm’s length inbound signups from ge and Coca-cola and other companies and when we asked the folks why why would they come to. You know what was in some sense still a class project for a lot of that period they said it is so difficult to be able to get elite people to work for us in these in these corporate settings that. Um, we’re we’re kind of at wit’s end and we’re willing to use this kind of broken website and use our personal credit card in order to be able to get access to those consultants I think that was the moment when we realized we had real potential product market fit.
Alejandro Cremades: And in this case Also you know like what was I mean for the people that are listening what ended up being the business model of Catalan for the people that are listening to really get it. How are you guys making money there.
Rob Biederman: Yeah, so in the end we we landed on rather than a software model. We were going to take a percentage of the spend from the customers and I think if if you were you know ge or an heiser Bush you looked at that and you said you know Boehner Mckinsey might cost 1 or $2,000,000 for this project and cattle. It’s going to cost. 250 k or 200 k and ah you know Catalan’s taking 20% now about 23 24 I think they they look at as a total pricing so forgetting what the split is between the expert and and the cattle and platform still feels like we’re saving. 70% 80% and so they they didn’t much care about where where how that pie was being split and I think on the expert side. It’s really hard to generate. Um, generate kind of leads as an independent business consultant until we essentially are there. Our outsourced business development arm. And they are are sort of very pretty happy to variableize that expense and they think they all make a tremendous amount of money on the projects anyway.
Alejandro Cremades: And and also how many co-founders of you I saw that there were say a few of you guys. So.
Rob Biederman: Yeah, there was there was there was more than a few of us and I think sort of over time people. Ah you know people’s interest dissipated a little bit and so now they’re essentially 2 of us still involved with with the company. My cofounder Pat is is now the sort of soule of business. We were co ceoos for 8 years and then I’m chairman. And but it was really a cool thing to start a business and you know with a bunch of friends and classmates and actually have it succeed which is you know, surely not the expected outcome.
Alejandro Cremades: And how how does that work I mean typically because I mean having having that journey where founders you know like go in different directions. You know I’m sure that there’s a bunch of people that are listening. You know like. How does that look like you know like perhaps how you can structure things in a way that you know if people have like other things you know going on or take different directions. You know how you can go about things you know amicably and and everyone being happy.
Rob Biederman: Yeah, for sure look I think one of the most important things is how equity vests and you know when you decide to start a business with people you have no idea where people’s minds are going to be four years six years ten years later and of course you know standard equity vesting is kind of on the 4 year times scale. But I think we did a good job of setting up a team that had a balance of skill sets and a balance of kind of commitment and interest levels and I think each person kind of got off the train at the point that that made the most sense for them and you know all those. Transitions were incredibly amicable.
Alejandro Cremades: And also what about that that co Ceo structure you know, typically you know like you would want to have like 1 person taking the decisions. How does it work when you have to.
Rob Biederman: Yeah, of course yeah, there’s a lot of kind of bad pr out there about coceo structures I think Pat Pat and I were able to make it work for a handful of reasons I think our relationship was really informed by by deep trust and respect that really um. Kind of pervaded everything we did I also think we had phenomenal alignment in where we were trying to go and of course we had incredibly spirited conversations about the tactics and and what we might do in the short-term un route to achieving what we were looking for and but I don’t think we ever disagreed about where the ultimate ah where the where the ship was ultimately headed and. Think if anything our relationship has become even more rich now that we’re in this chairman and Ceo construct where obviously you know on a day-to-day basis. He’s about a hundred times more involved than I am but I think it’s nice as a board member who had had previously co-led the company. Probably makes it a little easier for me to share opinions and and um and kind of input and they’re backed by you know, 8 years of being a full-time employee at the company which is pretty special.
Alejandro Cremades: And what are what are those dynamics. Um Ceo chairman you know the board and and board member I mean how how how do you go about that relationship making it effectively because at the end of the day. The chairman is the one that.
Rob Biederman: Yeah, yeah.
Alejandro Cremades: Certain degree manages. You know the other board members and the Ceo you know is the one that is running the company and grabbing whatever um you know, strategies discussed at a board level and then you know executing with a management team. So how does that relationship you know work effectively. Yes.
Rob Biederman: Yeah I mean in some sense I say we almost have more of a kind of informal co-chairman relationship and I don’t necessarily see myself as any different from any of the other board members I think Pat Pat is fully capable of running the company on his own at this point and um, doing that both the strategy and kind of. Even 1 ne one layer above strategy sort of corporate strategy versus commercial strategy. Um, you know I think look we’ve we’ve always had an an unbelievably collegial group of board members at catalan and and now some of the board members. We picked up in 2013 2014 have become some of our closest friends. Um, and and obviously investors and in my firm and so you know yeah, it’s not the kind of board where we have votes like we don’t have contentious board meetings. We don’t have you know knee knee knocker votes where it’s 3 people want to do 1 thing and 2 want to do other I think I think we’re pretty. Pretty thoughtful about billing to consensus and alignment and at the other you know once you’ve been doing it for 10 years and in some cases with some of these folks. Um I think we all kind of know exactly what everybody else is thinking and so it’s it’s very much kind of the company and the board against the market rather than the company against the board or. Ceo against the chairman it’s very much kind of all rowing the boat in the same direction. Ah we raised just about one hundred and thirty million dollars
Alejandro Cremades: And how much how much have the company raised to date What and what was that the journey of going from one cycle to the next to the business.
Rob Biederman: Oh man I mean our first round we we basically almost couldn’t raise it. We got really lucky that we met a judge at Hbs who’d himself been a alumnus and started a company. He offered to invest in the company but he said that we had to get somebody else to invest. It couldn’t just be. Can just be him went to every accelerator incubator angel group and everybody turned us down for for a handful of reasons some of them were really good. Some I think were a little less thoughtful and where we ultimately landed was we sent Mark we applied to go in shark tank we got accepted. We unfortunately couldn’t make the audition because it conflicted with our first day of class at. Hbos second year and so we dropped out of the formal sh shark tank process but we sent Mark cuban an email directly and and he agreed to invest really quickly and that ah kind of catalyzed everything and then um in the fall of 14 we got inbound from Highland and from graylock. They wanted to invest as well and we didn’t we didn’t need the money at the time. But I think when we met Dan Nova and Highland and Bill Hallman from graylock. We felt like they were just the kind of Dna we wanted involved in the company and if we didn’t need the money and I think that was in some sense that was kind of the professionalizing moment in the fall of 14 early fifteen where we I think for the first time really had. Professional investors on board and that really um, really shifted just how we thought about everything we had you know rigorous board meetings and you know Shirley Graylock and Highlander you know two of the best firms out there.
Alejandro Cremades: So obviously running the business for about 7 years and change. You know as a co-ceo at what point you know, do you realize? a maybe there’s something else for me.
Rob Biederman: Yep.
Rob Biederman: Yeah, you know I always fancied myself a little more of an investor than an operator and I remember a really memorable conversation with Dan Nova right up right? as they were writing our series a investment check which was which was actually in January of 14 and. At that point I was still contracted to go back to Bain Capital and I said look you know it’s it’s very likely I actually do go back to main capital I loved it there and and I really want to go back and he said you know I bet I bet after running the company for three or four months you’ll realize that you’re not an investor and you’re actually a Ceo founder and and I think that that. For me in the moment was true I think by the end of the school year and in the spring of 14 I really did have that that belief and I think that that pervaded you know the 7 eight years the 8 years that I was Ceo I really felt that and I think as we got into kind of 19 and 20 and particularly the pandemic I started making more angel investments. And I realized how much fun I found it to be involved in a bunch of different businesses I think at this point Pat and to some extent I are really you know two miles deep and ten inches wide at catalan and what I loved about Bank Capital was being kind of one hundred feet deep and eight miles wide on a bunch of different industries and. You know having every day be very different because you might be talking to a billboard company or a heart health company and um, you know I approached the board in the summer really starting in kind of 20192020 about you know what? what might it look like if I started doing more investing.
Rob Biederman: Um, or what might it look like if I you know transitioned to something that looked like a chairman role in order to be able to invest and I think you know at first they were they were somewhat um, unreceptive. But I think over time they kind of realized that you know for a lot of what we were doing Pat was really you know managing things day-to-day. And there wasn’t a lot that I was doing as Ceo towards the end that I couldn’t do from a board member seat that I didn’t really need to be a full-time employee and it was actually kind of a magical process the way the fund came together where in some sense the fund was just as much created by 1 of our board members as by me and and. He he actually proposed it to me. We were having iced tea ah out on his patio in in August of 2020 and you know I said I think I might be be ready to kind of sort of thing about transitioning out of cattle in and he said what do you think you’re going to do I said I’ll go to traditional investment firm. Um, probably more venture than private equity. He said well what you know would you ever consider starting a firm with me and and that was that was that was a really exciting moment and because I didn’t surely with virtually no track record I didn’t have the confidence in myself to think that that was something I could do um so it was really special. Um.
Alejandro Cremades: So what happened next.
Rob Biederman: So then I started thinking a little more about, um, you know what I wanted to do and and how I went and phased the transition. Obviously you know we were kind of right in the middle of the pandemic there but but the company was doing really well. Um I think for so many of the companies that we were trying really hard to. Sell to they they found it really difficult to conceptualize how they would bring in consultants who would work along their full-time employees and when everybody was full-time in person I think that that was actually quite intimidating and scary and then obviously sort of unrelated to the future work in March of 2020 essentially every company went fully remote. And I think over the course of that year our customers realized how much easier it was to be able to bring in flexible flexible. You know talent flexible contractors and we started working way more collaboratively with them and so we had a really fantastic summer in in 2020 and and and revenue was. Was doing really nicely so I felt like at that point the company was in a really good spot and and you know Pat was in great shape and so I I sort of approached the board in September of twenty twenty about you know, beginning to think about what a transition timeline Mccaque could look like and and I proposed that I would you know sort of. My my last day as Ceo I but become executive chairman in the fall of twenty I think November and then become non-ex executivecutive chairman in February and really get into um ah, investing at that point and um, yeah, it was it. Ah.
Rob Biederman: Hey I just have to take care of 1 thing if we just pause for one second I just have a annoying logific perfect.
Alejandro Cremades: Yeah, but but but just just just mute yourself. Don’t don’t touch anything else.
Rob Biederman: Okay, I’m back. Yeah so.
Alejandro Cremades: So then how you so you you got started with investing and then and then what happened.
Rob Biederman: Yeah, so um, you know we we basically agreed ah you know I would I would transition to a non-exeive chairman role in February and at that that point I wanted to um, ah you know my intent was to take a couple months off um and so I went out west to to Jackson Hole and and. tried to become a ski bum for a little bit but the snow was really bad. Um, and so I found myself and I think this this was kind of an interesting reflection. You know, obviously when you when you have a full-time job. The idea of taking some time off and doing other stuff hiking playing golf seems really interesting and I remember every day. Because the snow was bad. It was really drawn to coming back inside and just working on the pitch deck and and I had this feeling like there were so many exciting deals happening and I was missing them and I could take this could take a couple weeks or months off but almost every day that I wasn’t raising the fund was going to make it make it more difficult to you know, be able to. Like to get those deals and and I you know at the time I was warehousing some deals you know out of my my personal balance sheet but obviously couldn’t write very large checks and so wasn’t necessarily credible when when facing founders are facing the market and so got together with a bunch of folks. Ah, principally I already knew or my anchor investor already knew and we raised 105,000,000? Um, pretty quickly in the spring of 2021 attribute that about 95% to his reputation with those folks and 5 % to kind of how strong the market was for venture at that point and and then.
Rob Beiderman: We kind of put together the mechanics. There’s actually a lot of so venture capital firm is not as easy as starting your company like if you want to if you want to start a company right? now you can you could have one by the end of the day but a venture capital firm because it’s essentially kind of a 10 year agreement and a 10 year contract there’s a lot of pieces that have to get into place and so we spent a lot of the spring and summer both. Doing the legal mechanics of getting the firm going and then also hiring and I remember people people told me you’re going to find it really easy to raise money and almost impossible to hire and I I said I think you have that the exact opposite way I think fundraising is going to be impossible and be very easy to put the team together and fundraising only took a couple months and the team took about 2 years to assemble. So.
Alejandro Cremades: Wow because typically typically for for a firm like this. Um, what kind of team members. Do you really do you really need.
Rob Beiderman: Um.
Rob Beiderman: Yeah, well you know, originally when we were thinking of a fund that was probably going to be more in the 25 to $50000000 range um you know it’s probably only be 1 or 2 folks plus me. But when we got to 1 oh 5 it felt like we actually really had to put together a you know a larger group.
Rob Beiderman: I Sorry my dog’s about to bark if I don’t give them water once a.
Rob Beiderman: He unfortunately he does not understand the sanctity of podcasts and yeah, so so you know once we once we realize that you know we’re gonna be investing one hundred and five million dollars the imperative to put together a team that really had the folks who had the ability to lead deals apart from me became.
Alejandro Cremades: No no worries. No.
Rob Beiderman: Became more relevant and started out interviewing a bunch of people that worked in venture and I found that they kind of sorted into 2 groups broadly some of them were really world class. Amazing people at great firms and I think when I pitched them on joining kind of a startup firm out of hol cloth I think that felt a little risky to them. And then ah the other group of people I thought were were talented in certain respects but given my background as an operator and having been a sort of private equity investor I didn’t feel as if we were going to collaborate all that well um, and so ultimately almost all of the folks I hired or all of them had not previously worked in venture. All of them had either been operators or or private equity investors at places like Carlyle and Kkr. Um, and so I think in in certain respects. we’ve we’ve kind of brought a lot of the fire and the energy that I had in the startup context then we kind of blended it with a lot of the intellectual rigor and the discipline that we um. That that I think we inherited from being capital.
Alejandro Cremades: And how much do you have? do you guys have right now under management in terms of assets. Okay.
Rob Beiderman: Yeah, so just still just one of 5 We’ve only raised the one fund and we’re approximately halfway deployed with it I think we’ll we’ll you know continue to deploy that fund for the rest of this year and maybe into early next.
Alejandro Cremades: And what’s the investment theses there.
Rob Beiderman: Um, so essentially we we believe that you can create a lot of value using you know, traditional analysis of industries and understanding where particularly for legacy industries where people are still using phone calls and pens and text messages to communicate facts or data or ideas. And we really in the in you know in the main back really early stage software companies typically at the pre-revenue stage I think we care a tremendous amount about the founder and we care a lot about the end market. We’re completely willing to negotiate on traction. So you know the last 4 companies we back weren’t even incorporated at the moment where we invested in them. And we found that you know the Vc market is so unbelievably competitive and every little slice of it. The one area that might be a little less competitive is pre-revenu um, because I think for for most Vc firms. They need to see $1000000 of revenue or $5000000 of revenue. And so the pre-seed market is has some vcs that play in it but substantially a lot of ah, really just a lot of angels and kind of micro funds. Um, and we like we like that competitive set I think part of the challenges is you get to checks that are 5 10 $ 20000000 you start to get into a pretty. Pretty aggressive competitive set now I think over time we’ll probably migrate there and we’ll start doing more aggressive. Follow-ons in our own companies rather than letting the interreens and and others of the world follow on. Um, but I think when you’re when you’re first time fun with with not very much kind of brand awareness.
Rob Beiderman: Series A market is just unbelievably competitive.
Alejandro Cremades: And what is that thing that you typically look for in founders that you back. So.
Rob Beiderman: Yeah, we we have quite ah we have quite a few factors. We look for I think a certainly kind of commercial intensity and and fire in the belly I think we want to we want to back people that are almost maniacal about solving their pain point for for the customer segment I think we really. Really favor backing people that we think have have pretty good business savvy and pretty good videos business intuition I think the reality is when you first back somebody for an idea the chance that they end up actually running at that idea in the end is is quite low. Um, and so it’s nice to know that if we back. This group of people to run after idea a it turns out that the market isn’t there for idea and they want to run at idea B We. We’d equally be happy to be in business with them to build idea B Um, you know I think we also look for people that we can collaborate well with it’s a difficult.
Rob Beiderman: There’s so much angst and uncertainty that goes through building a company particularly for the better part of a decade and I think one of the best things I took away from Catalan is having just phenomenally honest transparent candid supportive relationships with your board.
Alejandro Cremades: So then let’s say you were to go to sleep tonight Rob and you wake up in a world where the vision of asymmetric is fully realized what does that world look like.
Rob Beiderman: Um, um, certainly for us I think we’re we’re a firm that is way more supportive of our founders than most Vc firms are to be candid. Um I think the industry has has a reputation that’s probably more or less deserved. Luckily I wouldn’t say 1 time but sorry one second yeah.
Alejandro Cremades: A and or is.
Rob Beiderman: Retreat where intro ah look this peanut butter man won’ get the peanut butter look at this. But so exciting shit place shit shit good dog.
Alejandro Cremades: What dog is that.
Rob Beiderman: Not ah, he’s a golden doodle. He’s a wonderful dog. But if I spend 2 or 3 hours at a computer without giving attention then he needs ah needs to treat. Um, so yeah, if you know if I woke up in the vision of asymetrics fully realized I think that the industry has a.
Alejandro Cremades: That’s how amazing that’s amazing. Go.
Rob Beiderman: Reasonably well- deserveved reputation for Vc is practicing kind of helicopter board memberming where they disappear for eighty nine or ninety days and then show up for 1 or 2 and and try to kind of throw their weight around often with very little context and I think we were we were lucky not to have that at catalant where we had board members that were truly committed and spent more time with us. But I think. The the reality of the industry in the main is that that that’s probably more true than not that the vcs kind of parachute in and they say things that that are really important to the founders and the founders hear those things and and sometimes make business model pivots around it. 1 second more water but I’m trying to do this come on I love you. You know you being a p you were being a p right? This is your last interruption consider water and that’s the end of you interrupting the podcast with me. What you’re being annoying. Okay, hopefully that was a good sad I tried to cut that on a good sound bite there and mindful that he was about the bark. Um, yeah, and look I’d say look the most important thing to us is that we’re just the first call of our founders when things go well when things don’t go well, we just want them to reach out to us and.
Alejandro Cremades: Yeah, all right? So no, always you deal is that off.
Rob Beiderman: If we don’t have the information we can’t assist them I think your relationship you have with your Vc is not different from what you have with your lawyer or your doctor or you know many other trusted specialties and if you want to get the most out of them I think. Transparency and and kind of early warnings are are really important and I think our what we have to do in exchange. We want founders to be really transparent when they come to us and something’s gone badly. We can’t be mad. We can’t point fingers we have to be really solution oriented and we really have to say okay, this is the set of facts on the ground today and assuming they didn’t do anything unethical. Um, this is what we’re going to do to help you out of it I think sometimes founders are actually quite rational because they feel as if they have to be perfect to their vcs because in the reality a lot of times the next round is going to come from the existing vcs and so people don’t like being transparent with their vcs because they always want to seem like everything’s perfect and everything’s going well and I think one of the disciplines I kind of bring to the table as ah as a former founder is that I know everything is not always going well and I know there’s lots of there’s lots of issues and we sort of in a world where we know that everything isn’t going. Well every single day founder can be honest and transparent with us and we can workshop that with them. Or they cannot and we never hold it against them I think the happiest phone calls I get from founders are when they’re super transparent with us. But what’s going on and I almost don’t care if the substance ah is good or bad.
Alejandro Cremades: Now imagine I was to put you into a time machine and I bring you back in time perhaps to that moment that you were still you know at Harvard business school wondering you know like what the future you know hold and you had the opportunity of going back at at that moment and sitting your younger self down.
Rob Beiderman: Yeah, yeah.
Alejandro Cremades: And being able to give that younger Rob one piece of advice before starting a company. What would that be and why given what you know now.
Rob Beiderman: Um, that’s so interesting I guess I’d say um I guess I’d say you know I tended to get very um, sort of had believed that every single thing that occurred was ah was such a big deal and the reality is no no. Great development is quite as good as you think it is and no um and no bad development is as bad as you think it is and I think probably having had a slightly more long-term point of view would have made the experience a little more emotionally stable for myself. Um. You know it’s it’s difficult when you’re running a company because you’re so emotionally invested in it and it’s so much a part of you. It’s not a job. It has nothing to do with any traditional job you’ve ever had and you know I think I found as a as a founder. Um. I think thiss what this is what I try try to transmit to our founders is how can I help you mute some of the emotional cycles of this company and I think one way that vcs can do that and they sure he did that for me at Catallin was ah make clear that they’re on our team and they’re going to be helpful and they’re going to help figure things out. And and that was something really special that they did that they did for us.
Alejandro Cremades: I love that so Rob for the people that are listening that will love to reach out and hi what is the best way for them to to do so.
Rob Beiderman: Yeah, um, so they they can find me on Twitter it’s Beaterman Rob and then also um, you know through through the asymmettric website. Um, yeah, find it that again.
Alejandro Cremades: Ah, hold on. Let let let’s repeat that the yeah.
Rob Beiderman: Yeah I they they can find me on Twitter it’s it’s do I’m sorry usually it’s not like this is what up from in that and um, so if folks want to reach me always available on Twitter it’s Petererman Rob Beiderman: and then also just through the the asymmetric website.
Alejandro Cremades: And no worries. No worries.
Rob Beiderman: Um, every all the sort of contact information there. Ah ah absolutely my pleasure. Thanks ajandra.
Alejandro Cremades: Amazing! Well hey Rob thank you so much for being on the deal maker show today. It has been an honor to have you with us.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
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Jacob Krogsgaard continues to lead the way in renewable energy through hydrogen. A journey that has seen him start companies, fund and scale them, and take them public. His latest startup, Everfuel, raised funding from top-tier investors like European Commission, Swedish Energy Agency, Force Technology, and Danish Energy.
In this episode, you will learn:
- The pros and cons of taking your company public
- Jacob Krogsgaard’s top advice for starting a business
- How he thinks we are doing in the battle against climate change
Alejandro Cremades · EP 621 Jacob Krogsgaard On Building A $300M Company By Converting Wind Into FuelSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Jacob Krogsgaard:Founder of Everfuel A, Nel Hydrogen An, and Hs web development, Jacob Krogsgaard currently occupies the position of Chairman at Everfuel Retail Norway AS and Chief Executive Officer at Everfuel.
In the past, Mr. Krogsgaard held the position of Chief Executive Officer for Nel Hydrogen A. He received an undergraduate degree from the University of Aarhus.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmaker show. So we have today an exciting founder an exciting founder that is a repeated founder. We’re gonna be learning quite a bit you know when it comes to building scaling financing exiting also doing the integration doing the vesting the vesting and resting as some of you call it. But they without a doubt we’re gonna be learning quite a bit and I’m sure that many of you are gonna be inspired so without farther. Do let’s welcome our guest today Jacob Kroxard welcome to the show.
Jacob Krogsgaard: Thank you so much. Thank you for having me.
Alejandro Cremades: So originally born ah in the northwest part of Denmark how was life growing up there.
Jacob Krogsgaard: Ah, well it was ah very exciting if you want to look at all the wind turbines that once stoleed back then in the in the 80 s and 90 s but ah, but besides that ah it’s not like ah that the place in Denmark where where so much is happening and but ah, ah, but now less and and and interesting and and comfortable. Ah, ah, period and getting inspired to what eventually have become my ah my life work.
Alejandro Cremades: So at what point do you? really? you know believe that that’s the future because this this happened really early on for you. You know at what point were you inspired enough.
Jacob Krogsgaard: Yeah, yeah, an nexttomy. Yeah did so in and so I’m working within within Hydland business and producing hiding out of renewable power. So the inspiration for ah for kind of starting up with all of this were. Back in the mid 90 s when I was still a teenager. Ah we had a fall storm in the in the northwest part of Denmark and ah the electrical grid actually collapsed and that never happens at Denmark It’s a very robust and stable electrical grid and the reason for that the grid collapsed up there. Were because there were more renewable power produced from wind turbines that the electrical grid actually consumed because no one back then actually installed a turnoff button in winterines because they only imagined that you had a electrical grid. You just push power in all of a sudden they needed to do like a manual containment. Meaning that they literally called one farmer and said today turn off your wind turbine the another farmer the next day turn off your wind turbine because the storm might be coming and that was the manual attainment today that is ah fully automated and happening all around the world with renewable power so solar and wind. Being produced in in excess of what we need and thereby you start to have the issues and the more renewables we get implemented. We get into challenges of using that harvesting it efficiently and that’s what you can do by producing hylum and store it and use that for other purposes where you cannot electrify.
Alejandro Cremades: Beautiful, Beautiful now. Obviously you know like that has been the the path that you decided to follow I mean you essentially went to high school then you went to college now in college Very interesting you studied I mean typically you would have people studying.
Jacob Krogsgaard: That was my inspiration.
Alejandro Cremades: Computer engineering or electrical engineering or mechanical engineer or whatever engineering that is in your case you studied business development engineering That’s quite unique I got to tell you I haven’t seen this often. So what were you doing really in business development engineering.
Jacob Krogsgaard: Yeah, well, it’s ah it’s the only University in the world where you can get that degree. So yes, it’s ah it’s pretty unique. Ah the the idea of this of of this degree is basically to create entrepreneurs practical managers So people that has a broad. Engineering technical competence so not just in mechanical or electronic or structural but in in all ah fields of engineering not as deep but has a basic understanding then you add some legal some design some finance.
Jacob Krogsgaard: Put that in you stir around and eventually pops out an entrepreneur that were the idea when that indication was already can be founded I was on ah the third the third year of this education. So still a very young and new education and I found that very very inspiring. Because the the founders of that of that education were still around. They were still like with ah with full energy full throttle giving so much inspiration to to this Ah this class of students and there was a limited limited offtake offtake of ah. 40 I think per year that was it.
Alejandro Cremades: Wow I mean I knew it was unique. The moment I saw that they they agree but then so your case you eventually graduated and and you got together. You know with some of your classmates and you decided it was time. To start your own thing so walk us through what happened.
Jacob Krogsgaard: Yeah, well well actually we started way before we graduated so we graduated in 2006 but we we founded H Toaptic back in 2003 so I and and 3 of my fellow students. Ah, we’re working in in in different teams making different projects in the college where eventually we started with the hydrogen project ah me and one of my other friends from way back. We grew up close together in the northward part of Denmark and he always said we got to work and hide them. We got to work and hyd them. Told too much say it’s too early. We got ah we got to see who are the other students on this Ah ah in this course before we jump into bed with some and then ah on the third year that was the time. So then we started up a project. On hydrogen and I think tore six weeks after we found that age eluctic and the the purpose with age selecttic was basically to work with Hyden trying to and develop and hardware so we started making a few cell systems for small vehicles. You couldn’t electrify them making them as replacements for for for gasoline the diesel vehicles and realizing that we needed a ways to to fuel these vehicles. So then we developed heightened stations to fuel hy them on these types of vehicles.
Jacob Krogsgaard: So here. We’re talking about forknifts and les less golf vehicles and small city cleaning vehicles. So those types of vehicles that honestly today we see them mainly being electrified. We didn’t see that back then so we did well out both the fuel so systems. To integrate in these vehicles to make them run them hy them and we develop the hiding stations to fuel it and and that that went well we were we didn’t have any money so we we needed to to to sell products and before we developed them. We were successful in getting. R and d funding from ah so the the danish energy agency the the danish counterpart of a due and and that mixed with sales of products just roughly made it work so we made a balance every year while growing the organization and developing competencies.
Alejandro Cremades: Now now now it really incredible that because you founded a company about you know in the early two thousand s or around 2003 and obviously in Denmark you know now you know parole is developing you know farther you know when it comes to the startup world a venture world a venture money.
Jacob Krogsgaard: And and.
Jacob Krogsgaard: I.
Alejandro Cremades: Accessible to all those entrepreneurs but back then you know it was probably nonexistent. So was that what’s that a really big challenge for you guys.
Jacob Krogsgaard: Ah yes I also think it was and and necessary. So I think in in in those years in in the early years of age to logictic with our ambition of growing more rapidly than we had cash to do I think I made like. Maybe 15 different investor pictures. They yeah, they all liked me. They couldn’t understand the business case. So many of those of course have afterwards approached me and said god them and why didn’t we believe in you but but nevertheless that’s a different story. So we really really made a lot of these and pictures I think conclusion were that the market was simply too early. This was prior to venture so and we were probably looking at seed and the challenge were we we didn’t want to do such a dilution to get some seed capital. So very early 2008. We also had a professional board of directors that we invited to join ah h tolock. They also got a small I think that was an extremely wise decision because when you’re an entrepreneur and you are working on the day-to-day and you’re working on. Um, tactical and then strategic in the evening you very easily get blinded and having ah having a board of directors I think we are not even 10 people when they when they joined was really really key and that was ah the former Ceo and cto of westster’s wind power like the world’s largest wind turbine manufacture.
Jacob Krogsgaard: And the former minister of indian transportation in Denmark so actually got those 3 guys to join us and I think that made made difference. Yeah.
Alejandro Cremades: My Gun So It’s like the it’s like less like the Os course of wind power I mean it’s It’s Incredible. It’s incredible. The way that you structure that now I’m sure that that opened up the. The world of opportunities for you guys when he came to accessing money when he came to accessing talent. Would you say you know that day that you were able to really benefit from their network to plug it into the execution of the business.
Jacob Krogsgaard: And yeah, but nitro not too much all of those 3 guys were of course already pretty pretty clever back then so they didn’t want to expose themselves too much. They wanted to play me and my team good. So. It was behind the scene to make sure that we made the right decisions and of course they opened the necessary doors if they could ah so I think generally they didn’t and like like all good parents. Ah you don’t you don’t tell what to do? You’re trying to guide in the right direction. And if it’s really bad. You tell you tell when to dock because something is going to happen like.
Alejandro Cremades: Understood now for you guys you know like you were pushing this for about 13 years and then in 2016 you know something changed. You know, obviously you know someone came knocking in the door. Perhaps you know it was timing. You know what? what.
Jacob Krogsgaard: Um, yeah, are.
Alejandro Cremades: What happened at that point that they meette you guys at a board level decide that it made sense to go after an acquisition.
Jacob Krogsgaard: Yeah, or actually it was in in 2015 and the story starts a little bit before them so in in 2009 ah, the global car manufacturers more or less all of them and made and an announcement in September saying that by 2015 they would have. Ah, hundred thousands of fuel cell cars on the road ah in the in the markets globally where hiding station networks were built that was our queue so we sold off anything that were related to fuel cell systems and just focused on making hyring stations. We developed a new heightden station technology.
Jacob Krogsgaard: We sold that to customers here in the nordics and nordic and the middle part of Europe and developed a new generation of home stations. Ah realized that we needed to be able to grow rapidly so we made the blueprints of a big factory. That we needed to do in order to be able to supply all of those stations that would be needed in 2015 and um and the years to come so that we prepared and we were ready and in 2015 ah, we we were acquired by no.
Jacob Krogsgaard: And they were a enowwetian electronizer manufacturer that basically were wall listed not too long before them I think half a year before them and they on the journey to develop what they call the world’s largest hiding company and they needed to. Ah, do m andmas to increase the activities of ah of not and that made sense. Bos they gave us ah a good offer we needed both a scene from a a founder and seatholer point of view that was attractive. Secondly they brought additional cash to invest in the factory that we needed. In order to continue to grow our business so that makes sense and I think we executed the the diligence and the finishive documents within six weeks
Alejandro Cremades: Wow I mean that’s pretty fast and in this case, it was about thirty million bucks so $30000000 that they ended up being the um, the transaction value of this and there was like a. Ah, structure there where you guys did you know a blend of stock and cash. So how was that blend and and how did you guys go about making sure that that was you know setting place you know correctly.
Jacob Krogsgaard: And well of course we had all the necessary ah advice and support on our side but the structure was one third in ca and 2 third and in si and no so basically that was as a c swap and I think that was a. A brilliant move both by the the board of of nell back then and by ourselves as well because that game was as ah as founders of a telelotic. Ah both a little cash to ah to make the the families back home ah less concerned. But at the same time a high level of motivation to keep going because I have actually seen a few occasions not trying to mention any specifically but where founders are bought out and then they have ah they have an earnout and that said see you on Bahamas.
Alejandro Cremades: Yeah, yeah, hey not nothing, not nothing bad with being in Bahamas but they totally I totally get what you’re saying because I mean in this case, you guys did stay for quite a bit longer than you know, typically those integrations they would be about a year or 2
Jacob Krogsgaard: And then very quickly. The organization falls about 2 So.
Jacob Krogsgaard: No.
Alejandro Cremades: And in this case, you stayed for longer, you stayed for close to 4 years now you know, go ahead.
Jacob Krogsgaard: Um, yeah, is exactly nice I stayed 4 years but both because I had 2 but thing actually equal important because I enjoyed it I yeah. I grew the the organization substantially together with ah with the management of ah of Num helping ah help help set up subsidiaries in Korea and California and by the end of that period when I exited. We had a a full autobook with more than one year of ah auto backlog and were the largest heightened station supply in the world.
Alejandro Cremades: I mean I feel that was more than okay now given that that was more than okay and now you know you your family. You know everyone was said you know how would I say this financial freedom. You know why going at it again.
Jacob Krogsgaard: Ah, think that was okay.
Jacob Krogsgaard: You know that’s ah and that’s a question I get a lot and the the people that know me would also know that ah using the parallel to bahamass again I would definitely love that for three or four weeks but that’s it. Ah. Then I wouldn’t be able to just do nothing I was not done honestly speaking I felt like I was not done proving ah that a heightened business would be successful because back then and now we were still investing meaning that we invested more that we earned.
Jacob Krogsgaard: And I fundamentally believe that we’re still in early days in hylum and ah, we’re not there where ah cash is just generated like crazy and I believe that ah and seeing that path to success actually also is an obligation to prove it. Ah, true. Prove it to myself and prove it to shareholders. But ah, we also have a climate crisis where we need solutions and showing that we can do that in Neighbourfield where we in in in nefield the company I’m Ceo of today where we are. And the own and operator of the full hyd and value chain where we’ are developing a large-scale Hyden products ah with hydroland production from renewval power hiding distribution and hiding dispensing into fuel cell vehicles and selling or shortly will be selling hiding molecules to industrial customers. So setting up setting up such a business ah requires insight and talent and I think that’s what what we brought when we founded able fuel in in 2019.
Alejandro Cremades: So you found that they were few you know, obviously in this same career path that you embarked yourself. You know when you were a kid you know pretty much you know which is something that really you really truly believed in I Guess for the people that are listening I mean you were you were touching there on the.
Jacob Krogsgaard: So.
Alejandro Cremades: On the model and and what you guys are up to but how do you guys make money. Okay.
Jacob Krogsgaard: Ah, well today we are. We’re burning more than we earn so when we are earning money we earn money by ah, producing Hyland so this is true electroisos a a machine that maybe some of you remember from the physics class. Ah, you have water like you’re drinking now or you put in electrodes and up pops hydro than an odum the hydrogen we we store that and then that hydrogen has a venue. The hydrogen can be used in industrial processes in refineries. It can be used in industrial processes to replace natural gas. So right now that’s pretty hard, especially here in here in Europe with the situation ukraine and it’s also and it’s also and ah used for few for the heavy duty and intensive vehicle by taxis and trucks. So. We are earning money by by selling those ah by selling hydgen as a few and the more we sell well the more we earn and then of course there is ah a cross point where that makes a lot of sense.
Alejandro Cremades: Now with you guys you know in this case, it was a little bit different than when you started h 2 logic your previous company because your previous company. You did it in the early 2000 with ever fuel you got going in 2019
Jacob Krogsgaard: And.
Alejandro Cremades: So I’m sure that the way that you were able to access talent the way that you were able to access capital. It had changed quite a little bit So did you see it a little bit less challenging on those two fronts.
Jacob Krogsgaard: Ah, yes, and yes, ah second time is is ah our easy is a wrong word and my fellow ever fuelers will kill me if I sell so but it’s definitely easier so we also went from from from 0 to. Where we roughly 90 employees in three and a half year ah and people employed in in 5 different countries we have um, we have people from 11 different nationalities that have joined us people from as far as away as New Zealand moved here to workforce. So our our head office. We call this the ever fuel farm. It’s ah it’s an old farm just south of ah of handing in Denmark in a beautiful, beautiful landscape scic site where we renovated in the entire place we wanted it to be and. A very cool story when when customers and guests everybody withs us and we want it to be a location where you have and you have time and you have space for creativity. Basically. For what we do here. That’s to a great extent sales and business development and and developing hide and projects we need and the best skilled people and we need a very good internet connection and then that’s it so we might as well do that at a scenic location instead instead of just doing it in a.
Jacob Krogsgaard: And a glass and concrete building somewhere downtown of big city.
Alejandro Cremades: Now for you guys. You’ve raised about a 100,000,000 a little bit over a 100000000 the company. You took the company public. So how is it um to really now I mean the experience of taking a company public and really dealing with the upswings of. Of the market because I mean in covid the company was valued at a billion now. The company is valued at the 290,000,000 or so so it just goes ups and down. So how do you ride that roller coaster.
Jacob Krogsgaard: And while you well when no when we were when we were acquired by by no, we already had the experience and our were we close to the processes of being listed so we were not ah we not unexperienced there. Um. And I actually think being ah being listed have a lot of upsides of course on downside that you need to be public. You need to tell everything you do so working in stealth mode doesn’t work and and however and creating the necessary speed momentum and also the required capital. To to execute on our ambitions. The only way to do that is by being listed and of course myself still being the majority shareholder and it’s also important that we are that we are listed in a way where it’s but’s possible for us to go and ask the yeah hold those for additional capital. When we have next and further projects that we need to invest so from from day one when we listed we basically ah put out our our business buy and that within 10 years that was now until twenty third we will wage one billion Euro in revenue and in order to get there. We need to invest one point five billion of that three hundred million Eu will come as equity and the remaining part will come as nonquity being ah public funds hopefully as many as possible and then back bank loan in order to do that. You need your projects to be bankable and that’s a complexity by its own. But.
Jacob Krogsgaard: Setting out that that ambition and that guiding star and and basically walking through the ah the slogan we have behind yesterday’s wind is today’s fuel telling that story again and again and again has really brought a lot of shareholders to join us from ah more or less all over the planet. Costly mainly focused in Northern Europe but also from ah from us.
Alejandro Cremades: And you know one thing that is very interesting too. Here is timing because with your last company you were ahead of the market. Now you’re literally at the right time in History. There sense there. There seems to be like more consciousness around climate change and and around you know, like what we could do to. To Really you know contribute and help out you know in that regard. Would you say that that has also helped you guys and and also helped you on the on that strategy of being a publicly listed company. Okay.
Jacob Krogsgaard: Um, and yeah, yes I would say I have you I have been working now 20 years within heidel I used the first eighteen years to tell about hyen and it’s the last two years that people actually started to listen.
Jacob Krogsgaard: Ah, where all of the sudden ah people it’s it’s like there. There became a movement of realization. Okay, we cannot just make the world green by solar and wind alone. We have ah the heart to abate and sectors. We have a challenge in transport. And we have a great challenge if we need electricity at the night time if the wind is not blowing which actually happens quite a lot so we need ways to balance that and producing hydroland from that surplus renewable is just and the logical on the way. Then the the people that disagree will say well, it’s not better. It’s it’s not as efficient as just taking electricity sorry electricity and into a battery but if we’re not just using the battery to to store electricity on board and a vehicle. But we want to use batteries to store electricity to balance an entire electrical grid electrical system. We are absolutely out of ah of the materials and the metals to do to make those batteries in a very short time. So there’s no way around and all of the sudden. And all no way around hydrogen and all of a sudden like two years ago and there became like and and a general and acceptance. Okay, that’s the way to go power to x the theme power to x all of the start and all of the sudden started to make sense power to whatever x the x being hide them or.
Jacob Krogsgaard: Next coming after Hydrogen being Ammonia or methanol or some other and some other fuel that you can then store and use at another point in time we don’t have your renewal.
Alejandro Cremades: Now imagine you were to go to sleep tonight Jacob and you wake up in a world where the vision of ever fuel is fully realized what does that world look like.
Jacob Krogsgaard: Oh well that’s the good thing about the visum. It’s basically impossible the vision of ever offume and is basically a and a a green planet without without any pollution and it’s a green planet running. And sustainably meaning that it’s sustainable from a renewable perspective but it’s also sustainable from an economic perspective and when you when you start to look at that on a very very remarkable and global perspective hydrogen becomes the energy vector. That you can actually use to transport ah energies and balance entities across continents that takes quite a few ah decades before we’re there and but and 20502060 ah, twenty fifty or fifty five is like the un ambition and oh my god we need to be globally called and exit to really achieve that and and we’ll work our asrself to get that. But let’s see. But anyway when when when that is completed I’m also at retirement age. So I think that is ah.
Alejandro Cremades: And obviously there’s a lot of talk now about what’s going on with the climate change and and where the world The planet is heading. Do you think we have a shot that they saving it or not.
Jacob Krogsgaard: That’s the vision.
Jacob Krogsgaard: Of course as ah and it’s my it’s my fundamental personal belief that we will not save the planet by by blocking things. We’re not saving it by. Ah. And making it illegal to use airplanes or whatever we will continue to do evolution but we will do that evolution in a sustainable way I think we will unfortunately and have further challenges with the climate changes than than what we see today and. So with my rest being a resident up here in op in Denmark where ah half of the year is pretty cold I guess it’s not that bad but on a global perspective. It’s really an issue and like and yeah, it’s it’s really It’s really an issue and it’s something and. That bothers me and actually me especially my kids my 2 daughters they make they truly. Ah, they don’t want to drive anything else, but my fuel cell car or my wife’s battery electric car.
Alejandro Cremades: Incredible now Imagine Jacob I put you into a time machine and I bring you back in time I bring you back in time you know, perhaps when you were you know, still a student of the business development engineering. You know they agree and.
Jacob Krogsgaard: Um.
Alejandro Cremades: Let’s say you had the chance of sitting your younger self down for a chat and you were able to give that younger Jacob one piece of advice before launching a business. What would that be and why given why you know now.
Jacob Krogsgaard: Um, that’s interesting and well and from ah from from two thousand three until now has definitely not just been strategy on the straight line. That has been all over the place back. Forth up down and then eventually to where we are today. So what would my advice be and stand up for what you believe in. So even if it has been and extremely. Frustrating tiresome like challenging in the early days we are a few times this close to being out of business and that also eventually gives you some gray hair and some robustness. Ah, and.
Jacob Krogsgaard: Believe enough in yourself and your ability and that the the journey you are on and it’s both the right for the planet and eventually a very good business and then not tell anything about the challenges.
Alejandro Cremades: I Love it. So.
Jacob Krogsgaard: That I will see.
Alejandro Cremades: Amazing now Jacob for the people that are listening that will love to reach out and say hi. What is the best way for them to do so yeah.
Jacob Krogsgaard: And while I am ah I’m on both a Twitter and I think Linkedin so that I’m I’m frequently getting a lot of ah, a lot of highs. So ah, feel free to ah to raise a hand ba I will do the best I can to ah to say hi by again.
Alejandro Cremades: Amazing! Well hey Jacob thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Jacob Krogsgaard: Um, thank you so much I and.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Jacob Krogsgaard On Building A $300 Million Company By Converting Wind Into Fuel To Decarbonize The World appeared first on Alejandro Cremades.
With a presence on every continent, Jussi Salovaara’s firm already has $3 billion in assets under management, across 15 early-stage startup funds. So far they have invested in over 750 companies and have 25 locations around the world.
In this episode, you will learn:
- Creating a new world with far more innovation and entrepreneurs
- The power of going fast
- Hitting product market fit quickly
- Why having a physical presence is still vital in our connected world
- Startup fundraising
Alejandro Cremades · EP 620 Jussi Salovaara On Creating The World’s Largest Startup Investment PlatformSUBSCRIBE ON:
iTunesGoogle PlayStitcherTuneInRSSSoundCloudSpotify For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
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Your email address is 100% safe from spam!About Jussi Salovaara:As co-founder and Managing Partner Asia for Antler, Jussi works with a global team dedicated to developing the next generation of world-changing companies and creating a global pipeline for top talents to pursue a career in entrepreneurship and innovation.
Before joining the startup ecosystem, Jussi headed the Global Services Commercial Management sector of Nokia.
He works closely with the founders to coach them and helps connect them with the right advisors to build their businesses.
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- Fundraising Process : get guidance from A to Z.
- Materials : our team creates epic pitch decks and financial models
- Investor Access : connect with the right investors for your business and close them
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Connect with Jussi Salovaara:* Crunchbase * LinkedIn * TheOrg * PitchBook
Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today. We have someone that has the meeta stats for investing and really backing you know founders that are going from 0 to one. So I think that you know we’re going to be very much enjoying his journey. You know his career. And also what he’s doing right now with startups which I think is remarkable so without further ado. Let’s welcome our guest today you see salloara welcome to the show.
Jussi Salovaara: Thanks Ajandra Thanks for having me. It’s a pleasure to be here.
Alejandro Cremades: So originally born in Finland you know they are and raised in a mid-sized town. So how was life growing up, give us a little of a walk through memory lane.
Jussi Salovaara: Ah, so yeah, I’m from hoovingcalf inland shout out I’m pretty sure. No one from hoka is going to be listening to this but you know imagine an american suburb and then like throwing some Soviet Union vibes um that’s that’s pretty much what what my life growing up but was like I’m born early eighty s so I’m a 90 s child in that sense. Um, and you know everything was gray but except that we played a lot of football like oh soccer for us folks. But.
Alejandro Cremades: Hey I do I do I do understand you know completely that and 1 thing that I that I didn’t really get was coming here to the us and people call football grabbing the ball with their hands instead of you know, kicking with the feet right? That’s why it’s called football. But anyways, that’s a different conversation I guess.
Jussi Salovaara: I Guess your audience is from everywhere.
Jussi Salovaara: 2 Yep.
Alejandro Cremades: You know here you know one thing that happened to you is that you spend quite a bit of time traveling you were singing So how did that come about.
Jussi Salovaara: That’s right? So um I was always an avid singer from an early age and um I ended up singing in a choir in Helsinki a boys choir if you believe it then we ended up traveling a lot over over you know. All over Europe ah europe I went to us several times where what was fascinating about this was that we would always of course tour because you’re going from town to town and then we’d also live at host families homes. So I remember at. Age 11 being from a small town in Finland you know being in the us at Halloween doing trick or treat was an amazing experience for for me same at at age 12 I was in Japan and living at a japanese family’s home where they spoke. Basically know english obviously we didn’t speak japanese so we’re just trying to figure each other out but by you know, gestures, etc. And um, you end up really immersing yourself in other people’s cultures. So I think what that really taught me was this open-mindedness.
Jussi Salovaara: Regarding other cultures and also very much an international flavor.
Alejandro Cremades: I mean you’d be moving quite a bit throughout your entire life. I mean you know you studied abroad now you’re living in Singapore so no doubt that you’re a citizen of the world now in your case you moved quite early. You know at 16 to helsinki and 1 thing that. That I find very interesting as part of your journey is that you’ve you’ve got it into card games. You know I think that you like that strategy you know that strategy aspect whether it’s poker or or whatever card games that you could get ah your hands on. So so where did you get that appetite for strategy.
Jussi Salovaara: Excellent question I actually think I ended up getting it from those games so you know I played magic the gathering this trading card game growing up and. It started as a as a thing where we didn’t prep much and we just put the cards together put put our deck together from the cards we have and and then at some point you realize like you’re just losing all the time and then that leads to the conclusion hey I need a strategy and then after that you start kind of prepping. Start practicing and when you when I at a young age so that leading to results I think that’s actually created this mindset that’s helped me throughout my professional career as Well. So strategy when you then combine it with winning tactics. Um, it’s fantastic. Recipe.
Alejandro Cremades: So then you ended up going to business school. Um, you know you went there to helsinki business school. Ah you did a nice semester there in London as part of that jumping around the world that is something that you know is say is a good theme here. You know in your in your background.
Jussi Salovaara: Um, what.
Alejandro Cremades: And then from there you know you venture into the corporate world and you did you know different roles I mean you’ve done investment banking. You’ve done consulting. You’ve done pension funds. You know more perhaps on the investment you know side of things and then you know you took a different role which was. Techy side of things you know which is Nokia which was the most immediate step to really venture in the world of startups I guess you know out of those experiences. You know what can you say that you learn because I find that you have something interesting here as part of your background and that is I would say institutional. Ah.
Jussi Salovaara: And.
Alejandro Cremades: Knowledge transfer to certain degree where you have like you’ve been able to jump through different industries and then how you apply that knowledge to the next industry that you’re going to be involved with but I guess why don’t we start with on the investment side with pension funds. What did you learn.
Jussi Salovaara: Yeah, um, that was end of the day. My like first foray into the world of business. Um I work mainly around public markets. Um, you know preparing investments and and then you know executing trades with. I think that was sort of a natural continuum of the or continuation of of what I mentioned earlier about the card games etc. So you basically you know formulate your strategy which is like the investment you’re going to be making and then you you know after that. Ah, combined with tactics to have solid sort of trades around that investment per se so so it really um, prepared me or or helped me learn about preparation analyzing companies and that has been very helpful throughout. Because even if we’re talking about an early-stage company. You can still analyze kind of the frames and what you need to have in place. Um, even though you know when you’re doing a pre-se deal. You’re not going to have anything in place right now as such, but you know you you can analyze what needs to be in place on the line. And then that analytical framework has been quite helpful because quite often I I also see you when I talk to other investors. There’s unfortunately a bit of finger in the air out there when it comes to early stage venture investing and I think this backbone of having a slightly more analytical.
Jussi Salovaara: Frame frame of mind has helped me.
Alejandro Cremades: And I’m sure that that’s also you know a pattern that you experience while you were Morgan Stanley I mean a little bit different than perhaps mckinsey. But I find that mckinsey you know, perhaps you know for you was interesting because you had that strategy thing going you ah you were into strategy and we talked about that earlier. Ah, but I wonder like how did you blend the now strategy coming with problem solving with the execution side which is something that you know the consulting experience gives you of being able to grab 1 big problem and breaking it down into small problems and then how you tackle them.
Jussi Salovaara: Yeah, so ah, quickly touching on Morgan Stanley before before we go to Mckinsey what that really taught me is is to work hard. So ah I remember my one one hundred and ten hour works we worked weeks at canary wharf in London and. And that’s one lesson you don’t easily forget? Um, but um, at at Mckinsey it was really about ah slicing a problem into manageable bite size solutions that you solve in different ways. And this goes both for again like analytical or conceptual problem solving as well as execution. So I think that you know going from strategy to execution. It’s really this step-by-step approach that you know you saw this or you see these? um. Achievement in these small steps and then basically you do enough of the small steps you you see big results. So and and this is again something that you you see a lot in startups too like you know, ah just solving problems every day. Um, step by step and getting perhaps more work done than competition is going to be a recipe for success.
Alejandro Cremades: Now in this case, you know what happened is that then you know one thing let to the next and you are in Helsinki you are working at Nokia and really nokiia is where you finally got bored of the corporate world.
Jussi Salovaara: Yeah, well so I had started looking at early stage tech companies as investment opportunities and at the same time when I reflected back on my day job I Realized that too much of it.
Alejandro Cremades: What happened there.
Jussi Salovaara: Is political games which I was extremely good at and I realized I don’t want to be good at that I’m not a politician I don’t especially want to be a corporate politician um, while at the same time I was looking at these tech startups who um, you know, grow and change the world. I started making some investments and then there was this massive moment of serendipity for me where my old colleague from mckinsday’s Magnus Greenalland who had left Mckinsey 2013 and moved to Singapore to build. Zalora.com which is the region’s largest fashion ecommerce company him and I got talking and he asked me if I wanted to join him to to build what’s now Antler um, basically building a new kind of platform to help founders and. Building a global venture firm. So I basically you know took a few seconds to make the emotional decision. Um, you know a few hours to make the rational decision and then it took a few days to convince my wife but um, so that that was kind of my my.
Alejandro Cremades: But I mean that’s not ah, that’s not a small thing because I mean you guys literally packed the backs and and went to Singapore so how do you get to that you know infinite clarity or high conviction that this was worth it to not only leave your.
Jussi Salovaara: Um.
Jussi Salovaara: Um, yeah.
Alejandro Cremades: Professional career behind. You know the corporate world that you had been you know part of for you know, close to 15 years but then also to move all your life in everything you know to Singapore that’s a big deal.
Jussi Salovaara: Yeah I mean it is. You’re absolutely right? Um I think it was a reflection of several different things. 1 is um I had been thinking a lot about what to do in a way that is more impactful on the world. What can I do to have some kind of legacy instead of just doing things that don’t add any value to anyone. Um, ah because also I felt like I’m not even adding shareholder value because you know these corporates are so huge. Um and then um. I was also excited about Southeast Asia as a region. Um I first visited Singapore in 2005 and I’d been very much intrigued ever since? Um, and then the vision that magnus had at that point which was. You know has ah evolved quite a bit since then was very compelling to me and it still is and we’ve evolved it since but um, it was a combination of in a way. Very attractive pool factor factors and a. An inner push factor that I had at that point in time. So I haven’t regretted it for a single second. So I guess you can say there there had been like this inner strategy process brewing in my in my head for for a time and then and this is the thing.
Jussi Salovaara: This is the thing that you by the way always need to have you need to be prepared in my opinion to make fast moves but you can only do it if the strategy in the background is is in order right.
Alejandro Cremades: So for the people that are listening to get it. What is andler.
Jussi Salovaara: Antler is the world’s largest early stage investment platform when it comes to geographical presence. We have 25 locations around the world with. Teams on the ground boots on the ground um in each of these locations. We make presed investments. Um both into existing companies as well as um, doing something that almost no one else does where we find individuals. Um, at the literally the start of their journey so you know often people say they’re you know day zero. We we you know we back you from day one or whatever but it’s not really not day one. It’s typically something where you’ve been around for six months or year and a half for us. It’s literally day zero or even before that typically so you haven’t even incorporated a company. You might not even have an idea what we do is we put together a program where we find. Talented entrepreneurs or aspiring entrepreneurs. These people typically have around 10 years of work experience. But the range is huge. We backed students and we backed people with 35 years of experience. Um, and we help people with finding a co-founder.
Jussi Salovaara: Finding the right business model for what you’re building coaching we invest prec to series c right now and then we help help them with our global advisory board where we have around 700 advisors right now. So. We’re an investment firm first and foremost. But we um make our investment decisions slightly differently and we back founders from from literally day zero.
Alejandro Cremades: How many fonts and assets under management. Do you guys have.
Jussi Salovaara: We have ah right now around 700,000,000 us. Ah u m and 15 different early stage funds. But we’re growing rapidly. Um. So 25 location is what we have right now every continent discovered. Um, we’re in the us in 3 locations we launched Brazil last year and then you go east from there. We have several locations in Europe East africa out of Kenya. And Ethiopia we have aac is covered from several different locations. We started out here in Singapore and this is our headquarters but we are a global firm as of no.
Alejandro Cremades: And why why do you want that physical presence especially in the world that we’re living in living today where we have that detail experience to what’s the purpose.
Jussi Salovaara: So um, a lot of what to do is tied to a physical setup where we you know help founders work with each other and that is something we’ve found that you cannot replicate only with a virtual. Ah, presence can’t do only remotely we we actually saw that through covid. Um, so there’s tradeoffs like there’s positive things that come with you know, virtual remote etc. But then there’s also some costs attached so like I always think about like if I had to. Find a co-founder for myself and start building something with someone. How would I personally build confidence in that person as a co-founder and there’s many different things. There’s you know, having aligned values. There’s working together for a while. There’s getting to know each other socially for me, there’s also getting drunk together like you know there’s different things like this. There’s Nimi Toba much I can do like ah fully remotely and ah because of this um we believe in having deep impact on the ecosystems we operate in.
Alejandro Cremades: Yeah I hear you.
Jussi Salovaara: And ah, we do this by having strong local setups full teams and and having our programs physically set up on the ground. So. It’s not so much a question of it was never a question for us like do we have something on the ground or not. And know other people who run let’s say accelerators or so run fully remote setups y combinator comes to mount mind. They’ve invested a lot all over the world out of Sf and you know great. It’s worked for them. We have a different view of the world and I think.
Alejandro Cremades: Yeah, yeah.
Jussi Salovaara: Want to have you know larger impact in the ecosystem if you work with.
Alejandro Cremades: And how many how many investments have you guys done since 2017 that you got started here. Okay.
Jussi Salovaara: I’m around 750 now globally majority after so if you think about that structure. It’s of course, um the base is quite young so majority the last two years
Alejandro Cremades: Okay, now you were talking about. Um you know the the co-founder co-founder relationships like the importance of being there. The importance of getting drunk together. So what does you know magic because I mean you’ve seen a lot of teams you’ve seen what the good the bad on the ugly.
Jussi Salovaara: Um.
Alejandro Cremades: When it comes to co-founders too. Tell us about magical co-founder dynamics you know when that match is just made in heaven kind of thing.
Jussi Salovaara: Excellent question I mean for me I have this cofound one of my co-founders is a guy called Bayard and I’m not claiming that we’re magical like end to end but there’s something magical which is that we have. We push each other like crazy. We challenge each other like crazy. We fight like crazy but we love each other and it’s it’s like very like there’s never even been a chink of the armor from all of this. So. There’s something where like you’re. So much in the same boat together fighting towards the same goal and you know you realize it’s never anything personal but and both are so passionate about the same goal that it leads to this like no barrier thing and everything is for the. You know benefit of the company. Not every relationship can be like that like for example for me and Magnus is different um in different ways powerful um, but like there, there’s really something about shared values um shared goal. And um, and and you know most of the founder breakups I see are somehow related to not having an aligned view of the target vision of the company and then you end up like you know.
Jussi Salovaara: Fighting about the small stuff and the breakup can seemingly be about oh misalignment on X Y Z but it’s truly about the values behind. Um you need to be different and you need to be able to challenge each other that is for me personally that the most important. Factors and you know if you’re if if there is a power imbalance in a founding team. That’s also a red flag for me like if someone there’s a big equity mismatch or or like you know someone has more equity or someone’s the de facto leader like you need to have.
Alejandro Cremades: And what about the.
Jussi Salovaara: Someone needs to be the Ceo but like you need to be balanced in and in a co-funder relationship. Otherwise 1 person is the founder and the others are in place.
Alejandro Cremades: And what about balancing that in long term and short term vision.
Jussi Salovaara: Yeah, excellent question I mean this comes goes back to what we discussed about? um you know slicing things into smaller manageable pieces and you know as long as your long-term objective is the same. You can kind of you can still typically balance the short term whereas if your short term goals are you know aligned but your long-term goals are not then that’s obviously a much bigger issue So I Do think that. The long term is what matters and the rest is execution almost.
Alejandro Cremades: You’re not kidding now obviously crazy environment that we are experiencing you know crazy macro you know hurdles. Um, you know landscape. Obviously you know the fundraising you know a lot of people that are listening now you know are are thinking hey you know what’s going On. How should I approach this Ah you’re seeing a lot.. There’s a lot of companies that you guys have in your ecosystem. What are your?? What’s your take on on the current you know landscape and then also how should people approach it. From a fund racing perspective.
Jussi Salovaara: Yeah, no excellent question I think this is going to be top of mind for a lot of founders. Especially um, you know and everyone needs to have a solid runway. Fundraising is not easy right now so you know also encourage everyone to think about whether or not they have unnecessary cost in the budget just today I talked to someone who you know a founder who had started from a very unhealthy starting point of. You know three four months of runway and now he was at you know six seven months runway not good at all. But I mean if you can double your runway with not so drastic actions like you’re not you’re not firing half the team. Um, that’s quite telling. So so you know there’s. Often a bit too much excess. You know in companies at times. But um I mean you need to um, build relationships in this ecosystem for the long term and the and the short term. I think I would encourage all founders to think about future raises quite early, get to know prospective investors years in advance because this is a human business end of the day and it helps when you build those connections early.
Jussi Salovaara: In the short term. Um, you know you probably might not have that luxury right Now. It’s really all about finding different sources of capital hanging in there. Um, and this this is all assuming your business is is. Working Well by the way. So if your business is not working Well this is a time where you get get hit even harder. Um, so I think or let me take a step back there like if your business is soaring Fantastic Rocket Chip. You’ll get funded. So.
Alejandro Cremades: Now.
Jussi Salovaara: This is not the audience for for this right? Then if your business is you know suffering big time. Maybe you shouldn’t be able to raise so like that it if that sounds rough then you know it is what it is.
Alejandro Cremades: So so in that case to be you you It is a fact.
Jussi Salovaara: But then there’s this the group in the middle this is kind of doing well but you know, um, perhaps more difficult than before defined sources of capital or you know doing okay and but so so there’s this kind of group of companies that are they’re doing quite well but not like. Fantastic! Fantastic. You’re not looking at 40% month -to-month growth or anything crazy like that. But you know, maybe you’re slugging along. You’re growing like 7 % the month and you know you feel like you’re doing well but people are not getting excited. So. I think here you just need to have a very systematic approach at identifying different investors hustling like crazy to get in front of them. Um, and sometimes this means you you you you can’t always reach out to them directly so you know reach out like. Get to know someone who knows them as the as the second tier option in a way these days there. A lot of these softwares that help with warm introductions like someone like someone in your network knows someone in your network knows someone in someone else’s network and then suddenly there’s like a so a match can that can happen. So so 1 thing is is having kind of great. Great identification of investors then hustling to get in front of them and then when you get in front of them. There’s like this you need to have a compelling package around the business which which.
Jussi Salovaara: Um, you know, hopefully almost everyone these days knows how to do. There’s a lot of tutorials in this stuff. Um, and or you can also work with anler because you know you know you can have a great partner like us and then it’s ah then it’s much easier. But what’s quite interesting is like for me fundraising is not a complicated topic but also it’s the one that founders most want to talk about like when we when we poll our um founder portfolio and portfolio companies the number one topic that they ah.
Alejandro Cremades: So what.
Jussi Salovaara: Value is fundraising.
Alejandro Cremades: And what about that rocket ship growth. Um that you were talking to you know, which obviously you’re going to have no problem raising money. Let’s talk. Let’s talk about 2 points there that they that you talk um and that I’m sure that you coach your companies. You know a lot on 1 is. Achieving product market fit you know how do you get to product market fit and you get to product market fit fast and what does that look like.
Jussi Salovaara: Um, Well how to get there is is not easy. Obviously so you know and it depends on what type of business you’re running so you need to have um somehow a vision around your product. And then you just go into heavy heavy duration mode. Try different things try different variants and hopefully you have enough time to run enough tests that at some point something starts sticking what it looks like is like you know where you feel like everything’s breaking. Everything’s uncomfortable. Um, but like you know you’re constantly shipping Product. You’re constantly growing fast and you’re not. You know you’re barely hanging in there to deliver to the customers that you kind of sell to and um.
Jussi Salovaara: And it’s a fantastic situation to be in. But I think every founder I’ve talked to about that is like they they just feel like they’re they’re not in control and things are growing almost uncontrollably. Um. And it feels unpleasant but in in hindsight you realize oh shit that was product Marker fit and you know we really have have something here. So how to get there I would just recommend kind of these iterative Loops. Um. You know founders will know best. What’s What’s the what’s the starting points for their business and then try different things when when it doesn’t work I don’t think like if you talk about generic insights then this is generic but you know in the world of Generic insights. There’s only a generic insights.
Alejandro Cremades: So let’s talk about something that is not so generic. Let’s talk about outworking the competition because that’s another one give us a clear example of a portfolio company of yours that outwork the competition.
Jussi Salovaara: For sure. So um, we have a company here in in ah based out of Asia. It’s called zion pool they um, they ah. Ah, my number 1 most concrete example of of this company outworking competition. This was a super small thing but you know moving fast and working hard compounds and you know if you work an hour more per week than your competition. Competition. That’s just so much when you multiply by you know number of people working number of weeks number of years so So that compounds like crazy. So I remember a few years ago I was in Finland um, at. Around New year okay this company is based in Asia and I remember there’s a tiny tiny thing but it’s just always stuck in my head as an example of how how like you’re on the ball fast. So this company was always sending um investor reports. Again, the dumbest thing they wanted to get it out of the way after the end of month done super fast and focus on the business. so I’m so I’m sitting there is thirty first of December it’s like nine zero P M in Finland two a m in Singapore.
Jussi Salovaara: And I get the investor report for that December and the year is not even over for me and is a high quality report and I was like awesome. Let me let me read it. Maybe I shouldn’t read that on new year sea but still I was reading it and um and somehow like this company is always operated like that. Super fast position fast execution and and and working hard no matter if it’s ah, New Year’s new year’s day new year’s eve. Um, you know you name it just ah move super fast and um and that always like said stuck in my head and and the company’s been doing doing great. So. A tiny example but of something that shines through and they they they definitely had product market fit at some point they’re running at I don’t want to say you know any of their numbers. But you know they’ve raised the series b done really? well.
Alejandro Cremades: Nice. So let’s say you go to sleep tonight you see and you wake up in a world where the vision of Adler is fully realized what does that world look like.
Jussi Salovaara: Oh ah, like a magic wand moment here. Um, well, it’s a world where we are. We have more innovation everywhere. I go back to Finland for New Year’s continuing on the previous example and um I just see an improved side. There’s a bunch of andler companies in the ecosystem. Um, and those guys have have done great work. We also have more more entrepreneurs so that’s one of the things that you know, um. We set out to help with is to help more people become entrepreneurs. Um not to get profiles that shouldn’t be entrepreneurs but there’s a lot of entrepreneurial spirit in different parts of society.
Jussi Salovaara: And we’re not believers in kind of that entrepreneurial pool of people just like organically ending up being entrepreneurs. Um, and we also don’t believe that you know corporate people can’t be great. Entrepreneurs. There’s great Entrepreneurial talent everywhere. So. We’ve been able to increase the number of entrepreneurs in every ecosystem we operate in and and there’s you know, New Innovative companies everywhere. That’s pretty much like my my vision and yeah, let’s have a couple of airbnbs and stripes in there.
Alejandro Cremades: Love it. So so so there’s there’s a lot of entrepreneurs right now that are listening to you you know entrepreneur entrepreneurs all over the world and the entrepreneurs that you know are ah different. You know cycles in their journey and perhaps you know the companies that they’re building.
Jussi Salovaara: As well then change the world over.
Alejandro Cremades: Some you know that are listening. You know are right now perhaps working at a company just like you did back in the day and wondering you know what that world will look like that world where perhaps you know they’re giving their notice and taking the leap of faith I guess for all these people regardless in the cycle that they’re in of their own. Um, entrepreneurial experience. What is 1 piece of advice that you think they should keep very much in mind as they continue to go along in this entrepreneurial journey.
Jussi Salovaara: Yeah, so I First of all I Want to say that you’re never gonna regret it. You jump you take the leave leap you start building your own Thing. You’re never gonna regret it’s that’s not the advice but I just want to encourage people who haven’t done it yet. To to go down that path. Um I think I’ve talked to a lot of people who also failed and they still don’t regret it. So So you know you’re never gonna regret it. The advice I have is is is actually an advice on humility right? we’ve we’ve seen. Years in the past now where like you know, founders get too excited by their own hype and this leads to ethical issues etc. I think stay true to Yourself. Don’t believe your own hype remember that. You know at some point when your company is doing Well you become the kind of health commodity did the party and everyone wants to you know, be um, you know, suck up to you and all that you’re still the same person you’re you’re growing in different ways. But you’re fundamentally still the same person. So. You know you’re not Better. You’re not Worse. You’re you’re the same So I would recommend this kind of um, attitude of humility because it’s also going to help you avoid mistakes in the future both for your company.
Jussi Salovaara: As well as for yourself psychologically because it’s only a trap that you’re gonna you know, run yourself into if you don’t.
Alejandro Cremades: Very profound. You see for the people that are listening I mean I love it. You know I remember a tool that that reminds me of something that I think was Robert De Niro that said that you don’t celebrate so much the highs and they’ll be too down on the lows because at the end of the day there’s going to be those ups and downs and if you don’t. Maintain that consistency then you’re gonna be you know, put to the to the ground. So I love what you just said you know I really I really stand by that too I could definitely subscribe to it. So for the people that are listening you see that will love to reach out and say hi. What is the best way for them to do so.
Jussi Salovaara: Um, thank you.
Jussi Salovaara: Um, connecting Linkedin um, you see a Dantler Ceo um always a good channel I’ve I’ve I avoid Twitter ah because of the the whole empty room hype cycle thing. So I yeah yeah.
Alejandro Cremades: Amazing! Well juicy, thank you so much for being on the deal maker show. It has been an honor to have you with us today.
Jussi Salovaara: Linkedin probably best or or email.
Jussi Salovaara: Thanks Sanjandro Thanks for having me.
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Daniel Yu has been championing a huge problem in what may be one of the biggest markets in the world. His startup, Wasoko, has attracted funding from top-tier investors like Avenir Growth Capital, Binny Bansal, Catalyst Fund, and Growth/Expansion.
In this episode, you will learn:
- Africa is one of the largest and fastest-growing markets on the planet
- Startup fundraising
- Creating and maintaining company culture at scale
Alejandro Cremades · EP 619 Daniel Yu On Building A $625 Million Business By Transforming Informal Retail In AfricaSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Daniel Yu:Daniel Yu is an entrepreneur and software developer with extensive personal and professional experience working and traveling across 65+ countries, primarily in emerging economies (Africa, the Middle East, Central America, Brazil, Southeast Asia, and China).
Daniel embraces opportunities to explore markets and develop the network and cultural knowledge to effectively launch new technology-driven businesses. He is conversational or better in eight languages: English (native), Mandarin, Swahili, Arabic, Spanish, Cantonese, Portuguese, and French.
Daniel is the founder and CEO of Wasoko, a tech company transforming the $600 billion market of essential goods sold through mom-and-pop stores in Africa through on-demand ordering, delivery, and financing.
Backed by Tiger Global and other leading investors, Daniel is based in East Africa with the ultimate responsibility over all businesses serving tens of thousands of merchants across Kenya, Tanzania, Rwanda, Uganda, Côte d’Ivoire, and Senegal while partnering with leading manufacturers, including Unilever and Procter & Gamble.
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Connect with Daniel Yu:* Crunchbase * LinkedIn * Forbes * RocketReach
Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So very excited about the guests that we have today I mean quite ah quite a global entrepreneur. You know that we have you know I think that listening to today’s episode is going to help us to make the world a little bit smaller and we’re going to be you know learning about all the good stuff. That we like to hear building scaling financing and everything in between so without farther ado let’s welcome our guests today Daniel you welcome to the show. So originally born in Southern California I mean that sounds like a pretty amazing upbringing. Give us a little. Ah.
Daniel Yu: Great to be here.
Alejandro Cremades: Walk through memory lane.
Daniel Yu: Yeah I was born and raised in Camar Rio California which is in Ventura County about our north of l a I come from my international background my my father’s originally from Hong Kong but I’ve got family in a few different places and I think was always. Given the perspective of the world being bigger than just the suburb the neighborhood where I grew up.
Alejandro Cremades: So so at what point do you start to develop hey you know like this this interest for traveling for like the world for I mean I’m sure that you know your your your mom from the us you’re that you know from Hong Kong as you were saying I’m sure that you were kind of like brought up you know in that day. In that environment of of of really you know understanding there was that there was much more than than than California but they but yeah, tell us about that.
Daniel Yu: I think so I I definitely had that sense of the the multicultural fabric of the world obviously from the family background but even from the environment obviously a lot of Latino influence where I was. Ah, but also was blessed to have the opportunity of my family. My parents loved to travel and took us on trips. You know, even as kids overseas both the visit family and also go to Europe and other places and I think what? what always struck me was a fascination with cultures and and languages actually and that even kind of led to me in university. Ah, ending up studying arabic doing these study abroad programs over in Egypt which is ultimately where my entrepreneurial journey got started.
Alejandro Cremades: And you studied everything but you know what you were really passionate about you know software. So why? So why was that the case and at what point do you start to develop that interest you know around technology and then also software.
Daniel Yu: So technology I’ve always viewed as as a tool and I think I had a really influential friend still to this day. Ultimately, he became a investor in my my company who basically ah. Told me about his background similar interests. You know he he loved traveling all over the world also came from ah, an immigrant family and had left the us actually dropped out of school originally to to move to India start a business there and then was successful. Came back to the us and. Ah, continued at university which is.
Daniel Yu: My interest in tech came from ah my friend actually at university who strangely enough was quite a bit older than me I think he’s about 10 years older than me but he actually had taken time off of school moved to India started his own business. There was was was ultimately quite successful and then moved back to the Us. Ah, where where I then met him and the thing that he told me was that if you really want to do a highly impactful venture out there in the world these days you know technology and specifically knowing how to code is one of the most helpful things that you can do because regardless of. What business you get into knowing how to code or being able to manage people who who code is going to be part of of what you do and that really inspired me to basically say well if if I am going to bring my ideas. Whatever they end up being into the real world then having that technology background and skillset is. Clearly going to be critical to that process and so actually from there I started originally just kind of self-learning um figuring out how to how how to how to code build out simple websites stuff like that myself later on took took a few independent courses but that is ultimately how I got the the initial background as ah as a software developer. Ah, that ultimately became quite useful down the road when I started getting going with wassocco as well.
Alejandro Cremades: And they you know we’ll we’ll get into that in just a little bit but we see the idea you know started with a a trip to Egypt. So what happened there in Egypt.
Daniel Yu: Yes, so that summer I was actually doing an intensive arabic study in the in the Middle East and I had a little bit of extra time at the end and I was just living by myself in this village in in rural egypt and I got to know. Ah, some of the shopkeepers who are around there. A lot of a lot of my neighbors and and other people in the town and I realized that they actually had this challenge with ordering goods for their stores. So all these small mom and pop stores the the bodegas these little shops. They’re selling rice and soap and sugar and everything to the to the people in the town but when they ran out of those products and they needed to restock. They actually had to drive all the way to the city many hours away by the products that wholesalers transport them back. It was a whole very long painful process and this. Got me thinking on shouldn’t it be possible to build out a technology platform a technology solution that can help solve this problem of knowing what goods are needed where in good time.
Alejandro Cremades: And you know who would have thought because you go back to into ah the University of Chicago and they who would have thought that one of the initiatives that they have to really foster. You Knowation is also a nice initiative to invite people to drop out of school because they did the business plan Competition. You ended up winning and then you decide that it’s time to ah to get out of there. So. So so I’m sure that your parents were not happy.
Daniel Yu: Yeah, definitely not I would say initially they were quite hesitant about what I wanted to do, especially you know my my father’s from more more traditional background and you know education has always been very very very highly prized and and important. And but you know I made a strong case I would say what I how I pitched it originally was oh I’m just taking a a short leave of absence to pursue this this project and if it doesn’t go well then you know immediately I’ll be back to school and I had discussed with the University officials everything the flexibility they they. They they gave me that guarantee that okay at any time you want to come back just reregister for classes. No Problems. There’ll be no restrictions. All of that. So So I had a very low downside case that I was able to make you know thanks to the University and and and their flexible policies. But yeah that that was definitely. Ah, kind of a bold thing for me to do and you know to this day I’m I’m grateful to my parents for for giving me the chance to make it happen. But I think these days they’re they’re pretty happy with how it’s been going.
Alejandro Cremades: So how how nerve raking was say it dropping out of school and what was that process of starting to reaching out to potential partners and to start to polish this further.
Daniel Yu: I think the most no bracking part was definitely the the call I had with my dad. But once I got through that then the the the process moving forward was pretty straightforward I think I was quite excited. There was a lot that I wanted to do in terms of my own. Kind of coding development getting the initial platform prototype built out I was very excited happy to be going to all the entrepreneurship events one of the things that I think I actually took advantage of quite well was that even though I dropped out. Of classes and and didn’t have the kind of university schedule I still stayed in the university neighborhood and was able to take advantage of all the resources so they would have these entrepreneurship events at the the booth business school all the time and there were these professors that I was able to work with talk to to get advice on what we were doing. And so I had all the benefits of of being in college without actually having to go to class which was basically a dream so that that was really helpful in the early days as as I was just starting to get this idea even basically figured out.
Alejandro Cremades: And they just for the people that are listening what ended up being washoka. What is the business model and how do you guys make money.
Daniel Yu: Yes, so wassoko as it exists today is an e-commerce company that connects large manufacturers. So think Procter and gamble Unilever Nestle but also ah regional manufacturers. Ah, who are producing products locally in these countries across Africa with the mom and pop stores. So these small bodegas these kiosks that are selling these essential goods to over ninety percent of the the local population. And so basically what we do is shops are able to order through our app. So there’s a wasoko app where they can browse and scroll and find the rice soap sugar toilet paper whatever products they need they place an order just like any other e-commerce platform and then we as wasoko actually arrange. Free same day delivery for those goods to get to their store and restock them as quick as possible. So that people in the community are able to go to that shop and get what they need on the back of that we do a little bit of other stuff now in terms of providing flexible payment options for those stores. Um. We’re looking at kind of building out other products and tools and services that those shops can be empowered with through our app as well as we’re also looking kind of upstream at other interesting things we can do in the supply chain. One of the things that’s quite exciting these days is ah we’ve been launching our own private label products.
Daniel Yu: Ah, so you think kind of like Kirkland with Costco and the own in-house brands. They have to kind of meet consumer needs at even kind of better value in pricing than the traditionalitionally branded products.
Daniel Yu: Upstream side. We are on the upstream side. We’re starting to do things like private label where we’re actually directly contract manufacturing our own products similar to Costco with their Kirkland brands and stuff like that and that’s helping us to get goods for even better value. Ah, to our customers across 5 african countries now as well.
Alejandro Cremades: so so I guess a out of all places. Why Africa.
Daniel Yu: Yeah, so if you look specifically at the space that we’re in which is fast- moving consumer goods and specifically informal retail. There’s there’s no other region that is as reliant on informal retail as Africa as I said over 90% of all goods are bought and sold through these small informal retail shops and really the the problems the pain points that those shops face are much higher than even small shops in other markets and so this kind of core challenge of as a shopkeeper when I need to restock on rice or soap. Having to leave my store go to a different town or downtown in a big city to buy goods transport them back myself waste all that time pay the pay pay the the fees lose sales while I’m out of my store. This is a really significant pain point and on the other side. As ah as a brand as ah as a manufacturer you have this really opaque series of middlemen who are there’s usually 3 or 4 layers between the manufacturer and the actual shop themselves and so you don’t really have a way to ensure that your products are even getting to those stores in the first place you’re just kind of handing them over to a big distributor and hoping. Ah, that they that they move your product and so really I think that the the pain point the opportunity given that this is an over $ 700,000,000,000 a year space in the fastest growing continent in the world is is really something that is a huge opportunity for tech to bring efficiency to and ultimately to save money.
Daniel Yu: Um, for the one point five billion people who live in Africa.
Alejandro Cremades: And they and in this case, how was it like you know the the arrival as an outsider because I mean ultimately you know you’re a foreigner you know coming there starting the business. So how was that process like.
Daniel Yu: Yes, so thankfully we actually did have a a very strong welcome and introduction the reason or ultimately how we ended up launching the business firstly in in Kenya which is in East Africa was because we had the invitation from a number of. Brands and and and companies their offices over here and so there was a whole process where once I built out the platform and I was able to kind of do some demos and and and and show different companies and and offices across emerging markets. What what the platform could do. Um, there was a very strong interest that came specifically from East Africa and and Kenya and I think that had to do with the fact that Kenya at least at the time was the world leader in mobile money. Um sort of there. There have been these systems in place for actually over 15 years that allow for basically text message. Money transfer so without even needing a smartphone or an app you’re able to just send money directly to anybody as long as you know their phone number and I think that kind of system. The fact that that was already widely established meant that there was interest in other types of digital ordering platforms in this case. Ah, for for shops to kind of order and restock for their for their goods as well and so having that invitation where I had a couple calls with some companies that are based here in Kenya and went through the system and they basically said hey if you come out here. We’ll be the first people to try them out.
Daniel Yu: That gave us a very kind of strong foothold to to come in and be able to focus and and know what we needed to do. It wasn’t like I was just out here running around without any kind of structure or any kind of interest already Settled. So. That Anchor was really helpful in getting us going and then from there we were able to quickly bring on other companies who were interested in using the platform to list and sell their goods as well.
Alejandro Cremades: And then also what was they? what was that experience of going through a pivot because you know like everything the business model that one launches you know, Obviously you got to see how the market reacts You always need to adapt yourself to the market. So how was that for you guys.
Daniel Yu: Yes, we had a significant pivot in the first year or so of operations once we got going in Kenya and that was specifically to move away from a pure marketplace model to an actually integrated first -party logistics model. And what that basically meant is before or what I initially envisioned was being able to just have a platform where companies brands would list their goods and then these shops would order them. But then the logistics the delivery would be handled by the brands. The manufacturers themselves and we realized. Ah, pretty quickly that that was not working or at least it was not working well enough there was something like half of the orders that were coming through were just not being delivered by the company or their distributor and once we dug into it. We realized there was a reason that made sense which is that a lot of these orders were quite small. You are seeing. Ah, shops that we’re ordering only say one box of ah of a company’s products. You know one box of soap that kind of thing and with these kind of small items. You know that can be worth only you know, five 10 dollars and what that meant was that in order to actually. Figure out how to do reliable logistics. We had to get involved in doing it directly ourselves and so we ran a small pilot with that where we asked a few of the brands hey, what do you think if we try doing some of this delivery this logistics ourselves.
Daniel Yu: And this is actually before the days of dark stores and on-demand quick delivery so it was a little bit of ah of an experiment with without precedence certainly in the markets where we were but we were able to demonstrate that when we did do our own logistics and we were able to get to you know 95% plus successful delivery rates. Um, that that indeed did lead to a successful and positive customer experience and something that customers were then excited to use and rely on and so we made the the at the time what was ah a pretty bold decision. To say you know what we’re going to go into doing all of these logistics ourselves which wasn’t something that we knew how to do at the time and so that was ah that was a big big move big investment to actually set up our own warehouses our own last mile delivery. But once we did get that going. We We saw significant growth. Um, that has continued to this day and that’s been the model that we’ve relied on.
Alejandro Cremades: And then from ah from a capital racing perspective. How much capital have you guys raised to date.
Daniel Yu: Um, in total we’ve raised approximately a $40,000,000 today
Alejandro Cremades: And what has been that the journey of raising this money because I mean you guys have raised from players with very deep pockets out of the us like tiger global and others. So how has it been that process of being able to get the. You know those big players that are so far away to get comfortable with the idea of investing in a company out of Africa.
Daniel Yu: It’s been a long process for sure. We started off our operations in Kenya in 2016 and it was only two years later that we were even able to raise our seed round which was a $2000000 round led by. Um, some specialist investors focused on technology in Africa Forty x ventures and and a few other folks and even that process at that time was very difficult. We had 1 investor that before that gave us a term sheet but then actually two weeks before they closed. Ah, there was a scandal that broke out and the fund had to close down and so we thought we were about to get $2000000 from that first investor but then ended up almost going bankrupt because they collapsed and we were running out of runway. So lots of crazy drama in the early days to even just. You know, get the the basic seed round level investment done. But thankfully since that round things have been much smoother so we were lucky to show a lot of strong growth. 2019 into 20 interestingly we closed our series a which is a $14,000,000 round led by quona capital. In February of 2020 so just before covid nineteen hit and shut down the world. So once again, kind of quite lucky to to get that done and then we were able to show kind of very strong growth on the back of that into 2021 22.
Daniel Yu: And February Twenty Twenty Two is when we led that series be ah ah led by tech globalbal and avanir capital.
Alejandro Cremades: So then in this in this case, you know how was the um, the expectations. How did the expectations shift you know, over time you know to us you were going from 1 financing or 1 cycle you know to the next.
Daniel Yu: I think there was a lot of education that we had to do with our investors. Certainly if you look at the series b folks tiger global avanir these are us-based investors that. Um, have done very very little of any investment in in Africa to date and so there was a lot that we had to do to explain the dynamics explain the potential which is something that I think is is unparalleled. Um, you know there is no other billion person market out there that is yet to be transformed by technology. Africa is really kind of final frontier when it comes to inflection points for for for tech investing and so given what we’re doing at the foundational level to really build out ecommerce focus on this b two b channel which happens to be the largest ah consumption channel. On the continent. That’s really something that takes some time to understand the dynamics around. But I think we were able to show you know through our unit economics through the the kind of efficiency in our operations that we have which match up very well compared to ecommerce operators in the rest of the world. Um, that this is really something to get behind and that the potential the tailwinds given the growth of Africa overall are something not to be ignored.
Alejandro Cremades: And then in terms of executing there. You know in in Africa I mean what have been some of the some of the um obstacles that you guys have experienced along the way as you were scaling this thing up.
Daniel Yu: A lot of obstacles for sure I’d say that some of the biggest challenges that we have currently are with the suppliers with the manufacturers. We have very large volumes of goods that we are. Selling and distributing on a day-to-day basis and we of course need to keep very tight inventory and working capital in order to optimize on those operations but we have a lot of challenges with stock outs at the supplier level where we place the purchase order for 10000 boxes of soak. But the supplier only delivers 6000 boxes and this is obviously something that’s hugely frustrating first and foremost for our customers but also for our operations where we don’t have the stock on hand that that we’re looking for um and so it’s a lot of this kind of stuff where unfortunately um, you know the the working capital financing that. Would usually help to smooth over a lot of operations across the supply chain is really just not as mature as what you’d find in ah in other countries and I think that that problem which fundamentally comes down to financing you know credit. Um, inventory across these markets is is really what holds us back but is something that we’ve been able to work around and slowly over time kind of find solutions to improve some of these issues.
Alejandro Cremades: And what about the culture on the team I mean how how many people do you guys have on the team right now.
Daniel Yu: We have over 1000 people on our team.
Alejandro Cremades: Wow And when you have like so many people. How do you go about culture values and making sure that everyone is say standing by them.
Daniel Yu: It’s quite tough obviously having that many people on the team and I think from something like 20 different nationalities spread across 6 different countries. This is not an easy thing to do to kind of build a cohesive culture I think we’ve really tried to do this by. Being explicit about what our values are what what it means to to to be part of wassoko and what our mission purpose ultimately are as a company and you know through that through repetition. You know, bringing it up tying back these values to. Our operations bringing them up in in meetings and and and pointing out behaviors. Both positive and negative that that that affect that culture. Um, you know that that’s the only way to to build up. A culture at this scale you know in the early days when it’s just a yeah, a dozen people sitting in a room you know culture is something that happens. Naturally, you don’t have to really point it out. You don’t have to be explicit about it. But at the scale across so many different locations you have to have a structure around it. You have to be explicit. And you have to continue to repeat it every day so that people really see it in their in their daily work.
Alejandro Cremades: So imagine you were to go to sleep tonight and you wake up in a world where the were the vision of Washoco is fully realized what does that world look like.
Daniel Yu: That world would be 1 in which every shop across Africa has the wasoko app and is using it to serve people in their communities. Not just with cheaper goods. Then what they’d get otherwise you know a single mother who is able to get rice for you know, 10% less than what she’d be able to otherwise without wasokco providing goods to her community to to the shop that she goes to um, but also ah wasoko. Being able to provide access to so many more services than just the physical goods as well. Some of the things we’re working on are going to allow people to access financial services through mosoko shops that otherwise probably wouldn’t be available in their community. We’re looking to kind of open up the infrastructure that we have to allow other companies. To to to provide their products through our logistics and through our our our technology channels as well. And so I think ultimately what what soco is doing is setting up the omni channel infrastructure both the tech as well as the physical logistics to help access and and distribute goods and services. As many people as possible across the african continent and ultimately if that’s done. That’s a huge boost in economic activity and hopefully well-being livelihoods for the one point five billion people who live on the continent as well as a huge opportunity to enable other businesses to be built on the back of the infrastructure.
Daniel Yu: That we have as well.
Alejandro Cremades: So then? so then also you know one thing that I’m sure that there’s a lot of people that are listening that are wondering how is being an entrepreneur in Africa you know, perhaps you know in your case, you’re insensibar. But. How is how is it different from let’s say being an entrepreneur in the Us. .
Daniel Yu: Um, great question I would say that the biggest difference is the need to build out a huge number of services. And and tools directly yourself. So if you look at the example of the pivot that we went through where we came into the market just imagining that we could be a marketplace platform not thinking that we would have to get involved in anything with the logistics or anything as well only to discover that the. Logistics Services distribution that was being provided was not at the quality that we required and that therefore if we wanted to do it right? We would have to do it ourselves. Um, that kind of necessity is a fact of life as an entrepreneur across a lot of the the areas that. You need as a business operator. Um, and so this kind of requirement because these business ecosystems especially in the technology space are less robust they’re they’re they’re not nearly as big as what you find say for example in the us that means that you have to do more of these activities yourselves and. Um, you can view that both in the light of okay that’s going to slow you down. It’s going to be more costly. What have you but you can also be in the light of this is really foundational and provides a huge barrier to entry for anyone else. Once you scale up and actually get these activities and operations working properly and that’s definitely how I see it.
Daniel Yu: Um, you know in in our sense and what I’d also say is if you look at it from an overall ecosystem impact um whereas in the us um, you can build a big business just by optimizing some process. You know, let’s say um, you know a click through advertising conversions if you can improve those by 1 % you know that that’s a multibillion dollar business for sure. But it’s really not transformational in the sense that there are already you know lots of quickthrough advertising optimization services out there and you know ultimately what impact is that going to have you know for those customers for those users who are going to be impacted whereas for us to build out these entire supply chains and. And provide you know delivery services to shops that previously had to spend you know half a day you know ten twenty hours a week going to source their products getting limited options. Bad pricing all that and to suddenly be able to provide on-demand delivery. With a wider selection of goods at the best prices around you know that ultimately then goes out to so serve tens of millions of people you know that’s the kind of thing that’s only really possible in a market like like the ones that were in in Africa and so I think it also depends on. Who you are as an entrepreneur in the sense of you know, do you want to optimize on something that already exists in an established big market. Um, or do you want to transform something in a place that might not have any services of the kind that you’re trying to do previously whatsoever.
Alejandro Cremades: So let’s say you know now I mean obviously we were we were talking earlier about the the way that you envision the future. You know how things you know you you find them to perhaps crystallize or hopefully they crystallize in that in that way that you are all envisioning with the team. But. Let’s say now you know we’re looking towards the past you know more than the future and I’m able to bring you back in time in a time machine. You know able to bring you back in time. Let’s say nine years ago where you were you know, incubating the thought of starting something that would eventually you know materialize into wasoko. So let’s say you’re able to have a sit down with that younger so that younger so that maybe it’s even thinking about dropping out from the University Of Chicago and you’re able to sit down that younger Daniel and you’re able to give that younger Daniel one piece of advice before launching a business bow that be and why given what you know now.
Daniel Yu: That one piece of advice would be to just get working just go to the ground talk to the users talk to the customers talk to the Partners. Don’t Wait. Don’t double guess yourself think That. You’re not ah capable that you’re not skilled enough or experienced enough to to take on those challenges and and and to learn about them I think that there are so many things in the world that and so many people that are held back. Um, by their own kind of self-doubts and and misbeliefs that they’re not qualified ah to to to work on a certain problem or area and I think I spent a lot of time being perhaps a bit more hesitant than I could have been otherwise in just diving in and starting to work on things. And I think if if you take on that spirit and you were willing to be agile. Um you know make mistakes quickly and learn from them and try out other things that you can then learn from and and quickly adjust from from there then ultimately you know there’s no way that that that you can ultimately. Ah, you know, stay off the track for too long eventually you will find your path onto something that um you know is really adding value for people in their lives and you know that’s ultimately a discovery process that you know can’t be can’t be skipped except for by trying to go out there and do it yourself.
Alejandro Cremades: I love it so for the people that are listening. What is the best way for them to reach out and say hi.
Daniel Yu: Yeah, so I’m actually very much off of social media I would say the the only platform that I’m using regularly. These days is is Linkedin and regularly is a strong word. There. So. I’d say definitely please if there’s something relevant reach out on my Linkedin should just be there Daniel Yu: Yu wasoko um you know happy to support, especially other entrepreneurs building. You know, great things to help people in Africa which as I said I think is really the. Final frontier for technology and transformation on on this planet and you know excited to see what happens in the ecosystem for the next few decades to come.
Alejandro Cremades: Amazing! Well hey Danny of thank you so much for being on the deal maker show today. It has been on on earth to have you with us.
Daniel Yu: Thank you! It’s been a pleasure.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Daniel Yu On Building A $625 Million Business By Transforming Informal Retail In Africa appeared first on Alejandro Cremades.
David Waxman sold his first company to Microsoft, took his second public for $1B in just 12 months, and then launched an $68M fund to invests in start-ups that apply data and technology to disrupt existing industries.
In this episode, you will learn:
- Learning from failures
- The startups TenOneTen Ventures has invested in so far
- Hiring and company culture
Alejandro Cremades · EP 618 David Waxman On Taking His Company Public For $1B In Only 12 MonthsSUBSCRIBE ON:
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Your email address is 100% safe from spam!About David Waxman:David Waxman co-founded the web community Firefly Network (acquired by Microsoft in 1998), the hardware and ISP service People PC (acquired by Earthlink in 2002), and the internet-based advertising agency Spot Runner.
He also now works as a consultant, helping early-stage startups get established and advising established companies on how to think like entrepreneurs. He lives in Los Angeles.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today. We have an exciting founder turned the investor I think that we’re gonna be learning quite a bit about building scaling financing taking companies public exiting everything that you can think of as part of the full cycle. Of a business so without further ado. Let’s welcome our guest today David Waxman welcome to the show. So originally you were born in I believe he was in Cambridge but also close to a science museum so tell us about.
David Waxman: Um, thank you. It’s great to be here.
Alejandro Cremades: How was life growing up.
David Waxman: Yeah, well let me clear that up I was born actually in Santa Monica right here in near where I live now and at the age of 5
Alejandro Cremades: All right? so hold and hold hold hold hold on. Let’s let’s let’s let’s repeat that let’s repeat that so give us a little for walk through memory lane. How was life growing up in Santa Monica
David Waxman: I didn’t grow up in Santa Monica sorry did you take notes I grew up in Berkeley I grew I was born in Santa Monica and I moved to Berkeley at age 5 So I don’t really recommend. That’s why I was born but I moved to Berkeley at the age of 5 So I don’t really remember.
Alejandro Cremades: Ah, for some I have I have Santa Monica here born in Santa Monica correct yeah and you were raised in in Berkeley. Okay, okay, okay so here we go so we hear the feet we start again. Ah I like.
David Waxman: We’ll get there.
Alejandro Cremades: So all right? So David so give us a little of a walk through memory lane. How was live growing up because you were born in Santa Monica and then you moved to Berkeley.
David Waxman: Yeah I mean I really mostly remember Berkeley I moved there at the age of 5 and um, you know Berkeley is a really interesting town. It’s it’s a college town but it’s also got just a lot of interesting people from all over the world who live there either who. Were attracted to the idea of Berkeley or came to the college and stayed or are involved with the university um, and I was really fortunate I grew up in the Berkeley Hills which is um ah a neighborhood that doesn’t really have any commerce in it. No shops. No walking or rather no walking to storage or anything like that and. As a child I didn’t like that so much I felt like you know I had to sort of drive with my parents to go to town as it were but the 1 place I could walk to was a place called the Lawrence Hall of science which was which is a science museum still is affiliated with Uce Berkeley and from a really young age I started. Hanging out there and I think that had a huge influence on me.
Alejandro Cremades: So they hold you know computers and and and and technology I mean how how do you develop that love for it.
David Waxman: Well, as I said I was spending time and this is before everybody had personal computers by quite a bit. Um I spent a lot of time in the science museum and actually joined something called the Friday club which was kids learning how to program and we were learning how to program on an old deck computer. Um, and I’ve also learned on some early personal computers and that gave me a lot of exposure to technology far before you know most of my peers were ever to see that kind of stuff. Um, and that Friday club alumni network ended up you know they they work at Google they work in other you know. Pretty pretty deep in the tech industry. Um, and it was it was the place where I wrote my first code and ah you know part of it was just wanting to belong to this group but part of it was being super excited by the technology.
Alejandro Cremades: And obviously it took no time you know for you to to use that you know love to eventually start your own company now you know before doing that you went to France you went there to um to school where you did computer music as well and then mit but. Coming out of mit the media lab. You know you you, you? Obviously you know like started to experience with stuff and things led to the next and then eventually you start your first company firefly network which ended up being quite um, a good outcome. So um, so how did you? you know all of a sudden land you know on Firefly and. And how did the the idea or what was that journey like of hey all of a sudden I’m starting a company I’m starting my first company.
David Waxman: Well I didn’t know that that’s what I was going to do I was a master student and I was going to stay for the ph d and um and honestly growing up in Berkeley you don’t meet a lot of or nowadays you do. But when I grew up in Berkeley you didn’t meet a lot of venture capitalists. It was not a place where um.
David Waxman: Where I knew of such things and I don’t didn’t really you know in my early career in computer music I didn’t really understand venture capital at all either. Ah, but when I was in Cambridge I met ah actually met a guy on an airplane who is a Harvard business school student and. We started talking. We were actually about 5 hours into a four and a half hours into a 5 hour flight from San Francisco to to Boston and we didn’t talk most of the flight but at the very end we started talking and realized we’d been at the same actually at the same new year’s eve party and we had some common friends and ah. And 1 thing led to another he and I started hanging out. He knew a lot about venture capital and he had been thinking about starting a company and so it was almost a little bit of a cliche story a Harvard business school kid meets mit grad and um, actually through that relationship. We grouped together with some other kids from mit. And and that’s what led us to start Firefly but I don’t think without the catalyst of having met him. You know I might have come around to doing startups but it might have been a while so we were the first company to do online music recommendations or online recommendations of anything. There’s this.
Alejandro Cremades: So what were you guys doing at farfly.
David Waxman: Technology called collaborative filtering which is very common now you see it. You know people who like x also like y so people who like you know, but people like Taylor Swift and the smashing pumpkins also like Beethoven. It’s very you know it’s not necessarily obvious things but you cluster with people who have similar tastes and. Then using those clusters you can say who else what else you might like because you’re you’re near on tastes and taste space to these other people. Um, we started that with music we ended up doing it with books and movies and websites we were actually integrated with Yahoo on their my Yahoo page and um.
David Waxman: We had another product when we had these sort of preferences we. We thought that that um it was kind of personal information whereas kind of early into privacy and we thought well we’re collecting your book preferences. It sounds a little bit quaint now where we’re collecting your book and movie and. Website preferences. Maybe this is kind of personal information. So we we had this idea for a common data wallet which we called the passport where you could go from site to site and sort of permission your data your preferences data so they could serve you um serve you recommended stuff. But then you could sort of have a receipt you could rescind your permission and um and that got the interest of Microsoft who had been thinking that they needed something like that and and Microsoft bought the company in 9098.
Alejandro Cremades: And what well we’ll edit this piece because I can hear the the dog going crazy. Ah, go for go for it. Go for go.
David Waxman: Um, you can hear the dogs um can I just grab up some water I’m super thirsty. Thanks Seriously this is never going to work. Um.
David Waxman: Um, yeah, are 2 Yeah.
Alejandro Cremades: My god that that is had dogra or or a dinosur on bo below big dog and oh that’s incredible. All right? so so here so why don’t you repeat that last piece about that got the interest of Microsoft because the dog was parking. Go ahead.
David Waxman: Sure, um, and so that got the interest of Microsoft and we and Microsoft bought the company in 9098 and the firefly passport turned into the Microsoft passport which wasn’t exactly what we had planned. We had planned for more of an open data wallet where you could. Sort of a little bit like Facebook connect was or like sign in with Google is now. Um but Microsoft had a different vision when when we finally came there to to make something that was just for their closed network. So it became the microsoft password passport and it was single sign on for the. Whole Microsoft universe online and offline.
Alejandro Cremades: So what? what? how was that process like of selling your company to Microsoft I mean that’s really amazing first company first exit what what kind of disability would you say that that gave you into the full cycle of you know the whole thing of of being an entrepreneur entrepreneur.
David Waxman: I mean it was an it was an incredible journey. The whole thing lasted only 3 years and but it felt like an eternity. Um you know things were being an entrepreneur or certainly a tech entrepreneur was not as well known a thing at the time so I didn’t really have it wasn’t like you could look online and you know. See videos of everybody else’s experiences or or follow people on Twitter or anything like that. So I learned a lot like basically everything was on the job training except for the technology part.
Alejandro Cremades: Now when when you guys ended up doing the the transaction you know, literally like like like right after I mean the following year you were already on your next venture on people Pc So how did the idea of people Pc come knocking.
David Waxman: A.
David Waxman: Well, you know we had um it was It was some of the same team members and actually all 3 companies I did were were with some subset of those same founders. Um, ah literally my cofounder and I kind of locked ourselves in a room with pizza. And thought about what we wanted to do next because we knew we wanted to do another one and um and we always had I mean I think one of the great things about the internet period has been sort of the democratization of things. So The idea that that ah you know a small retailer can compete with a big retailer. Idea that you know you don’t have a middleman in certain cases. Um and generally that that it is ah you know Enables creators these days to compete with with you know, big neighbor and stars or become big neighboring stars without labels or movie Studios. And um, and so that idea of democratization was very important to us and back then one of the issues that people were talking about was the digital divide was the people who are online and the people who are not yet online and it was very different. You know our experiences of the world were very different. Some of us had the internet. And and a lot of people still did not have a home computer and did not have the internet. So Our mission was to make that easy and at the time it wasn’t it wasn’t as easy to get on the internet you had to go to a physical retailer and buy a computer you had to figure out which online service you were going to use you had to you know people didn’t know how to necessarily.
David Waxman: Plug everything in so we made it really easy. We put together a package that included the computer internet access and support and we like did our own keyboard and made our own packaging and really worked on Usability and that was the idea for peoplepc.
Alejandro Cremades: And obviously you made it so easy that the company ended up going public for a billion. So what? what was that process like of taking a company public.
David Waxman: Um, well let me back up a second because it was a really interesting trajectory of that company if you don’t mind. Um, so we started as a consumer subscription business. So you you know, pay a monthly fee and you get all of this and we suddenly got this. Um this inbound from. Cfo Ford Motor company literally in our inbound email box saying can you talk to us and we talked to them and they wanted to make all of their employees aware of basically they wanted their employees to get connected to the internet so that they could communicate with them. They could do hr stuff. And most of the employees at Ford at the time didn’t have internet at home because and they certainly didn’t have it at work if they were driving a forklift or working on a factory floor. So um, so we actually got a $300000000 po from them when we were still only twenty people. To enable their entire workforce. It was a subsidized program to get computers in the home and so we turned our model from a b to c direct model to a b two b to c um indirect model where we we first did Ford Motor company we did then Delta Airlines so they could do scheduling. New York Times vivendi universal and and all of that was I think what led us to have the the growth that we needed to go public.
Alejandro Cremades: So then going public How was that like.
David Waxman: It was a trip. Um, it was you know in retrospect we were a very young company to go public. We did have a lot of revenue but but you know we were public we we um started the company 99 and we went public in 2000 so it was a pretty quick journey and um and it was a little surreal. Ah, to be honest with you. You know we we? Yeah I remember very vividly the the drafting process for the s one and I was sitting. It was just me in a room with like 12 lawyers. We were still hiring our general counsel and.
David Waxman: You know I’m sitting there and we had these very deliberate kind of talks about about what words we could use and um and then there was the road show which was something I’d never experienced before and um, you know and then there was being public which was both a good and a bad thing I mean it was it was great. It was sort of everybody’s dream back then to go public but our stock price was. Fluctuating and suddenly people were and I think that’s still true today for companies that go public. You know suddenly you’re very distracted by this thing that wasn’t a thing before which is what is your price doing that day. Um, and yeah, after 2000 the market wasn’t that kind to. You know, not very profitable tech startup. So we um so we you know we got beat up in the market a little bit and that was that was a huge distraction and you know in retrospect I probably still do it but it was it was um I think I think it’s better now that people are waiting longer to go public and getting more.
Alejandro Cremades: So then after people pc I mean at what point there that you you know realize it’s time to turn page and you move on to the next day to the next gig.
David Waxman: More prepared.
David Waxman: Um, well we sold the company so we got bought by another public company called Earthlink which back in the day was um was like 1 of the premier providers of internet connectivity and they wanted to incorporate the ppc brand it was sort of a fighter brand for them. So um, in 2002 they bought the company.
Alejandro Cremades: Was there like um lesson on eman that perhaps you got from the previous sale to Microsoft that they perhaps you know you wanted to implement for the next for this next day a man a you know process or transaction with people. Pc.
David Waxman: Yeah I think one of the things about getting bought by Microsoft which was frustrating was that they didn’t really you know that the sort of champion of the deal who did the deal um had the same vision as us for the company but Microsoft back then wasn’t very good at acquisitions and they sort of ah. You know they didn’t really follow through passport out great distribution. It went to you know hundreds of millions of ah people which would have taken us you know forever to get but it was something different and so you know lesson number 1 is when you sell your company you you don’t own it anymore and that’s kind of a hard thing for founders to swallow sometimes. Ah, earthlink was much more aligned. It was much more like in their core business. They knew what it wanted they wanted it to be people pc was allowed to I didn’t stay but but pc was was really an important product for them for another decade after the you know. After the acquisition I was still seeing advertising on Tv based on the advertising that we had made early on.
Alejandro Cremades: And in fact, they you didn move fa quite far when he came to the segment because what were you guys doing with spot runner.
David Waxman: So spot runner again. It was this theme of democratization so we thought why is it that Domino’s pizza can be on Tv but Joe’s pizza can’t be on tv you know why is it that that um you know. This restaurant chain compete be on Tv but the local restaurant can and we figured out a way using cable television to localize advertising to um to really a very small segment so that Joe’s pizza could actually compete with Domino’s pizza um and so.
David Waxman: It was it was in that same theme and to crack that we had to do a few things we needed to make advertising that was flexible and and inexpensive enough for people to afford to make an advertisement that looked good and we needed to figure out how to make a media plan that worked for people. Um. And and both of those were really interesting problems.
Alejandro Cremades: Now here you guys raised quite a bit over 100,000,000 and it sounds like it perhaps a you raised too much and you got over your ski. So why was that the case.
David Waxman: Well, a lot of things happened in that company and it wasn’t a wasn’t a good exit. Um, one of the things is we just got really hot. Um, you know we were third time founders. The idea was really compelling. It had a really good story and and. You know it. It was a good idea and we got a lot of heat. Ah partly because Google made an an acquisition not long after we started of a company called Demark Communications which was a similar thing that we were doing but for radio advertising and that was a. Big deal at the time it was like a $900000000 acquisition which in those days was ah a big deal. Um, and so people started to turn to us and said well if they’re worth 900000000 these guys and that’s radio these guys are doing television. It must be worth so much more Um, and you know my my partner got invited to sun valley um you know people were the michael eisner from disney was on tv saying that we were the next google and so money came to us very easily. Ah probably before. Well definitely before we had the same kind of product market fit that we should have had to really use that money. Well um, and then um, you know in a way that that. Rings a little bit familiar right now the market really changed so in 2000 we started that company in 2005 and in 2008 the world changed the economy changed the market crashed and marketing television marketing really suffered and so we we took a big hit um in just our our business generally.
David Waxman: And you know between that and some you know and being kind of far out ahead of our skis. We just were unable to recover. So ultimately we ended up selling company that not for not for more than we raised.
Alejandro Cremades: And as you as the saying goes, you know you either succeed or you learn so after having had you know like the 2 experiences you know with with this third one what was there for you to learn.
David Waxman: So many things I mean listen learning through failure is overrated. It hurts a lot. Um and I and I get it and and I did learn a ton. Um, but you know it’s It’s just was a very painful experience. It’s painful to have to let go. Employees that are your friends um and a lot of people are experiencing this right now you know it’s just it’s hard to fail. It’s really really can be brutally painful. Um, so but I did learn a lot I learned about overcapitalization you know I kind of understood.
David Waxman: The difference between after I come up came to understand the difference between sort of vanity metrics and real metrics and um I learned a bit about strategic partnerships we had ah we had a kind of a bad strategic relationship with 1 of our investors who was also in our area. Um, and that was.
David Waxman: Was kind of a big Tangle up in the end. Um, but just yeah I could I could go on for hours about the lessons I learned.
Alejandro Cremades: Well Okay, obviously I’m sure that they you know served you well and I’m sure that you are using those now for for for what you’re doing now to really be able to identify winners. So You know you decided that you wanted to go on the other side of the table. You know I was the next Chapter. So. Why did you go on the other side of the table as an investor I mean what was that thought process there and and what are you up to right now with 10 one 10 ventures.
David Waxman: Sure? Well I was lucky ah in during the time at um, at spotrunner or near the end of that journey 1 of our investors who is from index ventures was also an investor in a company called factual run by my now partner Gil Elbas and he said you two would really like each other and so after a couple of years after I left spotrunner I I started hanging out with giil and um and the the investor was exactly right? We we were not ah, we’re not alike. Really, but we really have fun talking to each other and hanging out and um and I had also started. You know I’d done some angel investments in the past. But I’d also started doing more of that and doing some advising and sort of helping folks in the la ecosystem which was still pretty early days for that too. Um. And so gill and I decided to start 10 one 10 to invest our own money really as as angel investors. Um, he had a lot of connections. He had you know had very successful exit with selling his first company to Google and um, while he was still a Ceo he he had. Interest in in being an investor and I had time and I had enthusiasm and you know the 2 of us decided to pair off and after about a year of doing that on our own with our own money we said well this is working really? well. It’s exciting. We’re meeting really smart people. We’re.
David Waxman: Making good investments. Let’s raise some money from outside folks and we raised an $18000000 fund from mostly other successful entrepreneurs and that became 10 one 10 fund one.
Alejandro Cremades: So obviously now you guys have done a ah few funds. So what are the um, the companies that you guys get excited about.
David Waxman: Well, we really like we’ve always liked Ai and machine learning and sort of big data. Um, you know and some of our fund 1 companies are really great examples of that. So um, one company is called. We’ve we’ve done a lot in the space of computer vision for example, which is a. You know an area of Ai. Um, one of our companies is called mashjin and it is computer vision-based retail checkout. So imagine going to a store and instead of like manipulating all your. Items in front of a barcode. You just put everything down and it sees it and it rings it up instantly It’s super fast. Um, that company is very successful fund one company they um they started in the cafeteria space which got really hurt during covid. And they pivoted a little bit of market to the grab and go sort of convenience store space and they’ve since just been blowing up so they’ve got a 10000 store contract with circle k which is one of the biggest convenience store chains. They’ve got a lot of others in the pipeline they’re they’re in airports and stadiums and. It’s just a great application of the technology. So. That’s that’s one from fund one that we really like and um, another company is called flockfreight that they do basically ah, they’d hate for me to use this analogy but uberpool for shipping.
David Waxman: Um, for less than truckload shipping. So if you think about less than truckload shipping like say a palette of something or a couple pallets of something that don’t fill up a truck the normal way you ship that is you ship your stuff to within a little truck to a hubb and it’s a hubb and spoke model to a.
David Waxman: Hub where they put it on a big truck goes to another hub goes to a little truck etc that costs a lot of money and it takes a lot of time and it can lead to breakage because you’re taking step on and off and on and off the truck. What these guys have done is optimize the routes such that they can pick up loads Abc and fill up an entire truck and then. Drive them to across the country and drop them off cba so that everything just goes in and out once and it’s it’s super efficient and less expensive and my dog is scratching right? there superfici unless it sense a dude and.
Alejandro Cremades: Ah, good Stuff. So So so I guess when it comes to Pattern recognition for being able to identify the ones that are the winners from the ones that maybe it that is not so much worth of. Perhaps you know the the investment like how. How do you go about identifying Winners. What are what are some of those patterns that you’ve seen over the course of time. Yeah, is that the bird I got you? Yeah, you got like a shoe they are going on and incredible.
David Waxman: Um, can you hear that we have chickens I do do I think there’s a squirrel. Um.
Alejandro Cremades: Pray? Yeah, so it go So so I think it stop now. No okay, still going. Okay.
David Waxman: Pattern Recognition Sorry it’s you want start that again or should we wake till least Nots you not really, but it’s cool if you can’t hear just that That’s um, color you can ask me about pets later.
Alejandro Cremades: Ah, yeah, this is amazing. We’re gonna get this happen. We’re gonna make it happen. You’ll see so okay so it’s gone. So so basically when it comes to Pattern recognition. What have you learned about identifying winners.
David Waxman: Um, well I think it’s really hard. Um, you know being ah being a a founder is way harder than being a Vc emotionally and work hours and stress and like it’s much much easier to be a Vc but to be a good Vc is really hard. Um. And um, and you know after a decade of doing it I feel like I’m still learning every day but 1 thing that comes around every time is it really does at our stage which is the seed stage boil down to the founder right? or founders. Um. We’ve seen a lot of our companies right now sort of I mean basically you you know you need someone who’s really resilient who can think on their feet who listens well not just to us but to to sort of everybody around them in the market. Who is charismatic and can hire people and kind of bring people to their cause raise money all of that stuff. Um, so it’s you know and they have to be passionate. They have to they have to really want to do whatever it is. They’re doing and you know passion can come from all kinds of places but it’s it’s. You know so someone’s it’s it’s really hard to be a founder and so you need someone who’s going to push through and be able to change as things change I cannot fucking believe this sorry come on like seriously people.
Alejandro Cremades: Talking. Ah.
David Waxman: Um, okay, where are we.
Alejandro Cremades: Ah, ah here here we go. So so so so go again with the um, you’re finalizing on Pattern recognition for your winners.
David Waxman: Pattern recognition so I’ll just I’ll just start again. So um, I’ve been one of the things that I keep learning over and over in my career is that you can look at the product you can look at the market you can look at the you know the Tam you can look at all these things. But really it always boils down to the founding team and especially you know at at our stage which is seed There’s not that much product and there’s still a lot to to learn. Usually there’s some kind of traction and and signal from the market that the thing is valuable but but really it takes you know what we look for is resilience. Look for you know because you have to be able to push through really hard things you have to be a good listener. Um, not just to us but to everybody on your team and around you and your customers. Um, we look for somebody who wants to go big. Um. And really wants to go big which is sometimes hard to tell and um and someone who is able to rally support around them. So you know as ah as a Ceo you need to and founder you need to build a great team. You need to get money into your company to support your growth. You need to. To get customers to engage with you so all of those things really come down to the to the person and what we’re seeing right now. It’s really interesting is you know chat gbt has changed a lot of people’s plans and thrown somewhat of a wrench into some you know some people’s companies because it’s like this thing that we were doing this way.
David Waxman: Now you can do it that way and I’m seeing founders respond to that challenge. Um, and and all of them in our portfolio are doing a really good job of saying either know that’s a distraction or yes we have to get ahead of this. Um, it’s It’s great to see and that’s sort of inaction. Ah the kind of. You know the kind of qualities that make a founder successful.
Alejandro Cremades: And I know ah for for what you guys are doing now and also for previous companies for you building around culture was very important. Why was important so important.
David Waxman: Um, because ah, you know so a software company basically is its team I mean most companies are their team and I think it’s really important early on because the people that you hire. The first few employees you hire end up hiring the next few employees and those employees end up hiring the people after those and if you set a tone about the kind of person you want at your company of you know whatever it is. There can be sort of different ways to to build a great company different management styles. Um, you can. You know and if you and if you work on that early you can propagate it through the company people want to join companies. Of course they want to have good jobs. They want to make money all of those things but but you know when employees come into a company. They’re also looking at the other people who are there do I want to be part of this group and if you if you have a company full of. Top performers who are great and fun and you know whatever you once again, whatever you’re looking for you’ll attract more people like that whereas if you want to sort of bring in people who are very different than the team you have. That’s that’s much harder.
Alejandro Cremades: So for the people that are listening that are you know, obviously excited about the opportunity of maybe you know sharing with you What they’re up to what would be the best way for them to reach out and say hi.
David Waxman: Um, sure I am that can email me I’m David at 10 1 ten t e n o n e t e n dot net
Alejandro Cremades: Amazing. Well hey David thank you so much for being on the deal maker show today. It has been an honor to have you with us.
David Waxman: Thank you.
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The post David Waxman On Taking His Company Public For $1 Billion In Only 12 Months And Now Investing In Early Technical Teams appeared first on Alejandro Cremades.
Before others saw the need or believed it was possible, Ajay Kochhar was working on how to recycle EV batteries. He’s now turned that into a billion-dollar, global, and public company. The venture, Li-Cycle, has attracted funding from top-tier investors like the US Department of Energy, Koch Strategic Platforms (“KSP”), and Glencore.
In this episode, you will learn:
- Recycling EV batteries
- How Li-Cycle is championing this space
- The benefits of going public
Alejandro Cremades · EP 617 Ajay Kochhar On Raising $1.3B To Solve The End-Of-Life Lithium-ion ProblemSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Ajay Kochhar:Ajay formerly worked at Hatch in progressive roles with the Advisory and Industrial Clean Tech practices. During his time at Hatch, Ajay particularly developed expertise in the Lithium industry.
For example, he has evaluated hundreds of lithium projects for a potential acquisition by a key lithium producer. His engineering experience spans the entire project lifecycle, from studies to construction and commissioning.
Ajay gained entrepreneurial experience from a young age as part of a multi-generational family business named Ashlin BPG Marketing. Ashlin supplies high-end leather accessories to the e-commerce and promotional product industries.
In late 2016, Ajay co-founded Li-Cycle Corp., a clean technology company. Li-Cycle is on a mission to solve the global spent lithium-ion battery problem and meet the rapidly growing demand for critical battery materials.
Ajay originally graduated from the University of Toronto in Chemical Engineering with honours.
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Read the Full Transcription of the Interview:Alejandro Cremades: So alrighty hello everyone and welcome to the dealmakerr show. So today. We have a really exciting founder. We’re going to be talking about building scaling all the good stuff that we like to hear you know also taking you know he took his company public. So I think that you know it’s going to be very interesting to see there. The differences between. Running a private company versus now running a public company. Ah, but in any case you know I think that you’re all going to find this interview very inspiring so without further ado. Let’s welcome. Our guest Today. Aj kochhara welcome to the show. Thanks.
Ajay Kochhar: Thanks all Andrew great to be on. Thank you.
Alejandro Cremades: Oh aj so give us a little of a walkthrough memory lane born in Oakville in Ontario canada so how was life growing up there.
Ajay Kochhar: Life growing up there would to be Frank was typical suburb upbringing. Ah you know look I come from you know, family of entrepreneurs that a family business and you know personally always had a propensity towards stem you know science technology engineering math. So. Always wanted to go into that sort of field and ah and you know had a passion for chemistry in high school and sometimes I say in life you know sometimes it’s your teachers that you remember had some great teachers at the times. That’s why I got very interested in it in part and decided on the back of that either 1 to become a doctor actually. But. Go down the path of doing health sciences or do engineering and so I chose out of that to do chemical engineering and life evolved from there but pretty pretty normal upbringing. But I’d say very entrepreneurially drone even at a young age.
Alejandro Cremades: That That’s Amazing. So Let’s talk about Let’s let’s talk about the entrepreneurial. Um, you know drive there. So How how how was that experience for you of being able to see your family. You know the ups and downs of running a business in. I Mean did you know at that point that you wanted eventually to run your own company or or did that develop you know, anywheres more clear down the line.
Ajay Kochhar: Yeah, and everybody’s different I think for me personally I did know I actually knew I think even from high school and I eventually want to do something primarily on my own look I think having been exposed to family business import expert business selling to retailers the time as other products so you know I. I Saw the ups and downs I saw at the same time though I saw the flexibility that it gave them but also the pride of owning something and making it happen I think that was all evident and everything I was observing so I knew for me that was something I wanted to do I Think the main gap of course you don’t want to be a entrepreneur you want to know. Is it something that you actually potentially your passion about hopefully but also is there some sort of key skill key reason that you’re bringing to the table. Why you should be the one to start a company I think that’s important. Ah so I didn’t know that part I didn’t know obviously at that time but I always knew that I wanted to start something and build it even from younger age.
Alejandro Cremades: And obviously that ended up happening I we’re gonna be talking about that in just a little bit but you go to Toronto as you were saying chemical engineering and then eventually what happened from there because it took you some time to you know to really to really go out it as an entrepreneur. So what needed to happen for you to. To know that it was time. So.
Ajay Kochhar: Yeah I always felt that I needed to bring build some real fundamental chops. You know in terms of either to be technical business learn. What’s what? Um and I think it takes time people always say even in the young age and often said now hey find your passion It’s so hard I think to do that. Think what we can more easily do is find your curiosities right? What are you actually curious about and so I was always curious about I mentioned chemistry I was always curious about I think sustainability was important I went to school at a time where that was starting to grow to become a a theme and. And so you know through engineering chemical engineering. It was interesting. It was right at the cuspy moment I’d say where historically that industry was a lot of petrochemical so like oil and gas but is around the time where there started to be new careers or new areas opening up like environmental engineering sustainability. So I was interested in that and. And through ah through that program I actually got a job. Um and through meeting some folks at a company named hatch so hatch is a global engineering firm ended up working there even while I was at school through the summers and that firm they’re global firm based in Canada but they have divisions of metals mining energy infrastructure. So. A lot of the things I was quite interested in. They did a lot of it and it’s really the engineering aspect of it in consulting on that so work through through the summers and ended up just happenstance. Sometimes it’s how these things happen in the metal space. So I was working on nickel projects copper projects rare earths. Ah.
Ajay Kochhar: You know Lithium came in a bit later which is the theme here but I just was interested in how you could take really complicated technical design of these facilities. But how do they work as businesses. Ah, these are Mega capital Projects. You know at the time very Fascinating. So That’s what got me interested from there and so I went to work there full time and of course. Left that eventually you start lifecycle.
Alejandro Cremades: And I was you know the the experience here in this company gave you me your other half in business tim a hundred percent
Ajay Kochhar: That’s right, very important right? Very important I always say I’m I’m a big fan of of 2 in business I know I know many founders that are you know, just by themselves. But you know look I think you can always make a powerful duo when you find somebody that you have great complimentary. Skills with and frankly get along with and can help make things happen. So I met Tim. Ah at hatch when I was working there. So the story of this is was working in as I mentioned base metals and was a very ah complicated group at the time the title was I believe non fers off gas handling I didn’t even know what it meant when I joined the group. Really what it is is ah pollution control equipment. So these are in like nickel smelters copper smelters where they have emissions and you’re trying to scrub them and clean them to be suitable for the environment. So that’s where I started but that gave me exposure to those spaces now. Fast forward of course nickel copper. Coba and all these materials are very important for evs I didn’t quite know that at the time but that’s how our worlds evolved through that also did some work in lithium so all this is metallurgy at the end of the day. It’s metallurgical processes to make metals and salts. So lithium came in I met Tim. Project I was doing the project execution planning he was managing the project. This is the lithium project in Europe so good became very fascinated because now of sudden I could relate to look where is this actually going what is it going into this case predominantly batteries. That’s why these projects were being built so that is very interesting because now you can relate technical design with the end market.
Ajay Kochhar: You know, use work through that. Um and then made a switch within hatch to more magic consulting. So at Hatch. It’s a pretty niche focus in that space. It’s really just transaction advisory. So now of sudden you’re taking this skill set of saying okay I know how that facility is designed what if now you’re advising. Ah, fund or a strategic who’s looking to invest or acquire it. They need to do a technical review dd to support them on that but you need to be able to link up technical know-how with economics what does that mean for the business case. What does I mean for the business so that was great. That’s why I joined that group I was very interested in that tim also had joined the group at the same time. So he told me at the time he said hey ij you really should is recommendation to me so you know focus your energy on lithium. It’s a growth space. You’re clearly interested in it I’m doing a lot of this space. Let’s do more together and so that did lead to doing more studies projects looking at. Again, screening different assets for potential acquisition investment. So lots of work in the lithium space at the time what happened was and I’ll tell us that I’ll pause. You know we were looking at different gaps we were seeing gaps in any maturing industry. There are gaps so one of the gaps we saw was recycling and. But we looked at other mature commodities lookedium out a commodity but look at other materials we’ve worked in like copper aluminum pretty mature recycling supply chains. But in the case of lithium you know so new development was even there yet. So we were saying hey we’re the business models or the technology to do this. We didn’t see that and so.
Ajay Kochhar: We said um we think we can do something here. Ah you know make it more fit for purpose make it economically viable. So fast forward to 2016 I had this entrepreneurial bug I wanted to do something I didn’t know what it was so all this is perfect. You know we have the skill sets of how to design these technologies these plants execute them importantly, not just the technology. But all the aspects of executing it. Um and we think we can work out the business model site. So we said hey ah this is very worthwhile was 2016 at that time very early electtrification days. So yeah I left hatch Tim Mufter on the same time we started the company.
Alejandro Cremades: And and and that’s incredible and what what do you? think you know made you guys so complimentary because you were alluding to it. You know, not only from a business perspective but then also from a personal perspective.
Ajay Kochhar: And that was now seven years ago almost
Ajay Kochhar: Yeah, yeah, I mean we worked together couple years there. Um yeah look I think my propensity and this is what we discovered as time went on as an example of how you can you know join forces and get 2 things done in parallel. I mean I I definitely get in love and Tim and I started both on the technical side. So. That’s where I’m rooted. But I love the communication side I love the external facing aspects. You know, different stakeholder Relations Tim can do that absolutely tim also is ah the sort of guy that you know back when we were much smaller. And we’re building our first facilities we have a 2 face model where we shed batteries then we refine them. He’d be the guy standing right? behind beside the team fixing the shredder it’ something that’s rough. So I mean I’m happy to do that. But maybe I’m not the right person I won’t necessarily do it right? So very complimentary in terms of our propensity of where we want to focus so as it’s evolved. You know Tim has kind of the core of the business under his wing be it. The operations building up the projects. You know some of the hr aspects at time to that and I’m very focused on with him. You know, making sure that’s all good and then also the external aspects so we’ve discovered how we both have propensly different areas. I could see if you were just one person. Um, you could definitely do it. Um, but there’s only so many hours in the day and 2 is if it works well more powerful than one. So I think it’s been great.
Alejandro Cremades: Absolutely now for the people that are listening to really you know, get it What ended up being the business model of lifecycle. How do you guys make money. Okay.
Ajay Kochhar: Yeah, so we just really simply put when we looked at the space and when we left catch what we were seeing was like a lot of waste oriented handling of these batteries at the time you can imagine so with my batteries just so people know. These are like the rechargeable batteries in your smartwat all the way to your smartphone but importantly also in evs what we were seeing in the market was more of a waste approach so we were seeing them treated a little bit like a waste. Maybe even people had to pay at the time go to this to get rid of the batteries and for us it was like wow like. We just we’re helping these clients dig up the stuff from the earth refine it and then do all this complicated manufacturing and make these batteries and then it’s not worth anything in the like that doesn’t make any sense so that’s a 2 part problem. It’s the business model and the technology. So what we do? How we ultimately make money. Is by extracting the materials from the batteries and then selling those and products but it’s important how you can get back to a high recovery and portly get the lithium so lithium’ is a lot of the value in the batteries when we were looking at the historical technologies a lot of them are wasting lithium just getting nicocobalt. It’s really about maximizing your revenue stream from what you recover being able to sell that but doing it in an efficient way at a low cost yet environmentally friendly and also safely so that really requires fit- for-p purpose technology that took some years to develop scale up raise money you know, get through that very initial phase and then scale.
Ajay Kochhar: And start to commercialize and build the commercial versions of that.
Alejandro Cremades: And the I know at the early days Aj were not easy. You know the ups and downs I mean what were some of those ups and downs that you guys were dealing with and then also how did you guys embrace them to to keep going.
Ajay Kochhar: Yeah I mean I just to paint the picture you know left hatch ah typical engineering or advisory type schedule very busy and just to put like a real life point on it. You know you leave and just on a practical point like your schedules a boyid I mean what you’re going to be doing next week up it’s open so So yeah this is a great idea right? Great idea like really excited. Obviously that’s all good, but then you leave and it’s the shock right? Especially if you know you’re used to a certain pace you’re used to certain things. So I think at the beginning at the same time we knew where we needed to go in terms of the technical aspects like when do we need to get done to prove this thing out. But was missing was and what we had to learn was how do you then? backfill that and accompany with it. The business model aspects how which then leads into how are you going to raise money and why do need the money. So look I think some of the trials tribulations at the beginning if you rewind to 2016 through like 2019 evs yeah, they were starting to become more mainstream but still, there’s a lot of doubt even at the time if you remember where Tesla was at remember even some of the things they were facing ah, people were even on evs are like ah okay, yeah let’s see so you can imagine when you say oh yeah, we we’re going to do recycling. Let my batteries. Like what are you talking about like isn’t that 30 years away or something and so you know at the same time we knew these things take time and we knew that the whole supply chain is going to scgrrrrrtrale and also what people were missing is as you make batteries. It’s not perfect. It has a level of scrap so that took a lot of education but I remember vividly many meetings.
Ajay Kochhar: People say oh you just working on a science project or what do you What are you doing? How’s this going to make money and I get it because on the other side. The early stages you’re trying to prove the concept. You’re trying to bring the customers along show that there’s real demand pull for what you’re doing and show that the solution that we’re trying to validate works. So yeah, for sure early days. There’s a lot of lot more unknowns. Um, and definitely a lot of doubt. But how you get through it look I think at a very base level. You have to be an optimist. You have to be a realist in terms of what what works? What doesn’t you can’t be deluding yourself. Ah, you know the not being clear and honest about what the challenges are but at the same time you have to have a positive outlook and I think that’s something which both Tim and I have optimism for the future and that gives you a base to say okay well we’ll make it through this. We’ll figure it out. And to have a solutions oriented mindset to say okay well that’s the problem of what are we going to do now and then you need the persistence to see it through but it’s very emotionally wearing and that is the life at the beginning of being an entrepreneur.
Alejandro Cremades: Absolutely So I guess for you guys at what point do you realize you’re turning a corner and you guys are gonna be all right.
Ajay Kochhar: I remember in 2020 and it was a really odd time mostly given covid but many different things happening in the world and I don’t know if covid just reminded us in a quicker accelerated way that how so how fragile our supply chains are maybe it was. You know, not having people driving around in the pristine air. All of a sudden saying oh that’s that’s quite amazing. Ah, all of a sudden this amount of focus on Environmental Technologies Climate change you know all of a sudden accelerated very quickly because I remember 2019 was not like that. And we were definitely out there. You know trying to pitch what we were doing and where we’re going and overnight all of a sudden things catch obviously at the same time you had from a macro perspective liquidity being you know pumped into the market. All of a sudden. Um, but just certainly from a tone perspective it changed and I think. Always I come back to? yeah, raising money is ah a big part of it. But what do the customers saying what do the customers want and I think the thing that changed all of a sudden was we were going from having dialogue at a vehicle Oem or battery maker perspective that were kind of 1 ne-offs or you know regional or with a regional office. All of a sudden now you were starting to have like a pretty strategic conversation to say hey if we do this right? You can give us your batteries and you can get back your materials and vice versa. They were starting to say our customers and have been saying. That’s what we want. You know we want to give you batteries want the materials back because this is how we’re going to get domestic sustainable.
Ajay Kochhar: Lower cost more resilient supply chain in the long term so that was a big changing moment because in the day if the demands not there then you can do all everything you want, but the business is not gonna is not gonna thrive. So so that was a big aspect. And lastly. Around that time too was this whole onsoring theme so out of nowhere from 2 years before that like basically no one talking about domestic battery manufacturing all of a sudden having this very rapid growth of these giga factories started with Tesla but now. Many different companies North America europe so from a very asia -centric supply chain purely to one that has a lot of domestic manufacturing why that’s important for recycling is that comes with scrap. So now you actually have a base to say okay, this is a roadmap for us to build out and scale so that was a clear. Catalytic moment and 2020.
Alejandro Cremades: And and also for capitalizing the business. How was the journey of of racing money prior to the company going public. How much capital Do you guys? raise prior to taking public.
Ajay Kochhar: Yes, so in total we’ve raised now you know, almost one point three billion that’s to date that includes the commitment I’m including there from the department of energy that’s due to close shortly. So so that’s overall to the point that we were public I’d say it was a minority. Never I think fishly better a number but it was a minority if that number significant minority that we had raised so you know what we were doing up until that point it was mainly the piloting validation and we run this two phases model where we shred the batteries. This is what we call our spokes is spoken how model reverse logistics. And then the hub where we refine and so as we iterated one of the things we figured out is hey we have to be in the market. We have to be doing something commercial but many clean tech companies climate tech companies. They have this issue right? You you have to do validation and then you have to build a commercial facility and then also need a bunch of money right.
Alejandro Cremades: Now.
Ajay Kochhar: And from an investor perspective. It’s it’s hard because you’re saying well how am I going to know that that’s going to work unless you’re already doing something that I can see. Okay, you have some traction so one of our it was actually 1 of our board members 2018 or 19 we had these 2 technologies and we were trying to do both at once. He actually suggested hey like. Why don’t we parse a set of bit do the spokes you know in lockstep with customers their lower capital requirement gets you in the business. Get some flow in the business and also builds that feed at advance of the hub and that’s what we did and that then color is the capital needs. We didn’t need a lot of capital before 2020 thing that was a catalyst and for us to need more capital was the hup which is a centralized facility much larger scale um, scaled larger because you want to have those economies of scale and also get all the feed from all the all the spokes and that then colors the capital needs so is basically at that moment where we said. Okay, we now need. This much larger slugger capital you know hundreds of millions of dollars to fund that and see that through and that was what led us to this process of assessing different options which ultimately ended up with us going public.
Alejandro Cremades: What was that process like what was that experience of going public.
Ajay Kochhar: Yeah, so we back in late Twenty twenty in early twenty one we so made this decision to move forward with the hub. That’s what we we knew we needed to do why did we do that again that’s really how you scale the business us we make the better grid materials that’s also how we best serve our customers. They want you know so spokes we make this intermediate product that goes to the hub we transform it the customers ultimately want back the battery grain materials. They want it domestically so scale purpose timing all line up. So I thing that then colors what we need so we went through a process we looked in the private markets at the time. Um, and and many options in the private markets. We also looked at this option around going public we could and it wasn’t you know I’d say now as mainstream relatively. Ah, you know, clean tech climate tech has been It wasn’t at that point yet. Um, but there was still interest. And we definitely had the ability to raise the money privately the thing that struck us at the time and we compared both options alongside each other it did come down to a cost of capital aspect. It also came down to a time perspective. You know I’ve spent a lot of big time. This is the benefit of having 2 people. Um a lot of my time at the end of the day even pre-goin public was focused on raising money I mean just to make sure that we had what we needed to keep going so so having having been through all that time you kind of take a step back and say well hey do I have enough time to focus on the business. Yeah.
Ajay Kochhar: And are we getting enough capital at once to be efficient and so all these things kind of played in and you know we have experience internally with you know folks that have been public before so we were not blind to the pros and cons obviously being public for staying private and so in the end, all those things. Together. We started to go the public route alongside raised a large summit capital was five hundred and eighty million dollars at the time went through a process of course to get public and eventually list in August of 21? Um I can talk about what’s happened since then but that in itself was quite the process. Ah, going through all the filing iterations with the scc and it can take a while so that was ah that was a journey in 2021.
Alejandro Cremades: Wow, That’s incredible and obviously you know to all those investors you had to um convey a compelling vision so in that regard imagine you were to go to sleep tonight a J and you wake up in a world. Where the vision of lifecycle is fully realized what does that world look like okay.
Ajay Kochhar: Yeah, we ah it was actually interesting that we ah 1 of the awards we won recently was this bloomberg new energy of finance pioneerss work. It was interesting. 1 of the articles you wrote about it. They actually think paned it pretty well it said imagine it’s 20 just Tuesdays year twenty thirty 2040 and you’re driving an ev and it’s made for majority recycled batteries recycle battery materials I think that’s a pretty compelling vision of the future. Ah, what do we want? We want to be basically enabling more e these to get on the road. We want to be enabling cleaner these. With a lower carbon footprint and we want to be enabling eventually more affordable electric vehicles and so we can do all that through incorporating recycled materials that can stay domestic. Don’t have to take round trips around the world but eventually get back into the end product on mass at scale and so I think for me. And doesn’t just seem to be evs. It could be energy storage could be any application both my betters. That’s really the definition of success at scale to the company.
Alejandro Cremades: That’s ah, that’s exciting for sure hey now for the people that are listening to understand you know a little bit on the scope and size of lifecycle I mean what? what? What do you feel comfortable sharing in terms of number of employees or anything else.
Ajay Kochhar: Oh yeah, we’re 450 people plus today we have presence in North America europe a packet pack is primarily a commercial you know office. But our main assetses are in North America Europe we as I mentioned run this two Phasese model. Ah, spoken hub the spokes shred the batteries. The hub is the refining aspect so we have in North America four operational spokes commercially, we have one in Ontario Canada ah Rochester new york gilbertb azonna and Duslos Alabama so very good coverage around the United States and Canada the whole point is you want to be close to where the batteries are so minimize that logistics cost from the customer. We don’t typically bear that cost but make it easier for them to make that decision to go to us and then we’re building this large hub in Rochester New York so that just for a sense of scale is circa. 60 football fields in size just to help relate for people so quite a large facility in terms of the land mass that it occupies will be the largest ah new lithium source in the United States whether from recycling or mining and we’re doing that in a short period of time because it’s recycling it doesn’t need. Long permitting associated with mining also our recycling type is much easier to permit. We have our permits for that. So so yes, that’s North America and then in Europe we have 3 spokes that have been announced or are underway Germany which will be our flagship facility. Our largest in Europe we. France.
Ajay Kochhar: On route as well as Norway So very similar Strategy. We’re falling where the batteries are starting with commercial contracting build the spokes to build up that baseload of feed make the black mass and eventually the strategy would be routed it with you know in general a scaled hup. That’s basically our. Region by region strategy and lots more to come.
Alejandro Cremades: So That’s amazing and they obviously you know as you’re suggesting you know and and you are talking through all these different regions. What comes to mind is is Culture. You know how do you go about culture when you have all these different you know, offices and different. You know, maybe like. Because at the end of the day you know the culture is the one that you establish in the in the in the in the Hq in the headquarters and those different you know other regions. You know they have their own different variations of whatever culture you have established in the Hq So How does that work and how do you guys go about making sure that that’s. Unified and aligned. You know as much as possible.
Ajay Kochhar: Absolutely and I think it’s you know customization with some key themes that are unwavering right? So that’s that’s the key here we know look it’s been interesting for Tim and me we obviously our roles have developed shifted but 1 of the things that we’ve understood. Well. Is at the end of the day us and our leadership team set the tone and visible leadership. You know, helping set that culture is really important. It’s starting it off right? You know we have a set of values. We have a set a vision a mission. We’ve continued to iterate that. Also as time has gone on to make sure it’s relevant but a lot of the same things have remained true whether it be safety being a top priority our ability to be agile right? That’s large amount of the ability that we have to to move efficiently also quite different for a hard tech. You know company. Um, so things like that that we ensure are instilled and grained. Part of the way that we act and hiring you know folks that we believe embody those values right? and are going to be great role models because we also can’t be everywhere all at once. So that’s one side of it. But at the other side of it. You know as I just mentioned we are in all 3 of those regions. The cultures are very diverse. The cultures are even diverse within say heat. The us. Different countries and then Europe different regions within those countries right? You have to know that and I think the the beginning there which will always serve you well is leading with empathy so understanding, you know where are those folks coming from what is their way of of leading themselves supporting themselves.
Ajay Kochhar: And you know being clear about the things that aren’t wavering like safety. You know we we can’t compromise on safety but then understanding how we can tailor our approach to be effective in communicating with those folks locally and I think that’s hopefully what drives a 1 team 1 lifecycle mindset.
Alejandro Cremades: So we were we were talking earlier about you know the future the future that you would envision for this and I want to shift gears here and talk about the past by being able to talk about the past with with a lens of reflection. So. Imagine I was to put you into a time machine. Aj and I bring you back in time you know, maybe like a seven years ago when you were still working at Hatch and you were able to grab that younger a j that younger Tim, you’re able to sit both of them down. And you are able to give them 1 piece of advice before launching the business. What would that be and why given what you know now.
Ajay Kochhar: Trust your gut that would be the advice. You know I think judgment comes with experience and I think judgment is you know what? Ah which you can ring at the table a lot and I think you know not to say that. Everybody makes mistakes everybody. That’s how you grow. That’s how you progress I think some of the moments when I reflect on different. You know we’ve obviously again, we’re scaling very well. We’re in a great place. Very excited about the future and I think about the moments we’ve had as we’ve moved on and ups and the downs and at times you can. It’s very easy as a human to second guessss and of course you have to do sound first principles analysis you know and do the work to get to a conclusion. But what I’ve learned is it sometimes is that blink feeling that you get. And don’t ignore it and and seek that out when you have it and listen to it as much as you can question it if needed. but but I think that would has and continues to service fall and I think the moments where I look back and I say oh I wish did something different there. It’s probably usually where I didn’t quite listen to my gut. And there were other things that were around it happening that drove a certain decision in a different way. All fine, no harm to foul but definitely something I’ve taken heart since.
Alejandro Cremades: I Love it So a J for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Ajay Kochhar: People can reach out at info at Lifecycle.com that’s info at l I hyphen c y c lee dot com I think also on website there’s other ways to to get in touch with us. Ah, you know for folks that are out there wondering also hey. And offs is for entrepreneurs and others and they’re probably thinking you know what can I do spread recycling batteries we work with different partners as well. Main focus is b two b main focus is on auto batteries and like but we also do take consumer electronic batteries. There are partners we work with that run these you know collection boxes at different stores or areas you can take back. You can look it up. We work with groups like call to recycle and other partners like that sore wondering people often ask hey how can I do something you know as part of this if you do have devices sitting in your drawer at home. There’s valuable cobalt in that I can go to making new ev batteries. There’s a collection program usually in a way that eventually gets to us. But that’s a way that everybody you know can play a part in electrifying our future.
Alejandro Cremades: Amazing. So aj thank you? So so much for being on the deal maker show today. It has been an absolute honor to have you with us.
Ajay Kochhar: Thank you all Andre great pleasure to be on.
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The post Ajay Kochhar On Raising $1.3 Billion To Solve The Global Manufacturing Scrap And End-Of-Life Lithium-ion Problem appeared first on Alejandro Cremades.
Ben Lamm has already started a handful of companies, with just as many exits. He is now onto his biggest adventure year. An effort to rewild the planet, which has already attracted $225M in capital and 50 advisors. The startup, Colossal Biosciences, acquired funding from top-tier investors like Thomas Tull, Breyer Capital, Draper Associates, and At One Ventures.
In this episode, you will learn:
- Creating additional value with spin-offs
- The upside of embracing your critics
- What Colossal is working on
Alejandro Cremades · EP 616 Ben Lamm On Starting 6 Successful Startups And Now Raising $225 Million To Fix De-ExtinctionSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Ben Lamm:Ben Lamm is the co-founder and CEO of Colossal. Ben is a serial technology entrepreneur driven to solve the most complex challenges facing our planet.
For over a decade, Ben has built disruptive businesses that future-proof our world. In addition to leading and growing his own companies, he is passionate about emerging technology, science, space, and climate change.
Active in angel investing, incubators, and startup communities, Ben invests in software and emerging tech and is deeply engaged in the technology, defense, and climate change communities.
Prior to Colossal, Ben served as the founder and CEO of a number of companies, including Hypergiant, an enterprise AI software company focused on critical infractures, space, and defense; Conversable, the leading conversational intelligence platform that helps brands reach customers through automated experiences acquired by LivePerson; and Chaotic Moon, a global creative technology powerhouse acquired by Accenture. Ben was also the co-founder of Team Chaos, a consumer gaming company acquired by Zynga.
Ben is a fellow of the Explorer’s Club, whose mission is to promote the scientific exploration of land, sea, air, and space by supporting research and education in the physical, natural, and biological sciences.
He also serves as a Scientific Advisory Board member on the Planetary Society and sits on the Advisory Board for the Arch Mission.
Ben has appeared as a thought leader in many publications, including the Wall Street Journal, New York Times, Forbes, Entrepreneur, Wired, TechCrunch, VentureBeat, and Newsweek, on topics such as innovation, technology, and entrepreneurship.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerrs show. So I’m very excited with the guest that we have today I mean his his background iss so extensive I mean I mean when you hear it, you’re not gonna believe it I mean I couldn’t believe it myself I was like losing count on how many companies his bill scaled and also exited. But. We’re gonna be learning quite a bit I’m sure that you’re all going to be very much inspired with his journey so without farther ado let’s welcome our guest today Ben Lam welcome to the show.
Ben Lamm: Thanks so much for having me I hopefully I can live up to the the intro you just threw at me.
Alejandro Cremades: So so Bernie Texas it sounds like you spent quite a bit of time there so give us a little a walk through memory lane. How was life growing up.
Ben Lamm: Ah, you know I love you know Texas is a great state to one grew up in It’s great state to raise a family end. It’s great state to travel from you know luckily with dfw you can travel anywhere in the world. You know it’s also a great business friendly state you know and and I feel like. In the last few years especially since covid people are starting to recognize how great of a state it is in in terms of you know how many people that we are getting moving from both coast to Texas I feel like Texas is finally kind of getting its moment to shine and in terms of how much it has to offer.
Alejandro Cremades: Yeah, no kidding I mean Austin has been without a doubt the the biggest winner of the pandemic by a mile. So why.
Ben Lamm: I and I was actually born in Austin which is I think that makes me a ah weird unicorn in itself right? because most people I meet in Austin weren’t born in Austin and so I’m I’m from kind of the old school kind of hippie Austin that I guess used to exist.
Alejandro Cremades: Now out of all things why finance and accounting What are what a weird blent especially for someone that has dedicated his life to technology.
Ben Lamm: Yeah, that was ah um, not really optional. So you know my my family made a deal with me that if I maintained a certain Gpa and went to school that they approved of and. Also gave me um you know also was in a major that they felt that you know I could get a job potentially in that they would help pay for school and so um I felt like it was a pretty um you know, fair trade. So it. It was great because you know I you know while I didn’t go into finance and accounting it really did help me. Ah, start to understand you know as ah when the business world start to understand term sheets. Ah you know balance sheets income statements start to understand you know how to think about the financial aspects of of a business specifically in technology.
Alejandro Cremades: So then I want to ask you now like this entrepreneurial drive. You know where where does it come from I mean do you have anyone in the family or or what does it come from? yeah.
Ben Lamm: Yeah, you know most my family was pretty. You know my mom was a Spanish teacher. You know my and my single parent kind of growing up and then my role models like my uncle and my grandfather when I they worked no traditional jobs. My uncle was in private equity and my and my grandfather. Was in the automotive industry and so I feel like you know and I’ve said this before I feel like it’s a wiring thing I don’t know if it’s something I would wish on everyone. The entrepreneur lifestyle with the ups and downs and craziness that comes with it. But I think that there’s kind of this I think I’ve said before that. There’s a combination of like dysfunctional traits that properly exist in your genes that make you want to be an entrepreneur and so I was just you know I don’t I don’t think that I was highly employable. Um, and so the choices I think were to. Go build companies or ah, you know to you know, sleep on my parents’ couch.
Alejandro Cremades: Because in total how many companies have you started today. So.
Ben Lamm: I’ve I’ve I’ve started been the Ceo of 6 Um, but I’ve I’ve helped start you know another kind of 4 or 5 in addition to that over the years
Alejandro Cremades: So so then take us take us you know through how everything started so you were in school and then you know like pretty much there. That’s where the I simply interactive you know comes to mind So what was the process like okay.
Ben Lamm: Yeah I I got to give credit for credits too. I you know had a wonderful professor. Dr James Boschinsky who was you know and I’ve always kind of gravitated towards academia and in the incredible knowledge and and ideas that come out of academia and.
Ben Lamm: Um, you know Dr Moe as he’d go by was one of the world’s leading performance improvement technologists in one of the world’s leading instructional designers and he actually built a lot of the core fundamental learning models that all these corporate training groups would use to understand you know cognitive. Learning models to understand how to relate content to action and and do just in job. Ah, just-in time job training and and really help you know workforces you know train their so their their their staffs and so um I got you know, very very lucky that I got to study underneath him I was. You know, probably not as passionate about e-learning and in in the idea of performance improvement technologies but I did love the application of leveraging the latest technologies like learning management systems and and other tools to help you know create distributed systems for for learning way before like you know Zoom and. Pandemics made it cool. So um I was very very fortunate to have just an incredible. Ah, you know, advisor and professor that you know he started. He had a consulting business I started working with him. Ah you know fast forward a few years I started a company and actually made him my chief learning officer. And and then we grew that had customers like black and decker and and whirlpool and and ultra and and a lot of these you know, massive corporations and it actually grew to be 1 of the the fourth largest e-learning company in the us which is pretty exciting.
Alejandro Cremades: And first company first exit how how was going through that exit like.
Ben Lamm: Ah, you know you you don’t learn you know, even though I would school for business. You don’t learn everything in in business school. They don’t teach you a lot of things about like supermajoities and and board dynamics and whatnot a lot of that’s just trial by Fire. So um, you know I learned some painful lessons you know in in that company. Which that I you know hopefully didn’t repeat as as as I I went on in my journey but it was It was definitely really interesting and you know there were a lot of you know great opportunities that came from you know, selling that business. But then there was other you know, interesting kind of social dynamics that started to change and and Whatnot. So. Yeah, the entrepreneurial journey you know has its you know it’s It’s always you know Feast or famine so you always you know, kind of go through that and you have to understand you know the impact it has on your life as well as the lives of others around you so it was a very early learning experience for me to start to understand how the kind of career choice. That I made really wasn’t a job but was a lifestyle that I had chosen.
Alejandro Cremades: And when you say a lifestyle what does that look like because I mean I’m I’m sure that there’s a lot of people that are listening that maybe they’re still in the corporate world. They’re reading Techcrunch and you know the entrepreneur entrepreneur magazine and and getting all excited seeing all those millions floating everywhere. Is is it really like that that.
Ben Lamm: Um, well I mean maybe for some people it It has not been like that for me I you know I think it’s a constant you know, uphill Paddle both ways in the snow and fire in in a meteor shower. So it’s um.
Alejandro Cremades: Yeah.
Ben Lamm: Yeah, the entrepreneurial journey you know I don’t think there’s anything like it right? It’s it’s incredibly exciting for me. It’s been the most rewarding thing that I think I I could have done ah to date. But at the same time you know it comes with its own. Um, you know challenges right? like you’re going to sacrifice relationships you’re going to sacrifice. You know, ah your health in times you’re going to sacrifice sleep. Ah, you’re going to have additional pressures that you may not have in a typical 9 to 5 right? And so um, it’s it’s a tradeoff right? and so you know you have to decide for yourself. Whether you think that you know juice is worth the squeeze. Um, but at the same time you know, ah like for me I don’t think from a ah you know from my personality style I don’t think that there’s anything else that you know would probably really fulfill me so the ability to really you know, create something and start with a blank page is just really interesting to me sometimes. You know? yeah you know I’m sure it’s a similar feeling to a writer where they love where some of them probably love the blank page and love to you know, craft this story a narrative. You know that’s the same thing we do with with with business but you know I don’t know if it’s you know I definitely don’t think it’s for ah the faint of heart and you know there’s there’s a lot of. Sacrifices that you have to make as well as your friends and family also have to make so it it is one of those careers that I think really affects a lot of people kind of in your social circle.
Alejandro Cremades: Absolutely now for you as they say you know once an entrepreneur always an entrepreneur so you know literally after they say this exit you went out and you started your next company Chaotic Moon So Why were you guys doing ah a chaotic Moon a chaotic moon sorry and then also. How did that you know again, another exit. You know? what’s what’s happening here.
Ben Lamm: Now we thought we thought that with chaotic moon that there was a huge ah you know Apple would released the iphone people were starting to develop apps. We. We saw a couple kind of app developers start you know existing we really thought there was an opportunity to do. To to you know, take kind of a vertically integrated approach and build a systematic design to you know, not just you know, ah kind of I would say the systematic design and ubiquitous computing kind of viewpoint to mobile I think a lot of people at the time was like they’re very focused on Ios or in. And others were focused on Android and we had this viewpoint saying that you know these are just inputs and outputs right? you know, leveraging different backend systems and so we built a core framework and then we started working on Ios. We worked on. You know that translated into tablets as they’ll translated into. Um, um, you know, not just into Android but also into car displays and into you know interactive displays in stores and into television and so what was interesting and is we we kind of looked at mobile as kind of the gateway drug to a brand being able to to. Distribute their content and and reach their audience everywhere that the the audience was gonna be wanted to be and so we were really excited and we we felt there was a huge opportunity to kind of go build kind of this organized chaos around the I don’t know if you remember the time where there was like.
Ben Lamm: Hdcs and samsungs and iphones there were so there was like all of the mobile wars and in every brand wanted to be kind of on everything windows was coming out with windows one seven so we really saw as an opportunity to build a company in ah in a core fabric that we could go build great experiences but also make it ubiquitous and be on all platforms for you know all brands. Um, and and we were very you know, very lucky we we built a team of incredibly smart you know women and men who you know worked on awesome projects everything from like you know the daily to you know pizza to Starbucks to um to Disney movies anywhere to marvel so we got to work on just really cool projects and. And watch these brands. Ah ah, transition into truly digital businesses and and we got to be kind of the help shepherds of those digital products as well as kind of building out this core infrastructure and you know we had a lot of folks that got really excited about what we were working on including Accenture. Um, and you know they they wanted our team and technologies as well as some of the capabilities. So.
Alejandro Cremades: Did you did you see now that it was your second company a shift on how people would relate to you you know? perhaps now that you were a second time founder maybe like investors employees.
Ben Lamm: Yeah I mean you know people. Ah yeah I mean it’s it’s it has more an app had probably a ah bigger effect socially and and personally you know, um, know I’m one of those types of employees that you know truly likes to be. You know, kind of you know meeting with the engineers meeting with the product leads. You know at at Colossal you know I spend a lot of time with our species leads and with our cellular engineering teams and so I try to get pretty hands-on because I I just find it intellectually interesting and I like to learn these different industries. But yeah, it definitely has an an effect right? People start to have different levels of expectations of you. People have different kind of viewpoints on you know what? you should be doing you know from a career perspective. Lots people love to give their feedback on that journey. But but you know fundamentally I was always just interested in kind of learning the next thing.
Alejandro Cremades: And in in this case I mean you guys sold the company to what the what can you tell us about timing and acquisition. How do you timing? How do you know? the time is right.
Ben Lamm: Yeah, it was it? Yeah yeah, well I don’t think you you know I don’t think there necessarily is a magic you know I’ve I’ve been asked that question before I don’t think it’s a magic ah you know time period and I don’t think you can really orchestrate. It. You know I try to just focus on building. You know, interesting and valuable. Companies and people are interested in them. They’ll probably call you in the case of you know Katic Moon we had a lot of people suitors calling us. Um, but I think that the the choice to sell really needs to be 1 that you know isn’t really up to me. It’s really up to the employees. It’s really up to. The investors and shareholders I look at myself as you know a supporting character in the story right? like my job is to hire much smarter people than me empower them. Give them the resources and tools they need and help set that vision but then fundamentally you know, ah my job is to help you know and listen to our board and shareholders. Ensure that you know I’m being good stewards of of kind of like where they want the company to go and so I try to take a lot of that that feedback and accounting and that’s driven kind of a lot of the sales is that you know when we’ve had really interesting market opportunities that that have come to several of my companies. You know. I always you know present it to the board and investors and sometimes it’s big enough that people are excited about it. Um, you know I’m excited about colossal because I feel like I’m finally getting to build a company at the scale that I’ve really wanted to for a while and I’ve got incredible investors like Thomasalll who support that vision which is.
Ben Lamm: Ah, you know made it much easier to to you know, build a larger infrastructure than I have previously.
Alejandro Cremades: Now and we’re we’re gonna talk about colossal in just in just a little bit now let me ask you this you know with with with with this last company with chaotic chaotic moon. Basically you guys did a spinoff and that was basically team chaos which you also ended up. Selling to Singa so again, you know another exit so on a roll here now.
Ben Lamm: Yeah, we we were I was very fortunate. You know one of my long-term cofounders Andrew Busey ah who’s one of my cofounders at at at cattic moon yeah, in my cofounder at Team Casey and he’s one of the colossal cofounders. Um, you know he and I have worked together a time and had like ah and we have a really great symbiotic relationship in terms of what we bring both bring to the table. But yeah I’d say this spinout was was interesting because it really taught me that you know there’s opportunities to monetize additional technologies. Um, you know as long as it’s not distracting to the core. Business it creates you know option value for our shareholders. Our employees our investors and whatnot and so what was interesting about team chaos is you know we had all of the core infrastructure to build mobile games and we worked very closely. You know we’re building all the top apps for for that were you know being. Showcase you know by by Apple and by by Google so we had all the relationships with you know the core product people at those at those companies we had tons of relationships with the you know store reviewers and so building ah building. Great games. You know we really just need to add in. More gaming talent right? because we we had the rest of the infrastructure. So you know if there are you know one of the things I learned from the the team chaos spin out in in ultimate acquisition was you know there are opportunities with businesses to create option value for your you know employees and for your shareholders and investors.
Ben Lamm: Ah, that you know they get additional upside from you know, leveraging some of these technologies or kind of opportunities that present themselves and you know we’re doing that Obviously with Colossal we’ve spun out some companies out of out of hyper giant and so that’s now been kind of a consistent theme where if we can find something in the spinout process is it distracting. You know, um and it’s a creative to Everybody. You know it’s something that we you know we kind of now have a ah framework of how to do it and how to do it successfully.
Alejandro Cremades: So they the next 2 companies right? before colossal you know is say basically conversible and then also hyper giant. You know, obviously you know conversible acquired by life person public company that was apparently.
Ben Lamm: And that was and that was really in converseible is really the brainchild of Andrew I’ve got to give Andrew Credit you know he he really felt that we could build a conversational intelligence platform that really understood sentiment analysis could help build scripted and unscripted you know conversation threads. With consumers so that kind of with the rise of voice based messaging with chat and whatnot thought could be pretty interesting. You know fast forward. You know we probably should have done more with it if you look at like the success of chat gbt right? Ah in today. But you know we created it. We were pretty excited about the the you know fundamental. Layer conversational. You know os that we built and we had a lot of people that are pretty excited about it and at the same time we were getting a lot of inbound interest in supporting us to to try to do something leveraging Ai in the defense critical infrastructure space and we thought that was an interesting challenge. So. We ended up transacting conversible and really then going and focusing on on building hyper giant just because we we saw a lot of the use cases around critical infrastructure space and defense as being very very similar and then adding in ah a layer of automation ai to some of those common operating pictures just didn’t exist. And we thought there was a really unique opportunity to do something that also had a not just a monetary impact but could have a you know impact to defense or infrastructure stability.
Alejandro Cremades: Now with hyper giant. You know you did something you know, pretty interesting and that was to find a Ceo to replace you so at what point do you? Yes at what point do you realize it’s time you know it’s time.
Ben Lamm: Yeah, it was my it’s like time. Well you know I yeah I totally blame you know I think is a combination of the pandemic I think it was a combination of you know I actually got pretty sick of beginning a pandemic which I’ve talked about before. Ah, you do a lot of introspection in that time you know I was also in my house for eleven months you do a lot of introspection when you’re not when you’re also locked up and for eleven months um and you know ah we we had built a company that had scaled well that was getting great ah feedback from you know. Us air force. You have space force strategic operations command um, ah, noride northcom and we had great feedback that we were getting and in different partnerships that we were forging in the Us federal government as well as with some large enterprises and what was interesting was you know I met George I reached out to George Church who’s arguably one of the top 10 if not top 1 smartest people on the planet at least my perspective reach out to George who’s the father of synthetic biology in today’s modern day genomics and started asking him questions and because I’m curious I also you know in addition to the Corp Ah, reason why I reached out to him. We started talking about other things and I asked him what else are you working on and George went through a kind of litany of really cool projects as Lao was working on and then he ended the call with he was working on. You know, broken back mammas to combat climate change and he had all the technologies to create a de-extinction company and you know as an entrepreneur who said up.
Ben Lamm: Thousand times like oh we’re going to build this company. It’s going to change the world. It’s going have this impact you you chase this idea of not just creating value but you know having impact and and at least for me, you know, thinking about legacy and and trying to make the world better a little bit better than when you showed up to it right? And um, so I felt like the biggest hypocrite. If I’ve been you know that I’ve been presented this opportunity and it’s like so. What do you do you? You know you can’t say oh well I’m just working on this other software company. So I I shouldn’t go do this so I felt this tremendous like initial guilt of I don’t have a choice like I’ve I’ve been given this opportunity if I’m going to be honest with you know myself and in in. And say I really want to go change the world and have ah ah a more um, ah, meaningful impact and someone like George Church gives you that opportunity and lets you be a steward of their vision. Um, you know you kind of have to take it and so ah Mike Betzer who’s an incredible operator and sold numerous businesses. In the enterprise software space oneda vista one to um, ah 1 to sible systems and and Tom Sibel and others other incredible leaders that he had worked with I thought that he was the right person to take the reins of hyper giant. You know, continue to grow. It. Let me kind of just be a board member and shareholder. And let me go focus on this the wild world of of d extinction which is not just creating a company but helping define a category.
Alejandro Cremades: Now 1 thing now before we dive into colossal is that obviously the tech component has been um, ah you know a constant you know and all these companies that that you’ve built but they’ve been in in so many different categories in so many different industries. How do you think that? Perhaps. Knowledge transfer being able to have you know that the know how or knowledge from different industries and being able to apply them all into a different one has given you an age. Okay.
Ben Lamm: so so I think one of my but like my 2 superpowers I think are I I learned things moderately quickly and then I think I’m really good at hiring people that are much smarter than me and you you hear that you read that in entrepreneur terms I don’t think I always did I think in my earlier parts career I didn’t. Um, but but I think that you know as I’ve grown in in my career. You know if you want to do bigger and harder things you’ve got to find subject matter experts and and specialists that are just way smarter than than yourself. So I really believe in like trying to constantly learn and then follow that curiosity and that passion kind of that journey of. Self-discovery. But then also I’m also you know really big believer of surrounding yourself with experts and people that are much farther than you and then actually listening to them because it’s 1 thing to do that. But then if there’s nothing to actually listen to them and pay attention to them and so I’ve been fortunate that you know I didn’t have to really know anything about. Satellite software and infrastructure or defense I didn’t have to really know anything about gaming I don’t really have to know anything about biotech. Um I could learn those things as long as I surrounded myself with people that you know are industry experts in in those fields.
Alejandro Cremades: So then let’s talk about Colossal you know what are you guys doing at Colossal and and why why is this problem meaningful enough for you to to to dive right in.
Ben Lamm: Well, it was kind of the perfect combination of value creation impact and inspiration right? I feel like there’s an opportunity to build a company that that you know hopefully could inspire genetics at people to you know little girls and boys to be geneticists. Or you know to to focus on conservation. But you know where I think people have started to really understand that we have a ah climate catastrophe looming and I think people understand that people think for the most part of it accepted the the impacts of manmade ah climate change where. Where people I think are starting to pay attention is is to what are the ripple effects of that and and loss of biodiversity is one of them we we could lose up to 50% of all biodiversity between now and twenty fifty if we don’t radically do something current technologies around conservation. Just don’t work at the same speed. And the current techniques don’t work. They’re very old school. They don’t work at the same scale as humanity is changing environments and eradicating species. So George and I talked about an opportunity to focus on bringing back a couple of keystone species to to reintroduce them back into their historical. Um, ecosystem a process called rewilding to help replenish those ecosystems and and then also leverage the excitement around that and the technologies around that to have a bigger halo effect to conservation and develop new tools and technologies that only that not only could be leveraged in this de-extinction toolkit.
Ben Lamm: Could be applied to conservation and you know when when you get you know someone like George Church that’s willing to be your partner on such a you know world changing idea. Um, it’s hard not to want to pursue it.
Alejandro Cremades: And in this case too I mean you guys have raised quite a bit of money. How much money have you guys raised. Okay.
Ben Lamm: So we’ve we’ve raised two hundred and twenty five million dollars to date.
Alejandro Cremades: And in no time because I mean you guys got started like in about 2021 and literally you’ve raised your seat in 2021 the series a in 2022 and then you know pretty much you know the rest between then and and now in 2023 and I believe that. It has been reported at a 1,000,000,000 plus valuation which is absolutely incredible in like no time I mean what do you think has really what? What do you think has been the the key ingredients to to feel. You know that that growth.
Ben Lamm: I think that the opera I think we’ve been very lucky to have like you know, best in-class long-term strategic investors like Thomas Toll and Jim Breyer and these kind of legendary technology investors that can look at a very long horizon. They can also. Understand you know one of the many conversations I have with Thomas very early on is that you know when you when you go after de-extinction you’ve got to build a lot of infrastructure to you know and you got to build things like a system like just like software just like you know satellite or or like satellites you have to build an entire kind of. Ah system approach to de extinction’re not you’re not solving one little point system and so in that there’s a lot of innovations that come from that in software whatware and hardware and so you know spending a lot of time you know with with our key investors like Thomas and others really helped us kind of shape that narrative. And ensure that that you know on the path to de-extinction. We’re building not just technologies that can bring back extinct species and help conservation but can also have a meaningful impact to human healthcare right? and some of that is manifesting the form of software. Some of that’s manifesting in next generation editing tools in the lab. And some of that’s even you know, hopefully long-term will manifest itself in in hardware devices that could help even you know, ah everything ranging from livestock to human gestation and so um, you know we’re very very excited about kind of like how these technologies can come together. But we’re also excited about you know how these technologies can independently.
Ben Lamm: Be helpful for human healthcare and so you know I think you know I think that the thesis of of looking at the de-extinction like the moon landing you know in our success we you know truly change the world and create kind of this history defining moment. But I think there’s a lot of opportunities to build really meaningful technology which touches. And you know everything from conservation to to human long longevity and and human health and so we’ve just been very fortunate that incredible investors have supported that vision and you know and I think that part of a function is coming out of covid and coming out of of some of the things that we’ve gone through over the last you know 5 years where think people are longing for you know, bigger opportunities to to to help humanity take a ah bigger. Step forward.
Alejandro Cremades: So as you’re talking about vision here. Imagine you go to sleep tonight Ben and you wake up in a world where the vision of colossal is fully realized what does that world look like okay.
Ben Lamm: Um, well hopefully better than before the vision was realized right? We get the Jurassic part questions quite a bit. Um, but no, you know you know I see a world where you know you where you know there’s a completely vibrant. Arctic ecosystem out there where you have you know mammoths back you know in the Arctic where you have thylacines and other keystone species and Keystone Predators back in their environments like like in Tasmania where you where you have you know people you know like the moritian government and the moritian people who are so ecstatic to see. And such an iconic species like the dota that they’re known for it’s on their flag and it’s on their money and it’s it’s a part of their heritage culture. But no one living in Mauritius has seen a dodo right? and so that’s so iconic to them and so I think the ability to return these species back and and fix these degraded ecosystems. as well as you know I think while that is success I think another part of success is you know, seeing incredible conservation partners that then take the tools and you know they save the northern white rhino or they save you know, blue whales or or they they you know create you know. Ah, genetic solutions to some of the diseases that that plague existing species like chytrid and and amphibians or ev and elephants and so a world where we’ve achieved our de-extinction goals and successfully rewilded them and other people have applied those technologies.
Ben Lamm: Conservation and made a meaningful difference and saved a species because of the work We’ve done here I think that’s success and I think we’ll get there. We definitely have the team to do it. We’ve got the backers to do it. So it’s really just on us to execute.
Alejandro Cremades: And you’re talking about team I mean the team you guys have grown it by over 92% in the last twelve months I mean how do you go about attracting you know a diverse team. You know that is also committed and and rowing in the same direction at the same speed as everyone else.
Ben Lamm: Yeah I mean you you you have to try you know like I said earlier I look at my my you know role as a supporting function right? and so you’ve got to trust your team. You’ve got to hire the best people you got to empower them to hire the best people you got to really listen to them and so. We’ve built this world renowned. You know we look at colossal as this like you know, not just the world renowning advisors that we have and and team members but it is it is this kind of global coalition of people that are working together right? We’ve got you know collaborators in in Australia. We’ve got collaborators in Germany. We got collaborators in in in the Uk and so we really try to work. You know with this kind of global mindset because you know you know loss of biodiversity and climate change doesn’t have borders and you know that doesn’t recognize borders. Um, you know like the way that we as humans do and so. We’ve really I think done a great job of attracting incredible talent both externally with you know best some of the best research labs in the entire world and then we’ve we’ve leveraged those labs as as conduits to to bring in incredible women and men into colossal that are the full time people and so. Have 107 people full time at colossal but then we have about 30 that we fund in academic labs and we have over 50 advisors right? and so you really are starting to get the benefits of kind of that network effect and they’re all you know multidisciplinary. So we’ve got people like Doris Taylor who are decellularizing hearts.
Ben Lamm: And and you know rebuilding synthetic hearts. You get people like George Church who are you know you know inventing you know, genetic engineering and in the field of readwrite genetic engineering as a whole you’ve got people like Beth Shapiro who are like the leading ancient Dna experts. You know in the world and so when you start to put these people together. That kind of their skill sets kind of comes together to you know a form kind of the fabric that you need to to look at a really hard system like species preservation or de-extinction.
Alejandro Cremades: I mean it’s pretty unboliable. The um, the people that you have been you know able to to really attract here whether it’s on the team whether it’s on the investment side whether it’s on the advisorrs I mean 50 advisors I mean that’s a lot of advisors too. You know to guide you know this in the right direction. How do you go about. You know what? what really stands out for me is 1 word and that is enrollment. How do you get them enrolled in in in that future that you’re living into so that they just want to jump right in.
Ben Lamm: Why you know I will say that you know we’re somewhat cheating right? because like de extinction just is cool like I mean regardless of the potential positive impacts for the world and for whether it’s human Healthcare or or conservation. It’s also just cool like I mean that we we are kind of cheating right? cause it’s like it’s Impactful. It’s intellectually interesting but you know it’s also just really cool like like for the most part people think is it’s cool and interesting. Um, and so I think that we we one of the things I think that’s been a secret to our success is we really embrace Criticism. So while I think it’s cool and while apparently a lot of people think it’s cool. It is big. It is bold. Sometimes big and bold ideas and transformation is scary right? So you can bring that sometimes brings out all types of Critics. We’ve actually really leaned into our critics and so some of our early critics of the company are now our most trusted advisors who we work with on a daily basis and we wouldn’t actually be where we are today. Without some of those critics joining our mission and I think that we’ve taken um you know, Ah, ah, very transparent and hopefully approachable Perspective. You know to this problem where we’re not going to do everything right? We’re going to do stuff that makes people really probably upset or into stuff that we think makes people really really happy. Think most importantly, we’re gonna do things that makes people that makes the world a better place and has a big impact but I think that we’ve we’ve tried to not only be transparent but we’ve tried to be very receptive to that feedback. We. We don’t think that we have all the answers and I think that that attitude.
Ben Lamm: And kind of that approachability has allowed us to to collaborate with some of our critics and then I think that’s helped expand you know, kind of the and widen the aperture of of people that we can collaborate with and that doesn’t mean that everyone loves what we’re doing and that doesn’t mean we won’t have some critics that we you know. Ah, that don’t change their minds. But I think we’ve taken this attitude of it’s our job with with how you know, big and bold of the the things that we’re doing. It’s our job to educate and be transparent. It’s not our job to Persuade and I think that that that that attitude has really resonated with you know. Collaborators across the scientific community the business community and the conservation community.
Alejandro Cremades: So so Ben in your case you pe at it. You know as an entrepreneur now for a little over 20 years I mean you obviously build all these I know I know I mean in dock years. It’s absolutely crazy know they the amount of years that you know go into building companies know from the grownup now.
Ben Lamm: Yeah, it was like 200 and but.
Alejandro Cremades: Your case I mean you pinut it for a while and let’s say I was to give you the opportunity of going into a time machine and I bring you back in time you know perhaps to that moment that you were still you know in Baylor University you know doing your finance and accounting. You know the greece let’s say. You were able to go there into the cafeteria and you’re able to sit your younger self and you’re able to give that younger self one piece of advice before launching a business. What would that be and why given what you know now. So.
Ben Lamm: Ah, the the biggest piece of advice is that I I realize along my journey that I’ve I’ve been very passionate about the journey I’ve been very passionate about entrepreneurship but I don’t know if I’ve always been passionate about. Every single project so like like conversible is a great example just to be not to pick on a company but like con versible is a great company. It could have been a much larger. It did well economically but could have been a much larger company Android a great vision for it. We we could have built something but like I’m ah you know. I didn’t want to communicate even with chat right? like that’s not my preferred method of communication. My preferred med method humation’s voice and so so you know I feel like I wish I if I went back in time or could you go back in time I would say look follow your heart be passionate about these things but really try to align your passion. With building the business with the things you’re actually passionate for and so you know I really want to mostly focus my time only on building companies that have an impact to the climate and and and to you know national security and in the areas that I I found a ah ah, bigger interest in and so. Um, you know I think that I had to build a couple companies along the way that I was really excited about the building and the team in in us winning those categories as we did. But um, but I don’t know if I was as passionate as I am with some of the later companies where I’ve really not married that passion for building.
Ben Lamm: With the actual work that we are doing and I think that some of the earlier companies would have been much bigger. Um or had different. You know if we had you know if if I had married those things better so that that’s the big advice I give myself.
Alejandro Cremades: I love it now for the people that are listening Ben what is the best way for them to reach out and say hi.
Ben Lamm: Ah I’m on social media. So I’m just federal lamb on Twitter so but a decent amount of time probably too much on on Twitter but but I’m on Twitter and Instagram and kind of all the major social channels.
Alejandro Cremades: Amazing! Well hey Ben thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Ben Lamm: Thank you so much for having me.
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Gautam Gupta has gone from VC investor to startup founder and is now back to investing in other entrepreneurs. His $460M fund is open for business and may be one of the few actively looking to fund good startups right now. The fund, TCV, has invested in companies like ByteDance, Cognite, Celonis, and Klarna.
In this episode, you will learn:
- What the Velocity Fund is looking to fund right now
- How TCV helps founders grow their business
- How to get in touch with Gautam
- His top advice when launching a business
Alejandro Cremades · EP 615 Gautam Gupta On Co-Leading A $460 Million Fund Focused In Consumer And Enterprise StartupsSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Gautam Gupta:Gautam Gupta serves as General Partner at TCV. Mr. Gupta served as Partner at M13. He serves as Board Member at PrizePool. He served as Board Member at NatureBox. Previously, he served as Chief executive Officer at NatureBox.
Gautam focuses on investments in the consumer technology space, including commerce, consumer-facing healthcare, education, software, and financial services businesses. He serves on the board of directors at Grow Therapy and Passport.
Most recently, Gautam was a Partner at M13 Ventures, an early-stage venture capital firm focused on consumer technology, where he led investments in the marketplace, consumer subscription, and B2B2C models.
Gautam started his career at General Catalyst in 2004. He was initially an intern while in college and later became a member of the investment team.
He left to launch NatureBox and, as CEO, helped build the company into a nationally recognized brand with millions of customers.
Gautam has seen the highs and lows of entrepreneurship first-hand, which greatly influences the collaborative way he works with founders. He is a graduate of Babson College, earning a B.S. in Business Administration.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show. So today. We have a very exciting guest. You know I guess that has been on the investment side has been on the founder side now back on the investment side. So we’re going to be able to really hear you know from both sides of the table especially when it comes to early stage so without farther ado let’s welcome our guest today Gautam Gupta welcome to the show. So your parents came from India you know immigrants.
Gautam Gupta: Hey thanks for having me. It’s a pleasure to be here.
Gautam Gupta: Um, for me.
Alejandro Cremades: You know I’m an immigrant Tomb. So I Know what that looks like you know I’m sure that for you was quite inspiring and and you know I’m sure they had to work a lot. You know, just like all the ones you know of us that we come to this Country. So I Guess what was that experience. You know, growing up, give us a lot of a walk through memory lane I’m sure that you found a lot of inspiration from your parents too. So tell us how was life growing up and.
Gautam Gupta: Well I did find a lot of inspiration for my parents. So my dad moved here first in the early 70 s and and you know I often think about just the the juxtaposition of our generation with his generation when he came here. He. Told us that you know often he would have to skip meals because you know they just didn’t have enough money to to you know, feed himself every day. Um, and if if I think about you know in our generation. We never have those struggles right? Um, and so. Ah, it’s it’s definitely an inspiration for me. Um, you know my childhood I would say um, was very much influenced by um, not just my parents but also grandparents. Um who are still in India or were still in India um, both my ah. Grandfathers on my dad’s side and my mom’s side had been entrepreneurs. Um and ran their own businesses in India and so from a young age I was always exposed to business. Um, that was sort of the dining room conversation and so. You know I kind of picked that up and I was always the kid with something to sell I always had something that I was selling out of my backpack in the playground or you know online in high school um and and was always really interested by.
Gautam Gupta: Business and and startups and and and technology.
Alejandro Cremades: And and probably that’s there. What got you to Babson now Babsson The University you know, really known for entrepreneurship. So.
Gautam Gupta: Yeah, so I hadn’t heard about babson until I was in high school and a family friend told us about Babson he had known that I was really interested in in business I went there for a college visit and fell in love with the place and so I decided to apply to Babson. Um, and I would say that that probably that 1 decision changed the course of my life more so than any other because it was at babsin that I started getting involved in the entrepreneurship activities on campus and through that when I was a sophomore of Appsin I met the folks at general catalyst. Ah, and they offered me an internship and so when I was a sophomore in undergrad I started interning for general catalyst which was still a very young firm at the time I mean the firm was maybe 4 years old I think investing out of the third fund at that time. Um, which. By the way at the time we thought it was a huge fund. It was a $300,000,000 fund I think ah general catalyst just announced that they’re going to raise 5,000,000,000 for their next fund so you know times have definitely changed. Um, but it was incredible opportunity and that shaped the rest of my career.
Alejandro Cremades: And obviously you joined them after graduating and you were there for about 8 years but you were that kid selling. So what really sparked the interest you know on the investment side of things. So.
Gautam Gupta: Well I always thought that I would be an investor for a couple years and then I would go back to starting a company or maybe join a portfolio company. You know that that dream and vision that I had of of running a company. Um, and. You know a couple couple things kind of changed for me one is I realized how much fun the job was ah and being able to meet entrepreneurs and see them build companies was incredible. Fun. It was really inspiring the team that I was working for at general catalyst if you think about kind of the founders of the firm. Had all been entrepreneurs themselves and so I felt like I could learn a lot from the business experiences that they had and then lastly you know what I didn’t realize about the investing world. Ah when I first joined was how much of the venture capital job is really a sales job. Um, and and I love that aspect of it of being in front of you know what? I would call the customer as the founder ah and convincing that that customer who has many options in the marketplace why they should go with you. Um, and and are really fed off of that. Um, you know the competitive dynamics of of the industry and and really enjoyed that part of the process as well.
Alejandro Cremades: And when we’re talking about like finding that customer or selling to that customer I mean there’s this thing called pattern recognition when it comes to the investment side to being a Vc and how do you go about finding that customer that you want to go and and sell to an. Ah, what point do you are like you’re like you know what? this I really got to get you know to invest in this company right.
Gautam Gupta: Yeah, the you know the funny thing is the longer that I’ve been an investor I’ve I’ve realized ah how much you have to challenge your own assumptions and how much you have to keep reminding yourself or at least for myself I have to keep reminding myself I don’t know anything. Um, so you know the the thing like I always try to remind myself is the past patterns or paradigms may not be applicable for the future right? And so the next great success. Story may actually look very different from the past. Um, but you know. We were in in those early days of general catalyst. Ah, the the firm didn’t have much of a brand. Um, and so a lot of the conversation or how we were finding entrepreneurs was outbound. We were going out into the market. You know, cold calls going to conferences ah reading a lot of just press and and media right and trying to understand oh this company is you know someone in. Atlanta is you know, getting talked about by the local media and you know seems to be doing something really interesting that could apply globally well, how do we get that person on the phone and and hear their vision or hear their story and so a lot of in those early days was a lot of outbound sourcing.
Gautam Gupta: Um, and and a lot of cold calling. Um, you know the general catalyst model was sort of built after a very prominent firm called Summit Partners who had a similar outbound sourcing cold calling program. Um, so we kind of mirrored a lot of what what they had built um and and that’s ah, a big driver of how we were meeting companies in those early days without much of a brand. Yeah.
Alejandro Cremades: And I got to tell you cold calling is quite humbling you know because you I’m sure you called to a lot of people and they’re like who the hell are you? So So how do you? How do you navigate that you know so that you’re able to really as you were saying you know you didn’t have much of a brand. So.
Gautam Gupta: Um, yeah.
Alejandro Cremades: So what do you do? to? really gain that trust of of of that customer in this case. Okay.
Gautam Gupta: I mean I think it it comes down to you’re always, you’re just trying to find common ground you’re trying to find commonalities between you and the customer um and build rapport right? and so often the lead message that we would have at general catalyst was hey. The firm has been built by operators and founders not financiers and that was you know, very true of the early days of general cows right? All of the 4 founders of of the firm had been very successful ah operators themselves prior. Starting general catalyst. Um, and you know had taken companies Public had exited companies and so that was the lead message right? was hey we’re different right? We’re not like your other investors we have. We’ve been operators and we can help and and that built a lot of rapport in a very short amount of time. With with entrepreneurs that we’re trying to get in contact with.
Alejandro Cremades: So you were there for about 8 years and I’m sure those were very fulfilling years but eventually you realized that it was your time to shift gears and to go to the other side of the table. So what was that moment like and. And why did you think that was the right time to do so.
Gautam Gupta: Well looking back on it. Um I feel like I wish I could have told myself maybe now maybe that wasn’t the right time because it turns out that the tech industry just exploded from there. But you know I had there were a couple things that created. Ah, perfect storm for me. Um I had a cofounder ah someone that I had known from Babson. Um, so I’ve known them for a long time and he and I wanted to be in business together and so we wanted to start something the timing felt right for both of us at that point. Um, where he was just coming out of a venture that he had sold and I was um, you know I had kind of done my tour of duty at general catalyst and I was kind of at an inflection point of either I was going to stay and really commit to you know spending the next eight ten years of my career at the firm or do something else. Um, and and so from that standpoint the timing made sense. The other piece was I had this personal passion around health food and nutrition up until going off to babson I really struggled with obesity. Ah, but. Luckily I learned about nutrition and I was able to lose £70 in six months through diet and exercise. Um and I had always wondered since that experience I had always wondered why the food system in the United States is the way that it is and why do people? um.
Gautam Gupta: Why we have an obesity problem in this country and what can I do to try to help and so I was always interested in trying to build a business around that space. Um, and so just you know things just aligned where my cofounder and I were starting to talk about Ideas. We found an idea that I felt like I could be really passionate about and that was a good business and so it just felt like it was the right time to to make a leap.
Alejandro Cremades: And how did you guys go about testing the idea as well.
Gautam Gupta: So we knew nothing about food by by the way maybe just stepping back. The company is called naturebox and the product is essentially our own brand of healthy snacks sold primarily online. Um, ah. Ah, as we scaled the business. We started selling products in retail stores and that sort of thing but primarily online. Um, we knew nothing about the food industry and so when we were starting to think about this idea. Um we thought well we think this is a good idea. But. Does anyone else think this is a good idea and so we went to a farmer’s market. We bought a bunch of snacks that we thought could be. You know they matched the vision that we had for naturebox. Um and we went back to the office. You know, slapped together. Ah a 1 page website a landing page with a photoshopped picture of the stuff that we had bought at the farmer’s market and there was a buy now button there was you know 4 bullet points of what the you would get if you bought bought the box and then there was a buy now button and if you clicked that buy now button. You would be taken to Paypal where you could paypal my cofounder money right? So it was a pretty messy setup but lo and behold. We started advertising for this website. We got 100 people over the course of a weekend to actually pay pal us money for this product.
Gautam Gupta: Now. The only problem is this product did not exist right? It was a photoshopped image of stuff that we bought in a farmer’s market and so my cofounder and I looked at each other and we said well we have 2 options we could either refund everyone’s money and go figure out how to build this product or. We could force ourselves to figure out how to ship something to these people that had paid for the product. Um, so we said listen if we want to start the business if we’re serious about starting a business. We have to go with the second option we have to ship them something and we thought a little bit about it and we said well where do you get enough? food. To ship a hundred boxes of snacks. Um and both growing up in suburbs the first thought in our minds was go to Costco so we went to Costco we loaded up 2 shopping carts full of Kirkland branded snacks. Um, and we came back to my apartment and we started repackaging the Kirkland snacks into nature box bags and that was the first shipment of boxes that we sent out was literally product that you could buy at Kirkland or at Costco. Um, you know, but but in these branded nature box bags that we bought off the internet.
Alejandro Cremades: And then what was you know that moment to because I mean obviously you also went through some ups and downs with the business. What was that moment like you know where you feel like you’re like running out of cash. You know you’re like with you know, ah well. 1 1 1 ne month left of payroll and and things like that I mean how was that experience too for you. Guys.
Gautam Gupta: Yeah, yeah, so you know fast forward from those early days. We had this incredible growth spurt where we got the business from 0 to 50,000,000 of revenue in 3 years um but we were burning a lot of cash and the venture market had started to sour on direct-to-consumer brands and so we weren’t able to raise another round of funding and we got to a point in lets say this was 20 ah maybe yeah, beginning of 2018 um, where we literally had 1 payroll left in the bank. Our lender had put us in default because we had some outstanding venture debt and you know it was pretty clear that we weren’t going to be able to pay the debt. Um, so we were operating the business under default. With one payroll left in the bank and and look it was an incredible stressful time I mean incredibly stressful. Um, you know I had never managed through a situation like that. But I’ll say a couple things that you know I learned in that experience one is ideas and people are way more durable. Then we give them credit for and so you know I think we as a company people just banded together. Got what needed to be done done. Um, and we were able to keep the business going. Um and and then I would say the second thing is it’s never you know there’s there’s always.
Gautam Gupta: Ways to to you know, figure out even the the messiest of problems and so it took us a little time but we were able to find a new investor to come in and help us do a recap of the business and help you know the business continue to survive and so. Incredibly stressful three month period of time but but it ended up with with a decent outcome.
Alejandro Cremades: So what does it look like when you do the recap of a business for the people that are listening to get it. So.
Gautam Gupta: Yeah, unfortunately recaps are very messy and they’re they’re hard to get done and rare in the venture industry but essentially what you know happened for us was. Some of our initial investors decided hey we don’t want to put more capital into the business where we sort of have reached our limit but we’re happy to essentially sell off our position. Um or be diluted. Ah, if there’s a new investor who wants to come in and recapitalize. You know, put New capital on the balance sheet and so you know there’s a lot of different ways that these things work. Um for us. It essentially meant that a new investor came In. Um, our existing investors had the opportunity to participate in the round if they wanted to some did some did not and so for the ones that did not their equity was diluted. They essentially chose to to you know, not participate in the future of the company. Um, but we’re able to put new capital on the balance Sheet. You know the new investors were able to get a large piece of ownership in the company. Um, and then we’re also able to you know, have enough of um, an option pool and enough stock.
Gautam Gupta: Ah, to incentivize the management team to keep going. Um and so you know very complicated situation but but I think everyone you know, kind of came out with with um you know the the outcome that they had hoped for or or that they had had wanted would happen. So.
Alejandro Cremades: Ah, what point do you realize that you know it’s time to get a Ceo for this and to perhaps you know like look at greener pastures.
Gautam Gupta: Yeah, so I think getting the question of when to bring in a Ceo is incredibly tough and and I think it’s a very personal question for for every founder for me probably in 2017 I realized that I didn’t want to be a Ceo anymore I I sort of felt like um I had learned a lot but the stress of running the business just wasn’t for me I just didn’t want to keep doing that. Um and I also felt like you know there were a number of things that I wasn’t great at. I wasn’t great at management I wasn’t great. You know, ah learning obviously and getting better but I wasn’t great at managing people and and you know really delegating and being focused on kind of high-level strategy I really more enjoyed being in the weeds and kind of. Ah, on the front lines. Um and and so in 2018 once we had had the recap once the recap had been finalized. We were able to find a new Ceo to take the business forward. Um, and and that’s when I decided to go back into venture investing. Um, and and you know my thought process there was I had managed a business through some ups and downs learned a lot in that process of being a Ceo and felt that I could be.
Gautam Gupta: Ah, much more valuable capital partner to the next generation of founders. Essentially I felt like I could be the Vc that I wish I had had when I was running a company and and so that’s what I’ve been doing for the last five years
Alejandro Cremades: And how much capital did the ah company raise.
Gautam Gupta: Raised a total of about $70,000,000 of debt and equity some something like that.
Alejandro Cremades: Got it and it what ended up being the outcome of the of the company because I know it went through an acquisition too. So.
Gautam Gupta: Yeah, yeah, exactly so the company then was later sold I want to say two years ago to a larger tech business called Hungary and it’s still the brand exists today. You know there’s actually. Still team members that were there. Ah from from you know back in 2018 when when I was running a company still still there and and moved along on the acquisition so still around spill operational. It was not.
Alejandro Cremades: Got it amazing and were the terms of the deal disclosed to know okay got it now in this case, you got the Ceo you know you take a look at the what’s next for you and you realize as you were saying Ceo you know was not your thing. So. Going back to venture investing you know, which is what you are excited about doing before you know taking the jump here I’m sure that now with this backro operational expertise. You know you knew that you could be much more helpful to founders. You know, sitting on the other side because you knew exactly what they were going through now in your case what you did is. You went to m thirteen you helped them with their operation. But then while you were doing that you know you you got approached by tcv and that’s where you are now why? tcv.
Gautam Gupta: So tcb I’ve known the folks at tcbforovert decade I have a very close friend here who’s another one of the partners at Tcb But interestingly even outside of that I had pitched Tcb when I was running naturebox and. Um, had gotten to know the partnership ah through that process of seeking capital from tcb ah, and in fact in that process I had met a Tcb venture partner. Ah who ended up becoming my independent board director at naturebox. So I really felt like I had a good appreciation for not just the quality of people at Tcb um, but probably most importantly, the way the firm has thought about company building and I really admired that you know approach and the fact that you know it wasn’t just. Um, ah a focus on you know capital deployment as much as how you build great enduring companies and build you know seminal technology leaders and so yeah, it was very exciting to to you know, kind of join up with a firm that I had a lot of respect for I knew pretty well. Ah, and and so it was ah you know bittersweet to to leave m 13 but decided to join Tcb about two years ago and help them launch an early stage fund ah which we call our velocity fund.
Alejandro Cremades: How how big is the fund.
Gautam Gupta: Yeah, so we raised for the velocity fund which we closed in December Twenty Twenty one we raised four hundred and sixty million dollars ah and the strategy has been focused on series a b and c stage companies. Um, we can lead or follow. Ah, and we invest in consumer b two b two c and enterprise um, and you know we’re we’re about a year and a half in post closing the fund. Um, but we’ve got 8 portfolio companies today. Ah so you know off to a good start. Plenty of of. Ah, you know we’re open for business. So we we are very much actively looking for for ah new investments but off to a good start.
Alejandro Cremades: And obviously you know Ttv has been around I mean we’re talking about a firm with I mean according to crunchbys which is not accurate. But at least you know it’s something 396 investments ah hundred and ninety seven exits 12 different funds. So what is the approach and how for example. Ah, you go about? Perhaps you know like the different the different team players the different funds that you have how does that work and how that ecosystem that you guys have built at tcd how they can support founders. But.
Gautam Gupta: Um, the end.
Gautam Gupta: Absolutely so Tcb has 2 strategies. We have our early stage strategy called the velocity fund and then we have our crossover strategy which is what Tcb pioneered um, which we internally call our growth fund. Ah, the growth fund is in its eleventh fund. So the most recent vehicle was tcd 11 and then velocity is obviously on velocity one which is the first fund in the velocity strategy. Um, so that’s how you get to kind of the 12 total. Um, but. You know what I would say a couple things 1 is given the breath of tcv we can invest from series a all the way through public markets. So there’s very few with very few exceptions. We can be a capital partner to many companies. Ah, whether you’re raising your series a you’re raising a pre ipo round you know or or maybe something even a bit later. So so we have a huge amount of breath across the Tcb platform. Um, it’s a relatively small team and so the velocity fund is 6 people. Um, just to give you perspective the total firm. Ah, all employees um is about 130? Um, and so you know we coordinate and collaborate ah all the time and so you know on the investment side.
Gautam Gupta: Ah, we’re in the same meetings across the 2 funds ah and leveraging the insights and the network of the overall platform and and for companies I think the reason why that’s important is not only do you have a capital partner that can go the distance with you but you have the reach of. Everyone in the firm their personal networks their experiences all of the you know past portfolio companies that we’ve been involved in and so yeah, that’s a ah little bit of of you know how to kind of think about the the breath of the firm.
Alejandro Cremades: And you know it’s interesting when you talk about Networks because you know in your investment thesis I so you were as you were saying is series a series B but mostly you know like around those say cycles when we’re talking about series A we’re talking about. That day validation. There’s revenue not significant, but you know there’s revenue. Ah and now it’s all about figuring out how you go from early stage and transition into grow stage which is you know a really tough cycle to ah to shift from So. How do you guys go about. Really adding that level of value or plugging in your network so that you’re able to help the founder in crossing that incredible. You know, ah a lifecycle.
Gautam Gupta: So one. Ah, we we have a few different ways that we think about just helping companies scale and and obviously there’s a lot that’s situational right? So it depends on the company the market that they’re in.
Gautam Gupta: Scale of the company today and their aspirations. But I would say a few of the things that that we’ve done and and you know we are I think pretty helpful around. So the first is around talent just given the network of companies that Tcb has worked with in the past and. The number of executives that are in our network. Um, we think we can be really helpful at bringing the right people into a company to help a founder scale the business and so whether you’re looking for. You know a head of people. We actually have a venture partner at Tcb who was the chief people officer of Netflix um, you know whether you’re looking for whoever it may be right? The the next head of engineering to help you scale your your engineering efforts or product efforts those are areas where we think we can be uniquely helpful. Um, the second is we’ve built this advisor and venture partner network I had just mentioned one one of them. But we’ve built this advisor and venture partner network of industry leaders and executives who can be both informal and formal advisors and board members for companies. And so as you think about you know that series a or b stage company. How do you get the smartest people in a room around you who have taken companies public or who have scaled a business from 0 to billions of dollars of revenue billions of dollars from market cap. Um, we think we can also get those people in the room with you. So not just.
Gautam Gupta: Full-time employees right? and and the executives that you want on your team but also executives around you to be a sounding board for you and and to help you think through issues and and paths to to scaling so I would say those are 2 of the primary ways that that we try to help companies. Um, and and you know obviously ah through the network of the firm whether it’s you know you’re looking for m and a opportunity you’re yeah looking to buy a company. Um, you’re looking for help scaling internationally like. All of those are also areas where we’ve had experience and where we can help but it’s obviously very situational right? Like if you’re in the us and you’re looking to scale to Europe you know it’s an area where we can help. But how we get involved. There may be very different from a company that’s in. Asia looking to scale across the rest of Asia.
Alejandro Cremades: So imagine I was to give you the opportunity of going back in time and I put you into a time machine I put you into a time machine where it brings you back to the babson days. You’re a student at Babson. You really love the whole venture world.
Gautam Gupta: Boof.
Alejandro Cremades: And you give you have yourself there the opportunity of giving that younger gotam 1 piece of advice before launching a business so question will be why would that be n why and then also you have the chance to give that younger gotam 1 piece of advice before investing in your first company. Ah, would those be those 2 pieces of advice for.
Gautam Gupta: Interestingly, they would probably be very similar which is that it’s all about the people and talent. So from an operating perspective I think I would tell you know the the founder ah Chapter. Of of my life that it’s all about ah the quality of people around you and the talent density in the company and that to achieve a greater talent density in the in the business you’ll likely need to make hard choices or hard decisions. Ah. And almost every time you’re faced with a hard decision like that. The answer is actually so more simple than you think and and so you know if you have just to contextualize this if you have a great you know head of Sales. Or excuse me maybe not a great head of sales If You have a head of sales and and you’re struggling with hey ah should I Keep this person should I go find someone Better. You know, whatever chances are by the time it’s you know on your your mind right? that you might need to make a change that. It’s already. You know the the time to make that change I’m not saying that it’s too late often. It is too late or it’s it’s you know, ah beyond the point that you should have made a change but by the time you’re thinking about it. It’s almost always in my experience the case that um.
Gautam Gupta: You know you you have to make a change but you’re delaying the inevitable and and you know procrastinating that similarly with investing it comes down to investing in great founders I mean obviously ah, there’s a lot that we want to understand as investors about the business. The market. Unit economics all of those things at the end of the day especially in early stage investing those data points are slices in time and you may talk to a business where maybe some of those data points don’t look good today but they might look better tomorrow. What doesn’t change or maybe set a different way. What will canalizeze the change of the business getting better and healthier over time are the founders right? and and the team and so if you don’t have the right team in place. Even if the metrics are great today. They might not be tomorrow. Conversely if the metrics aren’t good today. They might be getting better because of the quality of the team. Um, and so it all comes down to the quality of the people and and really just keeping a very high bar on that.
Alejandro Cremades: I agree a hundred percent now for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Gautam Gupta: Twitter Linkedin on Twitter it’s g ramblings and then you know on on Linkedin.
Alejandro Cremades: Amazing! Well hey, good Tom thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Gautam Gupta: Thank you for having me really appreciate it.
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Don Muir made the leap from traditional investment banking and private equity, to disrupting the traditional financial services space for the tech ecosystem. His startup, Arc Technologies, has attracted funding from top-tier investors like Bain Capital Ventures, Torch Capital, Y Combinator, and Clocktower Technology Ventures.
In this episode, you will learn:
- How Arc is different from traditional banks
- Don Muir’s top advice when starting a business
- Investor rejections
Alejandro Cremades · EP 614 Don Muir On Raising $180 Million To Disrupt Wall StreetSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Don Muir:Don Muir is a fintech entrepreneur on a mission to make finance and banking faster, better, and more equitable.
Don covers the disruptions impacting traditional banking and finance, the innovations driving the fintech category, and the potential of technology to solve long-standing challenges like access to growth capital, founder-friendly banking services, and alternative financing models built to help tech companies scale responsibly and without unnecessary dilution.
In 2021, Don founded Arc Technologies while studying at The Stanford Graduate School of Business and has since raised ~$200 million of equity and debt capital.
Arc offers non-dilutive capital, digital banking, and analytics that enable startups to fund their early growth, avoid unnecessary dilution, and create a stronger startup ecosystem.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the dealmakerrs show. So today. We have a really exciting founder. You know we’re going to be talking about the good stuff. The stuff that we want to hear you know the building scaling financing. You know all all of that good stuff. We’re going to be talking about today equity equity versus debt. Um, you know also private equity private equity going into startups. So I find that you’re all going to find the episode today quite inspiring so without further ado. Let’s welcome our guest today Dawn Weir welcome to the show.
Don Muir: Pleasure to be here. Thanks for having me.
Alejandro Cremades: So originally born there you know and and you grew up there in the in the Massachusetts area not far away from Boston so how was life growing up, give us a walkthrough memory lane.
Don Muir: Yeah, definitely bounced around a little bit as ah as a kid grew up born in the Greater Boston area moved to Rhode Island for about a decade for my dad’s job and then moved back to Boston to go to the same public high school as. As my mom and my grandparents who who immigrated to the us in their teens.
Alejandro Cremades: So that has to be you know, quite inspiring for you to to to really learn. You know from your from your grandparents because you know the immigrant stories they’re like quite unique I mean I’m an immigrant myself so really understand you know what. What that looks like but I’m sure that for you you know being able to hear how they were able to to come here to really make it happen for themselves and for the family I’m sure that that has shaped who you are today.
Don Muir: I grew up very very close with my grandparents. They immigrated to the us in their teens didn’t speak any english faced anti-immigrant discrimination shared that story with me from ah from a very. Young age my grandfather in in particular he went to ah public high school in the hometown that the same town that I grew up in and went to the the same public went through the same public school system as him. Um, so I got ah I got to relive that firsthand and and he would share stories with me. Um, he went to this school. Ah, he didn’t speak any english he ended up enlisting in the army and and fighting in world war ii ah landing in in Dday and and and dredging through ah France during ah during world war two to earn his stripes to prove that he was american he came back penniless. No education and and started tailoring a tailoring business with the support of ah his his immigrant wife. They bootstrapped this business and had a fair degree of success and sharing that journey with me just really put things in perspective at a very young age and. Was part of the inspiration for starting ah my own entrepreneurial career.
Alejandro Cremades: I Mean you know obviously by learning from their own Story. You know that anything probably with hard work and dedication is is possible in this life. So Did you perhaps you know like after like listening to those stories did you were you like clear that. Eventually one day you would have something of your own.. Thanks.
Don Muir: I always have been passionate about entrepreneurship. My grandfather was definitely the source of that inspiration I had a competing interest in finance I started investing and day trading at a very young age in my teens I just really enjoyed. Understanding businesses and and pick you know trying to pick winners in in my teens I didn’t know what I was doing at the time but I had this competing passion for both finance and entrepreneurship starting in my early teens I’d say you know 1010 to 13 years old.
Alejandro Cremades: Yeah I mean you were you were day trading at about 15 years old so what what were you doing? How were how are you there like movie money buying and and selling.
Don Muir: Yeah I think it was Scott trade or or etrader one of the the early movers in in in the digital trading space I managed to convince my mom to open an account for me under her name and I took I took some of the cash I I made for my early. You know my earliest jobs and and it would invest it in the stock market through her account. Um I would research companies. It was brands. You know that I was familiar with at the time that I thought I had ah had a lot of momentum in the market. Some of them ended up doing okay but it inspired me to to pursue ah finance as an undergrad. And and later to work in in private equity in New York and you know eventually you know to this day working in ah at a fintech company.
Alejandro Cremades: So let’s talk about you know, let’s say let’s talk about then you know going into Cornell because in cornell there you did study finance and strategy and they also you know you got ah a taste of starting something. You know you you even got you know about put together. They are not-forprofi.
Don Muir: Yeah, even at at Cornell I had this competing interest in building something of my own and pursuing finance which was kind of the the cookie cutter path out of Cornell I think Cornell is one of the the top feeders into the the big bulge bracket investment banks and so I studied finance.
Alejandro Cremades: Is that right? yes.
Don Muir: But then outside of the classroom I did whatever I could to roll up my sleeves and actually you know build myself I started a a five one c three at Cornell that’s now one of the largest organizations on campus that was that was mission driven with the intent of of um. Giving back to the community and and now that’s a vibrant student organization at the same time in the classroom I was taking every finance class that I could I could I could get into and um at graduation I had ah ah a tough decision around whether I pursue my interest in in operations and building and entrepreneurship or or to work. Um. On wall street in investment banking.
Alejandro Cremades: Eventually you ended up joining the Boston Consulting group and 1 of the things saying about people that go into consulting you know I guess some of the best entrepreneur entrepreneurs. You know they’ve had some either experience at a previous startup either. They were in private equity or Vc or consulting. I find that those say different segments. They just they just prepare your mindset for dealing and tackling you know, whatever you have in front of you in this case consulting to certain degree. It helps you to grab big problems breaking. Break them down into smaller problems and then you know start tackling one after the other in this case for you. How do you think that the world of consulting you know, helped you to be a better entrepreneur. So.
Don Muir: You hit the nail in the head its strategy and problem solving I got my first taste of of operations and understanding how businesses tick that experience wasn’tvaluable when I ultimately you know later went on to to work in in private equity. Um. But the ability to take a large and nebulous problem to break it down into its constituent parts and then tackle those individual elements solve them and then put the puzzle back together to solve that overarching issue or that problem at hand that skill set. Has been invaluable in my entrepreneurial journey and um, it’s really paid dividends at at arc particularly and in recent months given how much dislocation we face in the in the startup banking ecosystem.
Alejandro Cremades: And we’ll we’ll talk about that. It just a little bit but you know while you were there at Bcd and definitely you got the glimpse of private equity and you decided to switch gears. So why.
Don Muir: Yeah, so ah I spent most of my time at Bcg working in operations working in strategy at you know, hundred plus Billion Dollar publicly traded companies. The residual I spent working on the private equity team doing commercial due diligence for the largest pe funds in the us. That’s where I really rekindled my interest in finance and investing and I I needed to I needed to take the next step. So I left Bcg to join one of the largest private equity funds in the world called Onix Partners it’s publicly traded on the toronto stock exchange I was in the New York office and. And I joined onx specifically because they are or they were ah value investors. They would find ah businesses that were generating a relatively high ah percentage of you know, levered free cash flow relative to to valuation and we would buy. Cash flow and we would analyze the the underlying fundamentals and growth of these companies and make our investment decisions not based on you know hype or or fomo or who’s on the cap table but based on ah business fundamentals and and and durability. And so I really got my finance toolkit I built that finance toolkit and that ownership mentality during those years working on the investment team at at Onix Partners in New York
Alejandro Cremades: So value investing I mean I guess for the people that are listening. You know I guess that’s the mentality of Benjamin Graham I believe you know who is the um, you know who who really came out of that was Warren Buffett following that type of um, ah. Thinking or thought process when making investments. But I guess in this in this situation. You know from a private equity perspective when you were looking at the value investing what kind of patterns. Did you see from companies that deserved an investment because of that long term potential versus those that didn’t.
Don Muir: Yeah, we we look for ah the ability to generate cash expand margins grow defensibility of of those businesses so we would look for a moat. Ah, we would look for stable. Ah, margins with the opportunity to expand those margins over time. What’s what’s really interesting is unlike my my peers who come from investment banking backgrounds. Ah I had an appreciation for what it takes to actually expand gross profit margins by 50 basis points right? It means. It means renegotiating contracts with vendors to drive down cogs on a unit basis I actually built that that skillset at Bcg working alongside the management team at a retailer renegotiating a vendor contracts. Moving over to to onx I could go in and understand what makes the model work and what makes a business model defensible where there’s opportunity to ah to drive ebada margin expansion or outsized revenue growth understand a competitive landscape. Um. Pricing discipline within a narrow competitive set all of these ah fundamental drivers of a business’s growth and profitability. Ah the understanding or appreciation was unlocked from the time of management consulting.
Don Muir: The actual finance and investing toolkit was built during the time at onix and those those skillets combined really did a great job preparing me for the issues that I’m facing today in my in my role at ark.
Alejandro Cremades: So so it sounds like you were having fun doing this private equity at at Onix so why shifting gears. Why did you go and and and put a pause and go ahead and study at Stanford the Nba. Yeah.
Don Muir: Yeah, um I I thought going to the Stanford was was a long shot I lobbed in an application after my second year at onyx and never expected to hear back. So somehow I I slipped through the cracks. But.
Don Muir: Gsb worked out and and I got the phone call and um and I was I was I was tempted and I jumped on a plane and flew to to Palo Alto where I stepped foot on the campus and for the first time my life I was inundated in this. Entrepreneurial environment that I had never seen before on the East Coast my entire professional and academic career prior to going to Stanford revolved around finance and investing. Um that was certainly not the case at Stanford. Working in private equity wasn’t cool going into investment banking is not what students did after graduating from the gsb my peers at Stanford I wanted to start companies or work at big tech companies or or startups and that was a completely foreign concept to me at the time.
Alejandro Cremades: And how did you know everything because I mean it It took a turn here your your career I mean you went from the corporate you know, kind of thinking or the corporate kind of path all of a sudden you know you find yourself launching your own company. So What were those sequence of events that needed to happen. In order for you to be able to bring arc to life.
Don Muir: Yeah, so ah, first of all I met my cofounders at the gsb and that was a huge unlock. Um, one of my cofounders lived across the hall from me. Ah at Stanford and we became close friends and he was working on a different startup idea. At the time. Ah my second cofounder Raven he he went to Stanford cs for undergrad he worked as a software engineer at Facebook and Tesla and and was technical lead at ah at ah, a venture of series b venture back startup before going back to the gsb he was advising every startup my class. So. When I met James Cur or the founder of Nx when I was on campus through ah through a ah mutual connection. Another startup founder who introduced us everything kind of came together I had this competing interest in in finance and entrepreneurship I had met my 2 co-founders at the time. And I had this idea I had this thesis that the founders in the ecosystem around me who I had met during my time on campus they were being underserved by the traditional financial services market participants that I worked so closely with in my prior life in New York I saw that startup founders even the cfos they didn’t have the same ah the same resources that were available to the private equity backed businesses that I worked with who had who ran auction processes against the largest investment banks and commercial banks and in New York for every financing transaction and so my unique insight was that.
Don Muir: There was this gap in the market and all the pieces were there around me my founders engineers my co-founders engineers to bring on the team and of course sources of capital and advisors like James at Nx who came in early and believed in me and my vision to disrupt traditional financial services.
Alejandro Cremades: Amazing and by the way for those that are listening that would like to hear more about nfx we had pit Pete Flint the co-founder there of n fix. You know, not long ago here on the podcast as well. So that was a great episode. So I guess in this case for the people that are listening arc you know. What is ark can you give us the business model. How do you guys make money.
Don Muir: Art’s a digital bank and we’re targeting the tech ecosystem. So what does a bank do a bank lens and stores cash. So those are our 2 products we have a vertically integrated lending business which we call arc advance. Within days a customer can convert its future revenue streams into upfront capital at the click of a button and then deposit those funds into a digitally native bank account which brings me my next product. Um, our cash. We have a robust cash management service where. You have maximum fdic s scpc coverage and you can invest directly in tbill’s money market funds insured cash suite programs effectively guaranteeing 100 % of your bank deposits will maximizing yield up to 5% apy on that idle cash. So like a traditional bank. We offer both funding and cash management services unlike a traditional bank. It’s digitally native. We have a slick ui ux and it’s fully self-serve so a tech founder Ceo or Cfo can log in initiate a wire issue cards to their team access capital and deploy idle cash. Across fdi seebacked high yield bank account products.
Alejandro Cremades: That’s incredible. Um, obviously you know like very relevant and we’ll talk about you know some of the issues that are happening nowadays that they you know are definitely fueling your guess’s growth now. 1 thing here that that I think will be interesting.
Don Muir: Right.
Alejandro Cremades: Is how much capital have you guys raised too late because you’ve raised quite a bit on the debt side and then also equity side.
Don Muir: Yeah, definitely. So ah, we’ve raised during the seed round $11000000 ah led by Nfx and Bain Capital and y combinator and others ah alongside that round I raised one hundred and fifty million dollars revolving credit facility from. Ah, Multibillion Dollar hedge fund um that’s my source of capital for the lending business. Most recently I also raised a $20000000 series a led by left lane capital out of New York so 31,000,000 of equity another hundred and fifty million dollars of of credit.
Alejandro Cremades: That’s incredible now. How do you go about debt versus equity on a business like this.
Don Muir: In terms of fundraising or in terms of of operations.
Alejandro Cremades: Like why would you raise debt money and and and also equity I mean what’s the purpose on both for a company like this.
Don Muir: Yeah, great question. So for all companies equity is the most expensive form of financing um equity assuming that you intend for your business to three x five x ten x one hundred x over time which every venture back founder aspires to do. Equities. You’re by far your most expensive form of capital with arc because we have this lending business I couldn’t afford to give away my equity dollars with the hope of of getting it back from from customers for the lending business. So I went out and raised a much larger pool of capital. From professional credit investors at a much lower cost and so we’ll pay interest expense on that debt and then we’ll we’ll lend it to to our customers at a slightly higher rate and the delta is my revenue the equity dollars meanwhile I’m using to actually. Ah, invest in randd invest in long-term long payback ah Roi initiatives at the company and so ah, the equity dollars which are more expensive I’ll deploy across higher npv. Um ah capital projects such as hiring engineers building software. Building platform value for the company meanwhile the credit facility will use to generate revenue in the in the immediate term and to acquire customers and bring them into the banking business.
Alejandro Cremades: So I mean it’s it’s incredible because you guys have raised a 150000000 on the debt side and then also the 31000000 on the equity side now on the equity side. You know like you were you were talking about it. I mean it’s it’s It’s incredible. The the amounts that we’re talking about here because on the seat round you guys raised 11000000 and then also on the a round you raised 20000000 both rounds you know above the typical seat or series a that you would see so how did you guys go like about storytelling with those investors to be able to. You know, kind of like show them where you were today where you wanted to be and how you’re how you were planning to get there.
Don Muir: The vision has been clear to me from the very beginning and for investors who are aligned with that vision. It’s clear that this is a multi-billion dollar market opportunity. You look at the public comps. Ah the large publicly traded financial institutions. Ah, they are all offline. They are not tech savvy these are this is hundreds of billions of dollars of market capitalization in the us tied up by Jpmorgan Chase in citigroup and Wells Fargo and bank of America and formerly Silicon Valley bank and first republic bank these. Product and user experiences underserve the tech economy and I saw that early I saw that because I worked at these I worked at these financial service institutions that I am now disrupting. Um. What I realized the the unique insight was that startup founders and their operating teams. So their cfos or head to finance or Fpa and a analyst they expect and quite frankly, deserve a finance stack that keeps pace with their business. They expect a consumer grade frictionless intuitive product experience on the front end and access to capital that you that you would get that you that you should get with a traditional offline financial institution because arc is software first it’s software driven business.
Don Muir: We can provide a very customized ah very customized product-centric experience for our tech customers leveraging backend api integrations machine learning artificial intelligence we can make faster better decisioning ah with a crisp, clean frictionless intuitive frontend experience and. And partner with the traditional offline banks to give access to those same financial products that you would get by parking your money with Jpmorgan Chase directly
Alejandro Cremades: So then let’s let’s talk about now that that we’re talking about you know Jpmorgan you know it just came to mind you know Silicon Valley bank right so I mean what? ah absolute craziness. You know that that situation created for the entire ecosystem and the level of uncertainty just say. just just just crazy so I guess you know what happened there I think that it has definitely helped you guys quite a bit not to like to to grow. So so what happened there and how has. You know that that that situation or they or the events that have unfolded from that really impacted the growth of of your guest’s business.
Don Muir: That’s a great question first and foremost I have a lot of close friends, professional acquaintances people that I respect and admire who were impacted by seb who worked at svb who I can who I remain close with to this day and it’s really a tragedy what happened? um. The bank and at the time arc was on the frontlines when the startup banking world imploded. We were the crew on the ship deck helping load passengers into the lifeboats. Um. As they were trying to flee when the titanic hit the iceberg right? So we were there with a frictionless onboarding experience helping customers move cash out of Silicon Valley bank while their Vc funds are screaming at them telling them to to get out to escape. Level of panic and hysteria on the market in the in the market is unfor. It was unforgettable and arc was positioned was very uniquely positioned with a fast onboarding experience to spin up Fdic insured bank accounts outside of svb in a matter of minutes and yeah we had um, we. We experienced explosive step function growth in terms of new logos in terms of bank deposits in terms of new Loan customers. The business up leveled on an order of magnitude of you know 3 to to 5 x and our our pipeline is is.
Don Muir: 20 x what it was ah two months ago and so we’re now in ah in a position where arc is a central feature in the in the startup banking ecosystem and I’m fortunate that we could be in the right place to help so many companies weather the storm. And um, yeah.
Alejandro Cremades: I mean that’s that’s incredible like 20 x the pipeline I mean they they the growth that you guys are experiencing. You know it’s it’s tremendous and I think that you know when you experience or you go through that you can also die from being too successful. So what are some of the steps. Or how do you guys think about this from a strategic lens and I’m sure that your experience at Bcg comes very handy to execute here.
Don Muir: Yeah, so I had a key decision to make at the time when on on Wednesday night when svv stock started to plummet in the after markets and I saw the writing on the wall. We knew that ah that outflows would be significant the following day. I started receiving text the following morning at 6 a m from founders and ceos panicked their vcs were pushing them to move all of their funds out of svb that day. Um, and we had a decision to make um the product was. 90% of the way there. Ah in terms of meeting the ask of the the customer. Ah and we were. We had a ga prepared to go live a month and a half later and I made the decision to flip the switch. We’re going live today. We spun up marketing collateral. Ah, we spun up a 10 more minute onboarding flow and we took every team member who was not writing code to ship the features that were necessary to protect with 100% search and t customers funds. Anyone who wasn’t engineering who wasn’t writing writing the code required. To meet the ask of our customers was on the phone with customers helping them onboard into arc helping them move their funds out of svb or frb or whoever whoever the the offline bank was that was potentially going to be impacted by the crisis and move those funds into a safe haven with arc into an Fdic.
Don Muir: S scpc or government-backed account. Um that ah that decision ended up paying huge dividends for our business and the team at arc really rose to the occasion they stepped up. They worked around the clock. Don’t think the team slept for for two weeks because the momentum really didn’t really didn’t die for another 10 business days and um, I’m really proud of the team for ah for rising the occasion and helping so many of our our prospects our customers other founders. Ah, who were in need of our services at the time.
Alejandro Cremades: That’s amazing now imagine Don because obviously it sounds like the the future you know or the strategic roadmap that you guys had you know put you know into the future. You know it sounds like you know you have achieved a. Like with with with high- flying colors already. Well you maybe you were projecting to achieve me in and a few years with all these craziness that has happened so I I think as we’re speaking about or thinking about the future thinking about vision as well. Imagine if you were to go to sleep to and I done. And you wake up in a world where the vision of arc is fully realized what does that world look like.
Don Muir: Sure arc is a publicly traded company alongside Jpmorgan Chase and Wells Fargo we’re banking and lending to the largest tech companies in the world but we haven’t neglected ah the startups who are who are just. Ah, who are just stepping in to their ah to the ecosystem we’re working with companies of all stages and our software allows us to do that. Um, we have a frictionless user experience paired with ah a hands-on white glove. Customer service. So a team of relationship managers who can work with you if you want to get on the phone with someone that that intersection of wall street and Silicon Valley is what’s missing today in the banking world in traditional financial institutions arc will provide. A broad suite of credit products from revolving credit facilities to term loans to revenue-based financing which is our core product today alongside an institutional grade cash management platform where we’re actually passing back one hundred percent of the value to our users ensuring that they are. Maximizing yield on their idle cash to ah to use for working capital to use for payroll to extend runway while also protecting those funds partnering with a broad network of offline banks to insulate cash across.
Don Muir: Dozens of Fdi see insured bank accounts at regional banks and large national banks.
Alejandro Cremades: My cat Done that that sounds beautiful and the level of detail that you provide I can even that’s it. It’s incredible, Incredible now Now we’re talking about here about the future and the vision I Want to talk about the past but doing it with a lens of reflection. So let’s say I’m putting you into a time machine now Don.
Don Muir: Sure yeah.
Alejandro Cremades: And’m and I’m bringing you back in time bringing you back in time to that moment where you were you know in Stanford and you are now brainstorming with your cofounders. You know what could be that solution that you could bring into a problem that you guys were envisioning. Obviously you know this led to work but let’s say you are able to sit. Your younger self there and you’re able to give your younger self one piece of advice before launching a business. What would that be and why given what you know now.
Don Muir: Don’t give up perseverance persistence. It’s everything in entrepreneurship you’re going to hear ninety nine nos before 1 yes But if you stay true to your vision and you listen to your customers. Your customers only not your investors your customers you talk to your customers you build for them. You don’t build for your equity investors or for your credit investors if you stay true to your vision. You find the fastmoving water is informed by your customers. So you might make slight deviations along the way. But the overarching thesis remains the same you will succeed and you might have 99 investors who don’t see that vision along the way for that 1 investor that nfx that left lane that adelaya who understands and appreciates what you’re doing and the problem that you’re solving. And if you stay focused on the customer and you persevere you will succeed over time through hard work. Ah and persistence.
Alejandro Cremades: I Love it so much for the people that are listening that will love to reach out and say hi. What is the best way for them to do so okay.
Don Muir: Yeah, you can follow us on Twitter join arc you can follow us on Linkedin where we post most of our new content and and products and then you can research on our website at arkdot tech
Alejandro Cremades: Amazing! Well hey Don thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Don Muir: Thanks for having me This is awesome.
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Joe Spector has helped take his first startup from zero to being worth over a billion dollars. Then after taking that company public, he decided to apply his experience to helping pet owners and veterinarians too. His latest, startup, Dutch Pet Inc., has attracted funding from top-tier investors like Forerunner Ventures, Adapt Ventures, and Eclipse Ventures.
In this episode, you will learn:
- How Dutch is transforming this space for vets and pet parents
- How the fundraising landscape has changed
- The keys to growing a successful global startup
Alejandro Cremades · EP 613 Joe Spector On Building A $2.3B Company And Now Raising Millions To Bring Telehealth To PetsSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Joe Spector:Joe Spector is the founder and CEO of Dutch as well as a proud dog parent. Previously the cofounder of Hims & Hers, a pioneer in human telehealth, Joe is on a mission to make the veterinary industry better for pets, pet parents, and veterinarians through telehealth and innovation.
Joe believes every pet should have easy access to what they need to live their happiest and healthiest life.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show. So I am very excited with the founder that we have today I mean he is an immigrant that came to this country with absolutely nothing and his last company is now valued at two point three billion so I think that that speaks for itself I find that. You know you’re all going to find this episode super inspiring. You know on how to build how to scale. Ah you know issues on the rehula qualifieified. You know when you’re trying to build a business and everything beyond that so without fartherdo. Let’s welcome our guest today Joe Spector welcome to the show.
Joe Spector: Thank you! I’m so excited to be here. Thank you.
Alejandro Cremades: You So originally you were born in Withbekistan but then all a sudden you find yourself here in the Us So give us a little of a walk through memory lane. How was life growing up.
Joe Spector: Growing up in many ways it was you know it’s wonderful, but it’s such a. It’s such a world apart I grew up in Ussr a communist system a system where you cannot question authority. System where you are you know, brainwashed to believe in in the power of the state and as a jew a fairly anti-semitic system as well. But because it’s such a closed society. You don’t really know that there is anything else. You really think that the entire world lives like this and it was only after we left and and I came to America that I started to realize that there are a million you know, different cultures and peoples and ways of thinking.
Alejandro Cremades: I Mean you come here and starting from nothing you know for the family I’m sure that that was dealing with the uncertainty too. You know is like new everything.
Joe Spector: So.
Joe Spector: It was I give a lot of of credit to my parents because at the time I think they really shielded us and I was 10 years old but you’re still a child and they never made us feel like there is anything necessarily wrong. Um, and even I remember when we came here we were poor I mean we lived in subsidized housing on food stamps and I still felt like we were kings because they made us feel that we’re in this land of Opportunity. And we have so much more that we could get to So I think looking back I’m like I think oh my gosh you know we we had you know now I have three kids and I realized that the difference. Opportunity and experiences that they have but at the time I think my parents really shielded us and I give a lot of credit to them for that and.
Alejandro Cremades: But I mean it’s still a ten year assault I mean you you realize things. So I’m sure that you know seeing your parents you know like working hard trying to give you guys a better life I mean that that’s stuff that you I’m sure it really shaped you up, you know and who you are today.
Joe Spector: It does you know my both my parents were civil engineers and in the first year while we were adjusting my dad was working at flea markets as a day labor and so that was very humbling. But I think now as an entrepreneur at the same time you know one of the things we say at Dutch is no one’s too good to take out the garbage and it just means we all can roll up our sleeves and do the shit that needs to get done. And no one’s too good for that. So and and I definitely think of that experience with my dad during these moments.
Alejandro Cremades: So tell us about you know, also getting into into business because you know the whole world of business and and finance you know is something that they you know, got you hooked you know and you actually went into Berkeley you know and you kind of like got started you know and got your feet with. Before going into into wall street. So um, so walk us through that.
Joe Spector: I would say from the moment we got to America I realized that this is the land of opportunity and my from from everything I saw and I um. I wanted to I saw that being an entrepreneur is is the is the way to really make it here make a have a vision and and have an impact. Um I think I’ve always. I always had it in me where I didn’t like to listen to authority or follow the rules and be creative and ultimately you know even though I started my career in investment banking I think I quickly realized that it just it wasn’t going to fit with my personality. And really once I got into Wharton and business school is when I kind of met my brethren and realized that this is a whole career that could exist which I didn’t need being an immigrant didn’t realize that was an option. Um, and starting in business school is when I started to really commit to startups and commit to starting new ideas and executing on them.
Alejandro Cremades: I mean what? Ah what a journey here because I mean your parents come with nothing and then all of a sudden you are like literally admitted to the best schools in the world to study I mean war on Mba you know, incredible program. The communities is out of this world. And team and there I mean as you were saying you know that’s when you really got your first experience with entrepreneurship. You know when you entered their business plan competition. So what? What could you hooked? What could you hook to entrepreneurship. What? why why. Why was it so impactful for you. It sounds like it was like a mind-blowing experience. You were like oh my god I can’t believe this.
Joe Spector: I think I you know there’s these moments where there’s this intersection of who you realize who you are and you but. So you know you go through life in those early stages and you think you know am I weird or like is this are there other people who are like me are there is this something I can make a living from and I think I hid that intersection at Wharton where I realize there’s a whole world. There’s all these people. Who basically can dream up of an idea and then go do it and at the time I think that was so unfathomable and so crazy you know because in Russia and everything I saw before. You go you have a job and you work there and you work up the ladder and that’s that’s it I didn’t know otherwise I didn’t know there was another option and I remember the business plan competition at Wharton that first moment it was it was like a jumping over a canyon. I just I remember thinking how am I and I were like you know who am I to think of an idea who am I how am I going to even start to get this going. It feels like like they say like climbing Mount Everest
Joe Spector: And I think it’s just a muscle you build where you just realize. Yeah, you’re not going to climb it in the one day but you just take 1 step at a time and then you see the progress but being able to take that jump I think in business school and the safety of it. And starting to see some examples of other people who are doing it allow me to just start taking that jump. Um, and I think ever since then you know it’s a high it feels exhilarating to be able to. Have a vision to start executing against it to start seeing results and as you do it, you get more certainly confident and you learn from your mistakes. But I really owe a lot to wharton for creating that space for me to really start taking that jump and.
Alejandro Cremades: I’m talking about creating I think you also learned about creating luck right? And and I find that luck is always preparation meets opportunity because what you did right after Warharton is you go to silione valley where you know it’s the the La of innovation. You know when it comes to to launching startups.
Joe Spector: Are.
Alejandro Cremades: And you know 1 thing led to the next and then all of a sudden you meet andi do them and andi for the listeners. You know he’s also been on the show that was a great episode but you made Andi and that basically you know Wasa was a shift.
Joe Spector: Ah, hundred percent if I say that quote all the time like because people say you’re so lucky and you know it’s it’s never like that and this was 1015 years of busting my butt in Silicon Valley before um, and and being ready to be prepared. You know to have this moment and by the way when I met Andrew the first thing he did is he told me to go away. So even that it wasn’t a given he at the time was working on another company. And he was heads down and I remember he he said seemed like a smart guy. He seemed driven but I’m busy. Let’s just let’s stay in touch and I think by that point. I was already in the framework of I don’t take no for an answer especially when you see opportunities and I remember um the atomic studio where he worked and where hymns was born was such as is still. You know such a special place. So many incredibly smart? well-connected, thoughtful folks I was not going to let that go so I actually pestered him for several weeks until finally he relented and said you know we’ve been.
Joe Spector: Hymns of the time was called club room and he said you know we’ve been kicking around this hair loss idea and no one has time to work on it. You know why don’t you see what you know where this goes so i. Didn’t let him I didn’t let this opportunity slip by and I also made it super easy for him to say yes and and give me a try and again these are all this is all preparation that I kind of learned over that time but meeting him was definitely an incredible experience. And hundred percent agree um in in some ways it was luck but it was a lot of preparation that led up to it making the most of that moment.
Alejandro Cremades: So then what happened next because it sounds like they were you know hitting a block you know and then all of a sudden you come into the picture and then and then what happened.
Joe Spector: Um I think some one of my secret superpowers is I am so results driven and I’m a workhors and with him’s hot. Again I had been through Silicon Valley enough to know kind of shitty ideas or ideas that may sound good on paper but are not good in reality and I felt like what we were trying to solve. You know it was a hard problem. Um. Because it was highly regulated. It’s in a highly regulated space of you know delivering medicine and it was in an area that was ripe for disruption because the current competition of the time in hair loss in erectile dysfunction was doing a terrible job with branding so I saw a lot of opportunity. Um, and then like I said I think my secret weapon is execution and results and hymns was instill. It’s such an incredibly magical place because we from but from the very early moment. We were seeing incredible results now. Granted this was a different time this was before ios privacy so on Facebook you could get a read fairly quickly and you could run a lot of tests but everything we were doing I remember was working.
Joe Spector: Um, it’s never like that you know and of course when things work the only one ah for them to work faster and bigger and better. But we saw positive results almost from from the very beginning um and and like you mentioned you know. You know Andrew will say we did a million dollars of sales in our first weekend. Um, that’s true. You know once we went live. It was kind of yeah you know you ask any of the investors in in hymns and it’s their best you know performing company. Because it just did so incredibly well and and it’s the same thing you know I think right place right? time. The right people were there to do to the right things and took advantage of the right opportunity.
Alejandro Cremades: So what was that tweak that needed to be done so that you guys went from like you know, kicking the heads and hitting the wall to all of a sudden you know a million bucks in the first weekend.
Joe Spector: Um, it’s connecting the dots the running this business is operationally complex. You have to have pharmacies that deliver all over the us. So that’s kind of 1 thing and at the time. To find the pharmacy that’s going to you know, no pharmacy wanted to touch a telemedicine business so it was it’s finding that right network and and having a pleasant experience. It was investing in brand we had this company that no longer exists gin lane. Did some of our branding work and just created a beautiful experience for hair loss for erectile dysfunction that had never been done before so that was a huge unlock and you know this was a different time and place. This was a time when. We could raise 50 to $200,000,000 every ninety days so we could run beautiful New York subway ads and giants baseball toilet ads and be super innovative in our marketing and. We were even from the very beginning thinking about twenty four months ahead because we had that cash runway so kind of making the long-term investments and then doing the super complicated logistic operational things I think those were.
Joe Spector: The unlocks we did and we were just moving crazy fast when when we launched from from that million dollars of sales but a month after launch we had already raised the series b at a $200,000,000 valuation so it’s it was.
Alejandro Cremades: Wow.
Joe Spector: Maybe still is one of the fastest growing Dtc businesses because we were also just working our butts off and moving so fast.
Alejandro Cremades: And for the people that are listening to really get it What what ended up being the business model of hymns.
Joe Spector: Hims. It was a it’s a subscription model. So mom initially was just hymns and and men paid for a visit with a doctor and then the doctor for appropriate rights of prescription for hair loss for erectile dysfunction. We ended ended up getting into. A whole bunch of other conditions like skin care and mental health and then we launched hers. Um to do the same thing on the women’s side partnered with some you know with celebrities like Snoop dog and J-lo and a rod and. You know, still to this day continue to open up new verticals and continue to invest in just an incredibly beautiful brand.
Alejandro Cremades: And it sounds like you guys were like like a Scott like I literally like rocketing you know, right? right? Off the get-go like since that first weekend that you launched this thing how much how much capital.
Joe Spector: Here.
Alejandro Cremades: Did the company raise prior to the company going public.
Joe Spector: Um I don’t it’s too I want to say maybe close to $500000000 maybe 3 to 500,000,000 it was a lot more.
Alejandro Cremades: 3 3 to 500000000? got it and and and let’s let’s let’s talk about being able to raise money as you were saying you know obviously different times. But also you guys were at a position of leverage. You know, typically companies are like raisingcing money because they need the money I mean here you guys were like really kicking Butt. So. So How does it look like when you’re raising money and you’re at at that ideal position of leverage where you can like you’re in a your like metrics are like off the roof and you can literally pick anyone that you want to pick to to invest in your company. How How do you go about that.
Joe Spector: You.
Alejandro Cremades: What does that look like how do you go about picking the right people. What was that process like.
Joe Spector: It’s still look at that you still have even when people are giving you money still has a price money still has a price and so there’s definitely folks who would come and want to give us money but not at the valuation that we wanted and you always want. The least possible dilution. So you’re trying to find a partner who’s giving you a valuation you want but at the same time You also want partners who are actually going to be helpful to your business as you know and not be a distraction. So you’re still wanting that combo of of a good partner but also not wanting to be diluted because by the way some of the best vcs are not going to give you the valuation that you really want so you still have to have that negotiation.
Alejandro Cremades: Yeah, and then how was the process of taking the company public.
Joe Spector: The first word that comes to mind just it still feels surreal when you take a step back and you look at the odds and you look at the statistics going and as fast as we did. It’s just nearly impossible odds like. I do remember a year before really realizing that like we aren’t going to go public. This is this is going to happen and I just couldn’t believe I couldn’t believe that again for an immigrant. Who came you know my family I came here with $100 and one one suitcase literally. That’s what we had to be able to have the chance to take a company that I started public. Still to this day I just type inch myself I just can’t believe that happened and so so I think first it’s surreal. But of course once you start? ah you you know when you’re a private company. It’s different now you have to file with the scc. You have to have earnings calls so it just you know it becomes ah a different game. Yeah I have to be incredibly buttoned up and your operations have to rise to a whole new level. So I think in that sense it was like oh god even though.
Joe Spector: I’m so used to a lot of the legislative and the regulatory matters. This is obviously this is obviously a whole new level and then um, so yeah, so much much more regulation but a super surreal moment.
Alejandro Cremades: And let’s talk about this real moment because all of a sudden you know you as you were mentioning. You come to the Us with a hundred bucks and with a suitcase you know with a family and then all of a sudden you have financial freedom. How does that? How does that they what? what does that feel like and then also what what did you? do you know with. Once once you had you know money in the bank.
Joe Spector: Um, you know I still have ptsd from the immigrant experience because in in that time when we left. Um, we lived in this refugee camp in italy. Um. I would say basically as as homeless people for I mean maybe slightly you know we we had a tent but I will that experience that experience I’ll never forget it and so on the 1 hand. Um. Definitely feels like incredible because you know we can take vacations and I can have a nice house but on the other hand I still have this feeling like this I could still be in that place in that homeless environment and this could all be gone in a second. I never feel like um I have a base I think this could all be gone and so I think in the sense I really want to live every day like it could be my last and try to live it to the fullest and so I think you know when it comes to Dutch. I still I’m working I’m working harder than I did at hems because here I’m the Ceo and this is even more my company and so I still I think I would have thought that yeah like you you make several million dollars
Joe Spector: And you can just chill and that hasn’t been how I feel I still feel like I have a lot to prove and this could all be gone.
Alejandro Cremades: So then let’s talk about that. So um, you know you take him’s public. You know, right now he saved I got two point three billion incredible experience incredible journey why you know turning page why starting again from.
Joe Spector: Well.
Alejandro Cremades: From nothing you know, like building something from the ground up.
Joe Spector: Maybe I mean maybe I’m I’m a masochist but but I there is. It’s a high. There is something incredibly thrilling about that 0 to 1 about creating the universe and you know right now one of the things that’s going on is I’m working on bills in 4 States of changing the veterinary telemedicine law and. It’s incredible. You know I think I feel that as humans we have such a short time here on this earth and if I if I can feel like I can make some sort of an impact that feels incredibly satisfying and so. Working on this legislation to change the law which will increase access and increase affordability for millions of people that is such a high and I feel like I still have it in me to make big changes and I think that’s. Kind of like what I learned from hymns is it’s only worth doing if you’re going to do something big and you’re going to have a big impact. Otherwise it’s it doesn’t feel like it’s something that’s worth spending your time my time on and I think Dutch felt like.
Joe Spector: I Could still have a pretty major impact I think coming into this business when I looked at the pet landscape I was the only entrepreneur that had the regulatory experience and the big brand experience to make an impact and I felt like that. Very excited and very what’s the word optimistic about being able to really make another impact in this tangential. But ah you know adjacent space.
Alejandro Cremades: That’s amazing. So then tell us what are you guys doing at dutch. How are you guys making money.
Joe Spector: Um, very similar. It’s you know it’s telemedicine and it’s a subscription business. Um, there’s definitely differences. We focus on setting up pet parents with a video call with a veterinarian. Um, and then that veterinarian could either give you advice or could write a prescription for an issue that they’re trying to solve. You know some of the biggest differences versus hymns is it’s all video. You know we don’t have forms. We don’t have kind of quite you know. It’s not It’s all real-time video because you know you’re dealing with you know with a dog with a cat that you kind of have to see in person and it’s new telemedicine. You know when hymns got on the scene you already had companies like teledock that were public and so that. Behavior was much more accepted in the human field on the pet side. We’re having to do a lot more education. We’re having to you know, a lot of people don’t even realize that they could have a video call with a vet and a lot of people don’t even realize how much money they could save. By doing telemedicine versus in person I think you were saying you know and saying and this was my experience I don’t know that when I go to a vet and I so you know, ah you know I’ll get a bill of 400 or more and being able to.
Joe Spector: You know our service at Dutch. It’s $12 a month. So. It’s the best deal in town. You’ll never be able to see of that same day for twelve bucks and um and we allow up to 5 pets and and the medication is far cheaper. Been in person so you know it’s ah it’s an amazing service. We have to do a lot more education and then there’s still big states like California and Texas that don’t allow this type of service. So we’re also working on changing the lot. But I think you know. As with him I think the tide is on our side and it’s a matter of time before all 50 states allow this.
Alejandro Cremades: And I guess say for this I mean you you also have raised some money I mean it’s been like no time you know on 2021 you did the seed you know, then you did the the a round. So. How how much capital have you guys raised to date and and I’m sure that raising money this time around was a little bit easier since he was. You know you’re a very much a proven founder so I’m sure it was it was different.
Joe Spector: Um, I always think you know I’m sure it’s easy or but it’s not easy because I I did think it was going to be easier than than it was but it wasn’t I think. There’s there were so many concerns around pet telemedicine about the regulatory laws about ability to acquire customers. So I think in many ways it was actually still incredibly hard and we’ve now raised $30,000,000 so knock on wood. You know we’re in a really good position but it’s definitely It’s a very different environment when you know at hyms we could be looking at an eighteen even a twenty four month payback period. Right? Meaning how long how much we were willing to spend to acquire a customer and that’s just not the case today we have to be almost profitable from the beginning and I think in many ways that’s made us a superior company because in the end. You know, hims as a stock was being punished for a long time for being unprofitable and so it gets you one way or another I think that we’re a very strong company as a result of this reception or this you know economic environment that we’re in.
Joe Spector: And it’ll make fundraising easier the next time we’re out in Market. But um I Still think it was incredibly hard and I think oftentimes. Um, what I’m so happy with the with the folks who are my lead investors is. I Think they? um we connect with them on a personal level I think they understand what makes me tick and what makes me a good entrepreneur and that was important to me especially in in those early series investors of finding people. Who can understand um me as an individual because then they can help me. You know they can help me be better because they know me and and what it takes for me to win.
Alejandro Cremades: And tell us about pet health as well versus human health.
Joe Spector: So I think one of the maybe mistakes I made is to assume that there are so many similarities but there’s actually a lot of differences. The financial incentives are quite different and that leads to very different behaviors. So in human health about 90% of us in the United States have insurance whereas on the pet health side less than 3% have insurance. And what that means is that pet health is almost an entirely cash pay market and because of that you don’t have an insurance set of players who are regulating the industry you have you know it’s it’s cash. And so oftentimes brick and mortar veterinarians really are incentivized and talk about creating incentives based on what they call production quotas meaning that they order the extra x-ray they give you the extra set of pills. Um, because that’s how they build their practice whereas human doctors build their practice on service on the services that they provide and they don’t care. You know if you go to Cvs so or Walgreens to fulfill your prescription doesn’t matter to them because there’s a single set of.
Joe Spector: Or a fairly similar set of prices that insurance companies have created um and so as a result of all this. There’s many brick and mortar vets who really don’t want telemedicine because they think it will take away their ability. Upsell you on all these products and look at the end of the day we have to do? What’s best for consumers and ultimately, what’s best for consumers is going to win in the long run. But the fact is there’s almost 200,000,000 pets in this country.
Alejandro Cremades: Um.
Joe Spector: You know and pets are like all biological creatures have problems that they’ll always need to be seen in person you know and then by the way there the the other thing that’s crazy that I didn’t realize is how little that’s make the um, the. The average vet makes about $100,000 a year I mean it’s incredible. They go through almost the same amount of schooling they come out with several hundred thousand in loans and they make on average like I said $100000 it’s not nearly enough to pay off their bills. Um, in fact, vets have vets have a 3 times the national suicide rate 3 times people often think of dentists but actually vets are incredibly depressed because they love animals and. They go into an industry where they make actually very little money. So telemedicine is a great opportunity for them because we actually pay that’s almost double what the industry pays them and they can actually work from home. And so that’s been that’s been the cool part about telemedicine is that’s actually a huge win for consumers. But it’s actually a huge win for the industry as well. So.
Alejandro Cremades: And you were talking to about the long run. So let’s talk about that. Let’s say you were to go to sleep tonight and you wake up in a world Joe where the vision of dutch is fully realized what does that world look like.
Joe Spector: Yeah, it, you know? Ultimately, we’re we’re a global brand and people come to Dutch for the ability for that first interaction they can talk to someone in real time talk to a veterinarian in real time and. If they need be get a prescription delivered within a matter of hours and that’s actually I think one of the reasons I wanted to name the company dutch is because I wanted it to have this global ubiquitous um brand that can grow into variety of. Areas you know, just recently we launched an integration with ah lab testing so you can actually you know we talked about the how much money you you spend on on x-rays and labs we actually partnered with someone who sends you something at home. For one fourth of the price you pay in person so having more and more services that you can do from home and doing it at a national and ultimately a global scale is the ultimate vision.
Alejandro Cremades: I love that. So obviously here we’re talking about the future. So let’s talk about now the past but doing it with a lens of reflection. Let’s say I was to put you into a time machine and I bring you back in time I bring you back in time to those moments where you were you know. In Wharton you know they’re in Philly and then let’s say you had the opportunity of having a sit down with that younger Joe and being able to give that younger Joe a piece of advice before launching a company. What would that be and why given what you know now.
Joe Spector: I I would say kind of 1 mistake I made early on that I tell myself is spend the time to get to know people to build your network because. As a Ceo you know some of your main responsibilities are hiring people fundraising and having strategy and a vision and I think I jumped into starting something before I had any of those things. So I would say you know spend the time in the industry you want and soak up as much of it as possible from learning from people and then and then jumping into it yourself.
Alejandro Cremades: So Let’s double click here. Let’s say now you’re able to go even earlier. Let’s say you’re able to you know, really sit down with that younger kid you know that 10 year old that they. Was perhaps in that refugee camp in Italy you know, living literally under a tent and dealing with all that uncertainty you know surrounding the family. What would you tell that kid.
Joe Spector: Yes.
Joe Spector: I think I would say experience things that are different and that are all just.. You may not even know where it goes now because I think at that time maybe this is the Russian in me or the Survivor. You’re so practical but I would say get into experiences get into situations talk to people that. Are so different than who you are that think you know so differently? Um, because I think that’s kind of how your world opens up is by realizing the possibilities and the differences and not being um. Maybe at at the time as narrow minded as I was in the earlier days I think maybe another kind of the other thing that I give my earlier self advice is to be comfortable in my own skin I think um. Now that I’m older and just I am who I am but I remember earlier it was I had a feeling like I’m not salesman enough I’m not introverted enough and.
Joe Spector: And thinking that’s what I need if I want to be you know the caricature of a Ceo or an or an entrepreneur or an executive and I always felt that that’s another reason like that’s not me because I’m not this idea of who I think. Ah, Ceo is or who I think an entrepreneur is and I think what I what I would say is there is no caricature. It’s all about results if you can achieve results. You can be whatever and so I’ve learned now over time to be more confident and. Just realizing I am who I am and this has worked for me and there’s going to be others who are going to potentially get to the same result or better in a different way and that’s okay, there’s not 1 way to do it.
Alejandro Cremades: I love it Joe so for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Joe Spector: My email me Joe at dutch.com
Alejandro Cremades: Amazing. Well hey Joe thank you so much for being on the dealmaker show today. It has been an honor to have you with us. So.
Joe Spector: Thank you so much. What a fun chat.
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The post Joe Spector On Building A $2.3 Billion Company And Now Raising Millions To Bring Telehealth To Pets appeared first on Alejandro Cremades.
Nadayar Enegesi has gone from building companies out of Canada, back to the entrepreneurial hotbed of Nigeria for his biggest startup venture yet. His new company, Eden Life, has acquired funding from top-tier investors like EXPERT DOJO, Goodwater Capital, Village Global, and Google for Startups.
In this episode, you will learn:
- Creating a values-based business, and what to do when your values are challenged
- Managing quality in marketplace businesses
- Startup fundraising
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Your email address is 100% safe from spam!About Nadayar Enegesi:Nadayar Enegesi is an angel investor based in Lagos, Nigeria. He is a Co-Founder and serves as Chief Executive Officer at Eden Life.
Previously, he co-founded Andela and Fora. He has industry experience building enterprise software for the likes of OpenText, PTC, and Bnotions and has worked closely with major tech leaders in Toronto.
Nadayar holds a Bachelor’s in Computer Science from the University of Waterloo.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So today. We have a very exciting founder. You know we’re gonna be learning quite a bit you know from his journey ah from Nigeria to canadala from Canada back to Nigeria he’s built now several companies. The last one you know massive rocket ship you know with a $2,000,000,000 valuation and now he’s on another rocket ship but we’re gonna go into it. We’re gonna be learning a lot around culture around also raisingcing capital around values and mission. But again I don’t want to wait I don’t want to make any of you wait any longer so without furtherther ado. Let’s welcome. Our guest today Nadaya and agasi welcome to the show.
Nadayar Enegesi: Um, thank you Alejandra is great to be here with you.
Alejandro Cremades: So give us a little of a walkthrough memory lane. How was life growing up in Nigeria.
Nadayar Enegesi: Um, oh um, it was great I grew up in the in the southern part of of Nigeria. Um, great weather. ° all year round really close to the to the ocean and lots of seafood. It was awesome. And um, actually as a as a kid my my 2 favorite activities were play music and solving mathematics. So um, if after playing music professionally in in the band for about a year I I moved. To Canada to study computer science and that is really where my entrepreneurship story started.
Alejandro Cremades: So then so then we’re gonna talk about the entrepreneurship journey just a little bit but I know that for you going to um to Canada you know what saying was quite a breakthrough I mean you went to Canada very young, how old were you my god I’m I’m sure that.
Nadayar Enegesi: Me.
Nadayar Enegesi: Is. Our 16.
Alejandro Cremades: You know going at 16 to somewhere so far away without the friends without the family I’m sure that that was very uncertain I’m sure for you. So how do you think that that has shapen up who you are today.
Nadayar Enegesi: Um, yeah, it was it was scary. It was also exciting I think doing doing something I didn’t realize how crazy was actually until until much later. Um, and I think that experience alone has made me sort of like. Fearless like um I am not I have buildinged the resili be able to jump into new Territories a new Terin um, knowing that I I have the ability to figure things out in the midst of all the all the chaos. So I’m really grateful for that experience.
Alejandro Cremades: And in your case too I mean you ended up getting into computer science in Waterloo you know a great university for this now out of all things like computers.
Nadayar Enegesi: Um, because I I knew I knew that was that was the direction. The world was already going at the time right? like that was the that was the rationale thing to do. But beyond that it was also my own. Um I take my own I used the word laziness to describe it because because um I at that point all all I wanted to do when he came to school was um. Solve math and make things I didn’t want to have to read or study or write essays or anything like that and so like once once I landed in Canada at the Pre-university School I went to I just picked math physics courses and computer science that was it and um, and and that’s how I got it to like the top. Um. Computer science program.
Alejandro Cremades: And in your case you know you see 1 thing led to the next then you ended up starting your first business now your first business you know as they say you either succeed or you learn in this case, you learned right? because it didn’t you know, get the outcome that you had hoped for. So.
Nadayar Enegesi: Um, you have it.
Alejandro Cremades: So what were you guys doing with this business on why didn’t work. Why did it not work out. Okay.
Nadayar Enegesi: Um, it was um, it was an Edtech platform for africans to access like global university course content. Um, so we’re building this out of Toronto and we were distributing this in in Lagos Nigeria. We’re selling it to people in universities here or people who worked at financial institutions that needed to upgrade their education or their but but their certifications and um, ultimately it didn’t the say didn’t work out for 2 main reasons. 1 of them was was timing. Because you needed lots of internet bandwidth to be able to use a solution like that here at the time internet penetration was was not great in in Lagos and secondly we learned that people care about learning and people care about education but they only care about it. As much as it gives them the certainty of a higher income or a better economic outcome. Um people people are not learning for the sake of learning I mean at the time Coursera was also really popular and Coursera had like what like a 7 % course completion rate. So we we quickly learned that actually like when it comes to educating people. The the education and the economic outcomes must be directly correlated and and attached together and that was actually the thing that inspired us to start the next company because um, for anddela the the next company we were. We were solving the global technical talent shortage. We’re finding the brightest.
Nadayar Enegesi: Young people in Africa and like teaching them to be software engineers that could work for any company remotely and our our value prop to the engineers on the ground here was we will pay you to learn and right after you learn, you’re gonna have access to work with the best engineering teams around the world. And that was really powerful because like people people were putting in everything that was required to be world class so that they could have those opportunities and they did and they walked out reliba.
Alejandro Cremades: So then so then obviously you you know you were saying you know this was the segue to andela. So how how did it, you know, naturally, you know transition into mandela because Mandela.
Nadayar Enegesi: Um, and.
Alejandro Cremades: Absolutely insane. You know Success story. So how did it transition there.
Nadayar Enegesi: Um, um, it was kind of like a a collision of worlds really? so you had myself E Ian Bryce or 4 friends from college who were working on this e tech program right? and then there was um. Jeremy and christtina who were friends from a different life. Jeremy also had an Ed Tech Company he started that has just went public and he was also thinking along the same lines of actually when he comes to education outcome is all that matters right? and our worlds collided and um.
Nadayar Enegesi: Jeremy and Kristina had been talking about something like andela for about a year before we met and when we all met it just felt like okay like this is the dream team that has finally come together that can fully go after after this problem. And so we just jumped right in right away and said how quickly can we validate that we can take somebody from just being computer literate to being a software engineer and completing a software engineering task online that was our first objective and we accomplished that really quickly and from there we just started building the.
Alejandro Cremades: And and actually that also brought you back to Nigeria seven years later
Nadayar Enegesi: Business.
Nadayar Enegesi: Exactly so I left when I was 16 I left here like may twenty first thousand and seven may twenty first Twenty fourteen I was I was on the flight back to lagos to start doing and della.
Alejandro Cremades: On why? Why did you have to return to legors to on to do this.
Nadayar Enegesi: Um, because our our model hinged on finding the brightest people and then equipping them with the skills to be a world class of engineer and on on our team of cofounders I was the one that had the unique skill set of being. Software engineer myself and I had also done a lot of like training and coaching through like community Involvement. So My responsibility was being on ground and finding those people and building these systems that would transform ordinary people into world class Software engineers.
Alejandro Cremades: So so so I guess for the people that are listening to really get it. Why didn’t that up being the business model of Andela How is the company making money.
Nadayar Enegesi: Um.
Nadayar Enegesi: Um, the the company makes money through ums like a a technical talent marketplace right? Any any teams are looking to scale their engineering teams anddela is a number 1 place for them to access. Um, they are talent resources. And now it is it is more than just software engineering is is anything that has to do with like technology. It could be designed. It could be data science anything like that.
Alejandro Cremades: And the company has also raised a ton of money I mean it has raised the how much.
Nadayar Enegesi: Um, over three hundred million dollars so far.
Alejandro Cremades: Yeah I see here like closer to 400000000 about 381000000 with a valuation of over two billion now you know in this case, you guys were able to get absolutely incredible investors but investors that were more in the us. So what was that process of. You know here you are you know, pushing an operation in Lagos there in Nigeria and being able to get money from the us I mean how difficult was that.
Alejandro Cremades: How difficult was that not a year to to get this this investors.
Nadayar Enegesi: Um, um, yes, um, it was it was definitely challenging because at the time at the time there was not a lot of like investment activity in in ventures that were Africa focused really right? But. Um, one of the strengths of our team is also the diversity of the team. Um, so while I was on ground and some of our team were were on ground in in Africa we had our Ceo and Ceo Jeremy and Christina were working out of our New York office um, Jeremy’s former company had also got ipo so that really helped a lot as well and he’s an incredible Ceo I mean like he he definitely pulled all the stops like even at times when like things were so uncertain he just carried everything on his back and and kept going and um. Been a great inspiration to me as a leader who is going to perever until until the very end and I think his perseverance definitely paid off on that on that front.
Alejandro Cremades: So now I your how how were you able to get all these investors from the us I mean you guys got the who is on the investment world and especially being in Nigeria.
Nadayar Enegesi: Yeah I um I’d say credit to to Jeremy our our Ceo he did a fantastic job I mean um, it was a pretty difficult period actually to raise to raise fundnt for an Africa focused company because. Um, not not not a lot of venture was going towards Africa focused ventures thankfully Jeremy’s previous company had gone public so we had that credibility on our side but still it was really really difficult and. Were moments where he just carried everything on his back and just press it there until the end and so um, Jeremy is a very important figure for me. He’s um, he’s an inspiration. he’ the person I think about whenever like I’m going through a really tough time and it seems like there’s nothing also done I’m just like yeah if Jeremy were doing this thing. He would just like give it everything that he has until the very end so um, credit definitely goes to him and also to the rest of the team because like everybody was able to pull their weight which allowed him to to focus a lot on thekisha that we had the the funding that we needed to build or we had to build.
Alejandro Cremades: And how was that transition of um of financings because I mean every every year pretty much you know you guys were almost every year. You know you guys were raising money. So how was how was that journey like going from 1 financing to the next.
Nadayar Enegesi: Um, um I mean like it meant it it be the the causation and also the implication of that was like we had to be growing very quickly like we had to be tripling or doubling our revenue almost every year. So like. After after every round of funding It wasn’t even a thing of like oh like let’s celebrate that we have this much money Now. It’s like Nah like every new funding around came with the with the realization of the work that had to be done to get to the next stage and so the team was um was super super focused and I think that helped us. Um, stay the course.
Alejandro Cremades: And then I mean the company incredible growth when it comes to employees how many employees does the company have now.
Nadayar Enegesi: Um, um, I’m not sure the exact number now is um is been. Its been a couple years since I was there last but um, no, no.
Alejandro Cremades: But probably close to 2000 no
Nadayar Enegesi: Definitely not 2000 employees because now like initially um, we operated as a full stack managed Marketplace where the the engineers who are working for client companies were also employees. But um, Angeldela has Since. Moved to a purely marketplace model. So Most of the team right now is the technology team and the and the sales team so is a much much smaller team and running a lot more efficiently.
Alejandro Cremades: And then in this case, you know for you at what point do you realize? it’s time to turn pages I mean with all these employees with all these money raised I mean 2000000000 valuation I mean that’s absolutely incredible for for you guys. You know so.
Nadayar Enegesi: Um, um so about about 5 years into into building the business I think this was after after our series d um I had now lived in legos for about 5 years and I had spent a lot of time in in Nairobi.
Alejandro Cremades: Why Why did you decide? you know it was time to turn page.
Nadayar Enegesi: Kenya I spent some time in Kampala Uganda and other places just like expanding the business and um, it really started to hit me that I mean like at that point in andela. We we had built all of the all of the rails and the engine for getting talent in and ecquipping them with the right skills I could have decided to to coast you know at the company. But um I I started feeling a deep sense of responsibility. When I left my house and I go out and I see how like um, how how people just lived every day within within these different markets in Africa I was like there are the definitely day-to-day life challenges that we that we have here and um I feel personally responsible to do something. Something about it that was that was how my my my journey with eden life started and um, one day I just decided that you know what I’m definitely in this environment for your reason and I think I think the first big reason why I was back was to create economic prosperity for a small group of people. To software engineering now. How can we? you know like make that impact 101000 times by touching how a lot of people or millions of people live on a day-to-day basis and um I contemplated that thought like day on day week on week month month
Nadayar Enegesi: And it never left me right? and that’s like after like six months that’s when I knew that this was what what I was meant to be doing and I decided to take the plunge.
Alejandro Cremades: And as you as you are now. Um you know, pushing with it in life and and as you were doing with andil I know that the values on the mission you know has been a really critical thing you know for you guys. So how. Were you able to do that you know with e life I’m sure that you learned quite a bit with Mandela and I know that you guys have spent you know quite a bit of time you know on making sure that people are aligned that people you know are really um, you know, excited about the future that you guys are living into and having that level of clarity. So how have you guys gone about putting that in place.
Nadayar Enegesi: Um, very good. Um I mean like it is it is just like documentation and and repetition and continuously engaging with our purpose. Why do we exist and who what what kinds of people Do we need to be to achieve. Or to leave that purpose of of why we exist as a company in the in the case of even life. The reason why we exist is to tenx the quality of life We want to make life. Um, 10 times better for everybody and so for us like the the values that supports that um. Mission is that we are audacious. Um, what we are trying to do is hard and so we must live with that consciousness and not be afraid to challenge the status quo we are. We are obsessed with quality. So if we’re going to be the ones that create the rails for 10 X in quality of life Then. Ah, us Ourselves. We must be obsessed with Quality. We must. We must look around the world for all the inspirations of what quality of life looks like and like imitate and innovate from there. Um and make those things accessible to our market. Um, another one of our values is exponential thinking. Ah, means we must always look for ways to do more with less that means like leveraging the latest technologies to make sure that we are um, we’re able to achieve larger results with small amounts of um of of human efforts.
Nadayar Enegesi: Um, one of our values is also radical Candor. We say it like it is to ourselves within the company. We. We challenge each other directly but that doesn’t mean that we have to be assholes right? We can also care deeply about each other a while while challenging um directly um discipline is another one of our values self-discipline and. Um, team Execution discipline That means that even when it doesn’t feel like it. We show Up. Um and another value that we have is is thoughtfulness and this one is more is more about how we engage with ourselves and how we engage with our customers. Um, someone can be helpful without being thoughtful. Be be thoughtful implies implies, empathy implies asking the the deeper questions and making sure that the solutions that we provide and the support you provide to each other and to our customers actually get to the roots. Of what that person. Um really needs from us and our final value is is diversity. Um, it is a value that embraces our our ethos of just being welcoming to the people that come into our space and the people that that work with us. Regardless of their backgrounds and regardless of their of their sets of beliefs as long as they’re not harmful. Um and it also diversity also speaks to the kind of product that we are building because for E and live the product we’re building is one where we’re building the operating system for like.
Nadayar Enegesi: But is a wide range of stuff you can find on our product from food delivery to home care to self-care to travel and entertainment all of those things in 1 place. So you you need people with with different points of view that can like make such a product exist.
Alejandro Cremades: And and also what happens when that doesn’t happen because I know you guys have been dealing also with with abuse of people. So how do you identify that and then how you how do you clean up house so that that’s not cancer that spreads.
Nadayar Enegesi: Oh yeah, very good right? So every every every company like talks about values until until this time to enforce them right? It’s very easy to to celebrate the values when they are being upheld but like when when they’re not being upheld. That’s when a company’s metal is um is really tested. In in our case on on one occasion we we did have a very senior team member who was um, both verbally and and and physically abuseive to an another team member and for us that like that. Infringes on on how we believe people should treat people it infringes on our our thoughtfulness value it infringes on our radical candor value like if there was a conflict. It’s a much better way to handle a conflict um than being than being abusive and um, once that situation came up. Investigated it and on our leadership team. It was It was a pretty straightforward decision to make it like yes, this is going to be very painful. It feels like we are cutting an arm off right now, but it is better for the long-term health of the company because like this is the time when we stand true to our values. Ultimately, we Um. We got that person off the team and the response from from the rest of our team was like super so positive because like now everybody knows that the leadership of the company actually puts our money where our mouth is and it has definitely made our our culture stronger.
Alejandro Cremades: And how many people do you guys have today. That’s incredible, especially because you guys haven’t raised a you know a ton of money. How much money have you guys raised today.
Nadayar Enegesi: Um, we have about 50 people.
Nadayar Enegesi: Um, um, we’ve raised about $2000000 to date.
Alejandro Cremades: That is incredible. So how are you able to really you know, get this thing going I mean coming out of super hyper growth crazy a amounts of rounds of money that you raised to the last company. Why have you been.
Nadayar Enegesi: Um, um, a few things. 1 of them is that it’s a it’s it’s a completely different. Um is it different market and is it different um is a different sort of product. Um, even life is also doing even life is doing something that has not been done before in this market.
Alejandro Cremades: More careful and more conservative as you are thinking about raising money on this on this journey with even life.
Nadayar Enegesi: So the discovery period is is longer and um, it is better to build and figure these things out without um, consuming copious amounts of of capital. So naturally we are more cautious about like raising too much or raising way more money than we than we need. Until we have got into a critical point where it is time to literally pull rocket fuel on on the fire. Um, that’s 1 thing other thing is that our team is mostly is mostly local. We do not have an international team structure like like we did at Mandela where we had people. Not just in Nigeria but like in in New York and in San Francisco which commands higher salaries. Um, so those those 2 things have actually helped us stay very prudent when when it comes to raising.
Alejandro Cremades: So so in this case I mean imagine you were to go to sleep tonight and you wake up in a world where the vision is fully realized what does that world look like.
Nadayar Enegesi: Um, amazing. Um that world looks like 1 where um, africans are just thriving um get thriving because all the things that they need. For a good life. They can easily access them. They’re eating right? They’re saving lots of time because like all the jobs around the home they need to outsource. They can easily outsource people that they trust they can get to the places that they that they want to get to um on time because they’re saving time they can dedicate that time towards. Things that make their lives better like um, upskilling or spending more time with family and friends or engaging experiences that just like replenishes their school and these things under longer at things that people just like dream about having but don’t access. It is not possible for them because like write on that e and life app they can access all of these things are their fingert tips. So um, that’s the world. That’s the world that we’re going to build into one where everyone just thrives and wins because what they need to drive or we is super accessible to them.
Alejandro Cremades: And talking about thriving and Vision. You know the way that you guys got started. You know it’s not the way that you guys are heading now I Mean in fact, you guys started as an open platform and then you know it was tough to to manage the quality control and then the ship had already sailed so it was really tough to to turn it around. So. What happened there and how did you guys you know, transition or shifting gears.
Nadayar Enegesi: Awesome. Um, it’s’s it’s a constant journey of of evolution. You know so when we started we were like yeah we’re going to work with all of these third party merchants to offer these different verticals on on our platform and quality was really really with a big problem. Um, food delivery is the biggest service on on our platform today and we we decided that you know what what? What we’re going to do to enter 100 represent quality is they’re going to vertically integrate this food delivery operation. So.
Nadayar Enegesi: We We built a dark kitchen We. We brought on a team of professional Chefs. We started R and D we created our own menus and like we started delivering that Product. We went from a place where customers we complaining every single date’s ones where. Customers hardly ever complain and they just like give reviews most of the time and they’re like wellre retained but like before we accomplish this thing myself and my two cofounders we didn’t know anything about what it takes to to produce Food. So it was It was a period of dedicated learning and focus and leaning on the right people and the right experts to make that to make that possible now we are the place where we now understand what it takes to deliver like quality food at scale. And we have built we have built um processes and technology that helps us to achieve that on a daily basis. So We’re now going back. We’re going back to the beginning with third parties. But this time around we’re going with the knowledge because we know what it takes to succeed and we have codified all of those things So we’re going to be giving them to. These merchants to be able to operate on our platform and we believe that this is how we enable quality for the rest of the continent because at the end of the day we cannot. We cannot do all the operations on our own forever or we have to enable the rest of the of the market and that is what we are here to do.
Alejandro Cremades: I love it. So ah so let me ask you this one so how is it now you know they’re in in Nigeria you know to to because there’s a lot of innovation going on. But how is it you know being an entrepreneur there compared to perhaps what you experience in canadaala.
Nadayar Enegesi: Um, oh um, is is it’s um, is is different in in a few ways. So one of the things I enjoy about building in Lagos is lagos has legos nigeria has raw entrepreneurial energy. It’s like everybody. Is is building something because like the thelare pathway to to wealth here is actually starting a business and then um, outside of that we have adopted a lot of these digital technologies very very quickly right almost everybody has a smartphone almost everybody has um, data and and internet. But at the same time our our infrastructure in the urban areas hasn’t caught up to the rest of the world. So which means that anywhere you look. There’s a problem to be solved. And if you can solve that problem and and create more efficiencies or create convenience for people then there is um that that’s an opportunity. So I love being here because it is it is constant stimulation of that entrepreneur energy and and opportunities all around as opposed to at least like Canada where it feels like. Um, is mostly first world problems. Um, so like this is one of the best places to come to to get inspired as to like what what one can do for the world and for authority humanity.
Alejandro Cremades: So imagine you know now that I give you the opportunity of going back in time and I put you into a time machine and I bring you back in time to that moment where maybe you were still in the university of Waterloo and taking a look at you know, maybe starting something of your own and and becoming an entrepreneur.
Nadayar Enegesi: Um, again.
Nadayar Enegesi: Are.
Alejandro Cremades: If you were able to go back in time you know, especially after having achieved you know this incredible amount of of wealth of knowledge that you’ve gotten with these 3 companies that you built. Let’s say you were able to grab that younger na that year and putting that younger another higher you know there to sit down and to give that younger self. 1 piece of advice before launching a business. What would that be and why given what you know now.
Nadayar Enegesi: Um, ah um I would tell them um I would tell them that I’ll tell you younger and a daughter that actually you have.
Nadayar Enegesi: You have everything within you to materialize whatever vision that you have in your head and um and you have to trust trust that at at the right time things will materialize and you meet the right people and you you will do. You would do all of those things. Um I will say that Because. At the time I was I was pretty nervous and I was and I was pretty scared and there were times when I did not believe that I had it in me to to do all of these things but I realized that when every when every challenge came we just we just went through it. And it it was it was because of the amount of focus the amount of perseverance and also the people around that were that that were um that were committed to accomplishing the same goals. So I would I would really just if I went back in time I would save myself the anxiety and just give myself that very reasssurance that like all all of these. Dreams are possible. Um, everything.
Alejandro Cremades: It is possible. That’s for sure with hard work and dedication. Everything is possible. So now that I are for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Nadayar Enegesi: Um, um, the best way to to reach out and say hi is is my Twitter my handle is not dire said at nadayar especially to reach out to me. And.
Alejandro Cremades: Amazing. You see enough. Well hey now I are thank you so much for being on the deal maker show today has been on on earth to have you with us.
Nadayar Enegesi: Thank you so much ay Handra so much fun.
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The post Nadayar Enegesi On Building A $2 Billion Company And Now Creating A Platform To Enable Africans To Live Well appeared first on Alejandro Cremades.
Ramji Srinivasan is now on his second big startup and is working to help people extend their lives. His latest venture, Teiko, has attracted funding from top-tier investors like Altitude Lab, Tau Ventures, Founders Fund, and Pathfinder.
In this episode, you will learn:
- Honing in on the right metrics
- What Teiko is doing
- His hiring process
Alejandro Cremades · EP 611 Ramji Srinivasan On Selling His Last Company For $375M And Raising MillionsSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
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Your email address is 100% safe from spam!About Ramji Srinivasan:Ramji Srinivasan is the Co-Founder & CEO of Teiko Bio — Using blood samples, Teiko analyzes the immune systems of cancer patients in clinical trials and can predict a patient’s response to therapy. These predictions can help get these drugs to market faster.
Prior to Teiko, Ramji Co-Founded & served as CEO of Counsyl, a women’s health genetic screening company (Acquired by Myriad Genetics in 2018).
Ramji went from a napkin idea to ~1M patients served, an S-1 filing, and ~$150M in annualized revenue before an eventual acquisition. Upon exit, he had nearly 500 talented employees, many of whom have gone on to be leaders in their respective fields.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today we have a successfully repeated founder I mean he’s Bill exited you know everything that we like to hear so let’s welcome our guests today. Sir let’s see if I say it right? It ramji say re ni basan.
Ramji Srinivasan: Did pretty good. Yeah Ajandro Good Great to meet you thanks for having me on.
Alejandro Cremades: Welcome to the show.
Alejandro Cremades: Hey good to have you here good to have you here so give us a little of a walkth through memory lane. So how was life growing up be in New York city
Ramji Srinivasan: Oh a long island it was awesome. You know if you’ve ever watched jersey shore then you probably understand long island girls with orange tans guys who drive Camaros it was a ah, really fun culture and then.
Ramji Srinivasan: Ah, you know, loved it. Ah out there and then went back to New York after I graduated college. Also so.
Alejandro Cremades: And hey you know you got the best of both worlds because in long island you know you got the peacefulness you got the craziness in the summer tool but then you also had the city not far away. So definitely you know like the best of both worlds now in your case you know you early on you got into into problem solving. You know what? how did that come about and then also what what was that thing that you did with when it came to light and.
Ramji Srinivasan: Oh yeah, so a good friend and I um were really into cars hidden in high school and 1 thing that he liked to do and taught me how to do is how to tailgate which is drive quickly and then drive behind somebody which is a huge pain and I strongly recommend nobody does it. But at the time it was fun. Um, and you know he thought of this idea which is to put a brake light into the car that you’re following and if you press on a brake then the the the further the harder you depress on the break. The brighter, the brake light intensity would be and and if it tripped and if it. You know tripped automatic breaking system. Maybe yes then would flash and so we decided to create a prototype of this and we entered into Intel’s science and engineering fit fair which is now called regeneron and it won third place in the team’s competition so that was like my first entree into engineering was really fun.
Alejandro Cremades: So then let’s talk about to getting into actual you know business here so you go into Stanford and basically you went there to do your you know, pretty much mathematics so it was like a. So no you so you tell us you tell us what what? what were you doing in Stanford because you did computer science there. But why computer science in Stanford where you had such great schools in the East Coast so
Ramji Srinivasan: Yeah I mean um to be honest with you the weather. Obviously you know the first I heard about Stanford was in 99 that they had ah or Lyn at 87 something like that. There was like ah a team that was good at basketball in the final four that was also good at engineering. So I thought that was amazing. So I was you know set on going to someplace warm after enduring so many cold New York winters I was thinking about like Caltech or something like that or Harvey Mudd but ended up at Stanford. So yeah to answer your question. Yeah I was I did computer science and did a master’s in financial math. Also.
Alejandro Cremades: Yeah, so you did your masters and we’ll talk about we’ll talk about that in just a little bit because you also had to drop out when the good stuff you know started to happen in your life. But I will talk about that in just a little bit because 1 thing that that I wanted to ask you here. Is you go to Stanford here. You are you know in the.
Ramji Srinivasan: Yeah, yeah.
Ramji Srinivasan: Ah, yeah.
Alejandro Cremades: In the in the area you know of innovation of opportunity. You got all these classmates too probably starting their own stuff and instead of of going in that direction I mean you decide to going to wall street you know, come here back to to the East Coast and and and pushing paper pushing numbers I mean why.
Ramji Srinivasan: It was a very different time so that was 6003 and then the internet was over there was it was done. You know dotcom boom bust had happened etc. Everybody was laying off people so e-commerce was a fad you name it. Um, so I definitely bought into that whole whole thing and but the the real pivotal event that happened was nine Eleven happened and I was like oh my god I need to like listen the marines or save capitalism and ah and so that’s the 2 things that. You know, stuck in my head and so I was decided okay I’m going to save capitalism and go work on wall street which I conflated with capitalism and then later I realized that not exactly the same. So so that was really my part of my thinking on. Also you know huge backdrop of you know that that tech was over so to speak and so like the stable. Wall street kind of stuff which was you know highly prestigious. Didn’t exactly know what I was going to do there but it was very prestigious so that sounded good.
Alejandro Cremades: And I guess that day when you were there you know working in wall street there in Morgan Stanley there’s one event that they really got you thinking you know really got you to wake up and that was the ipo of Google why.
Ramji Srinivasan: Yeah, so that was August Two thousand and four and you know it was amazing. Hot summer everybody was out drinking partying having fun and I was working hundreds of hours ah or like one hundred plus hours that week sleeping under a desk and I felt like you know. Founders of Google or computer science tas and I was like these guys are changing the world and I’m moving around pieces of paper I just I just knew that I wasn’t doing something that useful and so I was like you know what I got to do something with my life and like I got to get out of here otherwise I’ll be on the treadmill and so I decided to to. To move on and apply to beschool and you know that was that was that back to yeah exactly back to Stanford Gsp and in between Stanford and like and Morgan Stanley had read Paul Graham’s book hackers and painters before he started Yc and there was a ah chapter there about startups that just.
Alejandro Cremades: So back to Stamford and they good stuff stuff.
Ramji Srinivasan: Absolutely struck me about like compressing your working life into a short period of time and then like like why to do it etc why not to do it and there was ah a thing about like why nerds are unpopular which like oh that doesn’t apply to be but anyway the rest of the the rest of the book was really interesting. So I like that. And um, that can be hooked and it’s like I’m I’m gonna do something in startups I thought it was mobile internet at the time but and’t being something else. So I got to I got to Stanford and um, one of Paul Grames Stings was he was very like anti Mba in the book. So I thought oh did I make a mistake.
Alejandro Cremades: So then what happened next.
Ramji Srinivasan: Um, am I a dumb Mba it’s kind of like the like like an anti-vc sentiment sometimes it’s like oh they’re just like paper pushers which I I don’t agree with the they of them now with the benefit of time but at the time I was just an impressionable kid. So I decided I was like okay I’m going to drop out but it’s like oh then I need to do something afterwards. So ah, my brother and another ah guy contacted me about this idea in genomics and it was like okay we’ll make genomics the next internet which is kind of like I don’t know if you know movie the graduate with Dustin Hoffman but he’s like plastics like yes sir. s gonna be big. You know I know today today w today today ch about solar power as I knew today today then about genomics which is like the sun powers stuff and that’s how you get solar energy but I thought hey this is great idea. Um, let me drop out of stanford and leave a extremely highpinging you know path in wall street and be broke on a futon and and and do that the other thing I had been thinking about was the prestieds trap which is like I got into stanford undergrad I did masters there I then got into morgage stanley and then I got into nba it’s like I was like. Chasing prestige after a while and like at some point I got to think for myself and that was also an important realization which is like if I didn’t drop out I thought I’d let’s get stuck on the interview treadmill and then end up back in like banking consulting and something like that and.
Ramji Srinivasan: That also worried me and enough to say that anything’s wrong with that. But just like for me that that wasn’t the the path.
Alejandro Cremades: So then at what point that say you know the the idea of counsel Really you know so crystal clear that you are like I gotta go after this.
Ramji Srinivasan: Um, I guess when I dropped out so I didn’t think it was like ah at that point. Yeah, no choice I was like I finished the first year and then I’m like I don’t I um, so yeah, and then ah our original idea was complete like.
Alejandro Cremades: There was no choice. There was no choice.
Ramji Srinivasan: Nonsense who was like go you know analyze a bunch of genomes and then predict who’s likely to to respond to some certain like or get like Allz Herm’s or parkedin sinces or cognitive traits and it was just like totally off face and we like banged our heads against multiple different avenues but finally hit upon an idea that worked which was. Um, what’s called carrier screening for prospective parents that we would screen prospective parents for genetic mutations that they could unnowingly pass on to their child and we found these preconception before they even conceive. They can do an in vitro fertilization treatment and have healthy kids. And this is something that resonated with us you know because we would all you know, go on to have children and so this this all made sense. Um as something that is not only knowable, but. Actionable because a lot of genetics was stuck in the inactionable like oh you find out this thing and it’s like destiny or fate and this was much more like okay, you can do something positive about.
Alejandro Cremades: So then so then in this case, you know for the people that are listening you know with council what ended up being the business model of the company.
Ramji Srinivasan: We turned into a clinical lab so we were a clinical lab that served a little over a million patients. So moms ah parents plan to have children mom’s in their first trimester pregnancy and then hereditary cancer for women. Um, we scaled to about 150000000 plus and you know annualized revenue several quarters of profitability. We filed a Ipo. We’re about to be on file with the with the scc to do and Ipo. But then ultimately got acquired by marriage genetics and then those at the end of 20 or um.
Alejandro Cremades: And we’ll talk about that because you know one thing that is a rio here is that you were at it for about 10 years and you experienced like different faces with the company I mean obviously when you guys got started. You know it was about you know for the world. You know to to.
Ramji Srinivasan: Midpoint of 2018
Alejandro Cremades: To almost you know to come to a screeching halt with the financial crisis now so you were probably able to experience that Also the issues around perhaps raising money around that time how it really is the difference of going through Cycles. So What did you experience especially during those early days where all of a sudden you get started with a company and and oh my God you know money is is perhaps drying up a little bit.
Ramji Srinivasan: Yeah I would say financial stress is very different than physical stress and you’re responsible for many more people you make a lot of promises it just it’s ah it’s a very very different kind of stress and I think it’s it can be strengthening. It can be a crucible moment for for entrepreneurs and their teams. Or you know it can it can cruble them and you can see people. Do you know, really good and bad decisions that come out of that. Um, for us it forced us really to to figure out a business model that worked quickly and. Um, in wall street I’d read Bezos’s stuff about free cash flow and it was a totally misunderstood stock and company. They’re like oh you know Amazon is unprofitable, but they’re looking at gap income as oppos to free cash flow and Bezos got it from buffet who got it from you know. Um, ah, Benjamin grammet and and so on so free cash flow in being cashflow positive was like really important for us which is like how many tests we sell each month to break even and so we we focused a lot on that and tried to our best to um, get the company to place would be self-suseeing um, interesting as soon as we started, we ran into all these crazy perverse incentives with obgns and in retro fertilization practices. Um that we later surmounted but.
Ramji Srinivasan: Um, yeah to answer your question. It was difficult. There was no easy answer. There’s just a lot of persistence. A lot of rejections. Um at the outset and you know that hopefully gave us a little bit of a thicker skin.
Alejandro Cremades: So then so then for the company in total. How much capital did you guys raise plier to prior to the acquisition and also what was that journey like.
Ramji Srinivasan: Oh about a 100000000 and you know it was ah definitely highs and lows so we had some amazing investors like founders fund felicis and and so on who were really great backwards for us and and I think that was ah that was a ah really.
Ramji Srinivasan: Ah, good journey in general that we did have challenges with others who I won’t necessarily name here, but it’s as many probably if the founders on your podcast as noted is like pick your investors very very carefully and.
Ramji Srinivasan: It can It can you know it can create a lot of positives for your company with the right team and right alignment or it can create an enormous amount of mental stress. Um, so you know it just said it just goes down to the specific person.
Alejandro Cremades: So then so then in this case, you know I know that I mean you alluded to It. You guys were on this path. You know, incredible revenue you had raised money from really amazing investors and then you filed for the ipo you know at this point you were about to get on. Private Jets you know with the investment bankers eating shrimp on the private Jets you know as as some of our other guests. You know have a have alluded to which I find hilarious. You know, shrimp and and private Jets but but in this case, you know you guys took a different turn you know in the end. So. So Why did you go after the acquisition instead of the ipo and then how did the acquisition come about.
Ramji Srinivasan: excellent excellent question um we we didn’t get look at the private jets and shrimp we were like waking up at am on the East Coast and then going back to back road show meetings in New York so um which was fun also like but um, ah ultimately I felt that. It was quite exhausting to carry around this like shareholder dynamic for so long. Um, and like that was the the real reason to be honest I mean like I think the company was great. We had an amazing 500 person team all a lot of those you know lieutenants have have done incredibly well and and built their own companies. Um, but the shareholder dynamics would be very tricky to fix and would probably take another several years to do and that was was probably the real reason like I I um I never built the company to sell. Um I never like to started the company with the intention to sell selling and. This day else I don’t believe that’s a good philosophy. You have to build a company that serves a useful need and in a profitable way and then if you get that right? then many ah options open up including potentially acquisition. But that was never the goal if that makes sense. Yeah.
Alejandro Cremades: I Hear you So what was that thing What was that process then of ah of the acquisition. You know what? But what was it going through that.
Ramji Srinivasan: Yeah I mean we ran a dual dual track so we were we we were like filing our paperwork that scc in in parallel. We’re also meeting with potential acquires. Ah, we had amazing cfo, amazing commercial team Amazing engineering marketing Team. So um. What we tried to do is keep our numbers low in in projections during that process so that we could beat and raise that you know like we’re coming in below excuse me ahead of our projections. Um, so that could inspire confidence on the part of acquires or potential you know investors in the public markets which is okay, these guys said something they not only overde delivered on that. But then you know, kind of outecuted their promise so that is ah in general ah technique you. Regardless of whether going public or doing a seed financing is is a useful technique.
Alejandro Cremades: So when the um when the acquisition I mean that that acquisition I mean incredible outcome. You know 375000000 I believe right? you know when that when when that happened I mean that that’s incredible I mean what was it like when you all of a sudden inked the deal because here you were for 10 years
Ramji Srinivasan: Yeah, yeah.
Alejandro Cremades: Pushing with counsel and then all of a sudden then you know it’s like Wow you know like we took this to the finish line.
Ramji Srinivasan: Yeah, ah I remember the day after um and I was like after all the yelling fighting and like all the you know stuff. It’s like man I miss that group so I never would have expected that because I was like okay. Relief. It is initially I was thinking relief but then I was like yeah we had with such a good crew and it was I really like love the team and all the alumni I just feel like it was mentally stressful fighting these like internal or you know shareholder dynamics. Um. So think that was that was more the challenge as opposed to like if that makes sense. But yeah, it was. It was a mix of emotions relief. Also okay I know there’s got to be a next challenge also because Olympic athletes when they win a medal you know be a bronze silver gold or whatever they get depressed. They’re like okay I need to. And because they they’ve finished their challenge so to speak so they don’t the adreline of competition is over so I knew I had to think about the next thing.
Alejandro Cremades: So then let’s talk about the next thing because the next thing for you was you know packing bags and going on a plate to China why China.
Ramji Srinivasan: Yeah, my dad was really big into you know learning chinese when I was a kid. So um, a lot of you know and covid has changed a lot of my thinking because a lot of indians growing up are like look at China China’s going doing well and we need a benevolent dictator like. Like China has covid completely shifted. My think we do definitely do not need that at all. Um, but in going to so I was interested in China and and a lot of the things we’re doing so I went to cuenming in the South East part of China which is like near Vietnam and and all that and it’s like six thousand feet is absolutely beautiful city it’s ah it’s a it’s a small city in China which means like you know, 14 Starbucks and 2 Apple stores and you know 6000000 people or whatever. Um, ah. Lived in a dorm there study chinese and then also practice mma and and and learn some martial arts as well. Which is really fun. So that was that was an awesome time.
Alejandro Cremades: And then how long were you there in China in total.
Ramji Srinivasan: Ah, not not super long just like on and all for like probably about three months but enough that I got the bug a little bit I got what I needed out of my system did a lot of life stuff like learn how to snowboard learn how to ski and all that stuff and then decided to get back in the game and so. I came back to us and traveled a little bit and then looked at 3 ideas so one was like an uber for blood draw second was in men’s nutrition and the third was in minimal residual disease. Um, but I end up doing something completely different.
Alejandro Cremades: And that’s called takeoff. So why walk us through well walk walk us through how it happened you know and and and why you thought that this company was meaningful enough. The solution that was bringing to really execute.
Ramji Srinivasan: You know that’s exactly that’s right, It’s physical.
Ramji Srinivasan: Yeah, good question. So um, long story short. Ah I had been looking at this uber uber for blood draw and I was either going to like buy a phlebotomy practice or do one you know or build one and I’ve been coming close on a potential acquisition right before covid. And it became very difficult to price any kind of deal because foot traffic to you know phlebotomy things just kept falling and and so on so I didn’t know how to price a deal and um I started to get very frustrated with the covid restrictions. So I thought of like you know 3 things which is you know. Bitcoin or crypto testing and immunity and you know crypto to like reduce ability politicians to introduce restrictions to testing so people can feel like hey this infection fatality rate is low maybe in the point 3 let’s test and let’s get back to work. And 3 immunity which I knew very little about and um so I knew in the sense of like it at council we tried to do like Amazon Web Services style business where we like salespae sequencing capacity to companies. So I’d talked to a company in immunology. But you know didn’t know as as much about it.
Ramji Srinivasan: Um, but then I contacted Matt Spitzer he had won an award on fast grants for characterization of ah cancer vaccines or basically immune responses that could predict cancer vaccines. Basically that means like what are the what is different about somebody’s blood who can respond to a cancer vaccine and that could be potentially applied to covid. So Matt and I got to chatting and I’m like Matt is an incredibly humble scientist with amazing track record of cells science nature papers et cetera to to his name and I’m like what he is doing in immune profiling could be the next version of liquid biopsy which i. You know had a front row seat to at at council and in in the prenatal field and in in talk with them I’m like oh man. Well we could actually build ah a way more like ah, a bloodbased to. Detection of your immune system that could be applied for cancer trials that could be applied to autoimmune that could be applied to infectious disease. Um, and that’s that was way more positive vision than whatever I was thinking about so we got to we got to chatting work together informally for about six months and then incorporated in September Twenty twenty
Alejandro Cremades: And what ended up the business model of the company. What are you guys doing at takeoff.
Ramji Srinivasan: Twofold first with drug companies we charge per sample so it’s 2500 to 404000 per sample for a blood analysis and we look at the you know immune response of different drugs or immune characteristic or immune features ah of different drugs. So a drug company will send us like 10 patients 10 responders 10 non-res respondnders we’ll run them through our lab. We’ll do machine learning on them and say this is the difference this why Alejandro responds and so and so it doesn’t the second thing is our clinical tests so we’re building our own clinical tests and we’ve run. Ah, ah you know several hundred and got a few thousand samples left. To to do to predict response and non-response to approved therapies that are already on the market and then we’ build our own clinical tests similar to like what we did on council except this time it’d be in cancer.
Alejandro Cremades: So then what? what? how did you go about building the team here because obviously you know like you had learned quite a bit you know over the course of 10 years with your last company around team building. So how did you go about surrounding yourself by the right individuals.
Ramji Srinivasan: Yeah I mean very good question I mean the starting small is is important and then also another thing that we do at council and also at Takeo is written assessments so we have. You know in in Zoom or in person people with very strong charisma can sound good in interview but a written assessment can tell you a ton and so doing written assessments can really help in terms of you know, understanding the person’s writing style their ability to problem, solve, etc etc. So we use. Ah a lot of those. Um, having a very defined need and this is a very common mistake in startups and which is like if you can’t see that this person can solve an immediate need like first week first thirty days for sixty days then it’s probably not the right hire people like oh well maybe in 100 like you know in a year we might need this person so we need to hire them now or so on and so forth, but that ends up not working out on and so seeing ah a path to a very immediate need is is quite important and along my old account. But.
Alejandro Cremades: And what about and and and what about Also they they you know as we are continuing here on the people side of things. What about the the surrounding yourself with the right investors because you know with the last company you you were able to really understand well the fundraising journey and. And and and getting the right people for the right reasons you know right? there behind you you know behind the trenches. So How did you go about raising money for takeo.
Ramji Srinivasan: Well first we you know we sat down with a financial plan which is like ah I also put my own money in first which is to back the back the company initially um and then once we felt like we’ve gotten our first initial customers. We’ve got validation and we feel like this can be. You know, potential success and potential to grow. Um, we went back to some of our other investors from council in other days and asked them to come on board. Um, that all started with you know, understanding exactly what the money is for how to get to profitability. Um, how to build a business that that meets a customer need. So I think that that needs to be at the outset as opposed to. You know what ends up happening is is raising money becomes a goal unto itself.
Alejandro Cremades: Yeah, that’s saying That’s what you’re alluding to you know earlier now. It’s It’s much better to have like people think too much about success when it comes to raising money. But at the end of the day you know I find that the best companies are the ones that are able to really show us a metric The the.
Ramji Srinivasan: Um, yeah.
Alejandro Cremades: The revenue per employee you know I think that that’s really cool like for example, when you see companies like whatsapp they’re like acquire for billions and billions and they only have like 50 or 60 employees right? like that’s pretty cool now I guess you know when you’re thinking about the authentic signals. Walk us a little bit more through authentic signals. So.
Ramji Srinivasan: Yeah, very good question. So I don’t know if there’s probably a term for it but like in 2015 s there was a lot of talk about vanity metrics which are metrics that sound good but don’t actually mean something so i. I don’t know if there’s an actual term for it. But I just like say authentic signals so you know renewal rates from customers are an authentic signal. Um are they actually buying from you, etc, etc. Um, you know we talked about raising money as a potentially misleading metric sometimes as as opposed to an authentic signal might be. Or customers placing successively larger orders with you is the time to close new customers from lead to ah like first call to you know sign to order is that shortening or or is it getting longer, etc etc. So those are the kind of things that are potentially authentic signals as opposed to just headline measures. Um, if that makes sense. Um at council one of the things we did also was in carrier screening. There was a lot of competition on number of genes screened and we thought that was didn’t make any sense because if you’re like a prospective parent. You don’t really care about the number of genes you care about does this gene. Have a like impact like does this improve my chance as a couple of having a kid with disease. So 1 gene can have a disproportionate can be like a point three percent impact and 500 genes could be point zero zero zero one so not all genes are created equal in terms of at-risk couple detection rate.
Ramji Srinivasan: So we created measures like adrisk couple detection rate that we better thought better reflected how parents and obese thought about risk and in genetics similarly for takeo. Um, you know there’s a measure of number of immune markers on a panel. Um, and you know we’re looking at things like number of immune cell subsets that you can see so we can see 600 plus immune subsets versus which is basically a 14 fold increase over you know, classic conventional technologies.
Alejandro Cremades: So I guess hey in this regard As as as we’re talking about this too I mean if you were to go to sleep tonight and you wake up in a world where the vision of takeway is fully realized what does that world look like.
Ramji Srinivasan: That means that every um, every trial that’s in immunotherapy there are about 5000 trials is using the takeo test. So hopefully for not only retrospecting looking backwards to see why the drug worked or didn’t but then also potentially to enroll patients so you know Alejandro’s immune profile is x. You should get on this drug or get on that drug separately. It means in clinical medicine. We’ve got tests. Um that have like a big lift in survival 30 to 40% lift in survival. So people who are getting these tests for living longer healthier lives and getting on the right drug. Um, and third if we do. 1 and 2 correctly we’re putting 100 years back on the clock and you know we we got 1 year because a customer told us that we saved her a year of development time had she not used takeo. Um, but hopefully that’s not just drug companies but also patients who were spending more time with families and.
Ramji Srinivasan: Whatever it is that their purpose is.
Alejandro Cremades: So then so then let me ask you this you know as you’re thinking about testing as you’re thinking about product development. Why do you associate stages of grief with product development. Okay.
Ramji Srinivasan: Oh yeah, so um, this goes back to our first pitches at council when we were talking to ob practices and we had a test that we marketed as oh hundred genes for the price of 1 and ob bees told us if we test for more genes we’re gonna find more positive moms and we said so like if we find more positive moms. We’re gonna have to talk to more positive moms. We said. So so and then they said well you know our business model. Is or compensation is 10 visits and a birth $1900 if you generate another visit for us. That’s an eleventh visit and we still get $1900 so then we went through like anger denial bargaining like oh they should do this. They shouldn’t do that blah blah blah blah blah so we went through all the 7 stages ah of grief to zen technological acceptance which is like okay we accept. This is the way things are let’s instead build couple testing so that the father or husband etc can get tested either simultaneously or asynchronously and then that. That the result can be merged and the couple’s chance of testing positive is way smaller than the mom’s sense of testing positive but that’s what I mean about like rather than fight their incentive and argue or like denied that existed like except that this is their incentive and then think okay this this.
Ramji Srinivasan: These individuals are trying to do the best they can with this incentives they have work within that incentive um to make the more successful.
Alejandro Cremades: And and also why you know just just going back to something that they that I think is gonna be interesting as people because obviously now you know with with with 2 companies and I’m gonna ask you now you know something around you know lessons learn I Want to ask you about. Prenabs in business. Why are they so important. Okay.
Ramji Srinivasan: They’re so important because um, a lot of the startup advices like oh don’t ignore your gut etct etc but mistakes happen because we ignore our guts all the time so in in some way some ways ignore it like pay attention to your gut is. Important but like not that actionable advice. So I was trying to think of like non-obvious things like if you get a prenup in business then you actually know what the cost of termination is and both parties understand that upfront. And knowing that you can be a little bit like it’s it’s not as um, it’s not as like pessimistic or nihilistic as it sounds. It’s like actually you can be more optimistic because you’re like okay we understand what what the costs are if we want to terminate this deal and from that shared foundation. We can build you know. A partnership or or what have you together. So that’s the reason is is because people say oh well, you know don’t get into business with so and so um and don’t ignore your gut but like ignoring your gut just Happenss so it’s like rather than beat yourself up about ignoring your gut. Think about like just do a prenum. Yeah.
Alejandro Cremades: That’s it. You know it saves so many headaches down the line. So so let’s talk about you know stuff that they that perhaps you know like you would tell yourself if you were younger. So if you could you know? perhaps go back in time and have a chat with that younger self you know that younger. RamG you know out of Stanford you know if you could give that younger ramg 1 piece of advice before launching a business what will be and why given what you know now.
Ramji Srinivasan: Um, so.
Ramji Srinivasan: Oh my gosh one piece of advice. Um I think really stand up for yourself. Um, which you know ironically is kind of related to the gut point. But it’s like stand up for yourself if you think that something you know the New York city subway if you see something say something. Um. That kind of lynch pin habit is very hard and you know it’s a muscle to cultivate like anything else the more you exercise it the stronger it gets so I think that would be the the number one piece of vice and from that keystone habit I think a lot of good things would flourish. That’s.
Alejandro Cremades: I Love it. So go ahead.
Ramji Srinivasan: That’s philosophical on the more practical note it’s charge higher prices. Um higher prices. Give you a lot more margin. Ah for not only you know sales and marketing and so on, but it’s ah actually related to stand up for yourself because if you know if your product is useful Then. You should be able to stand by it and be able to to charge a premium for that service depending on the nature of the business.
Alejandro Cremades: I Love it. So so let me ask you this ramji for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Ramji Srinivasan: Um, yeah, just shoot me an email first name ramjiia takeo dapo.
Alejandro Cremades: You say enough? Ramji thank you so much for being on the dealmakerr show today. It has been an on earth to have you with us.
Ramji Srinivasan: Um, yes, great to see you all right? Thanks alandro.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Ramji Srinivasan On Selling His Last Company For $375 Million And Raising Millions To Make Immune Measurements Routine appeared first on Alejandro Cremades.
Joseph Riley has become a master of turning challenges into profitable opportunities. Including building a big real estate startup that has raised hundreds of millions of dollars. The venture, Patriot Family Homes, acquired funding from top-tier investors like TRT Holdings and Miramar Holdings.
In this episode, you will learn:
- Branding and developing multiple brands
- Customer experience
- Debt versus equity funding
- Unique investor introductions
- Joseph Riley’s top advice when starting a business
Alejandro Cremades · EP 610 Joseph Riley On Raising $400 Million To Offer Short-Term Rentals In Underserved AreasSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Joseph Riley:Joe Riley founded Patriot Family Homes in 2018 to meet the need for affordable, reliable housing in the South, particularly near military bases.
Until 2021, Joe was an Infantry officer in the Army. He deployed to Afghanistan and Ukraine and served as a Director on the National Security Council at the White House.
After leaving the Army in late 2021, Joe rapidly grew Patriot Family Homes from 100 houses to 400 as of January 2023. An East TN native, Joe and his wife Rachel moved home to Chattanooga with their two boys, Jacob and Jonah.
They live on a working farm just outside of Chattanooga, which doubles as the Patriot HQ. Joe earned a BA from the University of Virginia and a master’s and doctorate in International Relations from Oxford University as a Rhodes Scholar.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So today. We’re gonna be interviewing quite an inspiring entrepreneur an entrepreneur entrepreneur that they not only has been serving our country the United States but then also you know he’s being building this incredible company that. I think you’re all going to love you know building scaling financing going through the ups and downs. You know how they went through covid and what they did you know to to really not only survive but to thrive. But again you know you’re all going to love this so without farther ado let’s welcome our guest Today. Joseph Riley welcome to the show.
Joseph Riley: Thank you very much. It’s an honor to be here I Really appreciate you having me on.
Alejandro Cremades: So originally from Tennessee your Soro file I walked through memory lame how was life growing up.
Joseph Riley: Yeah I grew up on a farm in a little small town in East Tennessee didn’t want to go to college I only wound up going to college because ah I was the first business class I ever took was keyboarding you know because I grew up in a town that you know we didn’t have any wi-fi sounds almost foreign. Ah, but so my business class was typing and I was failing my typing class and so my keyboarding so teacher said you know you’re no good at typing. But if you enter this public speaking competition you like to talk a lot I’ll give you an a on this test you failed so I did that and one and she said if you go to regionals I give you an a. Um, the next test and that sounded pretty easy. So I did that said you go to state I give you an a on the next one for the semester. So I did that said you go to nationals I give you an a for any class you ever take from me so I did that and when I was there I said you know I want to be national president of future business leaders of America and she said you know we’ve never even had a. Ah, regional or district officer said it’s thought it’s all right? So I you know started running for office wound up getting elected national president or future business leaders of America and some other groups and from that got a scholarship to the University Of Virginia did army ah rtc wanted to serve our country. Ah. Then right out undergrad went over to Oxford did a master’s in doctorate international relations focused on us China competition came back to the army was in the infantry had done some different rotations and and so forth in different places and ultimately was on a deployment to Afghanistan.
Joseph Riley: Ah, my wife is a partner at Mckinsey and so travels for work. So we.
Alejandro Cremades: And and 1 second one second there Joe because say I’m sure the people are listening. We love to hear how did the um, the calling for for joining the army come about. You know, is there anyone in your family or growing up. You know some type of experience that really inspired you to want to um to serve the country or how that they come about.
Joseph Riley: Her so in like in most small towns. Everything revolves around sports and you know every little small town sports has their like you know patron saints so to speak. Ah and ours was a gentleman named Watty Smith ah who had served in the green brace and in Vietnam and I was always inspired by his commitment to service ah of continuing to support our local school but then also kind of what I saw in him from his time from when he’d been in the military and so. Ah, that’s that’s a large reason why I wanted to go in the military.
Alejandro Cremades: And I mean you’ve you’ve been there you you were in the military for for serving the country for about 7 years You reach the captain rank. So I’m sure that there’s a lot of experiences there you know Afghanistan as you were saying you were deployed to ukraine as well. Ah, you’ve dealt and and obviously we’re not going to get into it because of some of this you know maybe classified and and and also you know perhaps you know experiences there that that that that you’re not so inclined to touch on but I guess what kind of. What kind of lessons did you really get from that experience because to a certain degree I find that building a company from the ground up is also going into battle. It’s also being in battlefield. It’s putting fires away. It’s putting threats away. Is leadership is say so what? What did you get from from the from the army experience that you know perhaps you could apply to business.
Joseph Riley: Yeah, so I’ll also frame this in the advice I give veterans who are leaving the service. So First of all, most people who want to leave the military they say oh I can’t wait to go work for a startup because you know I’ve spent my time in the military you know, building systems and doing all this and I say that’s nonsense right. You didn’t build any systems in the military. The military is the most bureaucratized organization that there is that it’s got 200 years of people building systems and process for you. So you know most the challenge for most military folks who want to go into entrepreneurship is that they’re used to operating within a very structured. And kind of rules-based environment right? where you know there’s a rank structure. There’s an order There’s you know down to the way orders process are produced. It’s all the same and then the second thing is they’ve never had internalized labor costs right? So when military folks you know, see a problem. Their inclination is to think I need people instead of I need a better process. But on the flip side to your point. What is so important as an entrepreneur is being willing to face down a really difficult circumstance and just say you know failure is not an option I can’t quit and that is what in my experience military folks do a really good job of because when you’re. Ah, you know when you’re on the Afghanistan border with another country and you’re taking ah, you’re taking a lot of fire. There’s a lot of cloud cover and there’s more folks on the other side than you anticipated when you showed up and you can’t get metava out and you can’t get the you know gunships in that you were anticipating.
Joseph Riley: You know you you got to figure out something to make it work because no one’s coming to help you and that’s kind of what it’s like being an entrepreneur.
Alejandro Cremades: And and you know this reminds me a little bit to the book extreme ownership from ah Jocko willingk you know is a fantastic book where you know he put some stories there too and how you you could apply them also to on entrepreneurship I guess. You know leadership is also a key one and you guys have been growing the team and we’ll talk about what you guys are up doing just a little bit but leadership is a really big one. So can you give us you know perhaps a crazy adrenaline Phil story that you know you are comfortable sharing where leadership was present and where. You got super inspired by.
Joseph Riley: Um, from the from the military days right? Um, oh my goodness. It’s almost like there’s a paralysis of so many different options to choose from. Um, you know I’ve just seen.
Alejandro Cremades: That’s right.
Joseph Riley: You know some phenomenal acts of heroism and bravery. Um, but I think that I think that probably the one that I would look to the most is um.
Joseph Riley: Um, let me I’m I’m gonna tell different 1 okay because I don’t I don’t want to get I don’t want get emotional on the show. So um, my when when I came out of ah well, we’ll do a noncombat one when when I came out of ah the army the army actually tried to kick me out. Because I was on this completely different track I’d gone to Oxford I hadn’t done the normal things that folks were would would have expected and so they told me the only person that can save your career is the chief of staff of the army and I was going to be on a panel with the chief of staff of the army in a few weeks to do this thing and so got on there long story short. I was kind of back on track and then my command and then he sent me to go with his aide-de-camp so his kind of guy who’d been his right hand person for a while and normally again I was completely so completely off track I should not have you know my career should have been in the dumps and this officer. You know is probably the most inspiring leader that I’ve ever worked for. He took me in he said you know what I’m going to do not only am I going to bring you in the battalion and I’m going to like let you you go through a couple of these I’m going to give you the most problematic platoon. Because I’m going to give you the opportunity to show folks that even though you haven’t had all of these experiences that the army says you were supposed to have that you can still perform as a leader and so I got to take that platoon that had more people that were on drugs and getting chaptered out of the army and lowest physical fitness score lowest you know ah you know marksmanship scores
Joseph Riley: And bring them up to the top platoon in the battalion and then based off that he was willing to send me to ranger school I went to ranger school ah you know and then was able to get through ranger school deploy with the rangers to Afghanistan and really kind of set my career back on track. So I could have ah kind of. Probably given some other examples but for for a range of making sure we’re we’re saying optimistic and upbeat and not disclosing anything. We shouldn’t we’ll we’ll stay focused on ah you know the ah you know someone taking a chance on me. Ah, when it would have been very easy to just kind of cast me aside gave me that opportunity and that’s made all the difference for me in my career.
Alejandro Cremades: And it’s a also it reminds me of a you know luck luck at the end of the day is I find that people oh you got lucky and and and yes you know we all get lucky right? and especially the ones that end up breaching the finish line. You know they do get lucky but luck at the end of the day is.
Joseph Riley: Yes.
Alejandro Cremades: Preparation meets opportunity which is what you know you are alluding to you got to generate that so I guess in your case, you know you went to study at Oxford you know, obviously you went through these deployments but 1 thing that happened that that was very interesting is when you came back to the us you started to experience.
Joseph Riley: Um, but.
Alejandro Cremades: Ah, what real estate you know was you know, perhaps you know like you started dipping. You know your feed and in in real estate you know, perhaps you know, buying renting. So how did that all you know come about and how and how does it develop into patriot. Family homes the business that you’re running today.
Joseph Riley: Yeah, so when I was in Afghanistan my wife travels for work so we needed to figure out something to do with our house and so we just you know it was kind of a last minute deployment as ah, folks who are you know ah have been in the military can appreciate and so. We just literally had time we’t have time to bring in a tenant. We just finished renovating the house. We said let’s see the furniture in it. We’ll just list it on Airbnb and homeway maybe some people will need it and realized no surprise. There is a huge need for furnished short-term accommodations around military bases. People moving from one base to another you know like my wife and I moved 8 times in 8 years in the military um people coming in to watch their soldiers graduate from airborne school or ranger school or basic training I wanted to be there together as a family. So. Took off so then we came back I moved my wife and I I didn’t want to give up on the revenue as many entrepreneurs this story will resonate so I moved my wife and I in the 1 bedroom of our 3 bedroomroom house started renting the other two bedrooms I also bred our dog without telling her because I thought the dog was in the negative you know, read on the balance sheet. Ah and but then we started. Buying warhouses flipping them turning those into short term rentals and you know then moved from Fort Benning which is there in Columbus georgia to other military bases covid hit first time I thought I was going to go bankrupt because how am I you know how do we manage? you know this, we lost 90% of our reservations in the first week
Joseph Riley: Ah, because the secretary defense put in a stop movement order but wound up.
Alejandro Cremades: And and and and let me let me stop you right there because obviously you know Covid is ah is a big time on certain event. Ah now you had an advantage you know because you were you know serving the country for for so long you know in this this different deployments where.
Joseph Riley: Um, event.
Alejandro Cremades: You had a different exposure to uncertainty and to uncertain events and I’m sure that served you well when dealing with you know, events like this you know which is obviously not life threatening and there is more you know towards business. But how do you think that being able to be with uncertainty. During your years in the Army gave you an advantage to be able to tackle a situation like covid.
Joseph Riley: So you know we huddled our entire team at the time which was a very small ah very small group of ah veterans and military spouses who are all working with us and just what you said you know this is one of those times failure was not an option. You know this was not. Ah, Vc company at the time where we were kind of playing with other people’s money. This was all my money at the time and I was personally guaranteeing millions of dollars worth of loans and I didn’t know how I was going to make the payments right? because our you know revenue stream had just dried up so we all pulled together we we we. Heavily focused around in Columbus Georgia was just outside of Atlanta we started a walking dead. You know, get out of Atlanta while you still can ad campaign. We started calling insurance companies who needed to displace. You know? Ah, ah, put people in houses health care companies. So we started getting created with what. Whatever were the all the different possible contractors. You know who were in you know, kind of critical industries you know and putting them up because they needed a place to stay when they were on the road doing jobs and that then wound up being a huge opportunity for growth right? because before we just focused on the military traffic. But when we were. Forcibly deprived of that revenue stream then we picked up all of these other revenue streams that actually allowed us to grow the company far more you know expand the company into other markets that we’re not military markets start serving other guests and ultimately you know dramatically increase the pace of growth.
Joseph Riley: And that would never have happened if not for covid um, and it’s like it’s the second time in my career where you know something ah completely unexpected that looked like it was going to ruin us wound up being. You know the kind of you know, forcing function. Ah that you know pushed us to create a new process or open up a new customer base. And again that kind of goes back to the military of you know? Ah when when rounds are inbound. Ah no, one’s you know there’s no sitting and you know you know wallowing in self pity in the corner you got to do something.
Alejandro Cremades: Now in this case, you know it sounds like you guys. You know, really turned you know around the corner there and you came up you you came out of that you know even more powerful than you know the way that you entered it now for you I mean you were alluding to it. You were really bootstrapping this entire thing. Ah, and you know it was quite a sizeable operation at that point now you even touched on it. You know on the fact that you have spouses um of of people that are serving Now. How did that idea come about of a hey you know like maybe you know like we could really. Ramp up the the talent by also you know for a bigger purpose here and and allowing you know this this this spouses to to come in and and make it happen with us. So.
Joseph Riley: So when I ah got my ah first took out my first decent size loan to go buy a portfolio of homes literally the day after I closed the army said surprise we need somebody to go fill a unit in Ukraine. Ah, to go train some of their forces over in Ukraine and so I thought again well this is how I go bankrupt because you know how do I manage this operationally intensive short term rental portfolio from shipping ah from a shipping container in rural Ukraine. And 1 of the guys I was deploying with his ah wife had been a west point grad army officer and then had gotten out and was doing real estate and he was like look let’s see let’s ah, have Kate you know, take over the portfolio and so then Kate came in and opened up this whole. Amazing talent pool of military spouses who’ve completely kind of transformed and it’s this you know highly overqualified underemployed you know talent base because they have to move all the time and so we have military spouses you know working for us in Dubai. Ah, where their husbands deployed and all and you know literally across the country. It’s a kind of a nightmare from the ah hr standpoint because we have to file in all of these different states. Ah but it was. It’s ah just a tremendous blessing and military spouses are exactly the sort of savvy you know scrappy.
Joseph Riley: Ah, you know folks that you want in ah in in a startup and so that was a great opportunity and now Kate who is that you know, kind of first employee has grown and done basically every role in the company is now our chief growth ah chief chief growth officer. So.
Alejandro Cremades: That’s amazing. That’s amazing now for ah for also for the people that are listening. You know that are interested in the whole fundraising and and transactional piece here I mean you were you were talking order that you bootstrapped the operation for the for the early years um for the early phases right now. How much capital have you guys raised today between equity and debt.
Joseph Riley: Ah, all blended probably around 400,000,000
Alejandro Cremades: And what is the how would you say you know why? deb you know, comes in the equation here. How do you guys? you know work debt into the business and how does that balance you know with the equity side.
Joseph Riley: Yeah, so we have 2 different we have ah the operating company right? Which is what employs everybody and does all of the activity for those of you in you know, familiar with the real estate space. Often you’ll have this opco propco structure and then the propco owns the actual real estate because it is on on one side very capital intensive to buy the real estate but because it’s seen as a more secure asset. It’s very bankable particularly in the single family rental context where we operate. So. You know we raise mainly equity into the operating company and then in the propco we raise a blend of equity and debt and in fact, more obviously more debt than than equity usually about twice or so you know 2 to 3 times as much debt as equity depending on the deal and and so forth. And so you know we’ve done everything on the debt side from small and when we first started out I literally was driving around in my truck ah to local community banks trying to find somebody to bankroll this. You know, kind of crazy idea from a military guy who is like. You know I can manage these you know short terminal properties all over the country and you know I need you to give me loans. Ah and then you know we would kind of flip them pull equity out of them. You know, repeat and then all the way up now I can’t disclose who the partners are but we’re the first player in our space to get kind of 9 figure. Um.
Joseph Riley: You know style debt facilities. Ah from you know national? You know, household name lenders and then in between that we worked with some specialty lenders and regional banks. So that’s that’s on the kind of debt side on the equity side. You know we really for the first you know. Two or three years tried to be so very focused on kind of raising you know, just just you know, growing off a cash flow and debt. But then in 2021 we raised you know around kind of 10000000 or so blended across opco and propco and then in 2022 we raised another kind of. You know, $60000000 you know, blended across opco and propco. So that’s a little bit of kind of what the equity looks like and typically when we partner with an equity partner on the opco what we’ll do is. We’ll get a commitment that’s about 5 to one of a propco versus opco you know because you need ah equity in the in the propco as well, right? So we’ll say. You know you give us $50000000 in prop cofunding and we’ll let you invest $10000000 in the operating company.
Alejandro Cremades: And ultimately as a whole for the people that are listening to get it How how are you guys making money.
Joseph Riley: In terms of what what’s the source of our revenue or yeah, so um, we are fully vertically integrated So our core business is obviously the rental income off of the property. So when someone comes and stays at our homes.
Alejandro Cremades: That’s great to what’s the source of the revenue for the company.
Joseph Riley: You know they pay us. You know whether it’s an insurance company somebody traveling for vacation. Whatever it might be a large different use case there but that rental in comes the core. But unlike most companies in our space who have never made money and have always just had to you know, raise more and more and more capital because they were burning so fast. And the reason is because their business models were predicated on essentially buying mom and pops or doing very expensive direct-to consumer marketing whereas what we said is we want to build an operational machine that is one vertically integrated. So we have an acquisitions department a renovation oversight department. We procure our own ff and e we then sell the ff and e to the propcos. We do the full service property management guest services engagement league. You know the whole nine yards so we are kind of soup to nuts. You know? ah. You know capital allocator for you know, institutional style investors and then the second thing is we want to focus on delivering you know great returns for those propcos because by delivering great returns for those proppcos we’re able to track more and more capital. And then we get paid an acquisition fee which is ah you know we have a marginal net business. We get paid a renovation oversight fee so we make money there we you know candidly Mark up the ff and e that we sell and we charge a shipping and delivery and install fees. So unlike all of our other competitors.
Joseph Riley: That are paying sometimes Eight nine 10 15 times ebita to be able to acquire more contracts. We actually make money at every stage of growth and are very profitable in growth because we’ve looked at the growth machine is not a cost center but a profit center and we’ve tried to organize it in the kind of fee for service. Ah, structure in order to achieve that so we make money in the growth phase and we make money on the kind of stable state.
Alejandro Cremades: And talking about the capital you know again to expand on that I just wanted to really quickly. You know, get the listeners to understand how you guys are making money but expanding and and double clicking on the capital side of things you know as they say while ghost around comes around tell us about that car wreck. That happened and how you know that led to you being introduced to one of your capital partners.
Joseph Riley: Yeah, so we I may have one of the most kind of crazy wild stories for getting linked up with a capital partner. But when I was in Oxford I used to my wife and I would like to you know. Another way to make money or you know they were not even necessari make money but just to have fun is we would go rent these castles and then we would have other people you know, go on these trips that we would plan and so we’d rented. Ah, ah, ah, a castle in France and and taken a bunch of friends over there from Oxford and as we were coming back. To the castle one evening there’s a kind of caravan of cars in the car in front of us pulled out and got t-boed by a ah by bus have rolled it multiple times and one of ah the girls in the car wasn’t wearing a seatbelt everybody in the car was injured. You know somewhat she was injured pretty badly. Um you know. A lot of people froze. But I you know I guess from growing up on a farm and the military background everything else. So I jumped in started pulling people out of the car got her out of the car right before ah it got really bad. Um and was able to get her. You know to a hospital and. Um, and so I think she overexaggerates it she you know the way she would tell the story is Joe pulled me out of a burning car and saved my life but she then went on was extremely successful. Did a bunch of different things. We worked at the white house together and after she left the white house. She took a job.
Joseph Riley: Ah, in in in Dallas with one of the family offices that ultimately provided our capital and so you know she one of their deal. Ah you know, kind of generators was asking about different opportunities and she was like oh you should talk to my friend Joe and told that story and so um. You know she’s a very special special friend and very grateful to her for for helping us get the opportunity. It’s an interesting story that at the at the closing dinner that we love to kind of tell about how we got linked up.
Alejandro Cremades: I Mean no kidding I mean they people always talk about the importance of having warm introductions to investors. But my God getting an introduction like that when someone is telling you hey I got introduced you to this guy that saved my life pull me you know in out of a car in flames and. I mean I will give you money too. You know come on I mean that’s unbelievable now Now, let’s let’s let’s let’s switch gears here. Let’s let’s go back to you know now I want to talk about the company the division because obviously division is something that you that you had to share with investors too. So imagine you were to go to sleep tonight. And you wake up in a world where the vision is fully realized for the company. What does that world look like.
Joseph Riley: So the first thing I want to say is you know you know entrepreneurs are talking to each other when they start a sentence is like imagine you go to sleep tonight like imagine you actually get your work done and can go to sleep tonight. That’s that’s perhaps the the interesting vote. But if I do which I hope I do.
Alejandro Cremades: Ah, ah.
Joseph Riley: Tonight Um, you know what? we would love to see ah I’ll frame it in in in a couple senses one from a customer facing view. Our view is that the short terminal industry offers a phenomenal product to guests who won’t. Larger homes to be able to gather as a family longer term stay have a kitchen all of these things but it’s very fragmented and in our view kind of unprofessionalized across the space. So What we would like to do is help bring the sort of discipline And. Ah, you know, kind of quality expectations that you would experience from Hotel Brands ah to the short term rental space so people are getting the benefits of the being in a single- Familymi home with some of the confidence of quality that they would have in a hotel similar to that you there are a lot of different use cases for why people need to stay in short-term Rentals. So Our new President Coo We hired one of you know he ran all of it. She’s kind of brand and loyalty programs and ran um a lot of their times sharere and stuff and so what he’s thinking helping us think about is how do we create a multibra short term rental. You know you know Enterprise. So that you know you can have a brand that targets luxury stays and you can have a brand that targets economy stays or longterm stays or you know unique stays and likelamping and you know and treehouses and um so how do you create? you know one? you know.
Joseph Riley: Harness The efficiencies of kind of scale on the backend operations from accounting and cleaning and operations and all of that stuff but then present a multi-branded product to customers so they know what they get what they’re getting when they book right? Do they they know are they you know. Am I traveling for for work with my colleagues in which case I maybe just want more of an economy style product or am I like taking this big vacation with my family that I’ve planned on for a long time where I want to make sure I’ve got a higher quality product and so that’s that’s that’s one piece of it on the kind of customer facing sign. And then on the inside View. What is really important for us is to continue to build a strong and scrappy culture that allows us to kind of you know, bring in folks who we say you know are grateful for for the opportunity to be a part of our team and we’re grateful to have them and so we hire a lot of military spouses as we talked about. Hire A lot of Veterans Increasingly we hire a lot of folks who are leaving prison or you know coming out of incarceration because we find they’re great folks to work in our warehouses or do maintenance tax and so you know putting together that team of kind of you know ah of kind of almost scrappy misfits but putting them in in a great organizational culture. Is something that we’re really you know, excited about and then of course ultimately you know we’d love to be the largest you know, vertically integrated short-term ah short-term rental operator. You know in the country and then ultimately in the world.
Alejandro Cremades: I love that now. Imagine we go back to the past. So we’ve been talking about the future now we go now we go to the past but we do it with a length of reflection. Let’s say I put you to a time machine and I bring you back in time to that moment where. You know you you were thinking about doing something of your own and let’s say you had the opportunity of giving that younger Joe one piece of advice for launching a business. What would that be and why given what you know now.
Joseph Riley: Invest in counting resources sooner that may sound super practical and maybe not entirely inspiring but you know 1 thing that delayed our fundraising as long as it did was because in the course of bootstrapping. And it was you know in my view kind of you know my company my you know I wasn’t as worried about investing in accounting resources and if it was you know in this bucket or that account or were it not that big a deal. But then when we started going out and trying to recruit institutional style capital. You know. It was difficult for us to get them comfortable with you know with our accounting and we had to invest and we had to then spend a lot more on the backside to get ourselves cleaned up so that’s not super inspiring but I would have said you know my cheap skate tendencies were probably right in most respects but I maybe should have been a little less cheap on accounting.
Alejandro Cremades: I love that so Joe for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Joseph Riley: They can just go to PatriotFamilymilyhomesDotCom so’s patriotfamilyhomes.com you’re also welcome to shoot me an email at my personal email which is just Joe Joey at patriotfamilyhomemes.com
Alejandro Cremades: Amazing, easy enough. Well Joe thank you so much for being on the deal maker show. It has been an honor to have you with us today.
Joseph Riley: Thank you so much.
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The post Veteran Joseph Riley On Raising $400 Million To Offer Short-Term Rentals In Underserved Areas appeared first on Alejandro Cremades.
Davis Siksnans built his own unicorn startup before becoming an investor to help other entrepreneurs maximize the potential of their own ventures. His initial startup, Printful, attracted funding from top-tier investors like Bregal Sagemount.
In this episode, you will learn:
- What Davis Siksnans is investing in now
- Testing your business idea
- How to optimize your customer acquisition costs
Alejandro Cremades · EP 609 Davis Siksnans On Building A $1 Billion Company By Turning Your Ideas Into Premium ProductsSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Davis Siksnans:Davis currently is a Senior Advisor and Investor at Draugiem Capital, Board Member at Mapon, a car fleet management company, and an investor/board member at Prime Prometics, a beauty brand for women over 50.
Previously Davis was a co-founder and ex-CEO of Printful, a print-on-demand and warehousing company for online stores and the first Latvian unicorn company.
Printful prints t-shirts and 400+ other products for online e-commerce stores and drop ships them to end customers.
With over $83.7 million invested in equipment, we use industry-leading tech to fulfill more than 1 million items every month. Since our founding in 2013, Printful has scaled to a team of 1,700+ people and did $289 million in revenue in 2021.
Printful has 10 fulfillment centers in the USA, Canada, Europe, and Mexico, and 7 partner facilities in Japan, Australia, and Brazil.
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Connect with Davis Siksnans:* Crunchbase * LinkedIn * RocketReach * Twitter
Read the Full Transcription of the Interview:Alejandro Cremades: Hello everyone and welcome to the deal maker show. So today. We have a very exciting founder. We’re gonna be talking about all the good stuff we’re gonna be talking about building scaling and financing but also financing via the private equity route. So I guess without farther do let’s welcome our guest today. Davis welcome to the show. So originally born there in Latvia so give us a little of a walk through memory lane. How was life growing up.
Davis Siksnans: Welcome Thanks for having me.
Davis Siksnans: While I was born in 9091 I was right after the fall of Soviet Union and Latvia regaining independence really had a normal and happy childhood and I just happy to be living a time when internet came into its. You know being and allowing me and others to actually make businesses on top of that you know internet growth from an early age I was actually interested in technology and and I was you know playing around as computers. as first as first computer I got. And learning software development on my own and in my bedroom I remember like there was even a time and I didn’t have internet at home. But I was going to a local library that internet I was just downloading materials and bring it to home to you know code and think around the computer all through late at night
Alejandro Cremades: I mean at 13 I mean that’s quite early so while what was that how did you encounter you know the world of computers. What what got you into it I mean how how did that happen.
Davis Siksnans: I just kind of gravitated towards it and you know I like you know like you know, just using internet to local library. Just ah, you know, being from relatively small town in a relatively small country. It was just awesome to see that through Google. Or Wikipedia or internet you get access to yeah, world’s knowledge I just naturally gravitating towards that.
Alejandro Cremades: And be ah 1 of your cousins. You know that’s how you got you know, really into you know, really the world of a of technology. So why? So what happened there.
Davis Siksnans: Yeah, my cousin was living in a different town so we were actually connected over Skype and irc chat at the time and he was a bit more technical than mine like when I was learning software development he he you know helped me do that and he just was a way better software developer than ias and he had. Ah, classmate that was a designer. So for me just maybe 14 to 17 you were just working on different projects together websites you know for businesses building a game etc and it just happened that he joined you know one of. At the time and still to this day monowork exercised exciting workplaces in Latviiaa which is drogam me a group and he joined at the age of 17 as the first ios developer the same year an iphone came out and I joined a year later yeah he’s a recommendation as an I administrator because the company was growing and needed just. Someone who would you know help people and coworkers use computers as they were hiding non-technical talent at the the same time. So I got the job at really early age of 18 and lucky to still be at that group today.
Alejandro Cremades: And you obviously experienced the American culture too because a you you you did your studies in information systems. So what was that experience like.
Davis Siksnans: Yeah I was always wanted to study the United States and I didn’t get chance to doing that on a high school level and luckily through applying to scholarships I got to experience that in Wisconsin University Of O Claire on a university level. And at the time in Latvia you couldn’t learn something that combined it and business. But the United States you can so I really like that the factor that it was not either software development or business but you could do something that’s more liberal arts. Where you can combine the 2 things and I actually filled my time in the United States university mostly on ah not just id courses but courses focused on marketing how to sell to american audience which really came in handy when I started working on new businesses including printful or the primary. Target market was the United States
Alejandro Cremades: So Let’s talk about that. What was saying because when you when you finish your studies you got into trying different ideas. You had like a bunch of them and then you realize that the printful you know was say ultimately the one that made the most the amount of sense. So. Why was that process like why testing all different ideas. How do you go about? hey you know let’s let’s go into testing all these ideas and what was that moment where you all were like printful serves all of our focus.
Davis Siksnans: Well, just you need to try a lot of times to find the ones that worked I mean over the course of which in groups history is now 19 years We have tried over a hundred different but business ideas and. And we came from a position where we always used their own capital because in early two thousand s there were no venture capitalists or and there were no banks that would lent to technology or internet businesses and we tried to work on different ideas that we could start with them. You know so relatively small amount of capital like a you know hundred thousand k per se and we were lucky that we had a social network. You know that’s our first business that really worked. We actually took the idea of friendsster adapted to Laa and that was our first idea that worked but um and. You know we just tried a bunch of different ideas and the connecting factor was only factor that there was a software developer. There was designer and there was a business focused project manager slash ceo who worked on it and we just brought it to the market and every time you brought it the market you try to use. You know the similar techniques and you know recycle them and recycle audience as well and just focus on the business where you know it went up to the to the right and the the businesses that didn’t work as well and we lost interest we closed down sold out. Ah sold.
Davis Siksnans: Or gave to someone else to manage so I was actually at 1 time running 5 business ideas at the same time. Um.
Alejandro Cremades: So so 1 thing there that that you mentioned that I thought it was very interesting is that you know you’ve been part of testing you know tons and tons of ideas and I guess before we really do the deeper dive and double click on printful I want to ask you because I’m sure that there’s a lot of people that are listening. How do you come to the point or to the conclusion and or to the conclusion that an idea has legs and that it’s worth pursuing as a business.
Davis Siksnans: Well to be honest, we didn’t do you know that much research we felt like we can put in the and mep together with our internal resource relatively. Fast and so we didn’t focus. In research, we focused on developing and Mvp and trying to bring it to market as soon as possible and basically base our feedback whether it has legs or not on customer feedback. So um, you know when even in the launch printful. We actually just. Email the link to a landing page that had a signup page but behind a signup page. There was no actual product. The 1 of audience for existing business which was start a winemins which is a ecommerce store for posters. And once we saw that a lot of people just clicked on an email and converted and sign up and we’re really interested in a product that just okay, this makes sense now we will invest about you know, 3 to six months and actually building the product behind it.
Alejandro Cremades: So then let’s talk about printful. So um, especially for the people that are listening what ended up being the business model of printful.
Davis Siksnans: We came up with sprintful because we operated online store starter vitamins and we you know we were selling posters on demand so we bought a poster printer and we bought paper and all all that was done on demand and actually posters are a great product to do where. You have no minimums. You don’t hold any inventory and you do it on demand each poster can be different but we looked at amount of products sold on internet and the biggest category there is a paddle and closing in general and we wanted to do the same you know approach being no minimum on-de demand for starter vitamins. And we couldn’t find a service that would you know integrate with our backend at the time which was shopify and would we know pull our orders from shopify automatically would fulfill t-shirts on demand and then provide our backend shopify with a tracking link and dropship these items to then customer so we. We thought if we as starter vitamins have this need and there’s just on a shopify platform at the time there was 100000 stores. There must be you know thousands of stores out there who has the same same need for a good on-demand rapturing service for t-shirts and other print products. And that was specifically you know, integrate with new ecommerce platforms that were coming ah to the market at that time. So that’s how we came up, you know, withprintful again. The first marketing channel was our existing customer base of starter vitamins and the next it was integrating with platforms like shopify.
Davis Siksnans: Woocommerce and later marketplaces like edspeed to actually drive the initial customer base.
Alejandro Cremades: So the the company actually quickly became profitable and you know you guys bootstrap the operation and you didn’t raise any money during the early days like you know the typical company would do. How were you guys able to do that.
Davis Siksnans: Well I you know I think at peak star weman’s did what about $1000000 in top line revenue and did it profitably you know, actually there’s good profit margins in wallardt categoryes specifically so we used the star vitamin’s profit for instance to buy some of the first t-shirt printers. And the first months we launched printful it was day I think it did $800 then $1600 and within six months that business was just larger than starter vitamins and because a business is a vertically integrated manufacturing business where you operate both the software part where it integrates with platforms. Ah, marketplace and ecommerce platforms and also the production part which is t-shirt printers poster printers the physical part we were able to actually get loans from banking and non-banking lenders at competitive rates as we all know you know. Previous years. We enjoyed the period of relatively low interest rates while some lenders are hesitant to lend technology only companies printful was sort of a you know. Ah, company. That’s both a manufacturer and both a technology company in 1 so we were actually were able to finance with good good loans and you know we run a business profitably. We set the competitive but profitable price for our products.
Davis Siksnans: And we’re just able to finance Lotta from our own cash flow.
Alejandro Cremades: And you guys were in latvia so did you did you feel at any point that you were at a disadvantage because you were there and perhaps not in the United States
Davis Siksnans: Well 1 founder was the United States another founder was in lata meaning I was in lata while the other founder large was in Los Angeles so actual physical production from day one happened in Los Angeles but Latvia was actually. And advantage not a disadvantage because we were able to quickly build out the marketing and software development teams here while in most for instance, just being purely on Los Angeles the United States we would probably struggle to hire the top talent while Latvia we were sort of recognized as the Google of. You know Latvia there was no actual Google office on the ground there was more limited opportunities to work remotely for top firms like it is today. So we’re actually able to get top talent at really competitive rates if we’re just purely us. Based we wouldn’t be able to that. So actually that was our advantage and most ah print on demand companies are actually from europe instead of the United States because they use this international talent.
Alejandro Cremades: And in this case, how did you guys go about dividing and conquering on the talent between the office in the us and then also the office in in Latvia and then also how did you go about making sure that the culture you know to certain degree was unified and they were not. That much friction between you know, 1 part of the team and the other part of the team.
Davis Siksnans: Well, you know I so said we would struggle to hardop engineering talent the United States so we really didn’t go for it and United States was very focused on operations. We as we grew and scaled the company. We hired talent from. Companies who had operational experience in our field of printing so there was folks from Amazon other companies that knew how to do printing but most other work was actually done in Europe because we just find it easier to hire in order to have good culture between. Ah, between a United States and between Europe we what we end up doing was what had very frequent business trips. We invited colleagues from the United States to Latvia and a lot of latvians went over to the United States we brought some software developers more in early days over to help. Integrate all the printing systems and make sure they work perfectly inside printful facilities. So mostly business trips and actually and the challenge was when covid hit them. He couldn’t do that.
Alejandro Cremades: And how was how was going through Covid for you guys.
Davis Siksnans: Well luckily we had built a pretty good team up until that point we actually you know made out weases for several intra-company transfer employees that transferred over from ah from latvia to work in the United States so if I hadn’t built a good team. It would have been much harder. But covid initially was a shock because most companies we didn’t know what to do and we were you know temporarily decreasing our actually spend and cost and costs in anticipation. Not sure what’s going to happen. But I think within a three weeks of initial logdowns happening and just really shot up and we. We’re basically in hyperg gross mode again where we you know we’rerascing that in a business likerunful. You kind of just plug in extra servers from Amazon rev services. We ended up having to build extra new facilities in a time when. Moving and flying around between countries is limited so we actually had employees who would stay in isolation for two weeks in a hotel room before they can be go out for instance in Canada and build out that new facility and that is also when the first time we were thinking about in order to. Ah, absorb this all new gross and opportunity. We actually now need to go out and raise external capital while up until that point we were really comfortable being a bootstrap.
Alejandro Cremades: So at the point I mean obviously you know so many years being a bootstrapped operation. You know I’m sure that you guys were a little bit concerned about hey you know like now bringing external people. You know how? how is that going to be so what was that process like of um. What was that thought process and then also how did you go about raising the money too because it was you know more going after the private equity side of things versus perhaps the Vc side you know so why private equity and then also what was that thought process on that experience.
Davis Siksnans: Luckily we were starting to think about that several years prior to actually around happening. We. We got acquainted with roschild investment bank and specifically their team in New York to talk about potential ipo advisory just exploring options. How would you know. Go about us eventually being a public company so we spent ah you know quite a bit of time in New York with the roschel investment bank team and them looking at our business and suggesting suggesting certain things that need to be you know, improved or updated within a company. For us to eventually raise a successful round or eventually go public. So when covid happened we actually used them as advisors in this round and the reason between choosing the private equity round the Vc round was you know primarily based on the business models of vcs versus. Versus private equity funds over the years prior to that we had so several offers to invest but we see business model is that they always strive for that. You know one you know more than 10 x return sometimes a hundred x return on their investment and for us to get. The validation. The shareholders would be happy about. We said like the private equity firms are more reasonable. They are going to be more reasonable like you know a 3 x or 5 x return so and it would be much easier to manage and work with and getting investment from 1 investor versus you know.
Davis Siksnans: Pulling in 5 different vcs together right? So yeah, that’s why you know so advice of roschild investment bank. It was decided that’s probably a company like us is more attractive to be affirms and the fact that company was profitable for all the years that it operated right? so. Um, while some media firms would not invest in unprofitable technology businesses. So we are actually able to go in a pe while other firms couldn’t.
Alejandro Cremades: And obviously very attractive for B firms because you guys were operating for so long. Ah, you ah were Profitable. You had the historicals you know, running for you and and on your favor so you had Leverage So when you were having those discussions. Why do you came? you know to the conclusion you know after yeah, I’m sure that you spoke with a bunch that ultimately you know the best firm was going to be the one that you guys ended up going with you know, which was a I believe it is called Brigal What is it.
Davis Siksnans: Yeah, well the the way the process worked is that there was referrals from the roshschild investment bank and there was our own so the contact book of investors who got into watch with us over the years and Greg allsage’s mom was one of those companies that.
Alejandro Cremades: Brigal Sage Mount correct.
Davis Siksnans: Actually got to know us earlier to actually us going into that fundraising period Um, so ah from all the firms that were running into that funnel. Ah you know a lot of firms had to be educated What is print on demand in general. They.
Davis Siksnans: You know there were not a lot of companies in our freedom because print was a first mover into you know, print on demand for e-commerce. So there was a lot of Fairscope were just not educated about it. We spent a had to spend a lot of time while brial sema actually done a lot of their own research and got us like they got into details. And they spent more time than perhaps some other firms to fully understand us while others. You know we don’t get it. We cannot you know say you know printful is like you know this other company in this different field. So we ultimately choose them because they did their homework. And really understood us and and wanted to get more in a detail than other firms. That’s what we found.
Alejandro Cremades: And how long of a process was it from the moment that you guys were like okay I think it makes sense to raise money to the moment that money was in the bank.
Davis Siksnans: 6 to eight months and the reason partly being that we wanted to have full financials for 2020 right? because that was the year the covid started and I wanted to have a full financials and I ideally fully audited financials. We had 2 fully outted financials by 1 of the big 4 firms prior to that so we actually had 3 years of fully out that I audited financial. So we finished 2020 in January we went to the bankers here’s the full Twenty Twenty data start. You know testing the water soon investors with this data and by the time we signed up. We had the fully outeded financials and the first few months of the performance of 2021 which is really strong so it was a timing and that timing helped us to get the you know the best terms possible for the company.
Alejandro Cremades: And I guess for the company too because being on your own you know for so long without any external financing. Were there any steps that you guys needed to take you know towards you know the corporate structure for welcoming this people or welcoming this money I mean any anything else there that you had to think through.
Davis Siksnans: Well, we actually did that for the years prior. Um, you know, figuring out like transfer pricing. You know any any relations relations to tax and other things and actually to use the full advantage of us actually having a subsidity in Latia It’s actually pretty. Pretty good because the tax regime in lat is very favorable. There’s no corporate income tax on on on profit. They invested left in a company. Um and we we had to make a bit or ah changes around because again the company didn’t have outside investors. We’ve made some changes to option pool and other factors. But.
Alejandro Cremades: Wow.
Davis Siksnans: Not nothing too major to to onboard this investor because it was clean. It was the by the time originally it was the lllc in California but during you know initial talks with advisors we change it to a delaware based Ccorp and that will happen also several years prior to us actually having that round.
Alejandro Cremades: and and I’m sure that’s a very interesting topic by the way I’m sure that there’s a lot of people that are wondering LLC versus ccorp you know before taking money like what? what did your advises tell you and why did you ended up going with a Ccorp part of Delaware.
Davis Siksnans: Well for California again is not like super like from a tax perspective friendly state. 1 factor was you know do choosing just a different state. Another factor is lllc where. The main shareholders’s finances are to interwwined with company finances right? So we needed to actually separate them on have a much cleaner look because like laers. The co-founder who was living and in la his personal finances was intervening with the company and and ultimately ah taxes were a bit lower was the ccorp. You know it is the structure usually preferred by any investor.
Alejandro Cremades: Now for you June 2022 you know you decide to turn page. So why did you do that I mean after so long you know over 9 years or such with printful. You know your biggest success you know I’m sure it was our incredible journey for you. What was that the you know moment where you say I think it’s time for me to to turn you know to another chapter.
Davis Siksnans: And well I over the nine years so it just a tremendous journey of gross and what I’m most happy was is creating the theme within printful and I built a great team up I spent a lot of time you know flying back and forth between United States and Latvia actually covid came sort of in a blessing as well because I was sort of more um you know had to be forced in stay in Latvia and as we exited covid in 2021 slash twenty two I actually saw that I didn’t really want to on a personal level also but to return to a level of. Traveling to United States so extensively spending the time I was you know more basing myself personally in Europe you know got married bought a house and and I felt like just like ah you know, bringing up a child There’s an eventual time. You need to let the child to go from high school to the university you’ve have given. That child a lot and you feel like you will be. You know let the child do um and you know, starting living independent life but you built you know good um foundations for that company to be independent at that level. So the new a lot of new hires that came. For printful more recently are us based sea level executives who’s going to help in a.
Alejandro Cremades: So obviously now you know the um the you can see now as as as as you were saying printful you know going on its own you know maturing being now you know more than a baby becoming more like an adult I guess I mean obviously incredible journey. You know a billion you know, probably one of the um first unicorns there in Latvia ah hundreds and hundreds of employees I believe you know it’s over 800 employees now or such or maybe more ah but what’s next for you.
Davis Siksnans: Ah, next for me is helping and other companies who are in a similar journey. Ideally, they are in a breakeven phase or ready to you know, go on a hyperg growthss and the. Looking at companies here in the baltics mostly and help them to expand internationally you know use our experience from experiencing United States market you know we didn’t have a lot of capital before. But now we have capital other founders actually have sold other companies to other investors. So we’re now investing between you know one hundred thousand to a million in some case even option 2000000 um to help them. You know do what we did at printful right? You know build out theme and scale in tackle international markets. So that’s my primary focus and they’re in a group. As well. We have other companies like carffleet telemmatics company map on which I’m now a board member off and help them to also eventually have the first customer first and outside investor on board right? So as I said and printful. Journey was to prepare for that. Maybe 3 years prior to actually closing around so map on that’s still in the future. So I want to help that company. We actually have built have our first investment done already and and cosmetics space in in an ecommerce company that I’m also currently helping on.
Alejandro Cremades: And when you’re looking at investments. What what are like the biggest Checkmarks you know that are critical. You know for you guys to to see that they take so that you really take ah an investment. Seriously.
Davis Siksnans: Um, it needs to be an an understandable business model. You know how you know the companies make makes money like in printful Sks but understandable. You know it’s actually selling physical products. So one is that we need to see an upside how we can actually be hands-on and helping in a company instead of. You know, thinking a really small part of the company being like you know a sub 1% owner we want to be more like you know 10% or more owners so we want to take an active role and help them and ideally they need extra capital to accelerate. You know things that already has you know first signs of it. Being working um and they need to be international and they need to have a good working product all already and what I’ve seen in a lot of cases from the company in baltics is that it’s a great product that has great abuse but companies often struggle to you know with performance marketing. Really how to grow either sales through digital channels partnerships or in b two b just you know, direct sales and that’s something we did in printful and just want to transfer over some of that knowledge.
Alejandro Cremades: So if you could go back in time Davis you know after 9 years of pushing printful and give yourself a piece of advice before launching a business both that be and why.
Davis Siksnans: Well I’d still you know recommend to try to bring the product to Mvp stage where it meets the customer as soon as possible. Um, and now I just know certain things more try to. You know, grow on the shoulders of others like you know, permful’s case you really benefit it from tapping into shopify ecosystem etsy ecosystem woocommerce etc so I would whenever I would research a new business idea I would say whether I can tap into those existing channels where potential customers already hang out. So and shopify has an app store. So if I have a channel like that I would try to find a business that would tap into that because if you do that it really brings down your customer acquisition costs. Substantially.
Alejandro Cremades: So I guess for the people that are listening that will love to reach out and say hi. What is the best way for them to do so. David.
Davis Siksnans: It’s Linkedin these days is mostly Linkedin I’m there responding quickly and then you know email or ah or a meeting after that.
Alejandro Cremades: Amazing! Well Davis thank you so much for being on the deal maker show. It has been an on earth to have you with us today.
Davis Siksnans: Um, thank you.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Davis Siksnans On Building A $1 Billion Company By Turning Your Ideas Into Premium Products appeared first on Alejandro Cremades.
Andrew Lacy sold his first company to Disney. Now he’s working to transform the healthcare system with his newest venture, Prenuvo. The startup has attracted funding from top-tier investors like Anne Wojcicki, Tony Fadell, Cindy Crawford, and Steel Perlot.
In this episode, you will learn:
- Diagnosing business ideas
- Why not to bet on second-time founders
- How Prenuvo is changing health and wellness
- Why having more investors may be better
Alejandro Cremades · EP 608 Andrew Lacy On Raising $80 Million To Save Lives With Proactive Cancer ScreeningSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Andrew Lacy:Andrew Lacy is the founder & CEO of Prenuvo, a transformative healthcare company growing fast across North America. Simply put, Prenuvo provides members with incredible peace of mind about their health!
Prenuvo’s core innovation is a one-hour advanced medical screening using MRI that can detect solid cancer at Stage 1 and 500 other medical conditions. Our customers come from all walks of life, from Silicon Valley executives to people who feel let down by the existing medical system.
Prenuvo is a mission-driven company that every day is saving lives and improving health through early detection.
Prior to Prenuvo, Andrew has extensive experience taking digital products from conception to launch in both his own startups (Tapulous, Zap) and large corporates (Disney, Lebara, and various large banks and insurance companies).
Andrew’s experience across a range of industries helps him to bring fresh perspectives, appropriately challenge established practices, and to bring breakthrough thinking to under-innovated spaces.
Andrew’s education includes an MBA from Stanford University, a JD in Law, and a Bachelor of Economics from the University of Melbourne, Australia
He specializes as a C-level executive and general management and advisory; business and corporate strategy; digital transformation; innovation; new product development and strategy; team-building and culture; customer acquisition; attachment and retention (growth hacking); consumer insights; digital insights, analytics, and business intelligence; engineering (node, PHP, iOS, Scala); ROI-driven performance marketing, revenue optimization, pricing, and monetization; business operations; web, mobile apps, chatbots, and voice-based products.
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Read the Full Transcription of the Interview:Alejandro Cremades: Righty hello everyone and welcome to the deal maker show. So today. We have a very exciting founder I mean a founder that has done it multiple times you know done the whole you know cycle of building scaling financing exiting and I think that we’re going to be covering very interesting topics about. Starting companies. Why to start the company. Why not to start the company who to raise from you know or perhaps you know going through the process or the difference between perhaps starting a company in the us versus starting a company in Europe. So very very interesting and at the same time relevant topic so without further ado. Let’s welcome our guest today Andrew Lazy welcome to the show you so give us a little of a walk through Memory Lane Andrew you were born in Australia and obviously today as the people that are listening. They can sense the battle of the accents here are going on.
Andrew Lacy: Thanks Hell hunter. It’s great to be here.
Alejandro Cremades: But give us ah, give us a walkthrough memory lane. How was live growing up in Melbourne.
Andrew Lacy: Ah, look. It was pretty um I mean Melbourne and Australia is a great place to live and a great place to grow up. It’s on the 1 hand super um, just family oriented quality of life oriented. But then on the other hand. It’s just so far away from everything in the world and like most australians when I first left Australia as an adult I left for 2 years so we all tend to leave for a long time because it just takes so so damn long to get out of the country in the first place. Um, but no it it was ah you know I had a fantastic childhood there. Um, and and ah you know from you know, twenty years later now I’ve been out of the country 15 years and still have very fond memories of the place.
Alejandro Cremades: Now 1 thing that is very interesting I find on the on the culture that perhaps you know you grew up in there in Australia is that once especially at the time I think that now you know things are a little more open more open. You know at least you know and the way that people think about careers. But. The way that thing think people were thinking through things was you would finish school and then you become a lawyer or you become a doctor and in this case, you became a lawyer and and it was not what you had hoped for.
Andrew Lacy: Yeah in Australia They have this interesting University system where you don’t really need to apply to University that every year there’s a book that’s published and based on the score you got in high school you could choose any course that you had a score higher than what was required to get into. So if you did well in high school which is what I did. You can more or less just kind of choose whatever course you wanted to study as undergrad and so I ended up choosing law I thought it was interesting um to be able to solve problems in the context of cases I you know fell in love with um, all of the sort of courtroom drama that you see on Television. And I thought man this would be a great career.
Alejandro Cremades: So in in your case you know going into consulting you know I’m sure that that was pretty interesting. You know more than anything to um to really understand how to tackle problems and how to deal with problems. You know, perhaps grabbing a big problem. You know, breaking it down into small problems and then going one after the other. I guess he in your case, you know what What do you? think you know that experience at Mckinsey taught you.
Andrew Lacy: Yeah, so I guess the arc of my life in some ways was that I’ve always been solving problems so when I studied law this was about solving problems. The main thing I really didn’t like about law was that the problems that you were trying to solve were often things that happened 10 years in the past. Even when you were trying to win a case, you weren’t even talking about the law today you were talking about the law as it was at the time that something happened you know, well in the past and I found that deeply unsatisfying and and very shortly after getting into law I was exposed to Mckinsey which is a big consulting company. And ended up moving over there and becoming a consultant and here I felt was this fantastic blend of I was solving problems again but here rather than solve problems that happened in the past I was really helping companies figure out how to respond to what’s going on in the environment and my focus actually at Mckinsey was. At the time think back to the early the late 90 s and the early two thousand s was you know this threat of the internet and or the opportunity of the internet and what our clients could do to take advantage of that so I ended up spending most of my time focusing on that area.
Alejandro Cremades: Now you know 1 thing that thing that is very interesting is before mckinsey you were part of the whole you know, working with for the government taking a look at the innovation so you had already a glimpse of of that. So I guess you know being at Mckinsey you had that seed already planted because eventually you when. To ah Stanford to do your and Mba and I’m sure that that field things even more on on on wanting to perhaps you know doing something of your own but then eventually you had to go back because Mckinsey was obviously paying for the and Nba so I guess 2 questions here one. How was that experience of being in the land of innovation. You know with all these people starting all types of companies and what you got from that and then also how painful it was to get back to corporate.
Andrew Lacy: It’s really interesting I um, even before I went to study the Nba I had a brief period where I was dating someone who is living in Silicon Valley and I don’t know what this might say something about me or maybe this is an experience that even yourself had when you first came over but I remember this distinct. Distinctly? um roller blading down alkammina real in Silicon Valley again Twenty years ago and and we would rollblade by companies like Yahoo or ebay and for me I found it just so fascinating coming from aschea that there are actually companies like there are people sitting in offices. Doing something that you know ends up being a webp page that people interact with no matter where they are in the world and it was sort of like a big eye-opening moment for me and I sort of fell in love ever since and it took me several years to actually kind of get myself in a place where I could be founding companies but there was that energy and enthusiasm. Even twenty years ago in Silicon Valley that really makes the place really special. Um, it was hard. It was very very difficult studying an Mba in Stanford and seeing your friends go and start companies and not doing it yourself for whatever reason and I’m sure a big part of it was me just not having the guts. At the time. Um I was actually meant to go to Mckinsey and so in San Francisco I thought I would be so miserable being in the silicon valley and not being an entrepreneur that I actually rang around and managed to transfer my job to the madrid officer mckinsey
Andrew Lacy: And so I ended up working in Spain for 2 years just because you know at least then I would have an interesting cultural experience while I was sort of waiting down the clock at Mckinsey.
Alejandro Cremades: And hey you know having good wine and and Topas is not a bad thing at all so that was a good choice I mean obviously obviously I’m a little bit biased but they but anyhow you know this was the immediate step before you went at it and ah you took charge and and started your first company. So. How was that process like of saying you know what? let’s let’s go. It’s time.
Andrew Lacy: Well I was still a bit reluctant even after leaving Mckinsey I came back to the bay area to hopefully join a high tech company and my background having a law degree having worked at Mckinsey and having an Mba were not valued at all by any tech companies twenty years ago it was um these are red marks on Europe. Ah, resume. So I actually found it easier to start a company than it was to work at another company back then? um and my first company was ah was a company called tapulous and it ended up being a really fantastic and fascinating journey. It was the very very first iphone company. So two months two or three months after the Iphone launched it started getting hacked by um, young kids actually out of Europe who had sort of hacked into it and learned that they could put other apps on the phone and we saw my partner and I saw this tremendous underground activity. Was happening on the iphone and we realized I think earlier than anyone else that this was ah going to be a whole new platform. This wasn’t just another phone and so we started the company. We ended up running the underground app store before the real app store launch we had over 10,000,000 installs um, and you know saw this new platform emerging well before anyone else.
Alejandro Cremades: And how do you guys go about capitalizing the business.
Andrew Lacy: Ah, it was very difficult. It was this was one of these companies that um, you know when you see something before anyone else does it actually makes fundraising quite difficult and we went to. We went up and down sand hillll road and we um, we pitched a bunch of vcs and almost every single one of those vcs said no they said if you’re not developing for a blackberry or Nokia then you’re not. You know like you’re not going to get any funding and this includes all of the vcs that later on maybe six months down the track started iphone focus funds. Um, so it’s amazing. What a little head start can do both in creating an opportunity as an entrepreneur but also in making it really difficult to get funding and it’s the sort of fine balance. So we ended up bootstrapping it and having a bunch of angel investors actually um that you know wrote us some small checks and from that we were able to build that company.
Alejandro Cremades: So let’s talk about this company too because you know definitely first company first exit. So pretty nice. So you guys sold it to none other than than Disney so that’s incredible I mean what was that process like of of going through that transaction and. And yeah I mean give us give us kind of like an insider you know access there are insider scoop of of what that journey was.
Andrew Lacy: Well I think too many too many times entrepreneurs think that they’re building something to exit it and I think our philosophy always was we want to build something that’s going to be a big hopefully world-changing company and our focus always is you know how do we make their company bigger and bigger. And so we were actually outraising a series b by this stage we were. You know we had survived the global financial crisis of 2008. Um, we had managed to turn the company um into something that was you know, modestly profitable. And we build a story around a whole bunch of other products that we’re going to bring to this mobile this new mobile ecosystem and when we’re out there fundraising as series b disney actually approached us um to see if we were interested in an acquisition. Ah um, and that process was. The first time I went through m and a with a large company I think Disney is probably even a more complicated business as it relates to acquisitions a lot of due diligence a lot of personal due diligence. Um, and. And it was really just at the very last minute that we decided that we would sell rather than raise that series b.
Alejandro Cremades: And what was that process like going through that transaction because as they say going through an acquisition is like experiencing a loss in the family you know people talk about like you know how amazing is doing the exit and all of that stuff. But. You know it? Also it’s It’s kind of like you you experience the loss because especially on your first company to certain degree I mean we are all entrepreneurs and and on that first go at it. You really feel like you are the company you have like like your identity is there. So So how was that for you as well.
Andrew Lacy: Well, it was the unusual situation. You know, like most companies I had a cofounder and I was the Ceo and the cofounder was a Ceo. So if we disagreed on a decision. Um, you know he had sort of the carrying vote. Should we say and so. When we sold the business he obviously he he was more interested in selling than I was he had had a couple of really big. Um I like hyped businesses that ended up not um, exiting and so I think he was a little bit more nervous about that for many years I had some resentment about it. You know because we saw subsequently how much bigger the mobile market actually grew and and I’m sure the company may well have been bigger had we held on but I’ve also you know now at the more mature version of myself realized just how how hard a decision that was for for my cofounder. Um, and just how kind of easy it was for me to be able to say well whatever happens. Not my fault. You know I can sort of have it both ways and I thought that was a little bit unfair. Um and subsequently and I sold companies where I’ve been the Ceo I’ve really felt like I understood a lot more that tension if that makes sense.
Alejandro Cremades: So in your case, the transaction happens you joined Disney and you were there for a little bit over a year perhaps you know working on the integration and then eventually you moved to Paris and I think that Paris gave you great things. You know he gave you your wife he gave you knowing you know coding you know. You taught yourself how to code and then also it gave you you know the possibility of starting your next business because as an entrepreneur you’re always an entrepreneur so tell us about this next thing go at it.
Andrew Lacy: Yeah, so I um I moved to Paris during my time working at Disney I actually were running some of their studios over in Europe and so I was traveling frequently through. Um. Various different cities in Europe and on one of those trips I met the person who is now my wife um I ended up moving to Paris I thought I would just do angel investing and just sort of hang out and not do very much but I quickly found that that was for the stage I was at in my career was something that was actually really boring. Ah, and so I did the 1 thing that I felt was missing in my entrepreneurial portfolio which was I wanted to really understand how to build product and that meant I had to learn how to cope so I sat down and started teaching myself I even employed. Another couple of engineers a frontend engineer and a backend engineer to teach me frontend and backend engineering and of course because I don’t like learning lessons sort of in the abstract all these lessons were in the context of building a new company that was a voice activated search company called za. And I remember about six months into doing my own coding education that I looked up and around me I had 4 or 5 people and I realized that I sort of accidentally started another company and and so I worked on that for a couple of years over there in Paris.
Andrew Lacy: Which was an interesting challenge relative to Silicon Valley
Alejandro Cremades: And what was what was what was the challenges. What were some of the challenges that you saw on building a company in Europe versus you know building a company in the Us.
Andrew Lacy: Well I think the thing that people don’t really talk about is just the effect of culture on people inside the company. What do I mean by this so and there’s good and bad to this by the way this is not sort of ah there’s no right answer but America really has a culture of you know we. You have sort of like making your own luck working hard following your dreams and you know if you start a company in America and you tell your friends and everyone around you. They’re really excited if you join a company that’s potentially changing the world. Everyone that you tell is really excited about that. They understand that you have to work hard. When you moved to France I found even you know there’s a younger generation of people that absolutely have this entrepreneurial energy and I would say the same probably is true of Spain from what I know about spanish culture too. Um, and they’re really excited and they’re actually building really cool stuff. The problem a little bit. Um for me was. You know when you bring on people as employees in those markets. Um, they’re still in some way affected by the culture around them and so you know I’ll give you a simple example of this. Um, when you have a web business. You know it’s on twenty four seven if a website breaks. You know the business is closed and someone needs to go and fix that and I remember oftentimes you would reach out at like seven o’clock on a Friday and say hey the website is broken and we need to fix it and it would just be impossible to find the engineers or if you did they were very grumpy about doing it and I learned afterwards.
Andrew Lacy: 1 of them actually confided in me that they were really excited to help and work hard but all their friends around them were telling them just how silly they were that you know this company was taking advantage of them and that’s like the difference of culture I think is if everyone around you just doesn’t value sort of like company building and um. And you know the effort that goes into that it becomes really hard I think it’s really difficult for employees to sort of give the same way that they do in the Us. Um, so so it was a different culture. It’s changing for sure the other big difference was the the fundraising environment at least in in France. Um. Back then which was eight or nine years ago. Just really didn’t exist. There are so maybe 2 or 3 angel investors. Um, and the way they invested was very different to the way they did in the us in the us people want to understand what your story is what your vision is how you’re gonna change the world. In Europe I found that people really wanted to see your 5 ive-year cash flow statement and you know understand all of the numbers behind business which fundamentally are irrelevant. Um, when it comes to investing I think that’s slowly changed as we’ve got like more successes coming out of Europe or Australia or these other secondary markets. But still the bias is there for you know, looking at investments the same way you look at financial investment which is just not the right way to think about startups.
Alejandro Cremades: So in this case, you know for you guys I mean it sounds like the 4 year Mark you know what’s ah important one for you because 4 years in you know you decided that it was time you know to um to to perhaps you know turn page and and in this case, you guys you know, went through a transaction. A company called Avara that the. But the business and you also did the you know vesting and resting with them. You know helping with the integration now in this case, you know with this experience. What was the lesson that you that you took with you.
Andrew Lacy: Well I think the original sin of the set. My second business was really two things. The first is when you have a successful startup as an entrepreneur you can tend to assume that a lot of that’s the sort of the The main reason why that company was successful was you and you completely discount the effect of luck or timing. Um, and so when you go out and then build a second company as an entrepreneur that’s exited the first one I think. You can. You’re much more likely to commit the second sin which is really focusing on something that I was very passionate about which at the time was travel and ignoring completely the market dynamics and so that second company um really was sort of doomed from the very beginning. By my sort of the mental approach I brought to the business itself and the space and we were very lucky that we were able to turn it into a slightly profitable company and able to exit exit it handily. but um but really it taught me in some ways that. Ah, you know I would probably never invest in a second time entrepreneur who’s had a success the first time because they’re just way too cocky and secondly it. It made me very skeptical about the idea of like investing or investing yourself your time in businesses that you are very passionate about I think being a little bit.
Andrew Lacy: Having a little bit of distance from the idea is actually really valuable and it’s hard to do if it’s space that you you you just are really into um so so I’ve often tell people I tell myself and I tell people who ask me for advice that it’s often a little bit dangerous to follow your passion 100%. Um, And that for me at least my passion was yeah I’ve I’ve learned that my passion is really in building businesses and solving problems and ah not all problems are created equal.
Alejandro Cremades: I hear you I think that that emotional attachment can be dangerous too. So um I guess I guess for you once this was said and done and you finalize you know doing the integration then you decided it was time to pack up the backs and come to the Us. So. What trigger that and and what happened next for you? yeah.
Andrew Lacy: Well, that was easy at that point I really felt like I’d learned some lessons and I really wanted to apply them in the context of another company. So and and having had a difficult time at least myself personally in Europe I I thought that it was time to do that back in Silicon Valley so in 2017 I moved back? um. Even though I thought I’d learnt the lesson about not working on something you’re passionate about I immediately started working on a genetics company that was an area that I was very fascinated by and again had very bad market dynamics and I remember I was only three months in I’d not raised any money. Thank god and I just looked at myself in the mirror and I’m like oh man, you’re doing it again. Um, and. And that moment I said I will build another company but for this company and from this point on I will never build an I will never build a company That’s my idea. Um, and so I I basically sent an email to all my friends everyone on Linkedin and said I am. I want to build something I don’t know what it is if you’ve heard anyone that has an idea looking for someone to help build it or or you’ve heard a great idea reach out to me and dozens of people reach back and connect to me with ah as tons of really fascinating and tremendous people I explored 2 or 3 things and eventually. Just fell in love with the company or the technology that’s now my current company called perneuvo.
Alejandro Cremades: So so one one question there when it comes to ideas. You know how have you you know come to the point where you’re able to really validate or see whether an idea has legs or not.
Andrew Lacy: Well I think to start with again if it’s not your idea you don’t have any skin in the game and I even train myself during that period I said I would go to the Starbucks every day and I would think through an idea that someone had presented to me. So someone that had messaged me or emailed with said. Okay I got you know this idea and I would actually think it through as if I was an investor. what do I like about the idea what do I not like about the idea would I invest in the idea because fundamentally as an entrepreneur the decision that we’re making is you know where are we gonna invest that time for x number of years. And that’s kind of the that’s the finite commodity that we all have to invest with and I found that that mentality was very freeing because at the end of the day I could just say actually you know what? I don’t think this is gonna work and then the next day I would start again on some other idea and. And and because they weren’t my ideas I was much more open to getting feedback and talking to folks doing a lot of due diligence before I sort of jumped in pernuvo my current business I probably due diligence for like two or three months before I even got involved talking to tons of doctors and. Investors and entrepreneurs and um and you know and it was only through that process that I really came to see the opportunity.
Alejandro Cremades: And why did you feel or at what point did you realize that the opportunity was meaningful enough for you to jump.
Andrew Lacy: Well this is sort of an interesting one. It’s funny because for your listeners that don’t know who preneuvo is so we do cancer and disease screen using very specialized mri. So. My first company was the first mobile company that ended up being a mobile gaming company and my current company is ah is a. Very medically focused um lifesaving screening company both these companies ah could not be more different and could not be more similar. They’re both. They were both really kind of creating these new categories. So whereas we saw a tapulous that the mobile phone. Was going to be that the iphone was more than just a phone. It was a whole new platform. Um, what we learned at prenuvo was that these machines that these mri machines that people typically use to diagnose problems like Mris of the shoulder or the knee or the head after a car crash or something like this. Actually there’s this other use case for this product which is 100 times bigger which is screening um and just like my first company when I went out and spoke to a lot of investors I got a very very um, ah sort of like broad. Um.
Andrew Lacy: I Guess kind of like diagnosis for want of a better word of the underlying business idea and I’ve come to learn that actually as an investor and as an entrepreneur you can think of almost every company as fitting on like a normal distribution. Um, so.
Andrew Lacy: What I found is. It’s quite easy to tell the good companies from the bad companies. It’s actually really really really hard to tell the standout amazing companies from the worst companies that you’ve ever heard and so the first lesson I sort of or the first sort of Lesson I taught myself was well where is this company in the spectrum. Because if it’s in the in the meat of the normal distribution in the middle part. It’s not going to be a transformational company. It has to be in the tails and then the difficulty is figuring out which tail is it in and you know I’ve been lucky enough in Silicon Valley to be to see some of the early pictures of companies like uber. For example, where. You know you’re like this is the worst idea ever. No one in California would want to sit in someone else’s car. You know everyone drives and has their own cars. Um, and you know so you know that that’s you know? So so so I had a very visceral negative reaction. Um, and I think I’m looking for that as a signal. You know some people love it. Some people really hate it then you know that you’re somewhere in the tails of that distribution and then it’s up to you to figure out which tail you’re in.
Alejandro Cremades: Yeah, know that’s ah, that’s definitely a tough 1 You know when you are creating categories. Um, so 1 thing here you know that I think will be great for the listeners I mean you were you were touching on it and and and some of the good stuff that you guys are doing but just so that they’re able to get it. What. Ended up being the business model of preneur. How do you guys make money.
Andrew Lacy: Sure. So um, so we ah it’s a pretty straightforward business to be honest, um, but we take we took this technology mri that’s usually focused on just imaging one part of your body at a time in a diagnostic way and we decided. We’re going to build an entire business around screening you from head to toe and and through that screening we’re able to diagnose cancer at stage 1 aneurysms that could also kill you and about 500 other conditions so we can really help you understand. Um, you know what’s going on with your underlying health in a way that the health system which is very reactive cannot um, that’s the idea is very simple. The execution idea is very hard. It involved rebuilding hardware software business models and ah.
Andrew Lacy: And figuring out if there’s a market for this and are people willing to pay for it. So It’s um, it’s It’s been a very difficult challenge but at the same time.. It’s been the most rewarding time in my life because I get to see directly the impact of what it is that we’re doing on people’s lives. And there’s nothing more rewarding than that.
Alejandro Cremades: And and also you guys have raised quite a bit of money. So hey you know this is not your first rodeo. So I’m sure that you were very picky when it came to, um, you know, making sure that you got the right people you know in the journey with you. So.
Andrew Lacy: What we had again very similar situation though as we did with tapulas so when we first started raising money. We were located just in Canada and 1 clinic in Vancouver. So good luck trying to get a Vc to go up to Vancouver to go and even experience the thing. Um, you know we tried to raise money from vcs even you know vcs I knew that had invested in me before and they went back to the people that they considered experts which were either their personal physician or they had a gp in the fund that was a physician and the physician’s view was that mri is just for diagnostics. Screening is a silly idea the same way you know ten years ago people thought that the iphone was just another model of ah of mobile phone so we ended up bootstrapping we got bank loans. We opened up a clinic in Silicon Valley and it was then when we were screening all of the vcs that they could sort of so. Been their disbelief that they could suspend the sort of the you know what they had been hearing from their physicians and realized just how transformational the idea really was and and at that from that point on it was quite easy to raise money.
Alejandro Cremades: And you guys have raised money from really amazing people. How much capital have you guys raised today.
Andrew Lacy: Are close to 80,000,000 total so most of it was in this last round that we did the 70000000
Alejandro Cremades: And I mean you have felici. You have a an wojiski from 23 and me founder of 23 and me Tony Fowel you know they they guy behind you know all the amazing Apple products. You know that work closely with the with Steve Jobs even Cindy Crawford I mean you have like all types of ah. Interesting profiles in there. So how do you How were you able to ah to meet these people and and get them on board.
Andrew Lacy: Well, it’s funny like yeah if you ask people and I’m sure you do on your show. Ask people for advice on raising money I think the normal advice is try and raise as much money as you can from as fewer ah investors as possible because.
Andrew Lacy: You know there’s this idea that investors are mainly annoying things on the path to building a great company. We took a different approach with preuvo we. We just said we’re building this really amazing technology and it can really impact lives in a positive way and once you screen enough people you start to see I mean people start to know someone whose life. We’ve saved and and you know so we took this off but off approach which is you know we we’ve welcomed in a lot of investors I think we have 30 or 40 investors that really are massive champions of the business and they really help us um out there in the market change sort of hearts and minds. And introduce this new concept of preventative health to a much wider audience. So most of it I have 2 or 3 financial investors. Most everyone else is an entrepreneur or a successful business person or a celebrity who is just really passionate about what we’re doing.
Alejandro Cremades: So what have you learned about activating your investors to be able to get the most out of them.
Andrew Lacy: Ah, it’s I mean if I’m being totally honest I think the primary lesson here is it’s really up to the Ceo and founder how much you leverage the investor network that you have I don’t think I would not give myself an a plus. At this I have a network that is fantastic when I need them. But I don’t reach out anywhere near as much as I should um and ah and I I think too often people completely ignore um, ignore. Investors as a sounding board for what you’re working on or a way to connect you with other folks out there. So we’ve started to do this a lot more as we’ve grown the business across the us um, but it’s actually our my to do list to do a much better job of this.
Alejandro Cremades: So imagine you were to go to sleep tonight Andrew and you wake up in a world where the mission or perhaps the vision of preneuvo is fully realized what does that world look like.
Andrew Lacy: Oh I mean that’s what keeps us up at night to be honest I mean the company is super mission driven. Everyone is really excited about what’s going on. Um, which as Ceo just makes it such a joy full place to be running. Um. You know the fundamental thing that we’re trying to solve here is that our health system in the us is 96% reactive care so out of a four point five trillion Dollar budget 96% of it is spent on people that are already sick in hospitals and and. So what we wanted to do was not just offer some incremental improvement but offer a completely different view of how healthcare could be um, the screenings that we do. You know they started a thousand dollars they go to 2500 but if I even just focus on that Thousand Dollar scan I think about a costa providing that we could probably screen every person in the us every adult I should say every 2 years for under $50000000000 which is a huge amount of money but at the same time we spend about one hundred and thirty billion just on Latestage Cancer drugs ah so imagine a world where we caught every cancer at stage 1 and you didn’t need any of those drugs or we caught any chronic condition which is the other big money pit of our health system at an early stage then you wouldn’t necessarily need to spend all that money and and I think what does that future look like it’s a future where um.
Andrew Lacy: No one has to die from advanced disease because everything is caught early and our healthcare system is probably half the size in terms of budget because we’re catching stuff so early when the interventions are not only more successful but they’re actually a lot cheaper as well. So so you know and. And on a more on a more personal and day-to-day level. What that looks like is you know saving lives day in and day out which is what we’re doing right now.
Alejandro Cremades: I love that. So imagine if I was to now let’s let’s talk about the the the past because we’ve been talking about the future. So let’s talk about the past but do it with a linch of reflection of reflection imagine I put you into a time machine and I bring you back in time. Maybe to that time that you were miserable going back to Madrid you know and obviously miserable at least you know drinking good wine and and having good tapas but to that moment where you know you were wondering you know hey I want to do something on my own too and imagine you had the opportunity of going back. And being able to sit down with your younger self. You know, maybe you were able to to have a sit down there at Plafa Maioi Madrid you know beautiful scene and let’s say that younger self you know, actually listen. So imagine you know you were able to give that younger self one piece of advice. Before launching a business. What would that be and why given what you know now.
Andrew Lacy: Um, and it’s such a good question. It’s hard to have a really short answer to it. Um I think I mean I just would have wanted to I mean do it being an entrepreneur is sort of like jumping off cliff to some extent. You know it’s almost impossible to. Arrive at being an entrepreneur through some sort of rational spreadsheeting of like what are the pros and cons of doing what I’m currently doing for longer and being an entrepreneur financially the expected value of becoming a director at Mckinsey was way higher than. Working as an entrepreneur and so often people reach out to me from Mckinsey or from law firms and say I really I love to have a coffee. Let’s talk about being an entrepreneur. You know what you know I’d love to be an entrepreneur Can you talk me into it and I have such a hard time doing that because it is sort of a leap of faith. Does that make sense and either you’re sort of your brain is sort of wired for that in some ways or it’s not and I’m so lucky that I actually you know for me that leap of faith was because no tech company wanted to hire me when I came back to Silicon Valley after mckinsey so I was you know I’m very grateful for them for not hiring me because I may well not have made that leap. So. It’s a really really hard thing. It’s a decision that someone would never regret but I understand it’s really hard and the people in particular that are sort of vacillating over this question tend to be people that are high achievers. Um, and you know their low risk path is not a bad you know doesn’t lead to bad outcomes.
Andrew Lacy: And that makes it harder and harder. Um, sometimes you know more specifically what I would tell myself is when you are young, um, the normal sort of financial advice that people give you is invest in stocks not bonds. You know, invest in high risk assets don’t invest in Lowris Assets when you’re retiring invest in bonds and not stocks because you know if you get wiped out. It’s a much bigger problem I think that philosophy also is a valid one as we think about our career I think when you’re young, that’s a time to actually take risks with your career. Because if you wipe out you got plenty of time to recover. Um, and I don’t think people I don’t think I thought myself as a younger person about my life that way does that make sense and and that’s the general advice I give other younger people and I would give my younger self which is you know. This is a time to take risks when you don’t have family when you are you know you can if you need to you can eat 2 minute noodles um and this becomes harder and harder to take those risks for various reasons as you get older and older in life.
Alejandro Cremades: Wow very profound Andrew I love it now for the people that are listening that will love to reach out and say hi. What is the best way for them to do so. So.
Andrew Lacy: Ah, they can find me on Linkedin They can message me for free there. That’s probably the easiest thing and then I’m also on Twitter my handle is my name and I’m pretty active there, especially if people have questions about. Ah, you know entrepreneurship or the kind of the company preneur that I’m currently working at.
Alejandro Cremades: Amazing. Well hey Andrew thank you so much for being on the deal maker show. There has been an on earth to have you with us today.
Andrew Lacy: Thank you I Really wish I wish you the best and also I wish your listeners the best as they sort of think through this decision around you know what impact they’re gonna leave on this earth in the one career that they have and you know I think. I’m super excited for this next generation of companies that are coming out now.
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The post Andrew Lacy On Raising $80 Million To Save Lives With Proactive Cancer Screening appeared first on Alejandro Cremades.
Antonio Juliano has already raised tens of millions of dollars for his tech startup that is forging the future of finance. The venture, dYdX, has acquired funding from top-tier investors like beToken Capital, BR Capital, CMS Holdings, and CMT Digital.
In this episode, you will learn:
- Thinking long term when building your startup
- How your motivation impacts how you build your company
- The size of the derivatives, crypto, and decentralized finance market
- How he raised $87M for his startup
Alejandro Cremades · EP 607 Antonio Juliano On Raising $87 Million To Help You Trade Crypto For FreeSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Antonio Juliano:In 2017, after stints as a coder at Coinbase and Uber, Juliano started Dydx, a crypto derivatives trading platform that caters to professional traders outside the U.S.
It averages roughly $2 billion in daily trading volume (Coinbase does about $5 billion).
The 19-person startup brought in $75 million in revenue in the first nine months of 2021. It expects to reach $125 million in revenue for the full year and $80 million in net profit.
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Connect with Antonio Juliano:* Crunchbase * LinkedIn * Forbes * TheOrg
Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So super excited about the guest that we have today you know we’re gonna be talking about all the good stuff that we like to hear building scaling financing I mean all all the above and also about crypto. You know because the guest today he was an early employee at coin base too. So I guess without far ado let’s welcome our guest today Antonio Juliano. Antonio welcome to the show. So originally from Pittsburgh so give us another little of a walk through memory lane. How was life growing up.
Antonio Juliano: Hey thanks so much for having me.
Antonio Juliano: It was good I feel like not that many people have been to Pittsburgh and there’s not a huge reason to visit but it’s a nice place to grow up so kind of grew up in the suburbs of Pittsburgh was fortunate to have great family I’m the oldest of 4 siblings. Um, and then just went to private school for kind of k through 12 before I kind of went off to college in New Jersey
Alejandro Cremades: Now What? what got you into computers.
Antonio Juliano: I would had always kind of been into it. You know, just generally nerdy guy right? Um, like to play around with video games with computers. Um I used to like torrent video games right before my parents would buy them for me. Um. I was fortunate to have access to some computer science classes in high school. So I started that in ninth grade and then just kind of continued that into Princeton where I majored at computer science.
Alejandro Cremades: So you majored in computer science in Princeton and then eventually you find yourself in San Francisco so why do you make that move. So.
Antonio Juliano: So I had always been really interested in starting a company. My dad had worked in entrepreneurship sort of in the.comtypeera so I always had just seen that as really the height of achievements and something I really wanted to do for myself. And when I was graduating school Princeton doesn’t really have a big entrepreneurship culture at least it didn’t when I was there. Um, so most people at Princeton just kind of go to work at you know your Goldman Sachs and your Googles and just call it a day. Um. But I wanted to start a company so I kind of felt like the best thing that I could do to set myself up for that would be to find a really high-quality startup and work there for a year or 2 and kind of learn how to do it. Um and I kind of got to coinbase pretty differently than everybody else at the time where. Everybody who worked at coinbase at that time was super into bitcoin and that naturally led them to coinbase as especially at the time basically the only or one of the main legit companies in this space I didn’t know anything about crypto. Um, but. Fred Wilson actually the the famous Bc came and gave a talk at 1 of our entrepreneurship classes at Princeton where he was mentioning coinbase. Um, so I decided to apply as you know come one of the 20 companies or so I applied to senior year and they had this really interesting interview process.
Antonio Juliano: Where they did what they called a work trial. Um, so I did their whole interview process and then they called me up and they were like hey can you fly out to San Francisco next week for a week and work with us as kind of a work trial and I was like ah have school in classes. But I thought about it a little bit and I did it to skip classes in school for an entire week flew out to San Francisco um and while I was there I just got the chance to obviously meet everybody there and there are super amazing people at coinbase. Especially at the time many of whom have gone on to do other really awesome things in crypto. Like the founder of polychain paradigm a couple other great crypto companies were at coinbase at the time and I could tell that they were all awesome and I really wanted to work with them I still didn’t get crypto but there are all these great people and they’re all super passionate and excited about this crypto thing. So I kind of took a leap of faith and decided to join but turned out to be an awesome decision.
Alejandro Cremades: I mean a hundred employee there I mean the company now has over four thousand employees and it’s a public company. So I guess as part of um of a company like this that is a rocket ship and and where you get to really experience the the you know obviously not the early days because the company already has you know.
Antonio Juliano: If if.
Alejandro Cremades: Quite some employees and a proven business model. But what were some of the ingredients that that you saw you know that that we’re all coming together because building a company like this is like you only you only get to experience 15 companies like this that are that are being built on a yearly basis. You know it’s like they they don’t come. You know in you know that that much. So.
Antonio Juliano: Um.
Alejandro Cremades: What were some of the kind of like the ingredients that you saw that that made this magical. So.
Antonio Juliano: Well I think the first thing and probably most important thing where the founders were really awesome, right? Usually it starts with the founders. So at the time Fred Urso was still there so it was Brian and Fred as the 2 founders. Um, and there are just kind of a lot of little things I think that. Went into the culture like everybody was in San Francisco there were a ton of events that really built a lot of camaraderie on the team we took offsites where we for example, just went up to Lake Tahoe didn’t work for a week kind of got to know each other um and those are obviously fun. But I think they actually really help. A lot with work as well because it just builds a ton of trust on the team and the point here is like we had launch and dinner together every day and I just got to know the people there really? well. So even though I was just kind of a new grad software engineer I actually got to know Brian and fred really well. Um, fast forward a little bit to do idx and when I was starting out. And they were the first people that I want to to kind of raise fonts and they knew me and they thought I was great for my time at coinbase and then they kind of immediately invested. So I think that kind of culture and just the commitment to getting to know each other really well even outside of work is a major component. Um, there were a lot of other things as well. I think at that time it was still a crypto bear market for the most part and it had been a bear market for like three or four years at that point so I sort of joined right in the depths of the initial bear market in crypto.
Antonio Juliano: So it wasn’t growing super fast to be honest I think I joined as employee one hundred and then when I left about a year and a half later there was about 150 people there so it was growing but not like ridiculously fast, but that was good actually there was it was also honestly pretty disorganized at that time but I actually like that. Um, like there was no vp of engineering or kind of engineering leader. There were just engineering managers rolling up directly to Brian but at least at that time Brian didn’t really have a lot of time to like manage engineering. So even just as a new grad engineer. You really get thrown in the water with like no support. Um, and some people won’t like that but I actually really like that kind of my heuristic for how good I feel like a manager is for me and I know this is not the case for everybody. It’s just like how much they leave me alone so that just really gave me a lot of space to kind of own a lot of projects like. Was basically responsible at coinbase for launching in new countries. So I would have to do a lot of banking integrations I’d have to even just as a new grad engineer talk to the legal team and the bd team and sort of serve as the de facto product manager as well. Um. And I think that gave me just a lot of opportunity and visibility on the team and I don’t know if that’s necessarily the ideal way to run a company because not everyone will succeed under that kind of environment. But for me, it was really helpful just to have so much space because I think one other point I’ll make is that I don’t think a lot of people realize.
Antonio Juliano: How much other stuff besides engineering coinbase does especially at the time like it was a hundred person company but there were actually only twenty engineers at the time just has huge like legal teams huge compliance teams so it actually felt like a pretty small company from an engineering perspective as like the twentieth engineer. Um. And it was just really useful I think my thesis that joining a really high quality company out of college rather than just starting something immediately. Um would be valuable definitely was true and I still would advocate for anybody that’s interested in starting a company someday. Try to work at a really high quality startup first because even to this day at dydx I just take a ton of best practices that they had like we do the same thing with offsites and we try to have a lot of in-person events. We have. And Ama with me at the as the founder every week and it’s just really helpful to kind of have that stuff that you know works that you can just default to rather than trying to figure everything out yourself.
Alejandro Cremades: So in your case I mean you did coinbase then you went to uber for a brief period of time I mean what were you hoping to get because I mean you knew that you wanted to be an entrepreneur. So what were you hoping to get out of your experience of working for other companies first.
Antonio Juliano: Yeah I mean learning was the biggest thing so I worked at coinbase for about a year and a half um it was really awesome. 1 of the things that frustrated me about a little bit about coinbase and it wasn’t really their fault was just that a lot of projects I worked on kind of got canceled. Um, so for example. I worked on a Paypal integration for coinbas which at the time like no traditional financial company wanted to touch crypto. But the the Bd team had finally gotten this relationship and I built the whole thing and we’re about to launch it and then Paypal was like ah actually no, we don’t want you to launch because we’re scared about crypto or whatever. Um. So that was a little bit frustrating but I super love my time there I’m still really close with a lot of people um a lot of the people I was close with are actually investors in duidx and some advisors to today. Um, but yeah, so I kind of was getting some of the end of my time at coinbase thinking about what I wanted to do next. Thinking about do I want to just jump in start a company right now. Do I want to work somewhere else. Um and kind of the goal I had in my head was that I wanted to spend 1 year started trying to start a company and I figured I wouldn’t be successful but I wanted to have at least enough money. To kind of live comfortably comfortably for a year um and then just devote all of my effort in that year to starting a company um in coinbase like this in retrospect was a pretty bad financial decision right? but they paid.
Antonio Juliano: As most startups do a lower amount of cash but like a good amount of equity. But at the time wasn’t really liquid or anything so honestly, one of the things I was kind of looking for and why I decided to go to uber was more money just to kind of give myself that financial security for a year to start my own thing. Um. And also more learning opportunities I feel like normally you learn more just by doing different things than by just staying and kind of doing the same thing or at least you’d learn more breadth of things so at uber my kind of thesis and this turned out to be true was that I’d learn how to build. More scalable higher quality software systems just because it was a much bigger company. It was like a 10000 person company at the time and I worked on their payments team and we were basically doing an entire rewrite of the payments infrastructure building ton of new microservices and stuff and pretty hard technology but it actually turned out to be really useful as well. And I used a lot of those things that I learned on the architecture side um to inform a lot of the decisions that we’ve made at DYdx um again I just generally don’t really like to be managed that much. Um, so when I was at uber even though I was just kind of a level 2 engineer or whatever just started working on. The most impactful things even though I wasn’t really told to and they were like but okay, you’re actually doing a good job with this. You can continue and so that that kind of let me learn a lot more than I think I otherwise would have.
Antonio Juliano: Again I’m not necessarily advocating that everybody does that but it worked out well for me and that’s just kind of generally the type of stuff I like to do.
Alejandro Cremades: So at what point do you realize I think I’m ready I’m ready to go I’m ready to take the leap of faith.
Antonio Juliano: Yeah, so I just to be honest, really didn’t like uber um and it’s not necessarily so much an indication of uber in particular I just really don’t think I would like working at any big company. Um, and I just felt like what I was doing was meaningless. Not to say that the uber product is meaningless. It’s super meaningful but I was just one out of 10000 people that work there right and easily replaceable. Um and I feel like for me I really want to find meaning in work. Um, so I wasn’t super happy at uber with that being the driving cause. Um, I had planned to stay for a year you know just to vest my options and stuff like that. Um, but and just kind of a Ras decision I was biking into work one day and halfway through the bike where I had I was just like you know what? I’m just going to quit today. Um, so I went in and I did it I told my manager that I was quitting you know I stayed for two more weeks and stuff of course. Um, but yeah, and then I just left and I kind of felt like I was ready to go like I had the financial freedom. My. My time time at coinbase and happy to go more into this was really sold on crypto still and wanted to build something in ethereum specifically so I didn’t know exactly what I wanted to build but I had this pretty good hypothesis that something that could be built on ethereum would be super valuable so I left.
Antonio Juliano: Uber two weeks after that and started working by myself. Yeah, so I started my company and it was just me. Um.
Alejandro Cremades: So what happened next? okay.
Antonio Juliano: And a lot of people I think are hesitant to start a company by themselves. But I’m actually a really big proponent of especially for good software engineers not being afraid to just start something by yourself like you have all of the tools that you need to build a product. And then if you’re actually building something that’s valuable. That’s like the best recruiting tool that there is just having a great idea having a great and mvp maybe even some investor traction. So I started building something by myself and again I really wasn’t sure what to build to be honest, but I was super sold on ethereum. Kind of going back in time a little bit to coinbase it was just a super awesome place to learn about crypto and I think the thing that you have to realize about crypto in 15 was at least as like a layperson in crypto bitcoin was really the only exciting thing that there was. And all of us were convinced that bitcoin would be the only thing that was ever interesting and could be big in crypto which of course turned out to be wrong, but just kind of setting the stage and the interesting thing that happened in crypto while it was at coinbase was that ethereum was launched. Um, and this really big watershed moment in crypto happens when coinbase added eth as a tradeable pair which was a big deal at the time but we were really fortunate to have a great front row seat to seeing a lot of this innovation happen. Like for example, we had vitalik come and talk to us.
Antonio Juliano: We had Joey Krag who’s the founder of augur. 1 of the great early ethereum projects come and teach us how to build smart contracts like we had Olaf Carlson we who is working there at the time just teaching just like running these lunch and learn sessions about ethereum. And the point I’ll make is that it took us a really long time or at least me and I think most people to really wrap our heads around what ethereum was um and I think it’s a lot simpler and easier for people to understand now because other people understand it but like back then like nobody understood it. It’s like maybe 100 people um, but once I did I kind of had this aha moment that I was like oh this is a fundamentally new paradigm of computing for the first time you can build these programs that run autonomously that aren’t controlled by anybody. There must be something that you can build on top of this that will be really valuable. Again I didn’t really know what it was and I didn’t really think of any great ideas to be honest while I was at uber thinking about what I wanted to do next. So but that’s kind of where I was at this point in time convinced on ethereum so I didn’t know what to build so I built something that I felt like was pretty general purpose and turned out to be a terrible idea but I’ll go through it because I think it’s instructive. Built a search engine for decentralized apps because again I wasn’t really sure what’s build but I was like okay, there must be something so I’ll just build something that kind of indexes the entire space and this was back in 2017 early 2017
Antonio Juliano: And the problem was there just literally weren’t any decentralized apps. So like what is the point of a search engine if. There’s nothing to search for the kind of idea was that I could use data on the blockchain um to kind of inform a new type of pagerank algorithm to. Effectively rank decentralized apps better than like your average web search engine could not a bad idea. But the thing that was wrong about it and the thing I’ve come to really understand and internalize about startups is that timing is by far the most important thing in startups. Like maybe someday somebody will build a search engine for decentralized apps but it certainly wasn’t in 2017? Um, and no matter how well I did just the timing was completely wrong for that. Um, so it completely failed like I built the whole thing out and spent like four or five months of my time on it and I had like 5 users ever.
Alejandro Cremades: So.
Antonio Juliano: Um, so it just went nowhere but that was really instructive and I feel like taught me an important lesson. Yeah, so it wasn’t working um and I had like 5 users was kind of feeling down about things but this kind of.
Alejandro Cremades: So at what point do you realize? hey you know I got to pull the plug here.
Antonio Juliano: Framing that I went into with starting a company of I’m just going to spend a year of my time on it I had already committed at least in my mind to doing that I think was actually really useful because I could have come out of this first experience and been like oh you know I tried my best. Like 5 users completely failed I don’t know what I’m doing I was just like go back to a company or something if I didn’t have that framing of I’m going to spend a year on this? Um, but I did have that so at least in my mind I had like six months or so of that left and i. Think like had taken a vacation with my family or something so it was like a little bit of a pause in between working and was thinking about what I wanted to do and I was thinking about whether I wanted to continue on this search engine thing um or do something different and I ended up thinking pretty strongly that I wanted to do something different. And again, that’s kind of why I gave the background of that I learned that timing was really important but the main thing I wanted to do and again I wasn’t sure what to do at this point was build something that was actually useful right now in crypto. Um and there actually weren’t very many that’s like very many things that you could build that were useful and in crypto and. 17 but the main thing that kind of was working and it was very small at the time but it was kind of working was decentralized exchanges. Um and the very first decentralized exchanges. There’s one called zero x and I’m fortunate to know the founder there.
Antonio Juliano: Um, and one called Khyber a couple other ones were just starting to come out and I took a look at this kind of wrap my head around it again and thought this is actually something that’s useful like wow for the first time you can trade with other people just using code rather than intermediaries. There’s. Some very small but like some amounts of volume being traded on these things. This seems useful. Okay, but do I want to just build another decentralized exchange is like spot decentralized exchange or something different and I think the next leap that I took was what’s the next thing that comes after these decentralized exchanges. And at the time they were just spot decentralized exchanges spot just being a fancy word for regular buying and selling of assets and I thought what comes next after this and I didn’t know very much about finance to be honest, but a lot of my friends from Princeton had gone to work in finance. So talk to them a little bit just to learn about. Very very high- level financial market stuff and I learned that in finance and this may sound obvious to a lot of people but I didn’t really know it at the time derivatives are actually the most widely traded asset in finance rather than in spot and I found this really interesting and I was like oh this isn’t the case in crypto yet. But. It seems like it should be or at least at some point it seems like derivatives will become the most widely traded asset in crypto too. So again, what can I build. That’s useful, right now and what makes sense from a timing perspective and what comes next after spot decentralized exchanges what about a decentralized exchange for advanced financial products and derivatives.
Antonio Juliano: And that’s what I started with U idx.
Alejandro Cremades: So tell us about DYDX I mean what’s the business model and how do you guys make money.
Antonio Juliano: So so yeah, I’ve been working at du idx for about five and a half years now and we are the biggest decentralized derivovatives exchange just kind of give you a sense of scope right now. Centralized exchanges. Are still the biggest way people trade crypto so this is just things like coinbase and finance and decentralized exchanges make up about 5 to 10 percent of the market or so it’s a of small derivatives but we trade about a billion dollars in trading volume per day on. Do idx. And that’s good enough to kind of make up about one and a half percent of the entire crypto market. So relatively small, but obviously we were building decentralized exchanges from zero and that’s grown from 0 in the past couple years and a lot of people believe that it will continue growing in the future.
Alejandro Cremades: So.
Antonio Juliano: So that’s kind of where we’re at right now in terms of business model at least today we make money based off of trading fees like a very similar exchange to how similar business model to how most exchanges operate and that is basically just linearly proportional to how much trading volume we do.
Alejandro Cremades: So centralized versus decentralized you know, especially for the people that are listening. What can you tell us.
Antonio Juliano: So the best way I can explain defi and maybe even zooming out a little bit more to encompass all of decentralized applications is that it’s just based on code not intermediaries. So what do I mean by that. Um. Let’s kind of start with what ethereum is and what a smart contract is a smart contract is just a fancy word for a program that runs directly on the blockchain. So. It’s sort of similar. You know how most programs and most startups just run on the cloud right? So they just get an Aws account start running some programs there. On ethereum you can just have a program but literally deploy it to the blockchain and then it just runs on the blockchain and this may seem like an implementationation detail or like who really cares about this but it has a couple of really important properties. The first is that once this code is running on the blockchain. Nobody controls it. So it’s just code that’s running on the blockchain sort of in a similar way to how nobody controls bitcoin and there’s no Ceo or anything but it still works and people use it so is the same for defi and then a decentralized application. It’s also really transparent so a cool property of smart contracts. Is that they can quite literally own money so you can have your program sort of custody funds on users’ behalf and then they are the only ones that have access to those funds.
Antonio Juliano: And everything is transparent so you can use what’s called a block explorer which is just a fancy word for a website that lets you see what’s going on on ethereum or whatever blockchain you’re using, check out the entire health of the protocol check out the source code and just really understand what’s going on this is actually really useful. Sometimes especially in cases like what happens with Ftx recently and a lot of the centralized products that people use in crypto if they were instead using something like du idx that never could have happened right? It’s just first of all literally impossible for us to steal any funds and then everything is transparent as well. So I would define kind of defi as running on programs that just run directly on the blockchain. It’s totally open. It’s totally transparent and then users can control their funds as well and just in terms of why I’m so excited about it honestly, it just kind of makes sense to me. Like it seems like the way finance should work like why do we even have financial intermediaries other than out of necessity because we didn’t know how to not have them before and going forward into the future. Yes, there are a lot of drawbacks today with defi like it’s just. Really nascent. It’s hard to build this technology but that’s the but kind of stuff that happens with any new technology and fast forward like 1025 years from now I really do believe that it will become kind of the dominant way that most of finance operates.
Alejandro Cremades: And what about Capital racing How much money have you guys raised to date for this. Okay.
Antonio Juliano: So we’ve raised a total of $87,000,000 over I think for fundraising rounds and starting from the beginning so we raised our seed rounds and actually for the first like six months or so of du idx it was just me working as a solo founder and only employee. Um, and we raised we I sort of used this a general term but I guess I raised the seed round when it was just me. We raised $2000000 at the time on the the safe but at 10000000 ah valuation basically from Andessen Horowitz and from polychain. Um. And I alluded to this before but I think the thing that like fundraising actually went super well and I found it to be really easy and why why was it so easy for us I think the thing that I had done really well is not go out in network to just like a ton of people and try to pitch Dyd x to everyone on sandhill road it was that I had these really good relationships with only a few people that really mattered. Um, so like when I was fundraising I went out to olaf. Um, who was ah sorry coinbase’s first employee. And had since gone on to Fallon Polychain which is one of the now one of the biggest crypto investment funds I went out to Fred who was the cofounders of coinbase and basically nobody else and I was just like hey guys I built this thing like I’m raising had maybe a phone call with them about it.
Antonio Juliano: And they were really excited and olaf to his credit was immediately like yes I want to invest like tell me how I can give you money. Um, and that’s that’s so much of his credit. Um I think I had a lot of anxiety about fundraising like I’m sure anybody does. And 1 thing I’ll say about olaf is at the time he had become at least in crypto sort of like a big shot basically and like he really started the first crypto hedge fund that did pretty well he was like on the cover of forbes magazine like all this stuff. So I like went and he invited me over to their like office which was just like. Ah, apartment building basically um and he comes over I was like super nervous and he’s like hey Antonio Juliano and he’s just like give me a hug it like wow um I really appreciate that like that sort of dislike diffused all of the tension out of the situation and much to his credit. Um, so we.
Alejandro Cremades: So.
Alejandro Cremades: What course the end. Well what course the anxiety Antonio.
Antonio Juliano: Well, you know it’s really one of the first big hurdles that you have to get over I think and it makes it feel a lot more real when you’re just working on something especially by yourself or just with a couple other friends or cofounders or whatever sort of feels like a project right. Like okay I’m like working on this startup. That’s just like me coding at home with like no users and like who really cares. But once you actually raise money it feels real right? Like oh oh shit, it’s like $10000000 valuation like oh yeah, like I was making like $100000 a year or whatever before that seems like so much. Um, all of that and you know that you want that. So I think anything that you want and don’t feel completely confident about causes. A lot of anxiety but I guess going back to the story. It’s like went to olaf went to fred and then they were super nice and it started introducing me to people. Like oaf I can’t remember who exactly but I think it was all off introduced me to chris dixon at andreessen horowitz then met him um and much to my surprise after a couple meetings they wanted to invest too and pauly chain and andreessen horowitz ended up. Co-leading our around. Um and I met a bunch of angel investors a lot of whom are really really awesome. Um, can’t name them all but 1 of my favorites is a vechell garg who’s now the founder of electric capital and the thing that he did and the thing you should really look for in investors is people that.
Antonio Juliano: Sort of on your side and you can kind of tell when that happens but he was like you know so I pitched him and he was like okay yeah I want to invest and also like let’s think about this from your perspective like here’s how we can structure the round here’s like how you should make a pitch deck like all these other stuff. Um, and that was super helpful because fundraising is really just this like arcane process that just is sort of weird. Um, and it’s very like relationship based you just have to like play the game sort of of getting like different term sheets and you don’t really know what these terms mean as a first -time entrepreneur um there’s like a lot of pressure on you. So it’s just super helpful to have some people like that that have gone through it before and can really be on your side.
Alejandro Cremades: so so I guess same in this case for you guys. You know, obviously you guys were selling all these investors on a vision and I guess the vision you know, let’s talk about that. So imagine you were to go to sleep tonight and you wake up in a world Antonio where the vision of D Y.
Antonio Juliano: Okay.
Alejandro Cremades: The X is fully realized what does that world look like.
Antonio Juliano: So I think it’s basically the same today as it was five years ago to be honest and I talk about timing. But if anything we were certainly early in dfi five years ago and even today I still feel like we’re fairly early in the grand evolution of d five I sort of touched on this before. But. My big goal with du idx is to make do idx into one of the biggest exchanges in the world centralized or decentralized and I think there will come a time and there will come an inflection points where defi is actually doing most of the financial activity first in crypto and then I think eventually in all of finance. Um, but it’s going to take a while and I think that’s the thing that people don’t realize about a lot of new technology is how long it takes um and I think that actually is one of the main causes of this kind of boom and bust cycle that we see in crypto. It’s like okay, new technology invented like ethereum or like urc 20 tokens or like Nftts or whatever people get really excited about it. They’re like oh this is the future in Xyz ways. Um and then fast forward a year from then they’re like this thing sucks. It’s because the technology is still really early. Um, and that initial enthusiasm is oftentimes right? Not always right? like people are never always right? but is oftentimes like people have generally the right idea but they just have the timing wrong. Um, and then when it doesn’t materialize as fast as they want it to.
Antonio Juliano: Then they get really sad about it and in crypto where everything is priced that causes the prices to crash and then there’ll be something else people get excited about and then’ll go up and then will crash and problem is that these things take like 10 years plus to play out. Um, and it’s hard for people to pay attention for that long and really just kind of maintain the faith I would even say that of a lot of founders in crypto and I’m sure this is the case in other technologies as well. But I think the biggest thing that we’ve done really well at do idx is take a long-term approach like I always tell everybody. Our goal is to become one of the biggest exchanges in the world but on a 5 to 10 year time horizon it’s not next year like there’s no way we’re going to be bigger than finance next year but 10 years from now could happen like yeah, it could probably like a 10 or 20% chance in my mind that that happens and that’s actually pretty reasonable. Um, and that’s something that really excites me so that’s kind of the main way that I talk to our team talk to the public about it. Um is in this really long-term approach and I think one of the other core things. That’s really important in our values and this just comes from the way that I am is thinking really big. Um, and not compromising or settling. Um and I think 1 important thing in startups is to figure out what you want to do as a founder. Um, it could be like okay I just want to run like a.
Antonio Juliano: Business and sell it for tens of millions of dollars and have enough money to live forever and maybe I’m happy with that or you know maybe I want to get acquired or it could be that you want to shoot for something really big like I want to build one of the biggest companies or projects in the world. And you know that’s like probably almost definitely not going to happen but like setting yourself up that such that you maximize the percent chance of that happening is how I think about things. Um, and I’m like I would rather kind of maximize our percent chance of of hitting that major. Milestone of becoming one of the biggest exchanges in the world. Um, rather than kind of optimizing for the downside and it becomes hard to do that harder and harder to do that as you get bigger because now we’re like you know when it’s when you’re just starting out. It’s like easy to say that because you’ like nothing to lose right? It’s like okay. Yesterday I had no company at all. Um and anything is going to be better than that but fastwards now in taking uiddx as an example, you know we trade a billion dollars a day on our exchange and we have real users and we’re making a lot of revenue ends I have 50 employees. Um, so it’s kind of hard to maintain that mindset of. You know I don’t care like we are just going to go big or go home basically and right now one of the things that we’re working on and it won’t go too deeply into this because it’s fairly technical but it’s building a new version of the protocol and what that means is just like an entirely new product and we’re going to build that product and we’re going to ship. It.
Antonio Juliano: And then we’re going to completely cancel our current product Basically even though it’s trading like a billion dollars a day and it’s using the entirely new technology and is fully decentralized and there’s all these things that are different and there’s a million ways that could go wrong, but like I really believe it gives us the best chance to. Kind of hit that goal that we have in the future of becoming something. That’s really big and that really matters. So I guess you’re kind of asking about the vision and I think this is something I’ve always sort of just been like this like honestly just to me like anything else kind of seems boring like why would you not do this like what do you have to lose um and. I kind of felt a lot of anxiety about that for a while because as you get more employees at least for me the biggest thing that I felt a lot of fear over was making sure that I do right by my employees and I’m like oh these people like. Devoting years of their life to this thing that I built like I want them to have a really great outcome and I want us to be at least moderately successful for them. So it’s hard to just take risks and gamble with like throwing it all away to build something really big and the thing that helped me with that and the thing I’ve kind of learned about leadership overtime. Is being vulnerable can actually be really powerful. So I have had all hands where I get up there and I’m like guys like heard me say this a million times. Our goal is to become one of the biggest changes in the world in five to ten years I’m serious about that and if I’m being honest with you and I’ll even say this publicly now. Obviously.
Antonio Juliano: I think we have probably like a 10 % chance of making that happen 10% so like 90% chance that we fail and we don’t get there. Um, that’s actually really exciting and motivational to me just like how many times in your life. Do you have any remote chance at all to do something that’s impactful on that type of scale. So I’m excited about that. 90% chance we fail guys like are you excited about that too like I’m telling you like what we’re doing like I’ll be transparent and like if you don’t want to work here like that’s completely fine and we’ll help you find something that you do want to do but that actually went over super well. And even though crypto is in a really big bear market right now and has been for over a year now. Everyone at do idx is still super motivated to keep working towards that goal because we are really long-term focused because we do shoot really big and I think that’s just something that I wanted to do in figuring out a way. To make that happen was really powerful.
Alejandro Cremades: So obviously here we’re talking about you know where things you know where you hope things to have them. You know in the future which I think that that’s very profound. You know the way that you’re shooting for the for the long run you know I think it was what what I think it was bill gates or or I can remember well who said this that. in in a year we always, um, kind of like overestimate what we can achieve and in a 10 year period we always underestimate what we’re capable of doing so I think that that’s really profound what you mentioned there. Ah now 1 thing that I like to ask you is you know let’s talk about the past.
Antonio Juliano: Yeah.
Alejandro Cremades: Now we’ve been talking about the future of talk about the past. Let’s say I was to put you into a time machine and I bring you back to that moment where you were taking a leap of faith where you gave your notice at uber and you’re like okay, let’s go. Let’s say you had the opportunity of sitting down with that younger self and being able to give that younger Antonio. 1 piece of advice before launching a business. What would that be and why given what you know now.
Antonio Juliano: I mean probably the biggest thing is the timing thing I was talking about probably would say myself six months at least but I already talked about that one. So let me try to think of something else. Um I think the the. Vulnerability and leadership is actually something not a lot of people talk about um and I was just talking about that. But 1 of the things I’ve really learned in the past year and I’ve been really fortunate to work with 1 of the best coaches out there Matt Mushari who coaches a lot of really great silicon valley founders. And 1 of his big things that is really unintuitive but actually makes a lot of sense to me now is not being motivated by fear like what are you motivated by? Um, and I think most people are motivated by fear. They’re like oh i’m. Scared of not being successful or you know not being relevant or things like that and most people start startups because of that I certainly did I think it’s just like a natural impulse I was like oh I see this as the pinnacle of success. Um, and I’m scared I won’t get there I’m scared I’m going to fail like whatever. Um, but in the past year I’ve really started being motivated less by fear and more by joy and kind of what is possible to achieve and it’s important later in startups as well. Even as things grow I’ve touched on this before but as things start to grow you.
Antonio Juliano: Raise funds you hire people you feel like you have a lot to lose um and you start to be fearful that oh like I don’t know what I’m doing like like I don’t know what the future of defi is going to be like I feel like sort of the fraud right now. Everybody’s like building me up to be this. Um. You know at least somebody that is purporting to know what’s going on in crypto and defi and what’s going to happen like how am I supposed to know I don’t really know what I’m doing I’ve never run a company before you start to just feel a lot of self-doubt like again I certainly did um you know you start to manage people. You don’t really know how to do that? Um, all of these things and then you just. Sort of feel like an imposter you feel scared um and you start to mostly be motivated by that and for the first four years of dydx that’s kind of how it was operating but fast forward to now and I touched on this a little bit in my previous answer just what you’re motivated by I think makes a massive difference. Um. And for me that you know I was scared of failing anybody would be scared of failing. Um and I was scared of letting my employees down but just being really transparent and vulnerable I think helped me a lot to not be motivated by that. Um, and one of the other things I did to really help me with not being motivated by fear is think about the worst thing that could like realistically happen with the idx we’re very fortunate with doidx we have about five or six years of runway right now which is great for this financial market and.
Antonio Juliano: We are fortunate to be in a good situation with really high quality employees. So like literally the worst thing that could probably happen to us outside of be getting hit by like a boss or something um is that we work on this for like 5 years It doesn’t really work out but what would happen. In that case and again, let’s just remember it’s like the worst thing that could happen so we build this out for 5 years 1 of the other things I’m proud of with u idx is that we really build on the forefront of technology even within crypto and Blockchain. Like. For example, we were one of the first apps to be built on a layer 2 and fast forward to today were literally the biggest application running on a layer 2 rollup in the world and we’re actually about to throw that away. We’re about to build on this technology called cosmos which I won’t go too much into but it lets us build our own Blockchain. So the point of this is that we really were at the forefront of all of these technology and again worst case even if we totally fail. We built some really exciting technology and even if it doesn’t work the people that build after us will learn from that and we still will have shaped the way that defi. Evolves in a big way. All of you employees that work at do idx that I used to be so scared of letting down. Well you helped to do that and you hopefully learned a lot of things just like I did at coinbase and you will go on all 50 of you and do awesome things in the future and.
Antonio Juliano: I can feel like it takes some small piece of credit for everything that you do and again remember this is the worst case so it’s like we totally fail. We build like really great technology. We shape the course of at least what I’m convinced. We’ll be a technology that really shapes the world in the future and maybe it’ll be us that’s out there as the winner. Maybe it’ll be somebody else, but we were out here like we really built something that Mattered. Um, and then I also get to take credit for like 50 potentially even more someday people. Going off and doing other awesome things in their life like wow that’s actually not so bad. Um, and again, that’s the worst case and then if I feel like fine with that. Then it’s like okay, anything after that is just gravy right? Like why? Why not chew for something really big. So I think that’s kind of the biggest thing that I’ve learned in the past year and and what I would. Try to convince my earlier self of.
Alejandro Cremades: I I love it I love it. Well Antonio for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Antonio Juliano: So you can find us online at DYDXDot exchange or on Twitter at at DYDX and then I’m on Twitter at at Antonio M Giiano
Alejandro Cremades: Amazing! Well hey Antonio thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Antonio Juliano: Thanks so much.
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Satyen Kothari has raised capital, sold companies, and now wants to help others to build their own wealth and enjoy more peace of mind. His latest venture, Cube Wealth, has attracted funding from top-tier investors like Beenext, Asuka Holding, and 500 Startups.
In this episode, you will learn:
- Lessons from being a first-time founder
- Satyen Kothari’s top advice when thinking about starting a business
Alejandro Cremades · EP 606 Satyen Kothari On Selling His Last Company For $130M And Now Raising MillionsSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Satyen Kothari:Satyen Kothari has spent the last 20 years conceptualizing innovative products and services, building/consulting/ with businesses, and designing user experiences that become differentiators.
At present, Stayen is the Founder and CEO at Cube. With his team, they have the vision to change how consumers create wealth with simplicity – their objective is for money to be a source of happiness, not stress!
Engagements: Apple, Yahoo, AOL, Intuit, Cisco, First Data, DHL, Alias, frog design, Seedfund, What’s On India, Prime Focus, ThinkLabs, Stanford University, Maastricht University.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So I am thrilled with the guest that we have to I mean we’ve we’ve been working on getting this episode for a while in the books. But now it’s happening so we’re going to be learning about building scaling financing exiting all of the above. And without further ado. Let’s welcome our guest today sajin kodari welcome to the show. Hello. So originally born in India give us a little of a walkthrough memory lane. How was life growing up there.
Satyen Kothari: Great to be here. Alejaros.
Satyen Kothari: How it was a very different India for 1 this is in the seventy s I’ll age myself proudly and I grew up in Bombay which is as you know the financial capital. It was a very quiet sleepy bombay comparative to what it is compared to what it is today.
Alejandro Cremades: And if.
Satyen Kothari: Grew up in a very simple middle-class family. Everybody’s an engineer and entrepreneur mechanical engineers at that time so engineering is in the Dna for sure I remember sitting with my father when he was designing his machines for his factory and he would always ask us for input. Um, me and my younger brother which was always a nice way to get the young mind flowing with ideas I begged and begged for many many years to get my first lego set and I played the hell out of it for 8 years after when I got it. Was the only game I had which I would play like rush home from school and just keep playing so no surprise in the 8 standard. You know when I discovered computers and programming I fell in love because it felt like it was a lego set with no limits on the number of pieces. I could do whatever I wanted so you know from that simple entrepreneurial family background came the love of building and the love of solving problems and lots of lots of lucky breaks later now I’m proud to say I’ve been building for all of my adult life.
Alejandro Cremades: That’s amazing, obviously problem solving engineering. So I guess what brought you to the us because you came to Stanford and and that changed everything for you.
Satyen Kothari: Absolutely ah so every every indian boy at that in that era definitely dreamt of ah, escaping to the us if they wanted to have a ah career which was without any. Politics is that without any bribery corruption unless you inherited ah a business from your family in in my case that wasn’t an option so it was definitely the dream to just get going and living a better cleaner life. You were recognized for your merits as opposed to the people you knew and what you were willing to do so I think everybody in my engineering batch had this dream. Um I was never shy of questioning the status quo so nobody in my college had. Even applied to Stanford from what I know and I know for a fact, nobody had gotten in and when I told my friends I’m applying they were like come on right? what’s the chance I said yep but what’s the difference the maximum they can say is no right? An attitude that. Absolutely has come useful as an entrepreneur many many hundreds of times. Maybe so I applied and I was very lucky I did well in my gres I had a senior year project in Ai which is now the hot thing but this was twenty five years ago at it Mumbai.
Satyen Kothari: I was doing well in my college level rankings and I was in absolute shock when I got in I remember screaming probably the only time I’ve screamed in my life I have a joy for sure and that was great. Except for there was one fact which settled in in a couple of hourss which is I had no money to go to Stanford I didn’t even have money for the plane ticket. But you know I’m a big believer alejandro that if you keep working if you keep working and you don’t worry about your failures. At some point things click for you and I’d had many many failures before that even ah, too many to even recount. Maybe I’ll write a book someday a life full of failures that’s a fun title but everything clicked I got about 8 loans and scholarships including one two even for the flight to 1 ne-way flight from bomby to California and you know after that it was just me believing that I can achieve more and more and more so that was the ticket to start my Silicon Valley Journey and I was ah absolutely ecstatic and very very lucky to be there.
Alejandro Cremades: So let’s talk about the ticket receiving a ticket for starting things. So you know after Stanford I mean or during Stanford you did some internships and 1 thing led to the next and then all of a sudden you know you find yourself starting your first company. You know I’m sure that you know. Your family back at home was like suchin. You know you got into such a good university maybe go into corporate and and do a little bit more that the risking side of things. But why did you think that the idea of trapio was meaningful enough for you to really take that leap of faith and and go at it for the first time as an entrepreneur.
Satyen Kothari: So Alejazro I’m sure you’ve had so many guests and many from Silicon Valley and they must have said this you know there’s there’s an energy in Silicon Valley that is contagious right? Everybody wants to build and everybody has that excitement and that optimism that. Oh anything is possible and the ecosystem in the valley supports that optimism there are people willing to write your check when you have achieved nothing pretty much. Of course it’s easier to get it when you achieve something. But even when you are 0 it’s it’s you have no excuse. So you’re right while I was at school I interned I was very lucky to intern at Apple just before Steve Jobs came back the second time so it was in the dark days of Apple and I learned so much about ux design. So my computer science masters was cs ux and then ah entrepreneurship. So I learned so much about ux design then I worked at a couple of companies. The famous silicon graphics at that time now at that point I was building software or designing software for helping video game makers now that was something my father could not believe. He’s like you’re getting paid how much to sit and play video games all day after you studied all these years I said dad I don’t know but there’s a plan here and I’m really enjoying it. So I think it’s almost like I train my parents to say trust me or give up on me I don’t know which one it was.
Satyen Kothari: So when I started my first company topezo I think they were just like well this guy’s going to do whatever he’s going to do. He’s not meant for the straightforward path. So I don’t think they were surprised ah, at least they didn’t tell me anything. And and the reason for topezo is straightforward. This was web one dot o the first dot com days. A lot of my friends were starting ecommerce companies. My classmates had started Google egroups ah so weather underground like a crazy number of companies. I didn’t want to start an ecommerce company because I just didn’t understand that was not my Dna selling things online but the idea behind tropezo came saying what if we can build software which can help all these people selling things online partner with each other and I started it with my ex boss at the firm I was at frog design. His name is Thor Muler and we just hit it off from day one I remember when he was walking me to my welcome lunch with the team and he said quite innocently, what’s your plan I said well my plan is to quit and start a company one Day so I can’t believe I said it on my first day of the job. But it turned out he and I just partnered together to start that.
Alejandro Cremades: That’s amazing and and and you guys were doing marketing automation there and you even raised the money from shopbank I mean back then you know the the vc space was not as developed as we have it today. So I’m sure that it was a little bit different but you know as they say you either succeed or you learn because the. Oh come that you guys were hoping for. You know you were not able to to get there but I’m sure that the lessons that you got were even you know more valuable than you know than because you you really learn when you don’t achieve the outcome that you had hoped for and so I guess for you, You know what happened there? Ah what? what was the breakdown. And then also you took some time to reflect and and and what was that reflection and and thought process like to lead you to the next thing right.
Satyen Kothari: Ah, absolutely It’s a great question and I think many many entrepreneurs would have gone through that that journey and it’s a very dark lonely journey. Ah, in hindsight you can reflect on all the mistakes you made. But in the moment itself. You know it’s it’s it’s this whirlwind you’re on, you’re getting money coming in or you’re not getting money coming in if you’re getting money you have to spend it. You have to do justice to it if you’re not getting money. You’re stressed out about it because you have a responsibility to the team and I made so many mistakes I made incredible number of mistakes there. The funny thing was we actually got the money from softbank after the dot com crash and we got a lot of money 12000000 and we were actually starting to break even but that was one of my other lessons one is ah my limitations and skill sets right? Because. Things had been on an upward track for me after Stanford Jobs Etc so I just thought I was invincible and there was a personal lesson of humility saying the the world is not that easy. But the second lesson also was that sometimes macrocondition are bigger than you because of the dot com crash. There was nothing we could do even though we were doing better as a company than ever before. But just there was no light at the end of the tunnel so we had to do the best we could as a company to get out of it to get our investors something and it was a very hard lesson for me to take I was very upset I was very resentful because I was so tied.
Satyen Kothari: Emotionally to the company. But I think there were wiser people than me on the board who said this is the only path and and we had to take it and I know I took it a year off to just reflect on where I’d gone wrong. What I love doing in that journey. What I hated doing in the journey. So that I could build better the next time around on the best years on my of my life because my daughter was born that year
Alejandro Cremades: That’s it. That’s the biggest success without a doubt now they say that kids you know they’re like startups too. You know, however, you know there’s no exit and you only break even with it late you sleep at night. So yeah. Now now now now in this case, you know for you such and you took that time to reflect you know and and then you know to think about other ideas you know and 1 thing led to the next and then all of a sudden you find yourself you know pushing what would eventually become a massive success sitru statements so give us the the way that because especially coming from.
Satyen Kothari: Right.
Alejandro Cremades: From Shotsha Fall I’m sure that you really thought this you know big time.
Satyen Kothari: Absolutely so you know there was a big gap in the middle way I said as I said I reflected a lot on the things I liked what I didn’t like what I was good at what I wasn’t good at I decided to work on my strengths most importantly and for about. Eight years I had a very hands-on consulting business in the valley where I had clients as big as Yahoo American online Cisco and very small startups and the reason I did this was alejandro that I realized my passion was in building software and building. Great design software. And since I’d been the Ceo of topezo for I’d learned a lot of business lessons as well. So this trifecta was very powerful speaking to the business stakeholders speaking to engineering teams but also speaking to product design teams which represented the user. So I said. This is my skill set. This is what I want to hone more and more so in those 8 years each of the projects was typically six months to 1 year so very deep dive hands on and I really I think honed my skills on all 3 areas. So cumulatively once I think I counted that the work I did along with the teams I worked with ah touched 100000000 users across 50 countries. So that’s a pretty big impact as a learning thing as well. So those things combine and along with that i.
Satyen Kothari: I had to work on my user interface on how I worked with people. Ah you know it’s it’s when you ah when you’re the Ceo or the boss too early you you don’t just know you haven’t come through the ranks to understand the lessons as a consultant because I had no political agenda in any of the companies I couldn’t get a promotion. I was always trying to do my best work but it also meant I had to deal with very different people with different different priorities, different agendas different styles I think those 8 years without any pressure of of needing to needlessly please somebody but at the same time not pissing off people. The same time not having any power over them I think really helped my people skills as well and my style of management. So all of that led to of of leap of confidence and it also coincided with a very special time in indian history. And my history where one day we just decided because my daughter was young but what’s the point of staying in Silicon Valley my journey here seems to be plateauing in the sense. It’s not that exciting anymore. Let’s just go back to India and live a ah adult life there I landed in India and I said there are 3 main areas that that are worth. Solving for here 1 is civic causes because of all the problems I mentioned earlier second is anything around digital payments because everything was mostly paper based that time when I moved I was shot everything needed forms, lines, checkbooks, etc.
Satyen Kothari: And third was real estate. So I played around with the real estate part I didn’t have the courage to deal with the civic system the real estate part became too hairy and dirty with so much black money. So then I settled on on payments and that was the genesis of citrus payments.
Alejandro Cremades: So what ended up becoming the business model of a citrus payments.
Satyen Kothari: So citrus payments had two legs at the very start and then we expanded dramatically one was the fact that in India there is a very unique set of payment options that are available apart from your typical credit card debit card. We have things such as net banking. Um, which is a direct debit from your bank which can come into the merchants account via the aggregator those needed individual pipes to be built with each bank. Um, as we progressed in the journey more and more payment options came up prepaid wallets upi etc. So. India is not as clean as the west in the sense if you just connect a credit card processor. You’re done There’s a lot more going on there so that was one angle of kind of the infrastructure plate and on top of that very excitingly and we were the first in the country to do this. Was we wanted a so unified checkout layer across all of our merchants very much like the Paypal experience in the west but of course localized for India and this sounds easy conceptually but it was really hard to launch Alejandro because. Each merchant was so possessive about their user data. You’re like we don’t want it going in any centralized database and we had to work very hard to explain to merchants saying this is a end times benefit situation if you get Thousand merchants.
Satyen Kothari: Each one of you benefits from 999 of the others who’ve brought in users because everybody’s checkout becomes easier. So your your drop off rate abandoned cart rate goes goes down ridiculously and we were very fortunate that the right wave of ecommerce was happening online. Payments was happening online businesses was happening that we the right merchants. Loved this idea. We lost a couple of big accounts who refused to use it I think we made sure that they regretted it later ah, but that was I think our main thesis over the 3 existing. Competitors who are there.
Alejandro Cremades: And obviously for the company you guys raised a bit of money I mean you raised a little bit over 30,000,000 prior to the acquisition and one pattern that they that I’ve seen here you know with you is that you’ve been able you know always to get incredible people um to get around you I mean you’ve. On the first one you know on the investor side. You know you got people like Softbank on on citrus payments. You got people like seoia and and basically you know those are like super tier one you know investors. How did you manage to get those investors on board especially coming.
Satyen Kothari: Yeah.
Alejandro Cremades: From you know the previous you know experience you know of the previous company that wasn’t you know the outcome desired.
Satyen Kothari: Absolutely um, so you know so softbank I think it was without any credentials of either success or failure so you were very proud of that as a team I think it was again the timing of the market saying the dot com had market had collapsed so there was. Value in software infrastructure and that’s exactly where we were and that really helped and of course the Vc on the other side we had the very very well-known id rise on a board. Ah one of the top entrepreneurs of Silicon Valley and she took a leap of faith on us as well. So that’s absolutely needed in the case of citrus I think it was me and another partner who conceptualized it and then we had a third partner join but me and the other senior partner. We just said well on day one we are just going to fund the company. Let’s not worry about the money. Let’s go fund it ourselves to because we have confidence this will grow I think that confidence comes from having experience in the startup space and that domain um I think when you approach everything with that confidence a lot of things align for you. Ah Sequoia loves loves. Payments. Of course they are the original investors in Paypal Klarna ah stripe everybody right? So they understood it very well. So when we met with Mohan but nagar he said I get it I remember a very very key moment when we met with him and he said I get it.
Satyen Kothari: I’m going to give you a term sheet but I think you guys asking for too little I think you’re going to need more money. It’s and he was right of course and this was just our first after our angel investment from ourselves our first check where I think we were asking for 600 k and he just gave us one point eight million he said you if you want to build this. Build fast build it securely. It’s payments security reliability robustness is very important. Do it the right way. Ah so again, his experience paid out and that was amazing and then we went on to raise with some amazing people again like be next terru sato guys second investment in India. Ah, and now he runs bx which is five six funds all over Southeast Asia and Japan they turned out to be incredible partners because they got us some strategic investors from Japan who were running a payment gateway there as well. So you know the dominoes start clicking together. And I think overall we raised actually a little bit less than what you mentioned I think yeah about 25,000,000 if I’m not wrong.
Alejandro Cremades: Gotten but an amazing outcome because eventually you know 1 thing led to the next and you know you guys were doing about 20000000 users processing billions in payments and then pay you comes knocking. So how was that the process this would be your first exit your first acquisition.
Satyen Kothari: Right? So so there’s a bit of a backstory there right? and I’ll I’ll fill you in now. It’s easy again to share it So a couple of things that happened during the journey of citrus pay that help lead to this.
Alejandro Cremades: So I’m sure that that was nerve racking. So how would say going through that process. So.
Satyen Kothari: 1 is in the early days we were getting a socks knocked off by pay you because they were being paid. They were subsidized by the parent company which had deep pockets and we were a startup with very finite money so ecommerce in India was heating up and every ecommerce account pay. You was winning by undercutting us on rates. So I remember we had 1 meeting where we just said we can’t win this war. We don’t want to sell at negative unit economics. So we actually strategically chain directions and we said we will not touch ecommerce anywhere simplified checkout layer was better for repeating transactions. So we said why? not we go for all the things that indians buy regularly so movie tickets flights bill payments all of these other things you have to do regularly versus do I shop on this website or this website so that we did a non-ecommerce target segment. What it did was it made us very very complimentary to what pay use portfolio was just for survival. It wasn’t just thinking oh they will acquire us this for this was for survival. The second thing we did is we saw I remember Vivaga in Vietnam for for some conference. And I remember just seeing some data point flash on somebody else’s slide saying India is 2% mobile and 98% desktop transactions and I said ah that makes sense because that was what our data was but what we realized is it was a very tiny market and.
Satyen Kothari: Everybody we knew in India was buying a smartphone this was two thousand and twelve thirteen and that is where the future transactions were coming from so what we did was when we went back I called for a general brainstorming meeting with with actually the sequoia people. Our senior sales guys everybody else said guys we need to. Push hard into mobile and I don’t have the data to back it up. It’s only 2% but the trend is very inevitable and rightfully everybody pushed back quite a bit and we went back and forth with the discussions but we vent with it and we were the first in the country to build out our entire mobile ah mobile Sdk for checkout. Ah, so you know an example of where your instinctive experience kicks in and it’s validation sales guys negotiated with us and said we are not going to hit our quotas if you make us sell mobile and we said okay, that’s fine. Ah, and this again was a very strong compliment to pay you because pay you did not have that mobile focus. So. That came in and third was the lightweight partt at money Twenty Twenty 2015 Copenhagen ah um, ah a friend of mine told me hey there’s a party that’s being thrown by pay you do you want to come I’m like I don’t think I’m invited. We are we are giving them a hard time in India. Said come on ah can’t sneak in. It’s a party I sneak in and at that time their Ceo was Lauren and I introduced myself quite cheekily I said Laro I’m the guy who’s giving you sleepless nights in India with my team and Lora said ah it’s you and we just hit it off.
Satyen Kothari: And then he was showing me the things that he loved in in ui patterns etc at the party itself and at the end of the night he’s just like tomorrow I would love to have a glass of wine with you. Are you up for it. So of course and I show up for the glass of wine and he’s brought his entire top executive team.
Alejandro Cremades: Wow! yeah.
Satyen Kothari: Um, like all right. This is a different agenda and that just was the seed. It took them a long time being a big company but this was early 19016 then to start coming around more formally via investment bankers who were connected to them as well and then. Then the deal started taking place and it was definitely a tense tense situation because everybody wasn’t even sure whether we should sell we were doing well we were doing two and a half billion dollars in payments in 5 years everybody’s like why do you want to sell and I remember just talking to each stakeholder individually and saying. Guys this is a life changing amount for ourselves for our team members by the way everybody in our team had eesops from the office boy upwards ah so and in India we don’t have a strong history of m and a ah we really should should take this. Um, by the way that reckoning was also right because this was 2016 and seven years later now that is still the biggest all cash deal in India it was 130,000,000 straight all cash. It was a lot of zeros.
Alejandro Cremades: That’s amazing and it was how much that’s a lot of zeros so what does say what? What? What? What? What does someone that goes you know to from India to the us with without without money. No money for the plane ticket you know having to. Scramble and figure out you know things to to really having that kind of exit I mean what? what was the first thing that you did you know when you finally had you know those zeros in your account too.
Satyen Kothari: Yeah, well I To be honest I did not do much because by then I’d made my peace with the fact that there are a lot of things that make me happy money is an important part of that but there are a lot of other things as Well. And I was very fortunate that consulting business that I mentioned had made me quite a bit of money it had helped me buy my dream house in Bombay on a mortgage but I still was living my dream house found a lot of joy in my daughter in my friends I Love Cars. So even before the exit. I Just said Okay, you’ve worked hard for my birthday I just gifted myself a very fun car. Ah so I think the biggest I jokingly say this. But it’s true. The biggest impact that exit actually had in my lifestyle is I didn’t have to worry so much when I was booking flights and hotels too late. I was like okay you can afford it now. It’s okay, if it’s a little higher. Ah exactly exactly. Ah.
Alejandro Cremades: Ah, so now now now you were able to procrastinate I love that I love that? Okay, so so now let’s shift gears here because you know it took really not not a long time. You know for you to um to close these same transaction and then to go out it again and now that’s what you’re doing with cube. So. Walk us through Kube because now at this point you know you’ve you’ve done you know quite a few companies and you know you really understand you know when an idea has legs or not you know, achieving product market fit all of the above. Ah y cube.
Satyen Kothari: Yeah, so there are 2 kinds of entrepreneurs right? The the smart ones who who understand a domain build all their network and connections in that domain and keep building one company after another in that one. Right? And I think those are the smart ones because they can keep scaling up to bigger and bigger companies. Once you are payments expert. You become build 1 company another 1 another one and then there are the idiots like me who who think life is short ah doing the same thing again and again is not living a full life. It’s not exciting enough. So each of the companies I’ve done is different cube I mean it’s still in fintech but it has nothing to do with citrus because it is wealth tech and the problem statement is something that I faced again growing up my entire team face growing up which is if you’re a middle class person anywhere in the world. Let alone India. Nobody guides you or helps you on to get on the track of financial freedom. You can do a lot of research on your own your bank guy will try and sell you some stuff somebody will try and sell you stuff but nobody takes it as their core-responselicing I will help you get there in 2030 years and this is a problem statement that resonated deeply with me when I was young because I had insecurity around money because we didn’t have money each time my dad and mom hardworking people tried to put money in the stock market. It was always too late when the market was at the top they didn’t do it in a discipline because nobody taught them right.
Satyen Kothari: And I saw that story repeat again and again I started investing my own money in dollars at an early age when when I was in the us I made so many mistakes because I was reading forbes magazine reading articles and and obviously the people who manage money are smarter than me. This is what they do. So this problem statement gravitated towards me and I said okay maybe this is my last company I want to build something that lost the ages well beyond me while because it has purpose something in the likes of you know what? what fidelity does or what? Ah even a Costco does in a very different way right. So we we look at these models as opposed to a Netflix I say okay, what if we could build a very simple platform that helped everyday people understand finance without the jargon find very high-quality products without needing to do their own research because we’ve done that for them. Very simply onboard into the right portfolio mix and then track it with very simple terms as simple as this is how much your portfolio is worth and this is your profit or loss literally the two things I care about right? I don’t care about anything else if I’m an average person and if you were to build this system. And we wanted to build a long-term company. How do we make it also a profitable company so this is the mission of quebe we service indians across the world. We’ve got many many people asking us if we can do it for other countries because they love it. We don’t have the bandwidth bate who knows maybe you find the right partner someday who can take.
Satyen Kothari: Take this with us and we we manage about 2000 portfolios. We have an incredible retention rate of 82% 5 years now out so people once they trust us they don’t leave us and we take that very seriously we do our best. And we have a very unique proposition in the company me and my team always invest our personal money in every product we show into to our customers and this is what keeps us honest, we are literally eating our own dog food. Um, but it’s not literally sorry that’s the wrong use of the word but you know what I mean.
Alejandro Cremades: Yeah, yeah.
Satyen Kothari: So I love it. My team is very passionate to towards a long-term goal of doing this the right way we have a value system. We call the three I value system that I instill when we started it because India has a a very famous term called jigad which means oh ways to get around things which is nice. But it’s also used as justification to bend the rules and we said we are not going to do that. So our 3 eye system is integrity intelligence intensity. So but number 1 is always paramount. Whatever we do. We want to sleep well in the night we want to take care of our users. So very happy to report after after doing this, we are just entering our fourth quarter of cash flow positive in over in ah and with a nice nice road map of where we want to go from here.
Alejandro Cremades: That’s fantastic Now imagine you were to go to sleep tonight and you wake up in a world where the vision of Cube is fully realized what does that world look like.
Satyen Kothari: I think for me that would be 1 of the happiest days of my life because it would mean that all the hardworking people I’ve met in my life. Everybody right? It can be from a waiter to an engineer to to somebody who’s an artist. We’ve helped them at. Get to a level of comfort of mental peace as they as they keep working year after year. Not just for them. But for their families for their children because Alejandro there are so many good easy ways. Clean ways to make money in the world. Problem is nobody wants to tell them to you unless they are earning a fat commission and and if we can break that cycle and we can help all these people say laugh a little bit more you know, enjoy the nice bottle of wine a little bit more because they know they didn’t get lucky in some crypto. Gamble or in Las Vegas but they actually plan their steps properly using cube to to get there that would make me the happiest because working hard making money and then suffering ah around worries for money is absolutely unfair and it’s a very solvable problem.
Alejandro Cremades: I love that now you’ve obviously done a few companies at this point. So let me let me bring you back in time. Let’s put you into the time machine. Let’s bring you back in time to that moment where you are in Stanford you have innovation happening. Everywhere around you. You have all your classmates going and starting their own companies. All of that good stuff and you have the opportunity of having a sit down with a younger self with that younger such and and you’re able to give that younger self one piece of advice. Before launching a business. What would that be and why given what you know now.
Satyen Kothari: Ah, you asked this question I literally have have goosebumps on me right now because you know I have no regrets in life right? Whatever I had to do in the moment was because of the situation but very often I think back to school and I think if if. I had to do it all over again I would do it very differently going back to Stanford and and again I have reasons why I did it the way I did as I said I had a lot of insecurity around money. So I had to rush through school to pay off debts I have money and what I did was I was just studying like crazy I had my work. Ah. And I was not focused on getting the maximum that that amazing place can offer so ah, my famous stories are once I was cycling in the late evening and I saw just saw a sign with said free pizza. So I breaked I locked the bike I said okay, dinner’s taken careir of and there was this guy talking on stage. Like ah when will stop talking because that’s when they serve pizza. It turned out it was Jeff Bezos but I just took the pizza and went home I just like dude I can’t talk hear anything else literally so the computer science department another story used to have something called tgif because they were. They were like these are smart people. They should interact with each other. Let’s give them some food some some wine and they’ll talk I used to go every Friday evenings to eat the free cheese drink the free wine and go back to study while literally behind me 2 guys larry page.
Satyen Kothari: Sergey Brin was saying how man search is broken. We have to fix it. These are some ideas and I was like guys you’re geeks I’m just going to go home after this after this free food. So if I could change it I would take way more time I would have more confidence in myself saying something you put in the hard work. You’re on the right track. Slow down take everything beyond just the classes which are amazing that this place has to offer meet more amazing people be inspired by them who knows maybe you work with them. Maybe you work for them doesn’t matter. This is the place to learn and and to be honest. I think I’m going to go back to university just to do that Alejandro this is my dream now. So this time around I’m going to do it right? because if I make a mistake I like to correct it.
Alejandro Cremades: Wow I Love that. That’s so powerful. So for the people that are listening such and I will love to reach out and say hi. What is the best way for them to do so.
Satyen Kothari: Um, um, write to me on on my cube address sahian at bankoncube.com on I’m on Twitter as well bit of a bulky handle saty underscore seven seven happy to hear from anybody. And I hope all ah everybody all of your listeners, especially the hardworking middle class professionals start their financial freedom journey soon because they deserve it.
Alejandro Cremades: Amazing! Well serant. Thank you so much for being on the deal maker show today. It has been an honor earth to have you with us.
Satyen Kothari: Same here. Amazing session. Thank you Alejandro.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Satyen Kothari On Selling His Last Company For $130 Million And Now Raising Millions To Help Others Build Wealth appeared first on Alejandro Cremades.
Drew Oetting is one of the biggest forces providing the financial fuel this new generation of fast-growing, super-sized startups need to make it. His venture capital firm, 8VC, has invested in startups like Unlearn, Chaos, Tome, and Ushur.
In this episode, you will learn:
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- Managing your network
- The new trends that Drew’s fund is excited about investing in now
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Your email address is 100% safe from spam!About Drew Oetting:Drew Oetting is a Co-Founder & serves as Board Member at Affinity. He serves as Board Member at AgVend. He serves as Co-Founding Partner at 8VC.
Drew serves as a Board Member at Resilience, Synthego, and Street Contxt. He serves as Board Member at IDX. He also serves as Board Member at Roam Analytics.
Drew previously served on the board of Touch Surgery and RealScout. He is a Board Member of BuildZoom. He served as Board Member at NuID. He is also a Founding Board Member of Affinity Technologies, a stealth enterprise software company.
Previously Drew served as chief of staff to Joe Lonsdale (Formation 8 and 8VC Founding Partner). Drew is an Advisor to LivingOnOne, a non-profit impact production studio, and WeAreThorn, an NGO which leverages technology to eliminate child trafficking.
Drew began his career as an analyst in the Technology Investment Banking Division of Moelis and Company in Palo Alto, California, where he focused on M and A advisory on the Internet/Digital Media and Network Infrastructure industries.
While in college, Drew worked in the private equity group of Cascade Investment in Kirkland, Washington, as well as for Asia Pacific Investment Partners, a Hong Kong-holdings company focused on real estate and mining investments in Mongolia.
Drew received a B.A. in Economics and Mathematics cum laude from Claremont McKenna College in Claremont, California. He was a Robert Day Scholar, two-time Bill Gates Investment/Michael Larson Asset Management Fellow, and served as a student representative on the Claremont McKenna College Board of Trustees. He serves on the Advisory Board at Rubicon.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today. We have a very exciting founder founder investor I mean managing now 8,000,000,000 you know his firm I think that we’re really going to enjoy this one and really find it inspiring so without farther. Do let’s welcome our guest today. Drew Aing welcome to the show. So originally you grew up there in Iowa so give us a little ah walkth through memory lane. How was how was life growing up.
Drew Oetting: Um, hey thank you very much for having me.
Drew Oetting: Yeah I grew up in Iowa City Iowa um which is a small town. It’s small college town where the University Of Iowa is based my parents were you know, grown up the south but they moved there for the university it was it was awesome a great place to grow up. Um, it’s ah. It’s maybe not the most exciting place. Um, you know when you get a little older but um, it was a place that’s sort of maybe like classic americana growing up very good public schools. Um and safe place to grow up and and my parents still live there and my grandparents are there.
Alejandro Cremades: So how how did the obsession around goal and investing How did that come about. It’s quite the combo.
Drew Oetting: I Love it I go back. Fair amount.
Drew Oetting: Yeah, yeah, know so I’ve tried to trace back why because those 2 things have been pretty forming in my life and maybe that’s Chris golfing investing is like maybe a very stereotypical combo. But um, my parents’t play golf. My parents are nothing about investing had a friend whose father was a. I thought was really cool and he golfed a lot and so I started golfing and um and I think golf was interesting to me because you get treated like an adult very quickly as a kid if you’re good at golf because most of the people you’re playing with are you know are adults are older and so a lot of the first conversations I remember having about. Business about life. But you know hearing about people’s you know, divorces and and and sort of adult conversations came when I was you know 13 fourteen fifty and and and playing a lot of golf. Um, so I think I think it it formed me that way and then investing I just a bunch of really good teachers that sort of were talking about the financial crisis. Right before it was kind of happening and talking about things and it got me thinking about financial markets and I started reading everything I could I mean there’s not a lot of investing in Iowa professionally for some note um and so I read this book barbarians at the gate and barbar at the gate is a story of Basically the lbo boom and really Henry Kravis and George Roberts sort of kk buying a v navissco and they had gone to this schoollamont they played golf there actually um and then my mom I told my mom about this and my mom got a recruiting letter where I got one but my mom opened it from claireon macow.
Drew Oetting: And she said this is that school you’re talking about and you know where those investor people win and they will you play off. So um, really the combination of those 2 things is or what? um, really propelled me to go to Clair Mckeno where I studied math and finance and that I was lucky to have a scholarship there um through the bill gates investment. Ah group. Um, and so the the 2 things really did influence a lot of of where my ah of where kind of I ended up today.
Alejandro Cremades: And what would you say that you’ve taken from the game of golf that you’ve applied you know to the professional side of things. So.
Drew Oetting: Um, well I’ve kind of had 2 relationships with the golf. So as a kid golf to me was everything was an obsession. It was a very competitive sport. You know I I you know of course as as a kid you always give me professional athlete by the time I went to college I realized that probably wasn’t gonna be the case but you know. I hated playing badly I hated making mistakes. Um, and so you know I think it taught me a lot of you know drive and competitiveness. It’s an individual sport There’s no one else to blame which is really true of investing I think as well and and. You know, maybe to some extent entrepreneurship. You need to have you need to at least believe that you’re responsible and then you know you you can determine your future. Um, and then I had the second and so that after college kind of gave it up. We were building our business we were you know, cofounding companies and investing companies and stuff and I didn’t play off for 5 years Um, but eventually I kind of famous and went found my way back to it and I have a totally new relationship with now where I’m just unbelievably appreciative of it. It’s like it’s it’s an incredible way to spend time with people and and it’s also I just feel so lucky that I get to do it and play all these courses now that as a kid I only dreamed of so I’ve kind of had. Really 2 different relationships with it and both were you know both have been important but today I’m I’m certainly not ah I’m not trying to you know, not breaking putters or anything over my knee like I used to as a kid.
Alejandro Cremades: And how how does John Longdale you know come into the picture I mean for the people that are listening John was one of the founders of pal technologies which right now is valued at 17,000,000,000 and he’s also done a bunch of other. Incredible stuff. So so how does he come into the picture in your life.
Drew Oetting: Yeah, so so Joe and I have worked together since um, really since I was out college and we were introduced by a friend of mine from claraome Mckenna so you know after I left Iowa went to went to Claremont Claremont Mckenna ‘ is a very small school only about you know 1200 folks outside of Los Angeles creible place and I would say ninety plus percent of the you know of the relationships I’ve built in business and and really and personally you know, kind of originated from there. Um, and so a friend of mine a guy named Clint Paulus um made the introduction he even where he had left. Clamont early and gone to work at Addappar which was a company that Joe started after he started pallanier. Um and Joe was looking for a chief of staff and Clint thought I’d be a good fit for it. So I really owe I really owe a trip plant for that introduction. Um, and so yes, so Joe had yeah he was one of the really. And inters of Paypal and then he had in its very in his early 20 s started palantier and then he had he had left and started to build outta park which was a software company for wealth management and he’s been obviously a huge driving force and in my life and also we’ve you know, worked together for the last eleven years
Alejandro Cremades: And that’s amazing now. Let’s talk about formation 8 you know which is the um, you know when you started getting your feet wet. You know with the whole you know venture world and and venturing vesting how was that you know you you also got to experience how to raise a fund from scratch. You also got to to have the insight to that and and it was not in the traditional way. It was quite unique. So how did you guys go about doing that. Well.
Drew Oetting: Yeah, so it was it was pretty funny. So when I started first working for job. He was still the Ceo of adamdapart and um he was he told me he wanted to they he were he was building a venture fund formation a with a couple other partners and he remember when he first met him. He said well you know venture capitalists are pretty lazy. So I’m going to do both I’m just going to be a Ceo and I’m ah you know maybe I’ll hire a president at out ofar and then um, you know then we’ll have the the venture fund but I see every deal already. You know be prolific angel investor before being a venture capitalist and so you know we’ll just kind of figure it out. And then like a few weeks later he kind of came to me. He’s like I think I’m going to replace myself Ceo of Aapar because you know I don’t want to raise a small venture fund I want to raise biggest first time mentor funds since the since the crash and I don’t think. Just going to be able to do it. You know I’m also the Ceo of a company and um and I never forget that conversation because it was it was this really interesting moment and what ensued after was that Joe basically approached fundraising as a again in a deterministic and very entrepreneurial way. So most metro funds raised from endowments fund funds banks charving well fundst cetera and ah we now work with a lot of those groups. We’re fortunate enough now to but when you’re first starting out very few of those groups want to take a shot on you and Joe’s track record as an entrepreneur had been incredible and angel investor we hadn’t never been a Vc use.
Drew Oetting: Twenty Eight Twenty Nine at the time. Um, and so basically we raised from whoever would invest and he went to a lot of the angel investors in palantir and out of hard other people and and seven days a week we would take meetings and we did meetings for a year and I watched him just not even it wasn’t even really a grind because he enjoyed it mean it was just like it was like being at a when you’re early at a startup and you trying to sell product and you’re going all over trying to sell um and it was it was so we ended up raising four hundred and forty eight million dollars for that fund which is a great first time fund. Um. But we had 282 and limited partners in that fund. So if you do the average and and there was about 50000000 from from 1 1 group. So if you do the math. You know it was. It was very small checks. It was people making basically making angel investments in in our fund. Um, and so every time I talk to people. Who are you know, fundraising or venture funds or even you know startups raising money. Um, and they talk about minimum check sizes or they talk about you know, only working with institutions or whatever I’m always just like well I mean I hope that you have that luxury but you may actually also learn a lot more if you raise. If you kind of go and and do the hand-to-hand combat and I will say like some of those investors who put in maybe a million dollars in that first fund some of them invest $50000000 with us now in every fund and some of them still only invest $1000000 and it’s there’s some of the strongest relationships that we have both in life and professionally.
Drew Oetting: Started by those people who bet on you early? um and so it was It was definitely a unique unique way to get into the the venture business. But um I’m very grateful for it.
Alejandro Cremades: And obviously that’s how a lot of people I mean I guess say what did you learn about activating relationships or activating your network because that’s a hell of a lot of you know people investing.
Drew Oetting: Yes, so I would say that Joe is ah like many people who worked at Paypal and from that kind of crew but very first principles thinker and so one of the first principles of venture that he ah you know that’s sort of obvious is. The relationships are where the deal flow comes from um and so you want to both put yourself into the right networks but you also want to treat that that network as an asset. Um, and so very early on might. 1 of my you know one of my jobs was basically to manage the process. The lists the datasets around our network and it was critical during that fundraising period of time and I think most people grasp that because they say well listen I need to raise money. There’s a subjective I have to figure out how to get to the money you know. Think people understand that um, but it’s not just critical for fundraising. It’s actually even more critical when you become when you’ve become an investor and you’re a venture capitalist and you need to you need to source investments you need to help your companies raise money you need to help your companies get customers. Um, and so really from day one. We talked constantly about network management and Joe had I think um I think Peter Thiel had had given this advice but I can’t but it was it was the concept when J P Morgan was being built. Um, there was this idea that the senior bankers you know.
Drew Oetting: Back in the day there was no internet. Everything was the information right flowed through networks and so these senior bankers were expected to host dinners. You know, events at their homes. Basically every night of the week because that was how the information flow. Um, and we kind of took that approach where you know up into the pandemic we were doing you know over 150 events every year and some of those would be small ten fifteen person dinners. Some would be 400 person you know barbecues. Um, but it was. Approached very much like a process a workflow a lot of resources. A lot of senior people’s time thinking about it. It’s not something we outsource um and then underneath that was also the systems to manage it because there’s a lot of data tons of it’s obviously coming through email calendaring. Um, you want to see the result of it like did the time that I spent with these individuals actually lead to to business outcomes. Um, and so ah, both on fundraising but also um, you know, kind of holistically at our business. We’ve been pretty obsessed with network management. Um. Kind of from from the beginning.
Alejandro Cremades: Now in this case with with formation 8 not only you guys were investing but then also helping companies in getting started. In fact, you know 1 of them affinity you know, incredible success. They’ve raised over one ah hundred and twenty million and also resilience. Has raised over two point five billion I mean where you are officially you know cofounder on both. So I guess you know there’s there’s like really interesting stuff that I’m sure that you’ve learned I think I in a nutshell you know, like just for the people that are listening. What are those 2 companies doing. And then also what is the biggest lesson that you’ve learned you know from from these 2 companies. So.
Drew Oetting: Yeah, um so affinity grew out of the process which I just outlined which was basically I was you know this was started when I was ge chief staff along with Joe and and then the current co ceos who are basically the 2 smartest engineers at Stanford. At the time so I used part what I used to do as relate to nevermare I used to just kind of hang around after Joe would give talks at various engineering schools and then I would just meet everyone and just kind of see what they were doing um and um and so you know I was just chief of staff I was managing this process of network management poorly manually. Excel and hack together crns and stuff and I said this got be a better solution for this and then Joe was like well I want it done like 10 x better than it is now and I was like well there’s no way we we’ll do this, you know maybe I was just very lit. Maybe I was lazy but I was like there’s no way room. We’ll do this without software this has to be software to integrate. Um, you know. To the actual sources of data. Um, and so you know Ray and shubi the yeah you know the the ceos and and cofounders of affinity. Um, you know can’t kind of convince them to work with us over the summer along with paigjmon and mar from ah fairvc. And we kind of scoped out the initial and Mvp and then they ended up you know deciding to to leave to work on it full-time so affinity you know was a need that we knew intimately. Um, it was ah it was a problem that I was experiencing every day. It was an existential business sort of workflow for us.
Drew Oetting: And we were a great testing ground for it. The other thing is we had the first two hundred to 300 customers ready to go because we knew other venture funds. We knew other project refunds. Um, and so that was one where we started a company um you know based off ah sort of a need that we were intimately involved with as a. As a fund and we’ve started 4 companies other software companies that way. Um, and then resilience is not a company. We could have started in in two thousand and thirteen fourteen resilience we started um, facing April of 2020 um so right as the pandemic was kind of fully. You know, kind of I think being a fully appreciated for the for the downstream effects. It was going to have and that was a company that we we also couldn’t have started a loan so we started that company with Bob Nelson at Arch who’s obviously one of the the sort of the history’s best biotech investors and and really. Just it been a mentor for us as we moved more and more into healthcare. So we’re very fortunate to have you know to to be friends and have a relationship with him and we started talking about the intersection of national defense and biotech. Um I had been spending time kind of in the in the first. Few months of the pandemic um initially on the nonprofit side and then and then working sort of more with governments on helping source pp so we were you know it started because my mom basically didn’t have any Pb um, you know she was working in the covid wars at the University Of Iowa
Drew Oetting: Think this is crazy. You know was talking to friends about it. A friend of ours Robin Chan who had really good relationships in China found some stuff brought it over bought it gave it to the donate the years of Iowa when it ended up starting this sink operation mask which is ah which was ah sort of a nonprofit that really helped. Just deal with the sourcing and then procurement of Ppe because it had totally changed so and then the ppe problem as quickly as it went up. It did then like all of a sudden there was like infinite ppe and it was amazing. How quickly that kind of solved but we were talking about supply chains and means of production. Um, and as it related to to national security Bob has a big interest in national security. He’s ah he’s a real patriot and um and obviously he’s an expert in biotech and we were talking about the common problems that our biotech companies were having with manufacturing which actually predated the pandemic. It’s credib, expensive to manufacture. Selling gene therapies r I medicines sort of advanced biologics and there’s large delays. There’s sometimes quality issues and really the most you know, um, the most successful company. Most forward thinking company most technologically advanced company wooshi. Um. You know was largely based in China and so um, you know there was There’s obviously some some significant issues thinking through how our companies were going to work with um, a manufacturer that was that was based in China um, both for supply chain reasons and for national security reasons and so we said well let’s build the.
Drew Oetting: Aws of bio manufacturingr here in the United States all the innovation is here or a lot of it’s here. Um, and why should we manufacturing not be also an expertise that we have why should we? Why should we? you know, take something that is really one of the biggest cost centers and a very high margingin part of the ecosystem. And just sort of give up on it. Um, and so at that point in time we were very lucky because it probably taught me the benefit of timing. Um, it’s tough to do as an entrepreneur like you want to start a company. You should start it right? But if you if you if. Sometimes if you start one at the right time it can just make a lot of things easier and with that because the pandemic was on everyone’s mind because these problems were very salient. We were able to recruit some of the best people right? off the bat in the industry build the best board that i’ve. Ever been lucky enough to serve on I’m easily the least impressive person on that board and then also we capitalized it along with arch and a few others so we could hire the team but then we immediately went and raised $700000000 um, and that enabled us to actually go and purchase. Already operational facilities which enabled us to get into the game immediately or yeah, almost immediately. Um and capture a lot of that tailwind that was coming it also allowed us then to have financial you know wherewithal to actually go and raise.
Drew Oetting: Additional money and continue to repeat that process. Um, it also sort of you know, crossed hairs with like sort of 1 of the lowest interest rate environments we’ve ever had so it was it was easier to raise money I don’t I think there’ll be a tougher strategy to do now but it taught me 1 the power of focusing tons of really talented, really senior really expert people at the right time where there’s this big tailwind and how you can quickly move but like magnitudes faster if you have that and. You know I’m not sure whether you can force that into existence all the time as an entrepreneur but it’s something to definitely watch for as you’re going through your entrepreneur journey. Do I have those tailwinds or are they upcoming.
Alejandro Cremades: So so eventually formation 8 transitions to 8 vc and that’s the and the firm that you guys are running today. Why did that transition happens happen. Okay.
Drew Oetting: Yeah, it’s a it’s pretty interesting story I assume that these types of things happened all the time but it’s it’s not as common. So basically we did 2 funds with some former business partners of ours at formation a um, there was really 3 general partners there I was obviously the chief of staff I was just a you know a kid. Um, and really we operated. We just had basically different operational cultures and also a very different focus so the original thesis of formation a was actually that we were going to help invest in companies here in the United States you know the kind of companies that Joe you know knew really? well. Um, gonna help them go to market in Asia um, and it was a great idea and in certain instances it worked um but on a lot of the enterprise stuff. The companies were not mature enough to really do business internationally especially in markets as complicated as you know. South Korea um you know and as competitive as China and so a lot of um, you know a lot of that original strategy turned to actually you know the the teams are on the ground there very talented senior people they started looking at doing deals so we ended up in a world where we had early stage. Us almost all enterprise and healthcare focused investing coupled with what would became later stage. Um, you know deals in in South Korea in Singapore china etc. And so there was this strategy drift occurring and then just culturally.
Drew Oetting: Um, you know we had this obsessive very like startup probably very chaotic and and you know throwing hundred fifty events a year and running around ah kind of way of operating which just was different than our other business partners. Um, and so um, yeah, we couldn’t have started. Gotten in business without them. They were instrumental to that and brought a ton into the table that that we didn’t have um but it just was clear that you know we probably if we all sat down and realized we’re weren’t going to work together forever and we wanted to be somewhere where we were doing that. So. You know I think most venture firms would have just raised another fund raised another fund and kicked the can down the road and then eventually there’s some big blow up. Um, but I always have had so much respect for the fact that um, you know Joe and and Brian Jim actually went through the pain of. Of separating things out and in retrospect it looks easy of course. Yeah, yeah, we’re like yeah you know you just do you just do it but we were a fund that was two years old or three years old and we had just we just spent you know a year and a half like I mentioned raising money like you know. Nickels and dimes you know at the street corner to then finally have some success on those investments quickly and then get all the institutions in to our next fund and then decide hey actually we’re not doing own right? that it’s actually very rare that that’s happened and I I have so much respect that? um.
Drew Oetting: You know because I wasn’t a leader there but that the leaders that were there. You know had the foresight to do that and the pain to do it and I also feel very fortunate that that our limited partners are investors. You know, 90% of them stuck by us as we made those transitions and um and it was easily I think the most formative. Thing that’s happened because when we were able to do that we were able to now completely operate the way that we wanted. We weren’t a company inside of a company. We were just a company. We were able to hire people compensate people and you know performance manage in the way that we wanted. Um and you know I think that you know. Jim and Brian and the other folks who left were able to go do that too which is great. Um, so it was a is a big It was ah a really ah instrumental part of my life seeing that happen.
Alejandro Cremades: No kidding now you know obviously today advc incredible success. You guys have seven billion that that you’re managing I guess for for the people that are listening to get a ah better understanding. What are the kinds of companies that you guys are investing in. What gets you guys? Excited yeah.
Drew Oetting: Yeah, well so we’ve we started with enterprise software right? The the original thesis of what we were investing in back in 2012 was really following from what Joe had been focused on and he was one of the earliest people to which was we called the smart enterprise the idea was that the same types of platform businesses that were built. Um, in the consumer world. We’re going to permeate the enterprise world or people’s work lives and you’re going to be able to build and and that really takes the form of workflow software. You capture the workflow and then you have the potential and because you have the users you control the data structure to build a real platform. Um, that seems pretty obvious now I think most people get that. Um, but that was the first way that we really were investing in a lot of verical software companies that we hoped one day would build sort of an operating system be the system of record within an industry and we were pretty comfortable with verticals because you know palinsier had. But most you know a lot of time in government when no one would touch that and then they went to finance and then they you know they kind of move by vertical attapar had been very successful wealth management open gov another company that Joe started and in in municipal government software um, and then we started seeing a lot of the best technical people leaving. Enterprise software companies and consumer internet companies. So you know people were leaving the pallaniers and facebooks and salesforces and googles of the world to go to what looked to us like biotech companies and we were confused um and didn’t fully understand it.
Drew Oetting: But we kind of had a rule that ah one of the great things about being early stage and doing a lot of seed investing is that you get to put bets behind stuff. You don’t totally understand when you understand the people and the quality of the people so we started making like springangngle seed bets in these people that were coming pitching us who had previously worked at Twitter right? people like a lot gil. Um, or they had previously worked to Facebook or they had previously worked at you know pal here. Um, and we were so we we started kind of seeing this talent migration towards biotech and we were also lucky because we had an intern at the time who was out of the bioinformatics program at Stanford. Name’s Francisco Madz and he’s now a partner and runs our biotech program so you kind of see where the story goes but he ah he basically came to us at 1 point. He’d been working on enterprise software companies. You know consumer companies because he was an incredible computer science and data scientist right? That’s the reason he was working with us and he finally came to us and was like. All right? You guys want to like actually do this spytech thing and understand what’s going on or like what and we were. We were like what what do you mean? he goes well. The reason that all these this talent is migrating. There is because all the most interesting technical problems exist basically at the intersection of you know. Genomics and cellular engineering and but there was and he kind of told us this this the the framework that now we have today which was that there was a set of technologies which all ended up converging really with the last one being crispr so you had sequencing technology which is you know Illumina.
Drew Oetting: Famously known for you had microfluidics. It’s the ability to actually um, you know move individual cells around. Um you need a cloud compute right? So you have the ability to and and some bio specificific tools as you the ability to to deal with all of this incredible amount of data. And all the costs and all those things are going down but you didn’t yet have the ability to in a in a way similar to to software actually create edits and and there was no abstraction layer on that so they were using really like clunky ways to actually make the edits so everyone knew what edits. Wanted to explore or they didn’t yet have a way to do it easily crispr you know and then now subsequent technologies are even better really changed that and that happened um you know only a few years ago and so there was this real wave happening. Um because talent was migrating towards some those interesting problems. So we started leaning really heavily on that. Um, and so you know now what we call bio mit which is really you know it’s biotech but a lot of it is actually tools services manufacturing like resilience um some therapeutics but but a lot less than maybe a traditional biotech firm. Um, that’s become a huge big kind of second pillar of what we do and so the smart enterprise has changed a lot application layer software is is much more competitive now. So that world really has shifted now down the stack to you know, software infrastructure and also shifted to businesses that have.
Drew Oetting: More? um harder involved so like in defense a software only company is really hard to build right now because pallanir and other systems kind of have ever really dominated but companies like Andril and epius and ceronic who’s right here our newest one we’ve we’ve built um, ah. Are building systems so hardware plus software plus in many cases you know, Ai or or some sort of machine learning. Um and and so the the composition of the companies has shifted but I think that the theme which is like the role of computation in the sort of non-consumer world. Has always been the place that we’ve been focused.
Alejandro Cremades: I Love it now. There’s probably a lot of people that are right now listening you know that I will probably will love to reach out and say hi. So what is the best way for them to do so.
Drew Oetting: Um, and send me an email at druitac.com is probably the easiest way pretty direct. Yeah.
Alejandro Cremades: Amazing! Well hey, easy enough Drew thank you so so much Drew for being on the dealmaker show today. It has been an honor to have you with us.
Drew Oetting: Um, hey thank you so much for having me I Really appreciate it.
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After two previous successful exits, Mance Harmon is now on his third startup. One which has quickly grown to become a multi-billion dollar venture that aims to be the platform for tokenizing everything. The venture, Hedera Hashgraph, Has raised financing from top-tier investors like Boeing HorizonX Ventures, Vestinwolf Financial Holdings, Digital Currency Group, and Tata Communications.
In this episode, you will learn:
- Resilient and decentralized governance
- Decision-making and empowering your team as the CEO
- Hedera’s token, and the tokenization of everything
Alejandro Cremades · EP 604 Mance Harmon On Raising $124 Million To Power The Next Generation Of The WebSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Mance Harmon:Mance is an experienced technology executive and entrepreneur with more than 20 years of strategic leadership experience in multi-national corporations, government agencies, and high-tech startups, and is Co-Founder and CEO of Hedera Hashgraph.
His prior experience includes serving as the Head of Architecture and Labs at Ping Identity, Founder/ CEO of two tech startups, the senior executive for product security at a $1.7B revenue organization, Program Manager for a very-large-scale software program for the Missile Defense Agency, the Course Director for Cybersecurity at US Air Force Academy, and research scientist in Machine Learning at Wright Laboratory.
Mance received an MS in Computer Science from the University of Massachusetts, and a BS in Computer Science from Mississippi State University.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So super excited about the founder that we have today joining us. We’re gonna be talking a lot about building scaling financing exiting I mean all the good stuff that we like to hear. But oh my god. This founder has done it and has done it for quite some time so without farther ado let’s welcome our guest today his name is Manz Harmon welcome to the show.
Mance Harmon: Hello. It’s good to be here. Thank you for inviting me.
Alejandro Cremades: So originally from the deep South Mississippi so why so how was life growing up, give us a little of a walkthrough memory lane.
Mance Harmon: Well, you know it was always very rural and very simple. My parents ah were come from modest means my father is a minister and my mother is a nurse and so. Ah, we we always lived in tiny towns and and I didn’t really understand that we didn’t have much money. You know when you grow up in it. That’s just the way things are and in retrospect I look back on it I understand the sacrifices that they made for me and my brother there are 2 of us. And and then I bootstrapped I bootstrapped out of rural Mississippi by using the military the air force so I graduated high school and had no opportunity for college I enlisted in the air force with the intent of going to school ultimately getting them to pay for college. 2 years in the air force. They decided to send me to college fortunately and I went to school back in Mississippi and to four years later after getting a cops I degree I was able to be commissioned an officer in the air force and then they sent me to work which was which was fun. You know I got to. Finally achieve the dream of being a computer scientist and and pursuing tech the way I’d always dreamt about actually there’s 1 interesting part of that story. My first computer. Ah.
Mance Harmon: I got in the sixth grade. This gives you a sense of of of what we’re talking about here is ah you know, growing up years in the sixth grade the way I was able to buy it. It was an old ti ninety nine four a back in the days of the commodore pets and the you know the pre-apple days. And we had a garage sale that my mother helped help put together and just through the garage sale. We raised $100 to go and buy my first computer so that’s how it all got started and then the military educated me and and they sent me to. To to do work in a ah laboratory subsequently.
Alejandro Cremades: That’s amazing and I know that during this time is where you also made a lemon bet. So why was seeing that connection there so impactful.
Mance Harmon: Yeah, well so and 9093 I got commissioned and a second lieutenant in the air force and I got sent to do research at Wright Labs which is the largest air force laboratory and. I went to work ultimately for the senior executive in the military for machine learning or artificial intelligence. That’s where I met Lehman Lehman Baird and I have been working together since 1993 in lots of different capacities. Persists to to this day and it’s just been a ah great sort of symbiotic relationship I quickly learned that I would never be lemons equal when it comes to the tech. Although I’m proficient enough that I can appreciate the beauty of of the science. Ah, Lehman does all the hard work and I focused on business and Lehman takes care of solving the hard problems and and doing the innovation and solving the you know creating the the new products and I take care of taking those products and. And growing the businesses taking them the market and everything else raising the money et cetera so that the 2 of us combined make a great team and we’ve been working together now for well almost thirty years
Alejandro Cremades: My God quite the marriage quite the marriage now now in this case, you know for you and in this in this case for you. It didn’t take any you know much longer to be become an entrepreneurs so tell us about venturing into the.
Mance Harmon: Yeah, it’s older than you with house marriages. That’s true.
Alejandro Cremades: Startup you know world. How was that.
Mance Harmon: Yeah, well it was interesting. It was while still in the military. Um, the air force was good to me like I said I did research in machine learning to start then taught computer science at the air force academy cyber security. And then managed a massive program for the missile defense agency many of your your listeners might remember the movie war games from the 1980 S with Matthew Brodrick that was my program I did the real thing so I built the real thing for the air force for the missile defense agency. And while still in that role Lehman and I decided we wanted to become entrepreneurs and we had this great idea for building a decentralized identity solution. This is back in 1998 1999 timeframe raised a small round of friends and family money even while still in the military $300,000 and then grew that on the side until I could leave the military a couple of years later continued to pursue that and. Your your listeners may also remember the old palm devices. So the the way this solution worked is that you would have a palm pilot or one of those old trio devices and all of your credentials would be on those devices you would have your device you would sign in on the device using.
Mance Harmon: Handwriting recognition. So the biometric is handwriting recognition enter a password. That’s what you know the handwriting recognition is what you are and then there is an embedded key That’s what you have so it’s 3 factor authentication into the device and then the device would log you into a computer. It was an early. A single sign-on solution and it was decentralized it meaning that there was no single database for the enterprise of users. All of those credentials would be pushed out to the devices. Well we approached palm palm source was the operating system back then. And pitched this idea we told palm you should be selling into the enterprise market and then this is your enterprise play use this software to build an enterprise grade identity solution and and now you’re focused on enterprise in addition to retail and that went. Fairly well actually at at the end of the first pitch I put together the initial pitch deck I remember it very well I was pitching to the Vp of engineering at the end of the first pitch he said something that was new to me. He said okay I love this send me your terms. We’re going to put it in the operating system. So you know we said okay hey we’re we’re off to the races we we are going to be in palm source and go in you know, hundreds of thousands of devices and then we did that we pursued we we negotiated the terms of the deal and it went to the executive council.
Mance Harmon: Their palm source and then they went dark on us and they were dark for for three or four weeks had no idea what happened the guy that was leading bd on behalf of the the Vp of engineering called me up said he’s left the company. But we’re still interested the the champion. The executive champion had left the company. We’re still interested in doing this deal. Let’s let’s get it inked I said great. Let let’s full steam ahead. Let’s get it done and then they went dark on me again several more weeks past the product manager calls me up. He says the head of Bd is no longer with the company. He’s left but we still want to do this deal. We want to get it in the os let’s let’s get the deal done said great I’m ready to sign send me the paperwork right? Then it went dark again and just no communication. Eventually the original executive sponsor the guy that was negotiating the deal in the first place called me from symbol technologies in San Jose turns out symbol at that time sold more pdas than all the other pda manufacturers combined. He said we want to just acquire you and and so we did it. We did the deal. We sold to symbol. It’s now part of Motorola and that was our first experience in entrepreneur and we never raised more than that $300000, we’re able to build the tech.
Mance Harmon: Deliver it integrate it and deliver ah a a decent return to the investors and and I consider that a win given that that it was our first experience commercially outside of military experience. We sort of dove head first and and it worked out for us.
Alejandro Cremades: And first company first exit I mean that’s quite an accomplishment man. What’s the yeah, but kind of disability. Do you think that gave you into the full cycle of of a business.
Mance Harmon: Oh I learned so much right? I most importantly I learned what I didn’t know right? It’s it’s 1 thing to not know something. It’s and much better position to know that you don’t know something. So that you know where at least to go look and and and what to figure out so I you know I learned how business works I learned the language of business I I’m sure that we made a lot of mistakes along the way in retrospect there are things I would have done differently. But it was just the educational experience was invaluable and we made a little bit of money which was a big deal for somebody coming out of the military right? and that very modest means in the military and it was you know it was a great experience.
Alejandro Cremades: Absolutely once an entrepreneur to always an entrepreneur entrepreneur. So what happened next for you mans.
Mance Harmon: Well, we we moved to San Jose as a result of that deal from Colorado springs that’s where I taught computer science and had been working for the missile defense agency and um, didn’t stay with symbol very long. In fact I I decided. You know that was fun. Let’s go do it again. I decided that in less than 18 months we decided that we wanted to move to Texas so we were when the early early migrants from California to to Texas settled in Austin and started our second company which. Was focused on really modernizing the building access control industry with Data Networks at the time it wasn’t the case that access control like you know cards that you might use to get into building systems. Those types of video systems and and access control systems. They didn’t use Modern Data Networks they didn’t use wi-fi they didn’t use ethernet. So we built one of the very first companies that created those types of security solutions for. Ah, you know Modern Networks Modern Wifi Networks I I found a partner that had owned the largest independent distributorship of that type of hardware in North America
Mance Harmon: And decided. Okay I’ve got a channel I’ve got the channel partner to start now I just need to build the product and actually I had the partner before we started the company so we we started the company I built that to be a national company over the course of about 6 years and ah learned a lot learned a lot about 2 wo-tier distribution learned a lot about sales channels and building out sales channels while also developing some cool tech ultimately ended up selling out to my partner who had a small equity fund private equity fund that wanted to put a bunch of. Businesses together and I decided it’s time for me to go back mainstream into computer science I felt like I was just getting too far removed from the core of the tech industry and so we sold that and in 2011 December of twenty eleven and ended up.
Alejandro Cremades: And and how is and man’s quick question there. How is it different Ah in this case because on the first go around you know with your company essentially with with trio security I mean you sold that to I strategic player right? in this case, you know like with with blue wave.
Mance Harmon: But right? yeah.
Alejandro Cremades: You sold it to a financial player. So how is it different. You know from an acquisition on the strategic side to an acquisition on the financial side like you went through with with blue wave.
Mance Harmon: Um, on the financial side. It was purely a financial play. In fact I was doing it so that I would no longer have to participate I no longer wanted to participate right? I I felt like I had done what I could do or what I was interested in doing with the tech at that point. When we sold it to the strategic player I viewed it as an opportunity to get it embedded into an organization that could really take it to market on a large scale I didn’t stick around to realize that vision. It’s not you know is not the role that I wanted to play. But I wanted to see the tech itself. Ah you know reach its potential and so that that was the difference between the 2 organizations and the 2 exits I should say the yeah.
Alejandro Cremades: And and 1 thing that 1 thing that is very interesting here for me is that and I’m sure that for the listeners too is that after you did you you finalized the the transaction with blue wave and it was time to turn page instead of building another company. You were. You know, helping you know someone else build their own dream and I guess that you know for example with with ping identity which was the immediate step you know for you to really? you know, bring your the rocket ship that you’re in now I mean you were in this process of whether I stick around or. Or I go and and and and and launch my own thing I guess 2 questions here one. Why did you go and work for somebody else after you had experienced entrepreneurship for a hand firsthand twice and then 2 why didn’t you stick around and you thought hey now is my time to shine.
Mance Harmon: Yeah that’s a great question when I joined ping I did it for several reasons one I was I was friends with the founder guy named Andre Duran Andre Duran has been very successful with ping. He’s grown. It. You know for now what 25 years something on the order of 2025 years and he is a serial entrepreneur as well. He actually started jabber back in. You know the the pre-ping days. He saw he started jabber installed at Cisco I love tech. But I also learned the value. Through those 2 first 2 experiences of really sort of taking a step back and making sure that whatever you’re preparing to devote yourself to is the right thing that you really know for certain this is the play that I’m going to give the next 5 maybe 10 years of my life too and so I was in a position to take some time and and and not jump too quickly right? just to to be measured in that decision about what it is I want to do next Andre gave me the opportunity to have fun. I went and stood up the labs organization for peeing identity and then also served as the lead architect for the work that they were doing there while taking the the opportunity to sit back and observe what’s going on across the entire tech industry.
Mance Harmon: And and look for the next opportunity it was in that role that during that role I should say that Lehman went to work on trying to solve a really hard problem a hard math problem. And it’s in the field of distributed consensus. So the whole crypto industry by the way is built on distributed consensus algorithms and that’s what Blockchain is blockchain is a distributed consensus algorithm lehman went to work in 2012 on trying to solve a really fundamentally hard problem in the field of distributed consensus that problem specifically is how do you maximize? The security of a network ah issue consensus network while simultaneously maximizing performance. There’s always been this tradeoff between security. And performance of these types of of systems and and it he started in 2012 had nothing to do with Blockchain right? it it just was not informed. His work was not informed at all by what was going on in the in the world of blockchain or bitcoin back then it wasn’t even blockchain it was just. Bitcoin right? that that was it and and in two fifteen he solved that problem. He cracked the nut so to speak he figured out the solution. It’s a fundamental advance in the field of distributed consensus. He solved that problem.
Mance Harmon: And today we call that hash graph. It’s an alternative algorithm to blockchain at the same time. Um, you know bitcoin was becoming prominent and bitcoin sort of made the market if you will for this new invention that Lehman had called. Hash graph I am ping from an identity perspective. We had an interest is there. Are there any identity solutions that we can build based on blockchain bitcoin blockchain in particular I came to the conclusion. No, it’s just not performant enough and then Lehman. Solved the problem. He he solved the problem of of performance and security and so we decided wow the timing of this is fantastic. If this is correct then this is a billion dollar invention right? We knew upfront at the beginning. The implications of what he had developed. We knew it from the very beginning and you know and there you have it. There are these moments in time where you just feel an overwhelming compulsion to. To do something because it it. Everything is aligned and and that’s what we discovered in 2015.
Alejandro Cremades: So obviously you know when you discover that you know eventually you started incubating this this thought of give me your notice at the same time you know they wanted to promote you so I’m sure that they you know when you knew that you had a billion dollar you know, baby. You know in in in in in the process. You probably you know thought it was an easy. It was an easy answer to to where to go? No. So I guess you give your notice what happened next.
Mance Harmon: Yeah, well actually what happened is I put together the first pitch deck right? So you know you have a new idea you got to go raise money to to build it and I put together the first pitch deck and I called up Andre. And said hey I I need to come see you I want to talk to you about an idea I lived in Dallas at the time for excuse me Austin at the time and ping is in Denver so I get on an airplane I fly to Denver I get off the airplane before I could even get off the airplane I could see that my. My schedule had been rearranged rather than going to see Andre. They said we want you first go see the chief marketing officer guy Brian Bill and I I went to see Brian and he said man we we want you to take over product marketing for us. It’s an important role. We’re going to give you a big raise. We’re going to give you you know ah a boost in in title and rank etc. All of those things equity and I you know I thanked him and it said I need to consider it and then I went to see Andre walked in the room. First thing out of Andre’s mouth mans. We really value what you’re doing for the company I need you to take this job. We want you to head up product product marketing and I’m going to give you all these things right? we’ go to give you a seat at the table and I’m going give you a bonus and all these things and so I knew then.
Mance Harmon: That I had a fundamental decision to make do I take the promotion and you know take sort of the easy path and continue to climb the the ladder. So so to speak or do I turn them down because I knew that once I show him this deck. It’s gonna become clear that I’m leaving and it’s it’s tough right? It’s tough to to go back and I decided that I had to show on the deck and I said well look I appreciate that I’m gonna give you this pitch and then let’s talk about it afterwards. So I get into the pitch first pitch deck. First time I’m ever pitching and 15 seconds into the pitch Andre stops me. He says man stop I want to get my camera or phone I’m going to record this because it it sounds and feels a lot like it did. When we first started talking about Jabber and so he he records my first pitch and I have a copy of it. He sent me a copy of it and at the end of it. He said okay can you do both jobs I said no I can’t I’ve got to go pursue this I’m all in on this. And he said okay come back in the morning we want to invest and and and then we you know we negotiated a deal and simultaneously closed another round of funding from an investor on the front range but ping was one of the one of the earliest investors in the project.
Alejandro Cremades: Wow! So I Guess say for the people that are listening. You know to ah to really get it. What ended up you know being the um, the model here for the for the initiative because obviously you know you guys have like different structures on how hey there I say support it on how you know is it has really being brought to life. But for the people that are listening to get it. You know what is it and they what’s the model behind it.
Mance Harmon: Yeah, yeah, well so we first started a a normal ccorp called swirls and that’s a mashup of shared worlds. That’s what it stands for the technology hash graph. Is just a consensus algorithm that has superior properties to first -generation blockchain and so we compete today in the same space as the other major platform providers like ethereum. Inslana and algorithm and and others in in that space. Ah when we started it all. We knew that we were going to be well definitionally we we were centralized but we decided let’s create something that looks very different than the rest of the market. Um, we had the tech. We had fantastic performance in the tech in terms of speed and security and cost structure. But we also knew that equally important if not more important ultimately was the governance of this global network. And we wanted to to be decentralized and we knew that the governance models of those early players those early crypto platforms just was not working very well for a lot of different reasons. So I read a book literally I read a book by the founder of visa.
Mance Harmon: Guy named de hawk and deha stood up visa back when his bank americard before visa was was the brand. It was bank mariccard in the 1960 s and he wrote a book about that experience and all the travails that he went through and the governance model that they created and we decided. Let’s let’s adopt that and apply it here because what we’re doing is bringing together a bunch of independent entities all that maybe are are competitive with 1 another in some fundamental ways. But we want to bring them together to build this ecosystem in this platform that everyone will benefit from. Today what it looks like is a global organization of blue chip organizations. They’re 28 today they they include some of the biggest companies in the world like Google and Boeing Deutsche Telecom and no morera and standard bank out of South Africa and magazine Louisa it’s like the Amazon of Brazil and South america f is you know they process 50% of the credit card transactions today you know this caliber of organization including. Academic Institution University University College of London and London school of economics I it Adam Madrid and others they we brought them together. We were able to convince them to join a delaware based lllc so hidera.
Mance Harmon: Is and a delaware based lllc and the members of the lllc are this global collection of organizations. they are hidera and they govern hidea in ah in a. Fundamental way. What? what? I mean by that is aa is a public network that makes it possible for developers to build applications on top of just like a developer might use Amazon Web services for normal applications. They use addra for web 3 applications. Except all of these companies I just mentioned are the ones that they’re running the nodes that the developers use when you know instead of Aws Run by Amazon. It’s hadera run by this collection of organizations and they provide the governance and and there’s nothing else like this in the crypto industry where we’re unique. In the crypto industry in the governance model. We definitionally started centralized because just me and Lehman but we very quickly built up the organization raised a lot of money and hired a lot of folks. And then decentralized the governance in the way that I described so we we recruited these council members. We’re 28 strong Today. We’re growing to 39 we decentralized governance and then over time we literally deconstructed the operations.
Mance Harmon: Of the organization this you know this is kind of unheard of it. It doesn’t happen in in most well any industry that I’m aware of um we we built up the organization then we we spun off created a foundation. Where all of my Bd team and Corp Dev team left and went to work in the foundation. We gifted the foundation a bunch of cryptocurrency our cryptocurrency the h bar and the foundation then has its own Ceo its own staff. Ah. Completely independent of us. We don’t hold a board seat with the foundation. The gift was was you know a gift and then where we cut them loose and then we did it again with a different organization in Switzerland so in the United States we have the H Bar Foundation in Switzerland we have the hash graph association similar situation. There’s an academic organization that’s doing that now as well. It’s the Dlt Science foundation that includes the council members that are that are universities on our council and and others as well. And then finally operations. So what was left inside of adea engineering product management ah Dev Devops Backoffice functions all of that we spun out into another organization called swirlds labs including me and Lehman.
Mance Harmon: And and so Leman and I and the rest of operations moved over as swirls labs and now hera exists as a council of these organizations that run everything by committee. It’s got a treasury and it’s It’s not much more than that. There’s a staff that manages the operations council operations and and finance and and that sort of thing think of it as a cross between a a standards body as well as a network ah that is operated by. By these council members in Sworl’s labs where we are today builds the software under contract does you know provide services to Hidera under contract and then swirls is going to go on and and build other products and services that are complementary. And supportive of the larger hidera ecosystem. But it’s ah you know it’s a very unusual ah play here and the the central thesis of it all was that while centralized organizations are certainly more efficient. And you you know you can move faster at maturity. The belief is that decentralized ecosystems of organizations are far more robust and resilient to whatever might come in the market.
Mance Harmon: And and now we’re seeing that play out right? We’re We’re seeing the growth of this hera ecosystem explode as a result of decentralizing all of these functions into multiple organizations each of which are autonomous and have the ability and capacity go build. The ecosystem and and it’s Worked. You know we we’ve you know we’ve very quickly gone from 0 to a multi-billion dollar organization using this this approach.
Alejandro Cremades: And while we’re talking about money. How did you guys go about really raising the money you know for this incredible. And also unique structure that you guys have put together. What was that process like and then also how much how much have you guys raised in total to date.
Mance Harmon: Yeah, yeah, well so before we announced hera the organization we really promoted hash graph the consensus algorithm you know this was back in the 2017 timeframe when blockchain the hy if you look at the garter hype Cycle Blockchain was just you know roaring in terms of of the hype associated with Blockchain and we we had a superior technology in hash graph and so we really. Talked a lot for about six months talked a lot about hash graph and the promise of hash graph without ever saying how we were going to use it and then in the spring of 2018 we decided, let’s have a big event where we. We really tell the world. Okay, we have hash graph. You’ve been waiting here’s now what we’re going to do with it and we we rented out the playstation theater on Broadway in Manhattan and decided we were going to have an event and. I remember it very well within just a couple of hours of opening ticket sales for the the theater it was completely sold out right? Just completely sold out in record time and then we decided. Okay, we’re gonna live cast this live stream. This.
Mance Harmon: As well. We went into the event prepared to talk about all of our plans and and and introduce hidera to the world and and the governance model and the whole vision right? The entire vision for what hidea is today. We actually did write down and put together in a white paper. Before we held this event in preparation for the event. We. We released the white paper the same night as the event and then the online accounts you know the the number of people watching it online just began to skyrocket. We. We bought enough seats I think we bought five Thousand seats online for the event and we hit it in just minutes and through the evening we surged to nearly eighty thousand people watching this on a global basis. So we we had an entire global. Ah. You know audience with with the pacted playstation theater there on Broadway and and we announced to the world. The vision for for Hideera and it just resonated right? everybody just everybody loved it and so we went on ah a road show. We and immediately went on a global road show all over Asia all over Europe and the us and we were able to to raise the funds that were necessary to kick off and.
Mance Harmon: And run the project and you know over the course of I don’t know three or four months something like that. We raised one hundred and twenty four million dollars pretty easily at a great valuation and that kicked it all off and then you know subsequently we’ve. We’ve released the token we we have it. We floated the token right? You have a token that’s associated with the project and the token went live and 2019 I don’t know the total amount that has been raised for the project since then but what I do remember specifically is that before that point. We very quickly raised a hundred and twenty four million dollars
Alejandro Cremades: So Let’s say you were talking about vision there and obviously that’s saying you know why you were able to get the investors you know to to come in so quickly and so easily as you were saying which is remarkable imagine if you were to go to sleep tonight Manz and you wake up in a world where the vision of Heata. Is fully realized what does that world look like.
Mance Harmon: Oh look. Um I think that we will realize that vision and it’s a world that is fully tokenized. We will live in a tokenized world and when I say that what I mean by that you know many of your listeners will. Obviously know about Nfts and then a lot of them will know about crypto but that’s the tip of the iceberg when we think about as an example, let’s just take a supply chain use case as an example, you have some ah large organization that is. Building producing manufacturing I should say sneakers you have raw materials flowing into the supply chain. Those raw materials will have associated digital twins associated tokens those tokens then get combined when the tennis shoes get. Manufactured the tennis shoes have a token associated with them as the product flows through the supply chain. There are natural points where you take the tokens associated with the sneakers. A lot of sneakers and you in real time with the workflow in the in the normal workflow. You exchange those tokens for working capital using defi the decentralized finance stack and and that’s all using stable coins and the tokens and it’s all programmatic. It just happens and then later you use the tokens ah to to.
Mance Harmon: Purchase Product insurance or shipping insurance and then finally you deliver the lot of sneakers to a distributor and the distributor pays you an account you get it. An Account’s receivable from the distributor and that has a token associated with it and what do you do with that token that a R and token form. Again, you go back to the defi stack and you factor it you you get working Capital you know by by selling that token associated with the accounts receivable for stable coins that you turn into fiat and you fund operations. Every single thing that you see. And touch everything that has any value associated with it is going to have a token associated with it. We’re going to live in a tokenized world and Hidea is enabling all of that. So Att. Maturity Hera is the platform. For a tokenized universe.
Alejandro Cremades: I love it now you’ve been at it for a while as an entrepreneur man. So let’s say put you into a time machine here. Let’s put you into a time machine and bring you back in time. Let’s say back in time to the late 90 s where you were. Thinking about building something of your own. Let’s say you had the opportunity of having a chat with that younger mans and being able to give that younger man’s 1 piece of advice before launching a business but would that be and why given what you know now.
Mance Harmon: Well, that’s a great question. Um, you know I think the most important thing. Well I don’t know if it’s the most important thing certainly an important thing is. To never be rash never make decisions important decisions when you’re tired or when you’re stressed or in the heat of the moment. There are a lot of times. Where you know when you’re when you’re an entrepreneur when there is a lot of pressure. There is a lot of stress and there’s the opportunity to be expedient in ways that perhaps are not ah. Most advantageous for the long term now fortunately with Hidea I don’t think that we’ve made that mistake. We’ve taken a very long view with hadira from the beginning. Ah, but you know as an early entrepreneur. There are times when you just don’t have the the experience to to to know you got to take a step back and and you got to rest sleep get advice from those that have been there and done that.
Mance Harmon: Before pulling the trigger on on major decisions and so that more the other thing is to assume that you assume that you’re you’re probably not the right person to answer the question right? You really need I’m a big believer. And surrounding yourself with really good expertise and I practice I very much practice. What a lot of the world will call servant leadership and what I mean by that you know everybody defines it slightly differently. What I mean by that. Is that I view my role as the Ceo as not necessarily the one to come up with all the answers. In fact I normally am not the one to come up with all the answers but rather to hire the very best talent and then remove the roadblocks to their success. I’m the one that tries to fix the problems and and remove the the friction just so that the those that are working for me can do their jobs if you trust their judgment as the experts and you enable them to do the jobs. They’ve been hired to do. And you knock down the walls so that they can do them then you have the benefit of the team and the team is all important I appreciate what that means today in a fundamentally different way than I did back in in 1998 so.
Mance Harmon: So so that’s it.
Alejandro Cremades: That’s very very profound mans. So for the people that are listening that would love to reach out and say hi. What is the best way for them to do so.
Mance Harmon: Oh um, yeah so mant at swirldslabs.com is fine I have an assistant that can help with ah you know with with the inflow but that but that is the email address and that’s probably the.
Alejandro Cremades: You see enough mans. Thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Mance Harmon: The most direct approach.
Mance Harmon: Thank you so much for having me I appreciate it.
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Ravi Parikh is now on his second startup venture. After having built a very successful first company, he is now working to streamline development for other businesses, so they can move faster, and focus on what matters most. The company, Airplane, has attracted funding from top-tier investors like Andrew Ofstad, Jaren Glover, Thrive Capital, and Guillermo Rauch.
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Your email address is 100% safe from spam!About Ravi Parikh:Ravi Parikh is the founder and CEO of Airplane. Airplane is a developer tool for turning one-off scripts into internal mini-apps that can be used by technical and non-technical users across the company.
Ravi started his journey as a programmer, and got into computers at a young age, taking a brief detour to become a professional musician. He then started his first software company, Heap Analytics, with his friend Matin Movassate.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show today. We have an amazing founder. We’re gonna be talking about building and scaling the good stuff that we like to hear he’s done it a few times and they you know also raised quite a bit of money for both companies and also hired a lot of people. So again. Product market fit. Raising money scaling I mean everything that you can think of I think that the episode today we’re going to find it quite inspiring so without far ado let’s welcome our guest today Robby Parrick welcome to the show.
Ravi Parikh: Thank you so much for having me on.
Alejandro Cremades: So originally born and raised there in Indiana so how was life growing up and.
Ravi Parikh: It was nice. Yeah I grew up here in Indiana in in the midwest um, for for the first eighteen years of my life pretty sort of normal american childhood kind of. Ah, definitely pretty different than you know, being in Silicon Valley and building tech startups and things like that. Not something that I was exposed to as a kid or that I imagine many people were exposed to back in the 90 s but yeah I was born and raised here. Both my parents are doctors both my parents inigated here from India and and had a great childhood growing up. Um.
Ravi Parikh: Yeah I was I was lucky enough that I was growing up in the 90 s when the internet was taking off and and all that kind of stuff and got a little bit of exposure to it and spent some time learning to write code and all that kind of stuff when I was a kid which is what eventually got me into engineering and and and into the to the startup scene and all that kind of stuff eventually. But um. Was was not aware that That’s what it where it would take me when I was when I was a kid.
Alejandro Cremades: And computers and music. You know they definitely played a ah big role. So at what point do you come across Computers and then also music.
Ravi Parikh: yeah so um yeah I mean we were. We were lucky enough to have a personal computer in in our house. Um, when I was five years old my dad was always um, a really big um, sort of like he he was into buying like gadgets and and and like tech. Tech products and things like that. So we always had like a mac computer in our house starting in the early 90 s when I was pretty young. Um, and so I always just sort of like played on that as a kid um less like playing video games and things like that and more just like. Getting into early online forums and stuff and eventually learning to code a little bit on my own learning how to write some basic html and and Javascript and things like that and making basic websites and stuff back in the 90 s and and so that’s kind of what how I got in this sort of computers and then in parallel as you kind of mentioned I was I was also a musician that’s something I’ve done kind of my whole life as well. Um, and you know took piano lessons and stuff like that as a kid but when I was in high school. You know, started in in bands with with my friends and started writing songs and things like that as well. So um, ended up getting some exposure to that as well. So those are the 2 things in that I’ve kind of defined my professional career and what I spent a lot of time doing as a kid as well.
Alejandro Cremades: So then landing in Stanford you know quite a different environment than you know Indiana you know, definitely the innovation. There is is happening so how was that experience in the network that you build and and and all of the above when it comes to innovation.
Ravi Parikh: Yeah.
Ravi Parikh: Yeah, it was. It was really different I mean I think when I visited Stanford for admitted students weekend back in 2006 or whenever it was that was the first time I’d been to California I think um and I remember I still remember it pretty well because in my head I had only ever seen like California and movies and you see. southern californian movies and it’s always very warm and sunny and then I went and the first day I was there was April and was raining and I thought oh well maybe that’s a fluke or something but then it turns out Northern California is actually kind of cold most of the year so but Stanford was great I was there for four years two thousand and seven to 2011 um I started computer science. Um. Honestly, that was a huge opportunity for me. It was something I was very lucky to be able to go there and just be surrounded by so many other really really smart. People. The person who eventually became my cofounder at heap the company I founded in 2013 was a classmate of mine at Stanford. So really that network. That I built there in that specific person Ma Teen who I met there um was kind of very pivotal to to the future of my life. But even despite even even besides meeting my eventual cofounder there met many of my lifelong friends there a lot of the people who were in class with me or the year above me or the year below me went on to do really great things. Um. Think the the folks who founded snapchat or 1 year below me at at Stanford Tons of other tech startups of course came out of um, ah that crop of people I went to school with so that was very cool to see. Um it was 2007 through 2011 so it was just when the current kind of tech boom was taking off like there had been the dot com.
Ravi Parikh: Bubble back in 2000 of course. But then that kind of crashed the year I declared to be a computer science major 2007 I think I looked at this data at 1 point or I saw it somewhere that was a local minimum for computer science major declarations I think there were something like 70 in my year. Um I think now it’s like hundreds like several hundred people in every year I think it’s the most popular major at the school but it certainly wasn’t popular when I was a freshman and it was starting to pick up I remember um you know it was Facebook was like the really huge company that was like growing super fast and. They had ah they relocated their their headquarters from Boston to Palo Alto and they were recruiting really heavily out of out of Stanford and and and so I knew people who were going there and stuff like that palantir was becoming really big as a company they were recruiting a lot of people out of my graduating class and sort of the classes around me so it was just getting that point where. You could graduate as a new grad studying computer science in 2010 or 2011 and get a starting salary of $80000 which was an an absolutely enormous amount of money. Um compared to you know what? most of us expected at the time so it was it was pretty. Crazy to see that kind of like early beginnings of the current um tech boom that’s sort of been happening for the past Decade and a half was kind of just getting short when I was at staford it something totally different than than what I thought I was going to be getting into growing up so it was really great I’m I’m very thankful for it.
Alejandro Cremades: And in in in this case I mean rather than you know going with a whole you know, getting a job or starting a company you decide to go at it and tour as a musician. So so that’s quite a unique you know path. So so tell us about that. Yeah.
Ravi Parikh: Um, yeah.
Ravi Parikh: Yeah, it was. It was pretty different. So yeah when when 2011 my my senior year of college. Everyone was sort of applying for jobs and there were career fairs and all that kind of stuff and I did a little bit of that but I actually have made music my whole life and in college I made. Um. Electronic music and I would put on the internet on Soundcloud and Youtube and and and things like that and and around like 14011 a lot of my music shard getting a little bit popular on the internet various you know music blogs and stuff started of picking it up and and ah you know writing articles about it and then people would contact me and say hey do you do you do shows do tour. And I was like yeah sure so people started paying me to do shows and then I was getting paid to do shows a little bit around like a little bit before I graduated and so I was like well instead of getting a job. Maybe I should just keep doing this for a while. So I did that for almost two years after that. So 15012 um I spent most of that time. Um, you know touring 2 3 days a week playing shows um in various sort of clubs and vennies and things like that around America and that was a lot of fun. It was not what I had planned on even even growing up making music my whole life. There was never any point at which I thought I would do it professionally. Um, and even when I was doing it professionally and I really thought it was gonna be my my long term thing and it turned out not to be my long term thing I think around 2012 after about a year year and a half of doing it I wasn’t really all that excited about it. Um I enjoy making music I don’t really enjoy touring. Um.
Ravi Parikh: It is. It can be lucrative but you have to get really really big before you you start making a lot of money doing it so it wasn’t necessarily something where I thought this was like a great long-term career unless I got really lucky or something like that and I didn’t necessarily want to do that. So um I started hacking around on startup ideas. You know when you’re playing 2 or 3 shows a week. You actually have a lot of free time. And in that free time I think most people would have been making more songs or something like that which I did a little bit of but I spent actually a lot of that time just you know working on side projects and things like that with with friends of mine. Um, and ah Maine the person I ended up cofounding keep with he was someone I spent some time in 2012 like hacking on various unrelated side projects with. And then when he eventually started keep as a company and then approached me to work on it with him that sort of made natural sense and then that’s kind of when I decided to say okay this is maybe a more interesting opportunity than continue to make music full time so transitioned into into starting the company. Yeah.
Alejandro Cremades: So tell us that moment where you receive the phone call what happened on that phone call.
Ravi Parikh: Yeah I remember pretty well so Mateen um, had been working on heap so heap is basically an analytics tool that it’s like a client side Web Analytics Mobile Analytics tool that sort tracks user behavior so you can sort of get a sense of what are people doing on your website. What are they doing on your app and the key thing heap does a little bit differently is it sort of. Automatically tracks data that in other tools you have to put a lot of manual work into into tracking and so matten had that idea in sort of late 2012 he started working on it. He actually asked me to work on it with him once and then I said no that sounds like a lot of work. Um I’m doing this music thing and so I didn’t really I wanted to work on fun side projects I didn’t really want to work on anything. Super like intensive at the time at least and so he’s started working on it a little bit himself I think he worked with with ah mutual friends of March from college actually for a few months on it for at first. But um, he kept sort of like pestering me to say like hey you know this is really interesting. You should you should consider taking a look at it and I really did find the idea very interesting. Um, one of the few internships I had done in college I went and worked at some startup that went defunct later. Um, as an intern and at that startup what I did for like half the summer was write analytics tracking code in a tool called amature which is now called Adobe Analytics um and so I spent and I remember thinking. Maine’s idea for for a heap I was like that would have automated Basically what I spent half my summer doing and I was like that seems pretty valuable if you can automate like half a summer of ah ah you know a few months of work of engineering work and sort of abstract that away so you can concentrate on more interesting higher level stuff that sounds like it could be pretty valuable. So.
Ravi Parikh: The idea made sense to me Ma teamen kept pitching me on it. At some point I thought you know this this made. Maybe this makes sense. Maybe I should do it full-time and so I joined Ma team and sha working on it together with him. Um, we did y combinator which is like startup accelerator and then going through that is where we got a lot of our initial customers and all that kind of stuff. And that really set us up well to eventually raise some money get some traction all that kind of stuff so it wasn’t like there was one moment where I said this is something I definitely need to do. It was more just like a couple months of being convinced that this was the right sort of opportunity and I’m really glad I I did eventually say yes to Ma Teen and and work on it with him.
Alejandro Cremades: So finding product Market fit. How was that a moment where you guys are Wow I think that we’re we’re into something here. Okay.
Ravi Parikh: Yeah.
Ravi Parikh: Yeah, ah, interestingly it took a while I would say like the core idea of heap never changed. It was the same core idea on day one as it is today. Um, you go to the heap website today you sign up for it ten years later um it’s the same. Core product that it was on day one yet it still took us a good year year and a half of work to really find product market fit because even though the idea was very resonant with people the actual execution of it and making it actually work for people took a long time and what I mean by that is so the way heap works is you install a javascript snippet on your website or a library into your mobile app. And will automatically track user behavior. So every time they click on something on a website or every page they visit or something like that we’re we’re capturing that user behavior so you can analyze it later on as as a person who is sort of developed the website and so that was the core idea from day one but it took us a while to to figure out that you can’t just capture all this. Raw data and present it to someone say here you go you have to actually present it in a way that’s accessible for that person and so what I mean by that is if I tell you someone clicked on this button a hundred times. Um, then the button you know the way we’ve identified it in our tracking code is. Ah, in sort of the tracked data is like someone clicked on a element on the page called a button which has a certain css selector a hundred times and that’s not that useful to you what you really want is semantic information someone clicked on the signup button or something like that so we had to give them a system to take the raw data that that heap was tracking.
Ravi Parikh: And correlrelated with the actual semantic. You know business relevant names they might have or the actions someone takes and that system for correlating this sort of raw data with like those names. Um that was a fairly complicated thing to do in heap and so while the product theoretically sounded really good people would use it and find it really complicated and hard to use. And so we didn’t really have great customer attention. People would sign up for it. Try it out and then churn pretty much immediately and then so we eventually built this sort of visual tagging system where you don’t even to think about what the raw data is underneath what you can do is you can just go to the go to your website load heap onto it. Um, and then like basically we have this thing called like a ah. A visual definition system where you can basically click on the things yourself that your users would click on on your website or in your mobile app and then label them yourself in line and sort of tell he hey this is my signup button. This is my homepage. This is my shopping cart button or whatever. Um, and and through that the data then you then you have then you see in heap becomes a lot more semantically meaningful. You can start to build interesting charts and graphs and stuff out of it. Um, it took us about a year and a half to get that insight that that was what we needed to have in the product and then we finally built it and then we shipped that that feature that sort of visual tagging layer. Um. Didn’t exist until about February Two Thousand and fourteen and we started the company or my team started in late twenty twelve I started worked on in January Twenty Thirteen so it was almost a year a year and a half after the company started that we actually built that feature that in retrospect, we were just built on day one if we had known. Um.
Ravi Parikh: And it was it wasn’t just that feature. There was a few other things that we had to get right? There was a lot of like polish in the product that we had to do over time. We also had to sort of it’s an analytics product and so we would have this problem for a long time where once you hit a certain level of scale. It would become very slow so we had to make the infrastructure better. But once we kind of had all those pieces in place in like. You know, early to mid 2014 that’s the point at which people didn’t just try it out. They would try it out. Find value in it and stick around as long-term customers and and that’s when he first started getting recurring revenue that actually stuck around That’s when we started getting our first sort of annual contracts or first sort of enterprise customers. All that happened over the next year after some of those features were in place but it took us a while to really iterate towards that.
Alejandro Cremades: And and how was the process too of of raising money because obviously this was your first company and I’m sure that it was not an easy process. You.
Ravi Parikh: Yeah, yeah, it was it was ah it was difficult. Um I think like we we’ve gotten. We got pretty lucky with fundraising at heap and I think 1 thing that we did really well was um after our seed round at least we were. We never put ourselves in a position where we had to raise money. So we always had the option of not raising money being cash flow positive things like that if we really needed to be so um, our first I mean heap did y combinator so you know why commenter gives you at the time I think it was $100000 I think now to give you more that was that was a good amount of initial capital for at least me and Maine. Um, to be able to like you know, do some basic you know, buy some servers or buy a little bit of a bs ah pay for database a little bit pay for some software all that kind of stuff we couldn’t really hire anyone on $100000 in total funding so we had to raise a seed round what we ended up doing is after y combinator was over after demo day. We ended up. You know, raising a $2000000 seed round. It took us a while it took us about I think something like 80 different meetings with Vcs and angels to put together that seed round. But um, it was relatively straightforward. It was it was about five six weeks of of meetings with people meeting with people constantly to sort of put that round together. Um, you know 50 k one hundred k at a time. Um, but overall I think it was considered a pretty good seed round at the time even today $2000000 is a pretty good seed round so that that round was not that difficult to do I think the future rounds were much more difficult so our series a round was almost three years later in 2016 early 2016 that was $11000000 but led by ne a but.
Ravi Parikh: It took us a long time to put together that round we probably spent almost six months fundraising um and we got no from almost and everyone we spoke to. We only got 1 term sheet which was from nea um, and everyone else that we talked to turned us down or or wasn’t interested. Um, this is despite the fact that we had about two million and arr at the time. We were growing pretty quickly. Um, we grew 2 to 6000000 and then in a year after that so we had pretty strong growth for a saas company and we were closely. We were basically cash flow positive so we didn’t necessarily um, we were really efficient as a company and so 2 millionaire are cash flow positive with strong growth today that would be kind of a slam dunk. Round with like ah ah it would be that that wouldn’t be a terribly difficult round to do at the time it was difficult but we did get it done. We got done to $40,000,000 valuation. Um, and and really I think the reason we eventually did get it done is because because by virtue of being cash flow positive. We didn’t need the round to get done. We could sort of. Um, we had the luxury of being able to say no until like the time was right? and so the fact that everyone was not interested in the company was not existential for the company and I think like what a lot of founders do is they assume that if they hit a certain milestone. Oh if I get to a million an error r or 2000000 error r I’m definitely going to be able to raise an next round and a lot of people think it’s guarantee. Um, maybe it was for eighteen months in 202021 when capital was was ah everywhere. But for the most part there’s no guarantees in fundraising um the sort of best advice I think is to just always run the company as if you’ll never be able to raise again.
Ravi Parikh: And that way if you do if you do decide to go Fundraise. You never need to fundraise. You can just sort of um, allow like the market to work itself out and if you get good terms then great. You can take them and if you don’t get the terms you like then you can just say no and and keep sort of operating as a business and so that’s more or less what we did with our seriesries a as we do Roce Seriesries b. sure you see in every round they were all difficult rounds but none of them were rounds that were like necessary the survival of the business and that allowed us to sort of survive despite maybe not having the rounds come together as fast or as cleanly as we’d like them to so that’s that’s kind of how the series a went. Um, but. Yeah, that was kind of like roughly what fundraising looked like at at heap.
Alejandro Cremades: And now the company. You know we see now you’re you’ve started your own and and we’ll talk about that in just a little but the company you know has done incredible I mean has raised over two hundred million hundreds of employees I mean with a company that was succeeding like that like literally literally like a rocket ship. Why why were you exploring other options. Why do you decide? You know it’s time to turn page and and do another company.
Ravi Parikh: That’s a really good question. Yeah so I left heap in 2020 in July of of that year um and started a new company called airplane which is what I’m working on now and heap has done phenomenally since then it was ah it was a good company and it was about 200 people when I left it’s about 400 and something people today. I think the revenue has much more than doubled. So it’s not only increased headcount but it’s also continued to grow really fast as a company itself. Um, the the reason I decided to leave was was honestly I like building things from the ground up. Um, you know when we were starting heap ah, neither Maine nor I really knew anything about running or starting a company. We knew nothing about finding product market fit about hiring people about any of these things. Um, and so that process of learning was just constant. You know every month every quarter every year there was some new challenge to deal with and so it was just a constant process of solving new problems and um. Really just learning so much from that process and then also that early first few years of figuring out. Okay, we have this cool idea. But how does that idea need to manifest in a way that people can actually adopt how does that idea manifest in a way that’s differentiated from what our competitors are doing How do we solve various product challenges. Who is this product even for is it for product managers for marketers is for engineers so all these like really tough questions were what we spent the first several years of heap grappling with but at some point the company got to the stage where it was very clear what our product market fit was it was very clear what we were selling and who we were selling it to. We had a product roadmap but it was very clear how to execute against that product roadmap.
Ravi Parikh: And the challenges of the company transition from being the sort of like figured out 0 to 1 type challenges to being more um, scaling challenges challenges where um, we have a huge organization and we have to keep everyone on the same page we have to make sure sales and marketing and product and customer success. All. Marching in the same direction and are all understanding of the same mission and vision of the company we have to make sure that um the handoffs between various teams are are working really smoothly. We have to make sure that our recruiting processes work really well so these are exciting challenges. They’re just not challenges that I personally found as exciting as the challenges of. Figuring out the product market fit of the company. The go-to-market model the company all that foundational stuff and so around 2019 a year before I left that’s kind of when I was feeling like you know I’m running sales and marketing and customer success and all this stuff I have 100 plus people reporting to me directly or indirectly this. Feels like um, you know I’m a first -time founder. My previous job was touring musician I don’t really know what I’m doing there are people out there who are much much better at scaling than I am and so we decided to go hire a co o we brought in a co o named ken fine um who joined the company in mid twenty nineteen um and immediately once he joined maybe two to three months after he joined the company the sort of go-to-market team operating cadence the maturity the rigor the predictability of it just went up because he was he had just seen this before and he had so much more precision in terms of like how that go-to-market team should run at scale.
Ravi Parikh: Um, and so having seen him operate so effectively led me to realize like what I was really good at was that like early building and all that kind of stuff and so I thought you know I’ll spend a few months making sure kennes fully transitioned in and that he’s doing a great job. Um, and that’s what I did and then once. You know once I felt like he was operating on all cylinders and I wasn’t needed anymore I decided to leave um I stayed a little bit longer. Um because around the time I was planning to leave covid ended up um hitting and that sort of pandemic led to a big shutdown and at first it wasn’t clear what that was going to mean for tech companies and so. Remember q 2 Twenty Twenty was was a really tough quarter for obviously everyone in every industry but um, our sales pipeline basic dred up overnight. So I did stick around for another two quarters after that. Um just to make sure there weren’t any ill effects on the company. Um, what actually ended up happening was there was a huge covid pull forward and saas companies like he actually ended up having like record. Ah, profits and things like that later in the year and and the next year um but so once once it was kind of clear that the the the business was going to survive is going to be stable and and all that kind of stuff I decided to just finally leave in July 2020 so that’s when I finally loved heap. Um. And I’m I’m pretty happy with that decision because what I did next was was work on airplane which is a company I’m working on now I’m very happy to be back in this sort of early stage building from the ground up making something new. So yeah.
Alejandro Cremades: And why why airplane? why was the problem meaningful enough for you to to leave such an incredible you know, chapter you know for for this new one.
Ravi Parikh: Yeah, it’s a really good question. Yeah, so basically what what airplane is is. We’re a developer platform for building internal tools and so what I mean by that is um, you know, let’s say you’re an engineer at a company like Netflix to use an example that’s not 1 of our customers. But I think it’s just a brand everybody knows it’s a good example. Um, you know part of what you end up doing on the engineering team at Netflix is you build the app that everybody logs into on their phone on their browser on their Tv whatever to watch movies and whatnot but a lot of what you have to do is build internal tools as well. So for example, you know. There’s ah, a team of people who do things like content moderation. There’s different shows and movies and all that upload every every 5 minutes and Netflix and someone needs to build a repository internally to sort of like how’s all that content and let people sort of like annotate it and and things like that and so there’s a ah huge team of people internally. who who do all that stuff and they need tools like they interfaces uis and stuff to read and write against that data and do what they need to There’s probably another team internally needs to do billing. You know, let’s say you get overcharged for your Netflix subscription one month or need to cancel your subscription or something like that. So you call up Netflix customer support and say I’d like to report an issue with my billing. Someone on the other end of that line has to be able to look at your account. They have to be able to see your billing status. You know issue a refund if they need to you know, upgrade your account to a different tier if they need to There’s all these kinds of internal tools and need to be built to sort of like read and write against customer data against billing data against content data. All that kind of stuff and every company has this I mentioned Netflix but.
Ravi Parikh: Bank has this your uber has this your saas companies and things like that they have this. They just have a plethora of internal software that needs to get written and all this internal software is specific to the business. Um, every business has its own flavor of things that it’s doing but there’s very common patterns across all of them. So the internal tools at Netflix. Building versus the internal tools that uber is building versus the internal tools that Facebook is building um all have in common a variety of features that they need to be permissioned audit logged all that kind of stuff and so the edm of an airplane is we give you a framework to basically build those kinds of tools a lot more quickly. It’s about you know 30 to 50% of all engineering work goes into internal tooling. We try to accelerate that as much as possible. So that engineering teams can focus on the core and the reason why this problem in specific resonated with me is because it was a huge problem at heap so you know heap is a saas company. We sell enterprise software to businesses and and as a part of doing that. There’s always times where. Customers would have needs that were not addressed by the product directly but we still needed to support. Um and we need to build internal tools for those needs. So for example, a customer might be migrating over to heap from another analytics system and they might want to bring in their historical data and import that into heap or they might want to. Um, you know, split up their heap data into 2 different accounts or something like that or maybe they need to um promote someone on their team to an admin role and they not sure how to do that in the product and in all these instances our support engineering or our solutions engineering team would get these requests and get these queries and usually they’d have to escalate them to the engineering team and then our engineering team and get involved.
Ravi Parikh: And they’d have to like run some script or run some query against the production database to fix this issue for the customer on a one-off basis and over time as we scaled these kind of 1 ne-off customer requests ended up became ah ended up becoming a huge bottleneck for our engineering team and so our engineering team was spending a lot of time. Solving 1 ne-off customer problems instead of building product features which was a huge drain on the ngt productivity. Um, and we also spent time like building internal tools to sort of address these things in a more systematic way. But that was time that could have been spent advancing our product roadmap and so I kind of just saw this over and over and over again at heap. Um, and then when I left he in charge for brainstorming new ideas I thought you know there’s probably a lot of things on the internal tooling side that we could build a framework for that would sort of automate a lot of that boilerplate and a lot of that repetitive work. Um, and then I was kind of brainstorming that. Was talking to a friend of mine named Josh who was previously cto of a company called benchling which is a co life sciences saas company. That’s also done quite well. Um and he was saying that benchling are the same set of problems over there and so benchling is also an enterprise software company. They also have tons of customers make 1 ne-off requests and they also have tons of scripts and queries and things like that internally that people sort of have built to address those problems and so Josh and I were kind of brainstorming we thought hey we could sort of provide a framework that takes care of the ui the permissioning notifications. All these kinds of like aspects of these internal tools that are kind of common across companies and.
Ravi Parikh: Probably he probably benchling would get a lot of value out of it and we spent some time in sort of late twenty Twenty interviewing friends of ours who work at other companies and just developed a sense that this wasn’t a problem just unique to heap and unique to benchling. It was a problem that was existed in almost every company. Um, and so that kind of gave us conviction that we could sort of. Build something quite valuable in this space. Um, and so I was excited to kind of tackle it as a result we ended up starting to build a prototype and write code and build an Mvp of the product in December of Twenty Twenty or so um, raised an initial round of funding a little bit after that. Um, and have kind of been working on it ever since.
Alejandro Cremades: And in terms of um, you know location here because a lot of founders. You know they’re always you know wondering where should they start their business heap. You did it in the bay area. So the um, the h queue is in San Francisco but
Ravi Parikh: Right? yeah.
Alejandro Cremades: With the airplane you guys took a different route and you’re in New York so why
Ravi Parikh: Yeah, it’s a good question so airplanes actually distributed. We don’t have any sort of single location where everybody’s located I live in New York as you mentioned my cofounder Josh Liz in San Francisco um we have employees in both cities and then we also have employees in a number of other cities across the globe and so part of the reason we did that is because we started the company in December Twenty Twenty it was still the peak of the pandemic. Um, no one was vaccinated yet because the vaccines weren’t really rolled out yet and so just by necessity we were fully remote from day 1 um, and because we kind of develop those norms around being fully remote from day one back when it became possible to go back into the office. We didn’t necessitate that anyone has to go back into the office. Um, and so we have a collection of people in San Francisco New York so we do have 2 small offices in both cities but they’re not requirements to have to go in. And we have remote employees too in in a variety of other studies across the world and so it it was more of a you know day 1 we did discuss that a little bit Josh and I discussed you know hey if we um, you know when it’s possible to go back into the office. Do we want to enforce something like that and I think we debated a little bit but ultimately we felt that. We were quite productive being fully remote. Both of us are sort of experienced um ah second-time founders and and had sort of like experienced managing teams and setting goals and and and and things like that and so I am a believer that like you know if you do an effective job of setting goals and setting requirements and.
Ravi Parikh: Um, saying this is what’s expected of of someone as an employee they don’t have to be in the office to be productive. There are a few things that sort of are done better in person. You know there are certain types of collaboration or discussions that are higher fidelity when they’re done in person. Um, but you can sort of solve that by getting the team together for like a company off-site or something like that on a periodic basis. Um, a lot of work is individual. You know if you’re writing code you can sort of do that in your own home. You can do that in office with other people I don’t think it makes a huge difference if you’re on a call with a customer and you’re doing sales calls whether you’re doing that from your own home or whether you’re doing that in a meeting room at an office I also don’t think makes a huge difference. So. You know I do think seventy eighty ninety percent of the time you spend on a day-to-day basis is doing things that don’t necessarily need to be done in person. Um, and so for that reason we want to be flexible and be able to tap into a global talent pool of people and be able to hire from anywhere. Um, so I was kind of the decision making there. Also heap my previous company it was based in the Bay Area we did have an office and we had a culture where we went in to the office most days. But even there we had ah a fair amount of people who were remote so our engineering team at heap even before the pandemic about one third of that team was remote. We had people in. Europe in in India and in Japan and Australia and a number of countries and and and all that across the globe and we had done that from early on just because it had always been hard to hire. It was always a very competitive hiring market and heap was not some you know, super famous company.
Ravi Parikh: Um, but that had an easy time hiring people and so we would just hire if we found someone qualified and talented. We would hire them regardless of whether they were located and so I had ah I had had a lot of experience kind of working on a partially remote team already before at heap given that. But a third of the team was distributed across the globe. Um, and so that experience led me to to sort of say with with airplane. Let’s let’s go even further in that direction and embrace this sort of remote um distributed team thing even more.
Alejandro Cremades: And now you know it’s it’s incredible because you guys got starting 2021 and literally in 2021 you raise your series a I mean typically you would do more like nowadays people are doing like precede seed than you know a series a but in your guys’s case you did a series a.
Ravi Parikh: Yeah, yeah.
Alejandro Cremades: In 2021 in December and then you did a serious b in 2022 in September and literally you guys have been able to raise money from like the who is who I mean you have their thrive capital and then also a bunch of other people like benchmark or silicon valley angel and the who is who when it comes to.
Ravi Parikh: Um, yeah, ah.
Alejandro Cremades: Angel investors so how would would you say that perhaps you know it. It got a little bit easier as second time founders to to to raise money.
Ravi Parikh: Definitely I think you know we were. We’ve been very fortunate with our a round and our b round from from benchmark and thrive um respectively to be able to raise from like really high quality vcs and really high quality firms at at great valuations and things like that I think a lot of that is. Due to as you mentioned we’re second time founders I think people give you a little bit more credit. There. They know that you have some experience scaling companies and finding product market fit and hiring great people and all that. So I think you definitely get a bit more credit as a second time founder and I wouldn’t necessarily say that what we’ve been able to do with with airplane is going to be something that every founder can replicate. Um. That being said I think um, you know some of the reasons that we were able to raise so much was because we’re second on founders other reasons were just because of that the traction of the product early and things like that you know when when thrive um led the round. Um, they not only you know thought it was great that were’re second time founders. But. Um, they also talked to a lot of our early customers. They got a little all of those proof points about the kind of value that we were adding to a lot of these companies and so um things like the just general nps of the product. The net retention of the product. The value. The the differentiated value. It’s been adding to our customers I think was a driver as well in sort of being able to. Um, raise at good valuations and and good rounds and things like that.
Alejandro Cremades: Now in terms of vision you know because I’m sure that you had to sell those investors on a vision if you were to go to sleep tonight and you wake up in a world where the vision of airplane is fully realized what does that world look like.
Ravi Parikh: Yeah, it’s a really good question. Um, ultimately if I Zoom way out the whole point of the whole point of airplane is to make engineers more productive and so if I think about my time in heap. The reason we built airplane is because this lack of good internal tooling and this like constant time of engineers. Spending time solving one-off customer issues was a huge drag on the overall productivity and engineering team if I could have sort of waved a magic wand and had 99% of the effort of the engineering team go towards advancing a product roadmap rather than doing these one-off things um rather than doing these these? um. Interrupts and stuff like that we probably would have been able to achieve the vision of heap a lot more quickly. Um, and I think that’s true of almost every company there’s there’s studies out there that show 25 thirty fifty percent of engineering time is spent on internal tooling and that ratio grows as a company grows because the surface area for the amount of tooling that’s needed and the complexity grows. Um, faster than the company grows and so as a result you have like really great companies that are just spending all their time fighting these internal fires instead of advancing their own vision and so if I wake up in a world tomorrow where airplane has achieved its vision. It’s a world where engineering teams software teams in general are able to just. Move at the speed of their roadmap. They’re able to move as fast as they want to move on innovating and moving their own vision forward rather than sort of being held back by sort of internal bottlenecks and and things like that. Um, and so if we need an interface internally at a at a company that.
Ravi Parikh: Someone needs to be able to use to read and write against customer data or something like that. It should be possible to build that and solve that problem very very fast so you can get back to the main stuff that you want to do which is sort of like pushing product forward and so that’s kind of the high-level thing that airplane is really trying to solve I do believe that software engineering in general is the main engine of innovation in the world. Um, over the last 10 years. There’s been. You know the the majority of value created in tech has been created by software now with the ai wave. That’s been happening. It’s a very software-d driven wave of innovation. Um I do think it’s the greatest sort of engine for innovation in the world and airplane if it achieves its mission is. The mission is to make that engine of innovation even more productive in a general sense. So that’s really what we’re trying to do if I if I Zoom way way out.
Alejandro Cremades: So Now let’s say let’s let’s assume way way in you know when it comes to um to putting you into a time machine and bring you back in time you know, let’s say we bring you back in time you know to that moment that you were receiving that phone call to really get going with heap and you have the opportunity of sitting your younger self. For a quick chat and on that chat you’re able to give your younger self one piece of advice before launching a business. What would that be and why given what you know now.
Ravi Parikh: That’s a really good question. Um, honestly I think the number 1 piece of business advice I’d probably give my my younger self is just spend more time listening to users I think you know when we spoke earlier on this. Ah. And conversation. We talked about finding pot of market fitted heap and it took us about a year year and a half to really get there and there were certain insights that it took us a long time to unlock and those insights would have come a lot faster if we had just spent even more time with our users. We spent a little bit too much time writing code and trying to guess what the market needed rather than just asking people. You know why didn’t you get up and running with heat. What was what fell short about it. We did a little bit of that but we could have done a lot more of that and even as we scaled and grew we still didn’t learn that lesson. We we spent a lot of time and years at the company building things that were not exactly what the market needed. Trying out strategies that were never going to work and we could have validated a lot faster if we had just spent more time talking to our users understanding them better understanding their pain points more specifically and really getting at the core of why they did or didn’t like our product. Um, and so it’s something that honestly was a painful lesson that we had to learn over and over and over again. Um there’s never any substitute for just getting direct feedback from your customers from your users about your product. Um, and honestly heap would probably be you know twice as big 3 times as big today.
Ravi Parikh: And just a lot further along if we could have cut out a lot of that early time that that we sort of spent doing the wrong things and at at at airplane we’ve tried to put that into practice Better. We’ve I’ve tried to spend more time just like getting at the core heart of what it is our product does or doesn’t do for our customers and and really listening to them. But even that’s hard. It’s It’s always easy to get into a room and brainstorm things and whiteboard things and convince yourself certain ideas are good. You know there’s no shortage of good ideas out there. But it’s hard to sort of do that work of then talking to 20 people and saying is this actually a good idea and things like that. So. That’s probably the number one thing I’d say.
Alejandro Cremades: Love it So rabi for the people that are listening that would love to reach out and say hi. What is the best way for them to do so.
Ravi Parikh: For sure. Um, you can just send me an email I’m Ravi R A V I at airplane dot dev so yeah, feel free to to reach out anytime if you’d like to chat.
Alejandro Cremades: Amazing! Well rabi. Thank you so much for being on the deal maker show today. It has been an honor to have you with us hi.
Ravi Parikh: Thank you so much. It’s been an honor being on on today.
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Naveen Jain has created a whole string of successful startups. Now with his seventh venture, he is tackling a problem faced by eight billion people around the world. The startup, Viome, has attracted funding from top-tier investors like Glico, Khosla Ventures, WestRiver Group, and Physician Partners.
In this episode, you will learn:
- How to think about exits and acquisitions
- How to build your team and lead them
- How Viome works
- Building the right board, and how to manage them well
- How to raise $170M for your startup
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Your email address is 100% safe from spam!About Naveen Jain:Naveen Jain is an intensely curious entrepreneur who is focused on ideas that will push humanity forward. He is the author of the award-winning book Moonshots: Creating a World of Abundance. His current moonshot adventures are Viome and Moon Express.
As a serial entrepreneur, Naveen Jain previously founded InfoSpace, Intelius, and TalentWise.
Viome’s singular mission is to “make illness optional.” Viome has built an AI-driven platform that analyzes the interaction between food, our microbiome, and our human cells in order to develop precision nutrition to prevent and reverse chronic diseases.
Moon Express is the only company globally with permission to harvest resources from the moon—developing the infrastructure needed to push humanity forward toward a true multi-planetary society.
In addition to his current moonshots, Naveen Jain is the Vice-Chairman of the Board at Singularity University, where he focuses on educating and inspiring leaders to utilize innovative technologies to address humanity’s greatest challenges.
Naveen Jain is also on the Board of the XPRIZE Foundation, an organization that uses incentivized prize competition to push the limits of what’s possible — to change the world for the better.
Naveen Jain has been the recipient of many honors for his entrepreneurial successes. These include: “Entrepreneur of the Year” by Ernst & Young, “Most Creative Person” by Fast Company, “Top 20 Entrepreneurs” & “Lifetime Achievement Award” for leadership by Red Herring. “Medal of Honor” by Ellis Island, and “Top 50 Philanthropists” by Town & Country Magazine.
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Read the Full Transcription of the Interview:Alejandro Cremades: Already hello everyone and welcome to the dealmaker show. So today. We have a we have a really exciting guest I mean he is a legend I mean he’s done it so many times that I’ve even lost track on how many companies he’s built scale taken public you name it I know that day he wants to leave you all with a lot of lessons. With a lot of good nuggets. You know there to learn and to inspire you all on your own journey so without further ado. Let’s welcome our guests today Naveen Jane welcome to the show. Hey.
Naveen Jain: Um, but Alejandro what a pleasure and honor to be with you I’ve been just looking forward to this for a long time.
Alejandro Cremades: So so let us let let us all get to know you just a tiny bit. You know give us a little of file of a walkthrough memory lane. How was life growing up in new daily.
Naveen Jain: You know I’m going to focus more not on me because I am just so unimportant in a human journey. So I want to focus more on just my background is simple I am an accidental entrepreneur. Who just wanted to do great things for myself and my family and at this decade of my life I am fully focused on helping others actually live their dreams giving them the lessons I have learned over the last fifty three years on what. Actually 1 has to do to be successful in life. What success really is how do you you know create your own legacy and what do you want your legacy to be.
Alejandro Cremades: So then let’s let’s talk about that. Let’s talk about that. So obviously you know like 1 of the things that that is happening now that that you’ve definitely learned a lot I mean when you created your first company. You were able because right now I mean it’s crazy the environment that we’re in right? So you got all these banks. Are they faulting. You know we got the ups and downs of what’s happening with the market and and you know people are really getting impacted by this you know and all these all these entrepreneurs that are listening to us. You know are really going to experience. You know this this craziness this uncertainty so you really have. Being exposed to the ups and downs I mean you were exposed to the dot com bust you were exposed to the all wait ah financial crisis. So I guess you know during those up swings because I mean info space. For example, you took it public you know during the dotcom bubble in no time just in a couple of years with a bunch of. Colleagues from Microsoft but I guess what did you learn and what could you share with the audience about handling this storm and and really you know dealing with the upsrings of ah of of a downturn like perhaps the one that we’re experiencing now. So.
Naveen Jain: Well first of all I want everyone to know that some of the best companies are started during recession some of the most successful companies were started when things were looking really really bad and this is the best time to start a company. The best time to start? a company is not when there is a absolute euphoria of everyone investing in everything because what happens is then there’s so much of free money out there. The people are building companies that have no business model. They’re just using the venture money to give away the product. It’s very difficult to build a company where your competitors are giving away their product because they have all these venture money the best time to really build a company when the markets are tough because now you’re actually building a company that has a business model a company that is providing a tremendous value to a customer. And you know in life life of an entrepreneur is when they are alive. How do you know? you’re alive is because you have a heartbeat what does a heartbeat look like it goes up and down and up and down and when it is smooth. You’re dead. If you’re looking for a life. That’s a smooth life as an entrepreneur you’re looking for a life of a dead person when you are seeing these ups and downs in your life. You know you are alive when you are down all you have to do is hunker down.
Naveen Jain: And know the next beat is going to be up and when you’re on top of that beat never become too arrogant because you know the winter is coming and winter shall come. That’s the lesson is that always focus on what is it that you’re doing that’s going to improve. People’s life and as we go along I can tell you that there is a framework that I have created for myself and I want to share that with everyone and then I’m going to show you higher how I apply that framework to every company I started including my most recent company that I started seven years ago when I’m going to show you. Framework and then I’m going to apply the framework so you have the context of how to apply the framework like so.
Alejandro Cremades: And and just so that the just so that the folks that are listening. You know, really understand this because obviously I mean this framework comes with with doing a lot and building a lot of companies. How many companies have you built.
Naveen Jain: Well this is my seventh venture and knock on plastic every single one of them have been widely successful and it’s not because I am smart. It’s not that somehow I’m gift to earth I am a normal person. It’s just that I have a framework that I use and in that anyone can use that by the way and that allows you to stay focused on what matters. So let me just get right to it every time I start a company I ask myself 3 questions why this.
Alejandro Cremades: Go for it.
Naveen Jain: why now why me the first question is why this why this is ask yourself god forbid I am actually successful in solving the problem that I set out to solve would it help a billion people live a better life. And now why do I see that is it’s not because I am somehow philanthropic and I want to help a billion people live a better life. Yes, we all want to do good in the world but it is really simple is any time you can build any product any service. That improves a 1000000000 people’s life. You can create a $100000000000 company but you don’t wake up in the morning and say I want to create $100000000000 company. What do I do making money is simply a byproduct of doing things that improve other people’s life. Let me manipulat it again making money is simply a byproduct of doing things that improve other people’s life and the reason is when you’re building something that they want they become your lifelong loyal customers and that is how you create a great sustainable company right.
Alejandro Cremades: So I want I it does but I want to double click on that. So as you’re thinking about creating you know that $100000000000 business and you’re thinking about impacting all these people’s lives. What does what does it look like when you are.
Naveen Jain: So does it make sense to you? yeah.
Alejandro Cremades: Bally dating some of those ideas because I mean some of them may have legs and some of them may not so what does that process look like yeah.
Naveen Jain: Um, at here yeah again is start with not I have this solution what do I do you start with a problem here is a problem I’m trying to solve and is my solution leading me towards solving that problem or not so remember lot of the ingenious lot of the entrepreneurs says I have charged gp what do I do with that. What can I do with that. That’s not the question. The question you should say is he. I have this problem that billion people have in this world. Can I come up with this solution whether it happens to be blockchain or it doesn’t have a blockchain whether it is chat gp you doesn’t have check Gpd you’t start with the technology you use the technology to create a solution and many times i. You know I’m hear entrepreneurs I’m trying to build a company that’s a blockchain crypto chat gp company and what is ah what’s the problem you’re trying to solve I’m trying to figure out what do you do? It’s like I’m sorry that’s a wrong get you can’t just but. Every single thing people wanted. Let’s say let’s find some problem that can solve it here like so now coming back to that you know thing. So I’ll apply this by the way. Ah to why I apply that like the second part of the puzzle is why now despite what you may hear.
Naveen Jain: The number 1 predictor of success of an entrepreneur is timing people talk about? Oh it’s the idea people talk about the execution people talk about the team and yes, yes, they all matter. But the number 1 predictor of success is timing. How do you get the right timing and it’s not Luck. It’s a very simple method and method that I use ask yourself what had changed in the last one to 2 years But more importantly, what do you expect to happen in the next three to five years that will allow you to solve the problem at scale in the next 3 to 5 years and this problem could not have been solved five years ago that’s simple right that means are you actually intercepting tomorrow’s technology to solve tomorrow’s problem or you’re actually using yesterday’s technology to solve tomorrow’s problem right and now in this premium world. The second part or the puzzle is you actually ask yourself to solve the problem that I’m trying to solve which is ah you know 1000000000 people problem. What are the sub. Problems that have to be solved for my big problem to be solved right? and I’ll give you an example right? For example, you say hey I want to live on venus don’t ask me why that is the problem I need to solve that people need to be live on venus you don’t say oh that will never.
Naveen Jain: You simply say what are the problems that have to be solved. Well you have to be able to leave Earth orbit got it. You have to go from Earth orbit to venus got it. You have to be able to land on venus got it. Yeah to be able to live on venus got it. There are four problems like and let’s go step by step how to solve them right? But that’s really the framework you use so you never get caught up on how to do it, You simply focus on what needs to be done and then you see what is the things that you’re going to be doing.
Alejandro Cremades: So so go ahead, go ahead, Go ahead.
Naveen Jain: The last part is the most important part which is why me and why me is what questions I am asking that are different from what everyone else in the industry is asking because the questions you ask is the problems you solve right. So just by changing the question. It allows you to look at the problem very very differently so coming back to say for example, living on venus if someone were to say hey how are you going to live on venus. How are you going to grow the food for us to live there when you ask the question. How are you going to grow the food. Only one way to Solve. It is find a way to grow the food when you ask yourself slightly different question which is why do we eat food by simply asking. Why do we eat food. It says oh the reason we eat food is because we need energy and we need Nutrition. What are the different Ways. Can you get Energy. What are the different Ways. Can you get nutrition and suddenly you have 10 different ways of solving the problem than simply growing the food and that changes the perspective of how you look at the problem and what is most interesting about this alejandro is people who are expert in the field. Tend to never be destructive the experts that once you become an expert at something you become incrementalless or you become useless in my book when you are a non expert.
Naveen Jain: You are able to challenge the foundation of what every expert has taken it for granted and that’s how you’re able to rethink and recreate the foundation of the things that people have never solved before so your biggest liability that I know nothing about it becomes your biggest asset.
Alejandro Cremades: So now we got let’s say now we got the $100000000000 company okay or the 100000000000 idea of a company that we want to build now. The next thing are you been alluding to it is people so how do you go about finding the right match when it comes to the co-founder and then also how do you go about.
Naveen Jain: Does it make sense.
Naveen Jain: Um, yeah, yes, yes.
Alejandro Cremades: Getting the first employees that are going to help you in establishing the culture for the company.
Naveen Jain: Great Question. So remember when you are looking for a friend you want who is someone who is just like you. You want to hang out with them. You want to do you want to go out and do things because you want to look for someone who is just like you. Who enjoys the theme with things stay your way and you have great time together when you’re looking for a cofounder you want someone who is absolutely a like you someone who compliments you so you are that visionary who is constantly looking for the idea. And you want someone who is an operation guy who said you I don’t know why you’re cutting those trees but I’ll keep building the road behind it and like oh we lead to the light part right? And that’s the kind of things you want you want complementary skills you want like now other thing is. When you are finding someone as a co-partner you’re creating this culture. You have the people who join you they believe in you people who join you because they believe in your idea your job is to take the loyalty to you and move that to the cause. That means we are in it together to solve this Problem. It’s not about me. It’s about the problem we set out to solve and that’s how you’re no longer a cult leader. You’re simply an entrepreneur one day you may be but the cause will go on and that’s really the idea is to find.
Naveen Jain: A problem find people who associate with the problem find complementary group of people who can work together and then go out and send them on a mission and lead that mission By example, go out there and be the first person to be out there say here is what we’re going to do. Not sitting behind go charge at the tree but sir there’s a bullet coming down the path. Oh come back and it’s like an hit. You can’t do that.
Alejandro Cremades: So so okay, so now let’s say we got the cofounder we got the team. You know that is going to an expedition and you are now rallying everyone in order to dance the same song with the same moves towards getting to product Market Fit How does getting to product Market fit which is validation.
Naveen Jain: Um, yeah, yeah, yes.
Alejandro Cremades: Before you really think about raising money scale. How do you get to that product Market fit.
Naveen Jain: Very very simple. You start remember we said what problem are you trying to solve So when you go out and say here is a solution you go out to the people who have that problem and say does that solve your problem. Someone says I have a headache. And you give them a whitetamint and they say does you solve your problem. They said no it doesn’t solve my problem. Well, That’s not a product market fit what they’re looking for is an aspirin I mean so you need to say? do you have an aspirin or you still trying to sell that a sell them a supplement.
Alejandro Cremades: So so then in that case you know, let’s say now we got. We got the team we got product market fit. You know we got we got things you know, moving in the right in the right direction. At this point you start thinking about perhaps scale and I think that you know as we are expanding on people. We’re thinking about. Racing money too because you need capital and not not just the capital. But more importantly, the network that is giving you the capital. So how do you think about getting the right people for the right reasons to to push things behind you.
Naveen Jain: Yeah, well first of all the capital is not patriotic capital flows where the opportunities are so very interesting is people somehow feel the people who have money ah have the power and your job is to somehow convince them to part with their money. Remember they only make money when they invest they are looking for things to invest in what is your job your job to let them know you you to let them know that what you have is so awesome that everyone else wants it including them. And what you have is so valuable that they are fortunate to be part of it in the way you do that is essentially talk about this is billion people here is the problem here is my solutions here’s where I am here’s what I’m going to get there and show them step by step. How are you going to get there and now maybe it’s a great time for me to actually what I would say grounded because we have been talking about apps abstract and I want to ground it right? So I started this company called viome seven years ago my first question was why you know why? this. What was this? This was what if we can understand what causes people to have an onset and a progression of non-infectious diseases that means why do people develop diabetes. Why do people have depression. Why do people have heart disease.
Naveen Jain: Why do people have cancer. Why do people have alzheimer why do people have all of these chronic diseases and what if we can find out what is happening in the body that’s causing it because if we knew what was causing it. We can prevent. It. We can early diagnose it and we can actually. Reverse it if not reverse it at least to stop the progression of it and that was a fundamental problem. We said what if we could solve that would it help a billion people live a better life and the answer was 8000000000 because every one of us is going to suffer through that problem. So why this was very clear. The question came down to why now and we said look to solve this problem. The 3 things have to happen the cost you have to digitize the human body. We are an analog body if you have to digitize the human body Secondly once you digitize you’re going to have massive amount of data. Be able to process the data and the third will be using Ai to be able to understand what is going on and we said okay the cost of digitization seventy years ago was is about $1200 just to take 1 single sample and just digitize it acgt right? Somehow take a sequence of thing on a human body. And we said wow that’s a very high. You cannot help a billion people if that’s the cost but we realize in the last 2 to 3 years the cost has come down from $10000 to $1200 and we see look in the next 3 to 5 years This thing will come down to $100 and here is why.
Naveen Jain: All the things that are happening in the industry this will cost will come down to hundred dollars and the time to do is now guess what happened cost of that did not come $200 it came down to $15 so while we were 10 times. Optimistic turns out, you are more like 5 times pessimistic. That’s the power of exponential technologies. The second thing was we realized that we don’t have access to supercomp computer to process this massive amount of data. We said look we could actually use cloud computing and just file away many cores and we did that on a cloud computing cost us $42 we took a deep breath and think that’s a lot of money but we realize it has come down to you know from $200 to $40 and we said the cost of computing is coming down cost of storage is coming down the cost of this thing has to come down down to $10 here. We sit today and it’s down to buck fifty. It is really. mmeting and everyone realized seven years ago even that ai is going to be there that will allow you to solve the problem. So we said let’s go and do that so that was why now and the big thing was why me I am not a scientist I’m not a biological site but. Being naive has an advantage and I say what are the questions people are asking today in the industry and we realize every company is asking the same question which is I want to know about your dna I want to know about your genes and it occurred to me with a simple high school biology that my genes don’t change.
Naveen Jain: When I become diabetic so you do my Dna test today and I gain hundred pounds so you can do my Dna testing again. So same same Dna now I become diabetic now I have a heart disease now I have depression I have cancer and I die and then you do my Dna again after I die. Still the same Dna we’re looking at the Dna of Kuten common right now point is Dna can’t even tell you you’re dead or alive. Let alone, you’re healthy or sick it occurred to us people are asking the wrong question they should be asking what genes are being expressed not what genes you have. So we can look at irony and um, we not gonna look at Dna that was the first problem. The second was 99% of all the genes in our body. Don’t come from our mom and dad they come from all these organisms that live in our gut in our mouth and we realize what if this is the key. To us our health and then I start googling them and say depression and Microbiome Alzyon and a microbiome parkinson’s and microbiome cancer and microbiome cancer therapy and microbiome turns out everything was connected and then it occurred to us everybody believes in the same thing. And the 10 companies doing microbiome testing. Why is this problem not getting solved you go back and see what question are they asking and it turns out and Andrew to date. They’re all asking the same wrong question they want to know what organisms are in your gut and it occurred to us.
Naveen Jain: What if these organisms are like human beings you could have 10000 different organisms producing the same thing that’s making you sick or the same organism can produce something good in 1 environment and something toxic in another environment just like a human being you take a person put them in a good environment. Good behavior. And a better environment bad behavior and that was the simple genesis. We say what? if we can find out what these organisms are producing and how that are changing the human gene expression if we can do that we can solve the problem I have no science background guess what now I went to every university every lab trying to find a solution. And I found the technology at Las Alvos national lab it started this company seven years ago First thing I did was hire the person who developed the technology at Los Alamos hired the person who actually was head of ib and Watson Research to do our Ai and this is what it does you can today. Go to wome.com and buy a test. We take a spit of your saliva touch of your tool finger prick of your blood and now we can tell you alejaru what’s your biological age. What is your cognitive health. What’s your heart health. What’s your gut health. What’s your oral health and then we tell you hey. Based on all the things we are seeing don’t eat broccoli and cabbage because your selfide production is too high is causing inflammation don’t eat a spinach because you can digest oxalate. You’re eating too much protein take a digestive enzyme with that because we see a lot of ammonia production.
Naveen Jain: By the way, don’t take vitamin b three or eat up acato because your duric acid production is too high and then we literally tell you here are the food you should eat and why here are the food you should avoid and why don’t take these supplements and you only need twenty two Milligram of per and every day take twenty seven Milligram of um elderberry take 89 Milligraph of amylase and we literally take all the vitamins you need minerals food extract digestive enzyme everything make the powder put them in the capsules ship it to you every month. There’s no premate stuff. We literally custom make it for you. And a andrewro wonderful things happened. We now analyze over half a million people five hundred thousand people and guess what we can not only show and we publish the paper. The people who take our personalized supplements and take our food guidance. Their depression level comes down by 47% their diabetes Sba one c come down by 30% their level of anxiety down by 32% their ibs clinical score ibs sss comes down by 40% simply using food as a medicine. Now we are able to diagnose the stage one and prestage one cancer in your mouth or throat simply with saliva 95% specificity and by the way we receive the fda breakthrough device designation for it right? So remember.
Naveen Jain: What we set out to do to find what was causing a disease so we can prevent it. We can early diagnose it guess what every single thing we were going to say we were going to do we were and able to do that in between now coming back to it. We started the company. We started to prove people that hey. We can do ah Rna Sequencing we are able to license the astrology we license the technology we raise the money then we go. We went out and say we can only do the gut microbiome because we can do everything at that time we’re going to just do the gut gut microbiome testing with this tool and we’re going to be able to understand what is happening in your gut. That will help us get to the next level of what is changing in the body and as soon as we did that that part we raise the series b and then we said look now we can look at everything and we have people that can show that our now stuff is actually working. We is the cc. And now that we have the diagnostic test for cancer. We now we building the channel for doctors and stuff and now we’re raising more money. So literally we took a stept at a time made the progress showed the progress and told people this is what we’re going to do and then we do it. This is. We’re going to do and we do it. And that’s what builds the confidence in people hundred and seventy million dollars
Alejandro Cremades: And how much capital have you guys raised today for biome now. Obviously you know that’s ah, a lot of millions that come with a lot of expectations too and and and vision you know vision is is everything so I guess imagine if you were to go to sleep tonight I mean.
Naveen Jain: Yeah.
Alejandro Cremades: And you wake up in a world where the vision of viome is fully realized what does that world look like.
Naveen Jain: Yes, ah, I’m so glad you asked because that’s actually what I tell every entrepreneur if you can’t visualize your vision. You don’t have a vision. So my vision of this world is very simple. Imagine your grandmother walking up the mountain and has you know without the walker. Imagine your loved ones who died from cancer didn’t have to die you could still be laughing with them imagine every one of your friends who is you know, committed to suicide because they are depressed doesn’t have to be that way. Everyone you know that is suffering from a pain and cannot enjoy their life that can actually be that. That means until the last day of your life. You’re living your life to the fullest and that’s the life. We all want to live is imagine living in a world where being sick is truly a matter of choices we make.
Alejandro Cremades: I Love that now. Obviously when when you get those people in when you get investors and I’m sure that you know a lot of people that are going to be listening. You know they’re either looking at raising money or they are going to be raising money soon money as we talked to earlier it comes with expectations.
Naveen Jain: Um, yeah.
Alejandro Cremades: And the people typically that are going to give giving that are gonna be giving you the money, especially the ones that are leading the round of pricing that round they’re going to want a seat at the board when it comes to board dynamics and having an effective board that is going to be guiding.
Naveen Jain: Yeah, yeah.
Alejandro Cremades: In a good way right? The strategy so that then management can take it and and and work on the execution. What does you know an effective board of directors look like okay.
Naveen Jain: Yeah, so first of all if your board of directors are not aligned with your vision and they don’t believe in you then you actually have a wrong board of directors board of directors should be there to support you guide you mentor you but they’re not. They to tell you what to do because if you are looking to your board for them to tell you what to do then you’re the wrong Ceo and all you have a wrong board because bo’s job is to hire and fire the Ceo if they don’t believe in you they should fire. You. They should be telling you what to do right. To me their job is to guide you and say hey in Naveen have you thought about this and you say yes I have thought about it. We are not going to do that and here is why we are not going to do that and that’s what your job is to say look a board thinks about your company once a quarter maybe for few hours. Ah, quarter. You spend 18 hour a day thinking about what you’re doing so how can you expect them to be telling you what to do, but they do have a perspective that you should listen but listening doesn’t mean following listening means taking that into account. And then telling them. Why is it the good idea that you’re going to be doing or why it’s a really shitty idea why you not be doing be doing it.
Alejandro Cremades: And now in this case, you know for you guys. You know you’ve done several rounds and you were alluding to it I mean you’ve done the C The a the B the C all all of the above now now in this case, you know like for you guys, you know as the.
Naveen Jain: Um, yes, yeah, Abc yeah yeah, yeah, yeah.
Alejandro Cremades: There’s a few things here that that are interesting and that I find that founders listening are going to be encountering number 1 is you need to be ah in constant you know, just like the companies in hypergrowth mode. You got to be in hypergrowth mode too developing yourself so that the company is not outpacing you.
Naveen Jain: Um.
Naveen Jain: O.
Alejandro Cremades: Ah, and and I find that that’s that’s ah, that’s um, that’s kind of like tough as um, as an obstacle that you’re going to have to deal with but then also the other one is going from being an early stage company to a grow stage company and how that transformation or how that transition looks like. Can you talk to us about those 2 obstacles.
Naveen Jain: Yeah, so first of all remember you and your investors need to be aligned on the goals and the kpis so when your investors are saying hey you know I think for the next one year we want us to focus on. Um, on showing that our product actually works in the way that we expect it to work and we don’t want us to be doubling our revenue and do you really believe? That’s the right path and if you all believe that’s the right path then? What do you? do you focused on building the science and building the efficacy and proving the efficacy. Rather than growing if you investors a saying look our science is well understood. Let’s double the things and you said look to double our revenue here is what we would need. We need 25000000 of marketing capital. We need to hire these 10 people who are going to be helping us marketing. And sales and here’s what the resources we need and once everyone is aligned not with your job to hire that team and execute you never ever fail. You never make a promise that you can’t deliver I’m a big believer. Under promise over deliver you never over promise and under deliververed. So I will never tell our investors we’re going to do 100000000 in revenue and do ninety nine I would tell them I would do 75 in revenue and do 99 right? Always making sure that you never miss your target. Ah now of course.
Naveen Jain: You know shit happens and shit has a tendency to happen and the best thing you can do is any time something happens that’s unexpected make sure your investor in your bowl are first to know from you before they hear from someone else. The good news. They can hear from someone else. You don’t need to share every single time you get written up. They can read about that but you never want them to be blindsided when there is a bad news. You want to be the first person to call them and say I want you to know this That’s how you develop trust and respect right? So you can say look. This is unexpecteded. We did not expect to happen and our revenue is going to not be 70 5000000 is going to be 60000000 right? But then said right, you told them and we made a new plan and there’s going to be 60 and you hope you’re still deliver 75.
Alejandro Cremades: You know there’s 1 word that they really comes out. You know as I hear you speaking here and that is integrity is being your word is being able to deliver on your promise and when you’re not going to be able to achieve that at least you’re in communication about it because that ultimately builds trust so I really love that now mean now.
Naveen Jain: Listen listen.
Alejandro Cremades: There’s 1 thing here as we are guiding you know folks listening in this master class of ah ideation you know product market fit people fundraising obviously as we’re thinking about this full cycle of building scaling and financing. There’s 1 thing that we’re missing here and that is the exit reaching. The finish line the promised land for all the people that you know pour their their ah heart and soul into the company. So in your case I mean you’ve done several exits I guess talk to us about acquisitions. You know at what point do you realize.
Naveen Jain: Um, yeah, so.
Alejandro Cremades: Is because you talked about timing earlier talk to us about timing and what point do you realize? it’s time to you know, look into get into an exit.
Naveen Jain: Yeah I am probably you know I am and never a big believer in having an exit block and here is why the minute you create an exit plot. You actually have you know, restricted yourself to what you can do. So if you say. My goal is to be acquired by Pfizer right? Guess what? you start to think like them. You start to act like them because you want to be there and guess what they have 0 interest in acquiring you because you’re like them right? Your job is very simple. You constantly wake up in the morning and says. Ah, many more lives can I improve and I’m going to constantly go out there earn the market share I’m going to constantly go out there and kick people’s ass and there is going to be always someone when you keep kicking their asses to say what would it take for you to stop kicking my ass and they’ll pay you what it takes to pay to stop clicking their ass. Your job is never to worry about acquisition. Your job is never to worry about an ipo here is what you should always remember when you build a shitty company There’s only one outcome when you build a great company. There are 10 different outcomes. You can think of right? So keep focus on building a great company. And the right outcome will happen. It is when you start to think I need an exit is when you start to make mistakes. Yeah, yeah.
Alejandro Cremades: So then let’s talk about you know the riot outcome. Let’s say you know you’re building a super successful company and then all of a sudden you start to have suiters. How should people really navigate that a process because. Is very is very tough is probably the biggest decision of their life, especially if it’s their first time or they’re a first time founder how so they should navigate those waters.
Naveen Jain: Um, it’s very simple is that you know if you have suitors just remember it’s like dating doesn’t mean every single person you go out with you sleep with them. You did you to marry them right. You should have a conversation with everyone I mean I’m a big believer anytime I talk to people I go out to dinner with them I listen everyone out and you know and pointed at the end of the day. It’s up to them to make you an offer that you can’t refuse you don’t have to say anything. You don’t have say look hey let’s go down like I’m interested I’m not interested. You simply said look I am just so in love with what we are doing I wake up in the morning at four Zero a m I jump out of the bed I am loving what I’m doing here is what we’re going to do next year and let’s talk next year we year after here is our plan for next year guess what the more the more you think you’re not for sale the more everyone wants you the more they think you want to sell them the more the price goes down so my job is to listen to everyone get them as excited about my business as I am. Guess what someday they’re going to make you an offer that you can’t refuse and don’t not refuse it.
Alejandro Cremades: And you know one thing that they that I would love to ask you here. You know that just just hit me is I mean you you’re right now in your seventh company. Ah, you’ve been through the apps through the downs and I think that you yourself, you’ve been able to mature to as a result of this experience as an entrepreneur.
Naveen Jain: Yeah.
Alejandro Cremades: You know what I find that there’s been a lot of consciousness Now you know around ah perhaps founders really taking care of themselves and obviously you know with your company now with Viome, you’re helping people to really take care of themselves. How have you found for yourself as a founder That. Balance between the hustling and then also taking care of yourself. So.
Naveen Jain: Well so first of all, remember you can’t take you can do anything unless you are healthy and taking care of yourself when you are sick. You only have one wish which is to be healthy when you are healthy. You have many wishes so to me ah taking care of yourself is. Always part of taking care of your company because you can’t take care of your company unless you take care of yourself right? even on the airlines put your mask force before you have someone else right? You got to put your mask for before you can help anyone now having seen that people generally talk about this idea of work life balance and I think that’s just a bad. Bad way of looking at life because when you trying to say that 2 things needs to be balanced. You have already concluded that they cannot live together balance happens when they are opposing each other one goes up one goes down to me. The life and work is a continuum in that continuum there are days. There is more of one and there are days days more of other but there is never a balance. There is no such thing as balance when you think you are balanced. You suck at both your.
Alejandro Cremades: Yeah, yeah.
Naveen Jain: Home life tells you that you suck because you’re not spending enough time and people are working you suck you have and enough time so you suck at both There is no such thing as balance and now the main thing I would say will be. You know as we get towards the end is that find something that you’re willing to die for. And then live for it find something that is your calling that you wake up in the morning and you jump out of the bed wanting to do what you do the day you wake up and you still want to lie down for 5 moment. It’s in the bed you realize. What you’re doing. You should quit that day that is not your calling and you find your calling you never lie in bed and by the way every single company for the last thirty years I jump out of the bat every day at four zero am and in every company I have done. There comes a day. Where I just feel I want to lie down for 5 minutes and my wife always kicks me out of the bed and say go do something else I think you’re done with this company now.
Alejandro Cremades: I Love it. So I mean for the people that are listening that will love to reach out and say hi what is but what is the best way for them to do so.
Naveen Jain: Well, you can always reach out to me on Linkedin. You can reach out to me on Instagram and at hadro for your audience I’m going to give them my personal email address my first name naveen last dot dot last name at Gmail.com so naveen.jenatgmail.com send me an email I read every email myself. So. Just go out there think so big that people think you are crazy and never be afraid to fail because you only fail when you give up everything else. It just a pivot. Well.
Alejandro Cremades: And you will need to fail in order to succeed I love that first.
Naveen Jain: It’s not failure your ideas may or may not work and every idea that does not work. It is stepping a stone to a different idea or a different way of doing things so you don’t fail unless you give up.
Alejandro Cremades: I love that well na mean thank you? So so much for being on the deal maker show today. It has been on on earth to have you with us.
Naveen Jain: Well thank you Aljandra looking forward to your customers at next conversation.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Billionaire Naveen Jain On His Framework For Building A Successful Company appeared first on Alejandro Cremades.
After leading another great startup to scale and become profitable as their CRO, Alan Chang has raised tens of millions of dollars to take on what is perhaps the largest and most impactful industry on the planet. His startup, Tesseract, has attracted funding from top-tier investors like Woorton, Accel, Balderton Capital, and LeadBlock Partners.
In this episode, you will learn:
- The state of the energy industry
- How Tesseract is setting out to change things
- Alan Chang’s top advice before launching a business
Alejandro Cremades · EP 601 Alan Chang On Raising $78 Million To Accelerate Renewable Energy Adoption GloballySUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Alan Chang:Alan Chang served as Board Member at Agrica, and served as Chief Investment Officer at Builders Vision. He also served as Board Member at NOWDiagnostics.
Alan served as Partner and Managing Director at Capricorn Investment Group. He oversees Capricorn’s multi-asset class portfolio of investments in Asia and emerging markets, as well as Capricorn’s global venture portfolio.
Alan served as Board Member at Suminter India Organics. Prior to Capricorn, Alan worked at DFJ New England with early-stage venture investments and at Montgomery Securities (now Banc of America Securities), advising technology companies on corporate finance.
Alan is a CFA charter holder and received an M.B.A. from Harvard Business School and a B.S.E. from Duke University, graduating cum laude with a triple major in Electrical Engineering, Computer Science, and Art History.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So we have a very exciting founder today. You know we’re gonna be talking a lot about growth. We’re gonna be talking about. You know the differences in the landscap in Europe in in the Us. But I find that we’re gonna find the interview today. Very inspiring so without far ado let’s welcome our guests today Alan Chang welcome to the show. So originally born in Hong Kong so how was live growing up there. Give us a little file walk through memory lane.
Alan Chang: Um, thank you for having me.
Alan Chang: Um, yeah, ah, very yeah is a great city. very very very very busy everything you need is within you know like a one mile radius but yes I’m buy but ah, but yes, it’s it’s. And also so you can you can certainly can. You can do water sports you can hike and you can you know poddy all within a 15 minute drive so yeah pretty pretty fun.
Alejandro Cremades: That’s amazing and and and I guess you know in your case, Why or how did you get into physics and and things like that.
Alan Chang: Yeah, So yeah I I chose physics at University because at the time it was the hardest thing I knew right? So and I just wanted to yeah, push myself and see Yeah. So I like to solve problem I like to solve complex Problems. So physics. The hardest thing I knew and that’s why I chose it.
Alejandro Cremades: And you and and also you moved so even you doubled up the the challenge because you went from Hong Kong to um to London so why? why not staying around you know in in Hong Kong why why why going to London.
Alan Chang: Yeah, so I went to London chose London because for if I get better with trines. So Hong Kong’s coach is quite traditional. Um, there isn’t that many that that many entrepreneurship startups going on there like people let’s per say there.
Alan Chang: Unless you’re a doctor lawyer or working in investment banking or you work in Mckinsey you’re not very well respected. So if you’re starting up people will see what you do? what do of like um yeah, that’s that’s that’s one of the main reason why i’ll.
Alejandro Cremades: Now for you when you move to London and you studied physics eventually you know like 1 thing is pretty interesting here because rather than going into the traditional careers. You know that you would go after um university especially going to imperial. Ah, college which is one of the best universities when it comes to to engineering science and other you know stuff you know in the world but they’re based there in in London you chose the startup world. So how did you come across? you know the whole startup you know venture world and. And why did you think that was a ah good idea you know right? after where after school.
Alan Chang: Um, actually I always wanted to and stops so I decided that you know Stlos was my what I wanted to do when I was a kid. Um so a lot of people offft university they they tell me the same thing I’m interested star then they will end up I ph.
Alan Chang: Invent some ba or something like that. So I you know I just ask myself if if I if a like start so much and I’ll just do that straight away I don’t have to go for more steps just to do that.
Alejandro Cremades: And how did that law for startups develop I mean at what point you know you’re like this is really where I want to you know, be participating in.
Alan Chang: Yeah, So I think really helped that my dad was also like um so I had a love exposure from him about Entrepreneurship. So I Just found the whole whole startups. Very very exciting. Like gets me up gets me going.
Alejandro Cremades: And what were some of the things that you learned from seeing your father being an entrepreneur entrepreneur himself and and also through him going through the ups and downs and the ups swings and downsrings that you experience when you are building something from nothing.
Alan Chang: Yeah I think ah I think it’s probably you know on an emotional level like high is it very high right? Sometimes you fitt feel like you’re a king in the world and then lots are very low right? You feel like you made the biggest mistake in your life. Um. But then I think what’s exciting is growinging something from scratch and then yeah make an impact. Yes, That’s probably what draw draw draw me to it.
Alejandro Cremades: So then in this case for you Why going and working at ah, another startup versus building your own right after school.
Alan Chang: Yeah, so I actually tried doing at school and then I realized actually I know nothing about this I’m I’m very bad at this. So then the next best next best option was to you know work in a startup from you know from founders and know what they doing right. Um, So yeah, just how I accidentally met. Yeah met my rev.
Alejandro Cremades: So then let’s talk about Rebellu Why rebellute And how does rebellute coming to the picture.
Alan Chang: Yeah, so I’ll say I came came across world by accident. Obviously at the time it was very very small company. Very very early stage I think for memory this yeah only for for for people working there back then? Um, so. Yeah, the first I met Nicola who was like super super smart. It just came across a very very small way. Um, and yeah, also I think what won me over was he after the interview he asked First of all, he asked me a very tough problem to solve. It told me a lot but then I eventually got it and then second is that he offered me a role. Me g off interview right? So I’ve never experienced such speed right? So I I basically said yes now what kept what kept make kept me sick. What? what What made me stick around was is actually quite simple right? Um I think Nick and flat day like. I don’t I don’t think I’ve met any other fund that works as hard as they do right there they’re they’ you know, very early in the morning really early in night. Um, and basically seven days a week in the office um and at the time we work in this coworking space where there’s like you know, like couple of hundred other startups right out there. And after 7 pm the whole core space is dead apart from apart from Rev and whole weekend was also dead apart from Rev that’s how I knew revel was something special and I just sticked around.
Alejandro Cremades: So and let’s talk about rebellu you know you enter there when they were just you know 4 people and they I mean rebel loot I mean right now is a billion multiple billion dollar company ah but I guess how was how were the early days of working at rebellute.
Alan Chang: Um, yeah was super fun, right? I think yeah, there was loads of problems. Um, there was not a lot of people to solve it so being able to solve different types of problems. Although. Um, yeah, wasre. Super super fun, right? Um, and yeah doing also doing things that you’ qualified to do right? Um, yeah know I wo multiple hats and you know every almost every day There’s a new problem that I’m definitely not Poor. Qualifie to do well would not be laughed do in a big but bigger company see that I’ll say yeah.
Alejandro Cremades: Because because for the people that are listening to really understand it. What was what was rebel What was what is rebel and what is the business model of rebel.
Alan Chang: So yeah, So Rebels ah affected global neobank and a financial super app right? So It’s basically everything money in a single app right? So with it’s fx stocks crypto insurance and and and credit right. Or in a single app. But yeah, 10 times cheaper and 10 times better.
Alejandro Cremades: Now rebelute. Ah what you were saying there is that you were wearing multiple hats. So how would you say that your role changed as the company you know was maturing because I mean the company has you were there for about 7 years I mean 7 years in startup. World in dark years I mean it’s like insane what you can do and what you can learn so how would you say that your role matured from time to time over the course of those 7 years
Alan Chang: Yeah, so like I saw as the individual contributor right? And then I ended up running customer service then I took on operations and then I ran international expansion and then I helped scale. The. Operations team to over hundred people um and operations is you know, essentially ah, kind of general problem solv that we throw into different areas of the business to either firefight or or just know solve more different problem different problems in the area in the. Business and then and then you know and then covid hit and then profitability was a really really big problem and then the Ceo asked me to take the company profitable. So we yeah we did that in in seven months from losing 40% revenues because of lockdowns to in seven months data we we hit net income zero which was a you know public pilot milestone and then and they’re obviously going top line right? Um, so yeah so I’ll say
Alan Chang: I I put myself in different problems when when the different when it needs are the best to change over time.
Alejandro Cremades: A rebel you know a company that has raised over one point seven billion you know valued at about thirty three billion what what kind of exposure did you get to to the financing rounds and and how those expectations matured from round to round.
Alan Chang: Yeah, so I had some exposure um you know from from meeting rebels investors to yeah, had a chance to I yeah, ah, yeah, go go for the due diligence process and somehow that works. Um, yeah, and and yeah, the. And obviously the expectation right? Um, yeah I think you know obviously exploit expectation of early stage or midstage or late stage is very very different but I’ll say like Rev was quite disciplined in the sense. Um, it was like. But knew you know what was important at what time. Um, so I’ll say you know. For example I think probability was important but now everyone’s talking about probability but rev was talking about possibility much earlier like and there’s a achieved possibility for for for while already. Um, so I think selfreization of. What is important as opposed to what investor expects is why investors work is very Marketd driven way whereas I think having this self-awareness of when what what is important and when um is very important and I think were able to have that.
Alejandro Cremades: So after 7 years you decide it’s time to turn page. Why.
Alan Chang: Um, yeah, so I I feel like you know there’s a lot of smart people working fintech already and also revellets in the very good position. It’s Jerekin a lot of cash. It’s ah you know it’s going.
Alan Chang: Quickly. Um, and it’s almost turned to a machine right? if machine just you know just compound every year. Um, so I decided to you know move to energy because there’s not that many ah players and energy that’s helping to you know. Having us to transition and accelerate to into renewable energy. Um, so that’s that’s really the main reason.
Alejandro Cremades: So then tell us about that transition out of all things. Why energy I mean all you know were was fintech. So why energy is quite a big shift so out of all things why energy.
Alan Chang: Yeah, so I think it’s probably the number 1 problem in the world right right now um I think that’s a number 1 reason number 2 is I would say I I consider myself a problem solver rather than rather than you know by domain. Before Rev I didn’t know anything about finance either or technology for that matter. Um, so but you know I learned right? So I would say I’m I’m pretty confident my learning skills. You know I spent I myself in routine spend you a lot of. Time learning about the space. Um I wouldn’t say we we’re energy experts yet. But I would say we’re probably learning much faster than than um, than incumbence right now.
Alejandro Cremades: So then for people that are listening to us why’t that up being the business model of the company.
Alan Chang: Um, yeah, so effectively we are building a vertically integrated energy company right? And essentially it’s um, a classic story I think which is yeah.
Alan Chang: Build everything in-house integrate everything improve margins build a customer-centric product improve Nps. Um I think this is ah you know I think this is just a playbook I think any consumer company should do in a low nps. Low Nps fragmented industry right? We’re seeing rebel do it. We’ve seen you know Tesla do it. We’ve seen Amazon do it right? Um, so obviously’ll see the business model bugwater is not novel right? We we have seen men made different examples in different industries but I would say it’s It’s quite simple. Really um, though the best product you have integrate everything improve margins pass some savings back to the customer and then go build.
Alejandro Cremades: Now now 1 thing that that is very interesting here too is that I mean being part of rebellute and and helping it to grow so fast you know over the course of those 7 years I mean obviously rebellu today you know it has like. Over like 7000 employees or something crazy like that. What are your thoughts around culture and also around building the team especially since you guys you know recently got started with a company. How have you guys thought about really building the team especially the. The initial players that are coming in and that are going to be setting the standards for the culture of the business.
Alan Chang: Um, yeah, so um, you know I I think Revler had 7 cultural values for memory. Um I brought one over right? which is affecting that settle right. So we want to what that means is you know we’re never set up for anything but top quality. We’re never set up for anything but number 1 um and this is also reflected in hiring philosophy where we’re trying to hire effectively a top top professional football team.
Alan Chang: You know, completing the world cup. Um, and we’re trying to win the world cup so we basically hi you know individuals that have you know, very very high Ti individuals that going to sacrifice effectively. Their. You know other commitments to achieve in all goals right.
Alejandro Cremades: So so in this case I mean for you guys. How much capital have you guys raised.
Alan Chang: Um, we raise approximately seventeen mo sent Seventy Centi eight
Alejandro Cremades: $70,000,000 seven zero seventy eight 78 okay, got it and the how has been that process like because I mean you didn’t wait. You did you typically would go through different financing cycles and in this case I mean so early I mean we’re talking about. Ah, company that literally you know got started. You know last year. So it’s almost no time. So how were you able to get all this money in such a short period of time.
Alan Chang: Um, yeah, so I think I think several reasons number 1 is um I think a t try record course. Um I don’t think there is a lot of fonders of that I would um have ah you know? Ah, ah. Ah, try to look treor rock I oz in the team. The number 2 is lola investors are very very excited about what we’re building. Um I’ll say suddenly from my experience like we scanned the whole energy market and there’s not a lot of innovation going on. Um. Like it’s a huge space. It’s a very hot topic but not of not of you know players trying to bring no sophistication and a customer-centric approach to solving this problem. Um, so I say this combination of these things. Um. That helped us raise a large round and also ah we do need a lot of capital to get started right? That’s ah i’ a third reason we would raise money if we don’t need it but we didn’t know we didn’t we do need a lot of capital to get started. So I said these are top 3 reasons.
Alejandro Cremades: And what was that process like of being able to source also all these investors to make sure that you had the right people for the right reasons.
Alan Chang: Yeah, so I mean luckily you know we we knew some of the vses beforehand right from from from our days at rubook um, and and ah says number 1 number 2 was we were very careful in choosing.
Alan Chang: Who I partner with um and yeah we we we we got to know the partners that they invest in us but beforehand so I’ll say yeah these are 2 main avenue strength. Um.
Alejandro Cremades: And how different is the funding environment in in Europe.
Alan Chang: Um, obviously I don’t know because I haven’t really raised from the Us. But we do have some american investors on our on our investment list but I would say you know there’s there’s.
Alan Chang: Like there is there’s plenty of capital in Europe um, and there is like there’s plenty times the real I’ll say this the fundamental problem and I think there’s not enough entrepreneurs. There’s more capital than pub entrepreneurs right? Um, even for myself like I also you know. Enjoy invest in the site and I would say I have more money can deploy than than you know, successful like what I consider top entrepreneurs I can invest in right? Um, so yeah I so I think for so first for sure that there’s more capital than than than then. And companies I can take capital a good quality companies at least so I’ll say the funding runs pretty good right? Um, even despite the the downtime we’ve seen.
Alejandro Cremades: So in terms of um, you know basicibility here into the vision because obviously to all those investors that you’ve onboarded. You know you’ve sold them on a vision. So Let’s say you were to go to sleep tonight and you wake up in a world where the vision of tesser act is. Fully realized what does that world look like.
Alan Chang: Yeah, ah, it’s great. Question. Um I think first of all ah energy will be cheap, right? It’ll be price like water. So think about right? if we if we think plus principles so renewables is really. Like with all renewables. We talk about really many soly so solar in wind and wind is basically indirectly solar energy and solar energy. We talk about like huge nuclear fusion react in the sky. Um, that can power the 2000. So if you look at if you if you look at all the if you look all the solar energy like that the earth so earth surface gas gets if you even if you get yeah basically that if you take that energy convert electricity. You can power the earth effectively approximate 1000 times over what the earth needs. Um, so. Effectively, it’s really about the roleer of you know solar and you know storage. So you think first principles then you know once we achieve that um you know and there’s areunds of energy right? effectively then energy’s price like water you no longer have to think about. Worry about whether and your your your next month’s energy will go up I’ll say that’s number 1 number 2 is it’s quite simple. One. Ah I want I want a grape I want I want a great user experience with.
Alan Chang: With with my with my utility right now right now, right? Well how most people interact with utility is I set up a recurring payment I forget about it. Don’t bother me again but in ah, other occasional occasional um, an occasion you need to? For example. Ah, get a utility bill to ah do a proof of address to your bank. But then like if you think about it. Let this this process makes 0 sense right? because what we’re doing is we’re translating machine readable data to human readable data and then some companies. And then usually human turn into the human readable data into machine readable data and some companies like computer vision companies or machine learning companies are try and turn that Pdf right into back to machine code. Um, whereas if you think about it. There’s no reason why utility can’t open up api. Like ah you know like Api authentication type service to allow you to press a button and then say okay allow my financial service company to get access to my utility data here. You go right? I don’t have to download some pd so like simple things like this right is I can I can name you like a hundred more examples where there’s fundamental like. Ux is very very bad with utilities right? So a good ux I want to see ah just like you know I want to see great uworks and utilities now just like right now I can press a button I get cab I want to press a button to get solar panels right? and have it.
Alan Chang: Finance completely like Amazon hast prime touch service right? It arrives next day if all installed I just press a button and that’s it and I get all the government subsidies automatically applied I get all the financing just go button right today that doesn’t exist. So I think ah, yeah. Basically to summarize um you know, very cheap energy fully renewable. Great customer experience and everything I need to save me money and energy help me electrify 1 in 1 place.
Alejandro Cremades: So It sounds like it’s a massive market so you were alluding to it earlier that day. There is a lack of innovation around it. You know why?? why? the lack of innovation. Why the lack of perhaps you know awareness or consciousness you know From. Maybe other people that could jump in and and help why is that the case.
Alan Chang: Ah, yeah, that’s a good question um to run us I I’m not too sure why I think ah I think in general in general have some hypothesis right. I think number one to really solve the electrification problem right? You have to you have to deal hard with right? you have to deal with physical work and I think and therefore you have to have to have cabinets. Um I think that puts a lot of entrepreneurs off I think for good reason right. Um, you know if you can if you can solve a problem with just so sas mean that’s that’s great that’s very easy that’s great right but unfortunately you can also solve this problem with justos Sas right? You can’t solve that with software you have to not software alone at least you have to solve the hardware as well. So I think a lot of entrepreneurs are. Ah, scared away from that. Um, however, you know companies such as Tesla and Amazon have shown actually even with capex you can build a very successful business and make a lot of money right? Um, so that’s I say that’s number 1 reason. Um, number two is I think this is really a new challenge right? So effectively if you think about fundamentally if if you look at how we used to do energy generation. Not so long ago so we used to have a big coal plant. Um, you know.
Alan Chang: Usually in a meant mega gigwats range serving about million houses like somewhere middle of nowhere next to a coal mine you send electricity down a very very long cable right? and then to serve the metropolitan area that’s really it like now if you think about it that’s quite you know. Quite simple and usually this big coalli is owned by 1 big company could be state backed right? and then they charge you a monthly but and the good thing of a coal plant is the energy production is pretty steady right? So now you think and know thing I think about the. The energy profile of a co plant right? It kind of produces a pretty flat baseload type profile. Um and and a good thing about co plant is is almost like is basically internal combustion. Engine. You can effective rev right? You can rev a co plant. So let’s see there’s ah, a surgeon demand in like and in energy. Right? So let’s say there’s ah, a football game going on or something like that right? and there’s a certain search in the mind and people turn on Tvs or people you know turning on the kettles or people cooking right? when they go from work. You can basically grab the engine to get more m from it pretty but otherwise pretty simple right? But now we want to trans your renewables. And so good thing about Renews is very few. However, the bad thing is it’s not dispatchable I can’t control how much solar energy I get I can’t control how much wind energy I get right? and also obviously there’s no solar night so you have this like very very fluctuating. You know, energy energy generation profile and also can generate it anywhere right.
Alan Chang: You to be able to only put coalline next to coal mines now it can put solar or wind almost anywhere right? So it’s more become more decentralized but also less predictable and because of this right? It basically creates a lot more challenges in engine right? So historically like. You know there’s not much to it in electricity. It’s pretty simple right? It’s a very simple circuit you have big generator. You have long cables connected every home right? That’s about it. But now you have much more complex circuit right? That requires you know a lot more sophistication right? So I think. It’s a combination of you know capex as well as a changing environment especially around policy because basically and almost every government I’ll say at least in the western world is pushing for your know net 0 right? Um, and they pushing pushing pretty hard. So I think combination of that and income that’s moving slow capex all this I think makes it you know that there for normal players. Um, but at the same time That’s why it excites me right? because because it’s novel players. Um, like okay if no one’s gonna do it then you know why out us right? Someone has to do it.
Alejandro Cremades: Hey, someone has to do it. Someone has to do the work. So Why? that’s it. That’s it. So now imagine I was to give you the opportunity of getting into a time machine and I bring you back in time to that moment where maybe you were still in school at Imperial College and you were wondering about. Really getting into the startup World. You know, maybe building something of your own because at that point you were you were even thinking about doing it on your own imagine if you had the opportunity of having a chat with your younger self at that point and giving that younger alan one piece of advice before launching a business but would that be and why given what you know now.
Alan Chang: I Think my advice would be don’t do it. Don’t don’t do it later. Don’t do it now startingling a business is very very tough like like a lot lot of things like. A lot of things that you don’t think can go wrong. Will go wrong. Um, and yeah, don’t do it unless you’re very racial I’ll see that’s that’s definitely what I with my vice I get to myself.
Alejandro Cremades: I love it I love it now for the people that are listening Ellen that will love to reach out and say hi. What is the best way for them to do so.
Alan Chang: Um, yeah, um, you know feel free to reach me on Linkedin or you know yeah, have like just yeah, have happy chat.
Alejandro Cremades: Amazing, well easy enough Linkedin so Allen thank you? So so much for being on the deal maker show today. It has been an honor to have you with all of us. Thank you.
Alan Chang: Thank you Thanks for having me.
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The post Alan Chang On Raising $78 Million To Accelerate Renewable Energy Adoption Globally appeared first on Alejandro Cremades.
Having already started and sold two companies, Omer Davidi is now working on his biggest project yet. One that he believes will be responsible for most of the food production in the world. His startup, Bee Hero, has attracted funding from top-tier investors like Firstime, Rabobank, Cibus Capital, and General Mills.
In this episode, you will learn:
- Building a company on a remote workforce
- Convincing investors as you progress through different funding rounds
- Pollination technology
Alejandro Cremades · EP 600 Omer Davidi On Raising $64 Million To Improve The Health Of Bees With Machine LearningSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Omer Davidi:Omer Davidi is the CEO & Co-founder of BeeHero. He previously worked at Squad technologies as a CTO & Co-founder. Omer Davidi attended Reichman University (IDC Herzliya).
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So very excited about they guess that we have today from startup nation. We’re gonna be talking about building scaling financing exiting I mean all the good stuff that we like to hear some of the issues about scaling on agriculture tech and then also the the. Things that come with it when you are raising money as well. But I think that we’re gonna find you know the interview today very inspiring so without farther ado let’s welcome our guest today Omar da welcome to the show.
Omer Davidi: I Welcome. Thank you so much for having me.
Alejandro Cremades: So originally from Israel so give us all of our walk through memory lane. How was life growing up.
Omer Davidi: I it was pretty good. Israel is great born and raised. Um, you know the the ability even though it’s a tiny country you get to see a lot and you get to experience different people. Um, you know. Be part of the army which is also you know part of life in a way. Um, and yeah, it’s been a while.
Alejandro Cremades: Um, I mean the army it’s it’s it’s incredible discipline that that it gives you guys over there I mean what? what? what did you get out of your experience with the army there.
Omer Davidi: Ah I think it’s actually an interesting part of also in in the reason israeli is becoming some sort of ah you know a high tech hub I think the fact that you are brought when you’re pretty young like 18 years old to an environment where. No one asks you anything I mean especially in the beginning you you build this discipline you learn that there are different things and it’s not the soft and a comfortable environment that at least I had you know at home and then you also get to experience connection with different people that usually you might not have. Experience if it were just in your own bubble. You know in a certain area. So I think this combination and then of course the ability to work with the most advanced technology in the world in some aspects just open minds to to what can be achieved.
Alejandro Cremades: Now Software you know on the engineering side. What really sparked the interest towards that because that same what you ended up studying to.
Omer Davidi: So I think since since I remember myself I used to take apart you know computers and try to understand how they work I remember this day of which I opened I think 3 or 4 different computers trying to look at the cpu and and you know broke some of those tiny pins that needs to go in.
Alejandro Cremades: And.
Omer Davidi: And I remember my mother being very pissed in the fact that they just ruined 4 computers. Um and and and and and and I guess it developed in a way so you know I was trying to figure out how those things work I became some sort of a geek. Ah. Very young age and or even before I finished high school I actually worked in one of the hyte companies focusing on knowledge management and and some other things so it was always probably a passion of mine. Um, and yeah, it’s a big part of my life.
Alejandro Cremades: And also a passion is starting companies because I mean you started so many I was like losing count. So let’s go ahead with the talking all the first company. How did the ah the idea come about and was that company.
Omer Davidi: So many years ago I was involved with some you know investors coming from the real estate space and looking to invest more into the technology space and I find myself acting as some sort of ah you know a person doing some sort of a due diligence or giving some more access to knowledge. Into those group of investors to understand the technology better and what’s challenging and so on and while I was doing it I you know I was focusing on the tech companies but they have experienced some other opportunities in different domains and and one of the things that came up is. Ah, you know, ah recycling of energy and like different challenges and opportunities that can come up in those things and I guess you know I was quite keen into business opportunities in general and I find myself actually diving into a space that they didn’t know much about and and found the first company um span. 2 a little bit more than 2 years Brought it to some sort of a success sold it and and moved forward so it was like you know an opportunity that comes and you just want to take it in a way.
Alejandro Cremades: And I guess that that gave you as well. The full visibility into how the full cycle of a company. You know, really works now. So what kind of disability did that give you.
Omer Davidi: So I think there are a lot of things that you learn you know doing things hands on that though, not necessarily can be taught or at least can be taught to a certain point. But once you experience it, you learn that you know real life is ah is a bit different and the pressure and like the. Other drivers that affects your decision making. But I think it also gives you the power that even though I was quite young when I first you know got into let’s call it the business world a lot can be Achieved. It’s a question of attitude. It’s a question of you know managing risks. Ah, it’s a question of bringing the right people that can support you in the areas that you don’t have enough strength or experience. Um and I think it helps to build up to to success in a way or or even a failure at least you learn from this failure. So.
Alejandro Cremades: Now now in your case, 1 thing that is incredible is I mean companies that you’ve started. They’re like so different in nature in terms of the segment I mean you just jump from one segment to the rest to the next I mean how are you able to do that because typically the the learning curve is pretty. Pretty high I mean typically you would see people that have had you know so many years invested into really understanding things right? You just jump. How do you do that.
Omer Davidi: Ah, so I think you know they’ll probably smarter people than me dealing with you know, super specific sophisticated stuff I think I was always keen to find and and I did actually this process because I was asking myself the same question like what passion at me. In terms of deciding what I want to do and so on I think looking into broken markets where technology can make a big difference and with my experience with technology and my ability to be hands-on and to try and get some sort of a sense of the problem or a sense of potential solutions. Ah, it is what led me and I guess the other part is that I don’t like to miss an opportunity. So if something comes up and it’s interesting enough. Let’s play with the problem. Let’s see where it goes and in many cases. It didn’t go you know and and I just stopped off for spending few months. But in some of those cases that you mentioned 1 thing led to the other and I find myself learning a new and new ah market and you challenge and again it’s about bringing the people who are more familiar with me that with with the problem and can help you know. Guide how a solution should look like.
Alejandro Cremades: So the next company that you did you didn’t really raise money for it. But it sounds like you were at it for about 3 years or so and you ended up also doing a transaction. So typically I mean I guess the question there is what were you guys doing. And what have you learned too because it sounds like here you go 2 companies for 2 exits like what have you learned around timing when doing an exit.
Omer Davidi: Who you know it’s sometimes they feel like if you’ve done something once or twice then suddenly you have all the answers and you know how it works I can tell you that every time I look back and I see mistakes that I could probably avoid you know thinking about them. But I think. Timing is is probably a big thing I mean when we look at the history of you know some companies that succeeded and you look back. Sometimes you find companies that were trying to do exactly the the same in some cases you can identify. You know, small things that they did differently but in many cases it’s about timing and they. Ability of the market to to accept some sort of a solution and so on and I think that especially now when we see the market you know changes quite a lot I mean once it was covid now is the financial markets that it’s a war. So a lot of things happening in the world and I think it’s about, um, you know. Working with ah um, timing in mind. So if you have something you want to achieve try to pursue it as fast as possible and you don’t know how the world is going to look like six months from now or four months from now. Um, so I think it’s about getting to a point they say okay I brought the company to a point that probably others can take it. Failure or it got to some sort of a proof of concept. Solid unit economics now they are probably smarter and and better people to take it from here and then you just just like look at the options say okay should I be here can I achieve more or what can the company achieve more or should I focus. Follow.
Omer Davidi: You know on the next challenge. Um, and now I’m in the next challenge.
Alejandro Cremades: And we’ll talk about the next challenge in just a little bit but as the saying goes you either succeed or you learn your next company was squat technologies and the outcome was not the one that you had hoped for so at what point do you realize? it’s time to pull the Plug. What does that thought process look like I’m sure he’s painful. And what did you take with you from this experience.
Omer Davidi: Um, so maybe I’ll start from the the latter question I think what I I’ve taken from this experience is the ability to kill ideas fast. So one of the feedbacks. The main feedbacks that I have for the process in in squad was that it took us me and my co-founders. Eight months to decide that we don’t that we want to drop this idea and the problem was that we spend a lot of time with senior management to get a better understanding of the problems and exploree the potential solution and we got you know such a good feedback and we were like and. Top of the wall saying. Okay, we just nail it and understand exactly what needs to be to happen and it took us few months until we got down to the you know to the to the field level in a way I would say to get the real experience of what’s happening because sometimes the senior management might have. Ah, perception of how things are running in their business but in practicality it’s not really the case and some of the assumptions that we’ve made in the early days just started to fall and I remember I had this chat with my co-founder back then I think it was after four months and he was like I don’t think you know our assumptions hold enough. And then we stop and we say okay we need to have like a group of assumptions. Let’s say six ten assumptions and as long as x amount of those assumptions holds. We continue. But if those assumptions fall we’re out and it’s not about emotions. It’s not about you know the baby that.
Omer Davidi: We we brought together of those kind of things putting emotions aside and when that happened we just decided we’re out. Um I think it’s you know, like many different things that you need to do sometimes in the business wall like laying off people is never nice. But after you do it several times and you understand that’s what the business needs. Ah, it doesn’t become easier but it it makes more sense and I think also here once once you have this experience saying. Okay, yeah I did spend eight months maybe I learned I probably could have learned in three months what I’ve spent just eight months on so it’s not like it’s all positive. But spending more time on something that I don’t think holds anymore wouldn’t make it better so just move on.
Alejandro Cremades: That’s it now 1 door closest another one opens and in this case, it was a rocket ship that opened so why? how do you come across? You know they say next idea with be hero and and why do you thought? why? Why did you think you know that it made sense to pursue.
Omer Davidi: I.
Omer Davidi: So I think in general you know when we when we close squad and we decided to look at something else. The the challenge was to experience you know problems or to experience industries that might require solutions and it’s always about you know the processes of doing idea ideation of different things. Usually you want to encounter the problem or you want to be in a market that you learn about the problem for many years we joined um a program in in idc herzulya one of the universities in in herzalya that was building some sort of a singularity university concept. Trying to bring people from different domains that already have some sort of an experience ah in the outside world and then put them in a room and see if they can figure out and deal with some significant challenges and one of the people that I’ve met in this program was it I cano. Who is one of the co-founders of Bee Hero and he’s a second generation commercial beekeeper so his his family owns one of the largest be farm in Israel and he was born in raised into beekeeping. Um, you know most of us heard about colon collapse. He sold it on the fact that bees are dying so you know one 1 thing led to another. And I found myself diving into the beekeeping wall with some other team members that were looking into the same issue and trying to figure out whether technology make a difference in this world.
Alejandro Cremades: So then once say you had an idea there you know and you thought it could make a difference. It could make a difference you know in in what you guys are up to what were the next steps that you decided to to take care.
Omer Davidi: So unlike the you know squad that we just talked about I think it was about getting out to the field immediately like okay technology in most cases can can be built. Ah there’s a question about unit economics. There’s a big question about the ability to scale. But you want to experience the problem you want to see it in your eyes and and we spend a lot of time out there in the field speaking with at the beginning beekeeper. So 1 aspect was trying to learn more about beekeepers challenges in dealing with the you know, changing environment. Ah, with the industrialization of agriculture and how it affects you know, mortality rates of bees unit economics of beekeepers and so on so that was one angle. The second angle was to start and play with data. So you know we we used our academic hat to try and get some. Collaboration with big companies and try to figure out what they’ve been studying about bees and colon collapsepsy disorder and we’ve learned that everyone use very sophisticated hardware components. You know to collect data and and and we need to think of a different approach because we’re looking to build a business. We’re not just trying to make a research. Um, so we started to play with with sensors like you know the off the-shelf. Easiest simplest way to just start and collect data. So the more time we collect data. We can later on sense. The the feel for it and see whether collecting data from inside hives can actually say something about the hive because.
Omer Davidi: Sometimes that’s not that’s not the case. Ah, and the third part was trying to understand why hive monitoring companies that we’ve seen so far didn’t get to the scale that you know we are even looking at the problem like colony co collapsepsy saw it was not something new five years ago it was probably. 10 years before that we we introduced it was introduced to the wall. Um, but we didn’t see a lot of hive monitoring companies that are focusing on the commercial domain the majority of highs most of them have shifted towards the hobbyist beekeepers. And there was a big question marks whether you can actually build a scalable company that dealing with hive monitoring. Ah and I think the outcome of those 3 things that we’ve been doing since the early days of being hero led us to focus on pollination optimization. And how we can utilize technology and work closely with beekeepers but not only help beekeepers to deal with their challenges but also introduce different concepts of pollination that will allow. You know, seventy seventy five percent of the crop growers. Um. To pollinate better and increase output.
Alejandro Cremades: And obviously you know the rest is history. What what for the people that are listening to really understand that Why ended it up being the um basically the business model of be hero. How do you guys make money.
Omer Davidi: So bee hero is actually selling precision pollination as a service. So if you are growing a southern crop that requires bee pollination which again is approximately seventy seventy five percent of the crops out there. You need to bring bees to introduce bees during the bloom season. And those hives that are being brought on tracks to the field might pollinate millions or tens of millions of flowers a day or they might pollinate zero flowers a day depends on the quality and the strength and the welfare of bees. Ah, so we focus on how can we ensure that they will pollinate those tens of millions of flowers a day and you get a full cover because a flowur that is not pollinated will just dry and fall a flower that was pollinated is an opportunity now you need to use irrigation. Smart. You need to use nutrients smart and other things that has been. Have been optimized over the years in order to achieve the the maximum outputs possible. So we’re selling precision pollination as a service and behind the scene we’re establishing partnership with commercial beekeepers to support their efforts to introduce better hives so we work with both players.
Alejandro Cremades: And for something like this I mean you guys have you know, raised ah a bit of capital to to support the operation. How much capital have you guys raised today.
Omer Davidi: So until today we raise approximately $64,000,000 in the 3 funding round. So we’ve announced our series b approximately six months ago. Um, and yeah.
Alejandro Cremades: And what is the process like for raising money for an arctic I’m sure it’s a little bit different than from the traditional Sas you know type of company.
Omer Davidi: Yeah, so I mean I’m I’m originally kind of coming from the cyber security space and and a lot is different I know that you know in the early days of be hero. It was. It was extremely challenging. So you know you come up with this. Concept or idea on a field that most people don’t even know about and you don’t have any traction in the early days and you’re you’re trying to get you know investors to believe in what you’re building and and it’s quite hard because everyone is afraid of the Arctic space. Can you actually build scalable companies in the Arctic space. Ah, we haven’t seen a lot of axes I mean again, going five years ago Four years ago haven’t seen a lot of exits in this space. So there’s a lot of question marks of whether you know investors want to take their money and invest in something that they’re not well familiar with and and.
Alejandro Cremades: Um.
Omer Davidi: The early day was were quite tough I mean I remember you know for the seed stage. We. It felt like we spit blood you know in a way and we actually had a date on the wall that we say okay if we cannot raise money by that date. It’s it’s over I mean maybe we have something but we need to have those resources. And after we raised this money and we got some good strategic investors to join and we started to feel more traction and to see some some more you know revenues then the discussion changes Now. It’s about you know unit economics and about how fast can you scale? Um, versus. Is there something interesting here or not or can you overcome some of those technological challenges that you need to do um and and I definitely see you know a better experience going through series a and later on Series B bringing most Litage investors to help and to push forward the company. Um, but but yeah, the early stage for an actor company is I believe one of the most challenging parts.
Alejandro Cremades: Now in Acttic why is it so complicated when it comes to scale. What are some of the issues. You know that they typically founders would encounter and perhaps you know some of the ones that you guys have encountered too.
Omer Davidi: Um, so it’s it’s a question of the you know the valuable proposition and the validation. So I mean think of a grower. Let’s say you’re growing citrus and you speak to different companies that you know tells you how they going to help you to increase yields or help you to do. Something eventually, you want to make sure how much money does this brings in and you cannot try everything at the same time so you’re going to pick few and you’re going to run some of those experiments and if the value proposition is increasing yield then how many years you want to see. Um. Consecutively that will show you this increase in yields and can you actually ah be confident that this increase in yields is a result of this specific solution and and one of the things that I had the privileges to meet with. 1 of the probably the most successful farmers in the world and and to talk about you know the strategy and the valuable position and he told me that you know companies are coming and say okay I’ve I’ve walked with I mean I’ll give you farmers that I walk with and they will tell you how well the. You know my solution is and how they seen the value and that’s going to be some sort of you know evangelist to support the solution but he said yeah, you probably go to 10 goalers you’re running experiments 5 of them will see better yields because 5 of them will just see higher reels. This is how it goes.
Omer Davidi: And some of them maybe 3 of them will be convinced that you’re the reason of of the yield increase and suddenly you have 3 evangelists but I don’t trust it I mean I want to be able to have my own confidence that the solution that you’re providing is actually as a result. So. Think a lot of companies are struggling in the cycles and and there’s a seasonality so it’s not like you can do things on a monthly basis and then you find yourself spending sometimes 2 3 years to move from. Let’s call it the proof of concept to commercialized solution and then to scale it. Ah, and for startups two or three years it’s sometimes it’s a lifetime. Um, think that one of the things that we took from those those meetings and and trying to to do a bit differently I would say is to to focus on things that can be validated on the spot. So if we want to talk about the accuracy of the system we want to be able to show you know on a screen. Okay, this is the status of this specific hive. That’s what’s happening in this hive. Let’s open the hive together and see inside and this is something that can be validated on the spot and it helps you to build the credibility that at least you know what you’re doing. Now. There’s a question how it’s going to support me and so on. So maybe you’re not trying to um you know trying to monetize your solution in the best way possible. But you’re also taking into consideration that you you need to scale. You need to scale. It will help you to improve it will help you to show the value on ah on a brother.
Omer Davidi: Ah, sample set and then you can start and and maybe build premium models or different ways to monetize those solutions in a more efficient way.
Alejandro Cremades: So I sort thinking about scale to I’m thinking about team I mean how how many people do you guys have right now in the company.
Omer Davidi: So we’re getting close to 60 people now in the company which feels a lot but I guess compelled to revenues will feel still kind of a thin company. So I don’t know.
Alejandro Cremades: Now now in that case I mean you have the sixty plus spread across 6 different time zones. So how do you be a culture like that you know I’m sure that you know is is not easy.
Omer Davidi: It’s not easy I think that one of my main challenges like my personal challenges in in be hero is the fact that we’ll spread across 6 time zone as you mentioned and we have people coming from different cultures speaking different languages. And miscommunication is miscommunication and time zone difference are probably the the biggest barriers for some of the projects or some of the things that we are trying to push forward. Ah, there are also you know some advantages so you know a salesperson goes to sleep in the next morning then they have a solution because someone walked all night or. Morning in order to solve it. But I think when it comes to culture. It’s about trying to identify the maximum group of values that brought people to walk in the company. So everyone to join be hero cares about the environment care about bees. Want to see how. You know technology can make a difference in this kind of an old fashioned industry. Ah, and I think as long as you focus on those core joint values. It’s easier to create this you know joint culture and and bonding. I’m not saying it’s easy I’m not saying we’ve solved it I probably have more questions and and answers on this topic but that this does all the things that we focus on and and be here.
Alejandro Cremades: So imagine you go to sleep tonight omer and you wake up in a world where the vision of be hero is fully realized what does that world look like.
Omer Davidi: Um, so we have approximately 100,000,000 hives in the world that are responsible for most of the food production in the world. I mean I want to see. How technology is introduced to all those hives by the way whether it’s bee hero or other companies I want to make sure that we create sustainable food production system that we can ensure that bees are being used in food production for pollination. But they’re also being taken care of um I think that over the last many years we’ve managed to show how we can optimize food production. But I think we did it by mortgaging our children and grandchildren future basically taking resources. From the future and using them now and and and I think that’s not fair. I mean if we want to simplify it. Just not fair. We need to be able to create a sustainable food system that can support the growing population. Um, and and I’m sure that addressing the Bee problem is a significant part of it. It’s not the only part of it. But it’s a significant part of it.
Alejandro Cremades: So if I was to put you now you know, let’s talk about the past if I was to put you now into a time machine and bring you back in time back in time to that moment when you know you were thinking about starting your first business if you could go back in time and have a chat with that younger Omar. And be able to give yourself 1 piece of advice before launching a business. What would that be and why given what you know now.
Omer Davidi: Wow Um I think it’s about focusing on the people that you walk with in the beginning I think that we tend to work with those that believe in what we do. And those will always try to give us the confidence that we’re on the right track whether because their you know friends and family is trying to support our efforts whether they’re like extremely positive people. The things that everything can be achieved. I think I would focus a lot more on those that told me why that will not work and and you know you you never want to be in a place where people telling you why the things you’re doing and investing your life in wouldn’t work but those are the people that taught us the most and made us better. Um. And and even in be here I feel like in the early days we were trying to you know, push away those that explain why it wouldn’t work like um, let’s walk with those who believe in us. Um, so I think that would probably be the biggest advice or something that I would do differently? um. And I’m not sure I I will the next time but it’s definitely something that they want to focus more on in terms of just getting better faster.
Alejandro Cremades: Amazing, Well honor for the people that are listening that will love to reach out and say hi. What is the best way for them to to do so.
Omer Davidi: So first of all, be hero website. So it’s behero as you can see here io and you can contact us I’m also on Linkedin so feel free to reach out I’m not as responsive on Linkedin but I’ll try to do my best. Ah, and yeah would love to connect with people who can relate to our vision and our mission.
Alejandro Cremades: Amazing. What hey Omar thank you so much for being on the deal maker show too late has been on on earth to have you with us.
Omer Davidi: Um, thank you so much and keep up the great work. It’s it’s exciting to hear about your stories.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
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Andy Bromberg is now on his third startup. One which has already raised $100M from top investors, to make the financial services space simpler, and more accessible to everyone, everywhere. His latest venture, Eco, has attracted funding from top-tier investors like Lightspeed Venture Partners, StartX, Formless Capital, and Blockchange Ventures.
In this episode, you will learn:
- The future of rewards
- Simplifying your finances
- Andy’s expectations for the crypto market
Alejandro Cremades · EP 599 Andy Bromberg On Raising $100 Million To Put Your Money Back To Work For YouSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Andy Bromberg:Andy Bromberg serves as CEO of Eco, a consumer financial app creating a single place for your entire financial life — giving you market-leading rewards on saving, spending, and more.
Eco has raised more than $90 million from an array of leading investors, including L Catterton, Activant Capital, a16z Crypto, Founders Fund, and others.
Prior to Eco, Andy was Co-founder and President of CoinList, a leading platform for token sales, trading, and other financial services for the best digital asset projects.
Andy is also a founding board member at FreeWorld, a non-profit seeking to end institutionalized poverty in the United States by providing access to living-wage jobs for people with criminal histories.
He studied Mathematics and Computer Science at Stanford University and co-founded the Stanford Bitcoin Group.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So I’m very excited about our guest Today. We’re going to be talking a little bit about building scaling financing I mean all they all the good stuff that we like to hear we’re going to be talking about crypto quite a little bit here are the crypto winter the crypto highs. They. Cri talo I mean all of that stuff and then also riding a rocket ship even during the macro environment that we are right now experiencing so without far ado let’s welcome our guests today Andy Brumberg welcome to the show. So originally from Boston.
Andy Bromberg: Thanks for having me really excited to be here.
Alejandro Cremades: So give us a little of our walk through memory lane. How is life growing up.
Andy Bromberg: Life growing up was great I grew up in the suburbs of of Boston um, really fortunate to just spend a bunch of time when I was younger starting to build little businesses marketing firm and all sorts of stuff like that. So I spent a lot of my time growing up doing that and then. Ah, you know did that before I shipped out to the west coast for for school.
Alejandro Cremades: So how did you get into the whole you know, ah math thing I mean it it sounds like you know that was like a really big passion of yours you ended up going to Stanford but how did that develop.
Andy Bromberg: Just love numbers. You know I think sometimes kids grow up and like the numbers Sometimes they like the words and for me it was it was numbers and just doing interesting and fun things and the achievement of figuring out those problems and solving them and that is that certainly stuck with me stuck with me now.
Alejandro Cremades: So let’s talk about Stanford so arriving there to the you know territory of innovation. You know everyone there are starting companies. So how was how was it like you know when you went there and and all of a sudden you’re looking around and and it’s just startups absolutely everywhere. So.
Andy Bromberg: It’s a really special place for that reason I mean the exposure you get from being there and being around people who are thinking about the same thing and and the access you get from being at that university is really special I feel really fortunate to have been able to go there. Um, you know a really formative experience for me and and a really important one was that my freshman year. When I was at Stanford I took a class taught by balogyernavasan who um was the the founder of earn.comlaterctwo of coinbase. It’s an investor is is in the news recently for his his bitcoin bet that he’s been He’s been making about hyperinflation but he was he was my professor at the time in a class called startup engineering. What was amazing about this class this was months into my experience at university was that it was all about how to build a startup in great detail. A lot of practical stuff. But then also ball always had these guest speakers come I think it was every other week or every week a guest speaker would come and talk about. Building startups and it was amazing people early engineering leaders at uber founders of all sorts of companies investors and and you just got this amazing exposure to people that were actually building things in really close quarters and hearing them talk about their experiences and and interacting with them closely and so. Yeah, that was something I could I feel like I could only get there and and it was a really special experience.
Alejandro Cremades: And now in this case I mean you did have a professor that they they really made a huge impact on you so tell us about this professor and and why was it such an impact.
Andy Bromberg: Yeah, well, the other interesting thing about this class that I took not to go too deeply into this class. But um, there was it was all about building startups and and how to do that in practice and it was it was kind of a computer science oriented class. So really about the coding and techniques required in building startups. There was a hackathon every Thursday where every Thursday everyone came together in the engineering building and worked on some project they were going to work on for the whole quarter and there was a group of 7 of us that every Thursday went to this hackathon at six zero P M in the engineering building and stayed until 6 a m the next morning. And we’re working on these these projects the whole time and and it was a lot of fun and the amazing thing was that ball this professor stayed with us the whole time. So every Thursday he was up all night with us working on these projects and helping us and giving us pointers at the end of that quarter. We had so much fun building these things and we were all like man. We really want to. Keep spending more time together and working on stuff and and thinking about things embology with all of his foresight which he has in in spades said to us. Well let’s let’s turn this group of 7 of you into the Stanford Bitcoin Group bitcoin is going to be a big deal. It’s going be really important. This is in 2012? Um, and he said this is going to be ah, a big deal. We should study it academically and and you know the group of 7 of us were at that point a little skeptical I think we’re like ah maybe this bitcoin thing will be a big deal. We’re not really sure but ball kind of pounded the table and said listen bitcoin’s going to be a big deal. It’s going to matter. You’re going to want to be involved. Let’s.
Andy Bromberg: Start a group and study it and so that group of 7 of us plus biology and another professor named fij pode um started the Stanford bitcoin group in 2012 and spent a couple of years doing academic research building projects doing a lot of advocacy work running up and down sandhill road pitching pitching bitcoin to people. Um, and that was a really formative experience for me, got me into the crypto industry which then um has as meaningful throughout my career but also just a fascinating experience to be involved in in the early days or early-ish days of that ah of that technology.
Alejandro Cremades: So What was it like when when because this was 2012 I mean it was not as adopted as as nowadays, everyone you know you asked them hey have you heard about bitcoin and and everyone you know has heard of it. But back in 2012 I mean not a lot of people. So. What was it like you know writing you know bitcoin you know at that point and and what was the industry like yeah.
Andy Bromberg: It was really fun. It was a really small industry like everyone knew each other small set of people. Um and see we got to know a lot of people and many of which are still working in crypto today are working in bitcoin today and it’s been cool to see now a decade of those relationships. Um, build since the early days everyone kind of recognizing that that you were there. You were there early and that’s been that’s been a lot of fun. Um I will say one of the most fun things we did which I alluded to was as this kind of Stanford bitcoin group. We would go to Sand Hill Road which was you know, right? next to our university was. And we would go into investors offices and pitch bitcoin. We weren’t looking for investment ourselves but we were just looking to pitch this technology and saying hey you should be looking at bitcoin you should be funding bitcoin startups. Maybe you should be buying bitcoin yourself and it was fascinating going and pitching vcs on bitcoin in 2012 ah, some people were super receptive. Some people were not receptive whatsoever and thought we were were crazy. Um, and I still get emails to this day. This is now ten years ago I still get emails to this day from investors that we pitched when we were students and coming back and you know wanting to talk about crypto again. Um, and so it was it was a really cool experience to be able to do that. Back then when it was such a nascent nascent technology.
Alejandro Cremades: But probably now they’re calling back to see if you can invite them out for lunch and because they had such a mistake and so now you can’t invest in them and versus the other way around. So So good stuff So now in your case you know you actually started your first company while there Sitewire. So. How did the whole idea of sidewire come about and and yeah, why? Why did you thought it was It was a good idea to go with it.
Andy Bromberg: Sidewire yeah was a company in the media space initially in the political media space where we put the experts together and had the experts chat where everyone else could read and only the experts could talk to each other so kind of like Twitter without the noise if you could have just the experts on Twitter talk to each other and everyone else reading. Um, and obviously it was an election cycle that we’re going into this was kind of 20142016 and so there’s a lot of discussion about politics. We started in that industry the way it came about was that I met my then cofounder Tucker who was a long time and you’d worked in politics for a long time to work in media for a long time. You’d work in social media. Um. And so he was really kind of the industry expert on this space and came and had this idea that he and I started developing together that turned into sidewire and at that point I was kind of the technical side of the operation. He was the the expert on on all things, media and politics. And it was. It was just one of those situations where something comes about because you’ve got someone who’s so deep in an industry that has a thesis about what should be built there and I think that thesis was was right? Maybe a little bit little bit early. But I think it was right? Um, and and we came together and started started building it and in 14.
Alejandro Cremades: Now with sidewire. Um, you know obviously it didn’t end up turning out the way that you guys had hoped for. But I’m sure that this was pivotbotal for you because as they say you either succeed or you Learn. So Why didn’t it work out the way that you guys had hope for and. What was the lesson that you took with you from that.
Andy Bromberg: Yeah, lot lot of lessons taken away. Peter Thiel has this line I think where he talks about failures being overdetermined. There’s always there’s more than 1 reason for a failure There’s rarely a single kind of bolt of lightning that that kills something and there’s there’s many reasons that things fail and so it’s it’s often hard to isolate it and I think that’s right. Um, and there were a bunch of things. 1 media is just a really tough business and you see this over and over again the discussion when I was running sidewire when you talk to media people was always what is media’s business model gonna be how are we gonna work out a sustainable business model for media. The industry was. Kind of this crashing plane and we’re trying to save it and it’s it’s hard to save a crashing plane and find a way to to get it to take back off. Um, and so I think there was there was certainly some industry stuff. Um, you know I think we tied ourselves to the kind of political cycle because there was opportunity there to grow. Um. And and then of course that cycle is kind of on and off and it’s it’s not always reliable and then probably the biggest thing was that you know we built this product on the premise that people wanted to hear from experts and if we put the experts in conversation with each other that would result in really interesting conversations and then people would be interested in consuming them. What we found in practice was that wanting to listen to experts is a stated preference but not actually an observed preference. What I mean by that is everyone says oh of course if there was a place for me to listen to the experts I would go there and I would listen to them but in practice most people don’t actually want to listen to the experts and they would rather go.
Andy Bromberg: And talk themselves and that’s why something like Twitter is so successful is because people can talk themselves. That’s you know it’s a place for them and so despite you know, asking people hey do you want this and hearing a lot of yeses in practice I think a lot of people were less interested in it as a product because it was less participatory for. For them and that’s ultimately what a lot of people want.
Alejandro Cremades: So then in this case, you know what happened next I’m sure that it was a a tough 1 to swallow what what happened next fine.
Andy Bromberg: So when we we made this decision to wind down wind down sidewire and it was actually incredibly fortuitous. What happened next for me. Personally we we wound down sidewire um and and did that kind of as gracefully as we could and then right as I was starting to think about what would come next an opportunity popped up right in front of me. And that was the opportunity to start and found coin list. Um, and so coin list is this digital asset platform for token sales and all sorts of other digital asset financial services. Um, it’s been built into a really amazing business and at the time it was just spinning out from Angellist. So Angellist had kind of worked on this. Idea of coin list and was ready to spin it out into an independent company and I knew the Angels team I knew the protocol labs team who were also working with angelist on it and they were looking for someone to to lead this new spinout startup. Um, and and so I i. You know, started up there and was the founding Ceo of coin list and began to run run that business which obviously is its whole its own whole story attached to it. But that that popped up right as I was winding down sidewire.
Alejandro Cremades: That’s incredible. Hey 1 door closes on another one opens. So really, really cool now now in this case for the people that are listening to really get it. What ended up being the business model of coin list.
Andy Bromberg: So initially coinless business model. This was in 172 you might remember the ico boom there were all these token sales happening tons of noise in the space. Lots of garbage but but some legitimate projects and coinless set itself out to be the premiere platform for. Digital asset projects to run their token sales that started with the filecoin token sale which was kind of the first marquee one on coinin list and helped to kind of get the company off its off on its feet. Um, and there were a bunch of others that came shortly thereafter blockstack and then eventually salna and celllo and a whole bunch of other token sales. And coin lists model was to be a technology services provider to these projects running token sales and make money off of these projects doing so and that was an incredible business in 2017 when we started in early twenty eighteen straight straight shot rocket ship and then crypto winter hit and. When crypto winter hit token sales just stopped. There’s open like your revenue just goes away. There were no more token sales we had made money off token sales no revenue and so then coinless had to begin to figure out. Well what are we going to do. To keep this business running. We believe that token sales are going to come back at some point when the market returns but in the interim we need to figure some things out and so coinless started to offer this increasingly diversified set of digital asset financial services whether that was not to get 2 in the weeds here but a wrapped bitcoin.
Andy Bromberg: Service exchange service that ended up being really valuable spinning up an exchange product lending products all these different business lines into this really diversified financial services provider and then the market returned token sales came back and that started lifting the company again. Um, and now Coinless has this really diversified. Set of business lines that allows it to do well through through Market cycles. You know, no matter how high or low they go.
Alejandro Cremades: And you’ve you’ve seen obviously the um you know the the whole crypto space developing since you know back 2012 war there was like nothing to like what it is today and those cycles I mean they’re just like so crazy now like when it goes from. From winter to spring to summer to winter and you know also the swings are just like absolutely ridiculous. So so how do you How do you think you know you know people should really think about cycles when it comes to crypto.
Andy Bromberg: Yeah, the fundamental first question you need to ask yourself about cryptomarket cycles is are you fundamentally long-term long this technology or not do you believe this technology is going to be more meaningful in 10 years than it is today. That’s the first question you have to ask yourself. For some people the answer to that question is no, they don’t really believe in the technology they don’t believe it. It has that much of a future and that’s totally fine in which case crypto marketet cycles. You’re just going to see those as kind of speculative bubbles that rise and fall and you know one day it’ll all collapse to to 0 if however, you are fundamentally a believer in this technology which I of course. Count myself in that set the way you need to see these these cycles is just part of the natural evolution and maturation of the asset class and I remember you know my first crypto cycle this happens to everyone I bought a little bit of bitcoin. You know when I first got into the space tiny little bit because I was a broke college student at the time. Um, and then the first cycle happened and I freaked out and I sold a bunch of it because you panic you think it’s over you think you know the space is ending and then it doesn’t end it starts building back and you realize oh wait. You know that I got caught right? this this happens these cycles happen and people wash out and since then I’ve understood you know what cycles are going to come and go and if I fundamentally believe in this technology just hang on just stay in the game survive stay allocated and in the long run if your thesis is right? It’ll all work out for the best. Um.
Andy Bromberg: And so I I think basically everyone in the space follows this pattern where they start panicked highly emotional in their first cycle and then the more cycles you see you just become more and more used to it more more sanguine about about how it works.
Alejandro Cremades: Now in this case I mean you guys raised quite a bit of money How much money do you guys? raise for coin list.
Andy Bromberg: Coin list raised. Well it’s it’s now raised well over one hundred million dollars. Um, over the course of multiple rounds going back. But but yet’s it’s in the in the nine figures.
Alejandro Cremades: And what was that the experience of raising money for a company that you know was involved in a market with such you know, crazy volatility.
Andy Bromberg: You You just have to find people that are similarly convicted about the opportunity in the long term chance What I’ve found now with coinless and then also with with Eco which I’m sure we’ll talk about is that you can find people that are you can find investors that are tourists in. Cyclical industry that are there for the good times then are scared about the bad. That’s actually not a good idea to work with them because when things get bad. It’s going to turn to a really tricky Relationship. You’re going to be sitting there saying it’s fine. The cycle is going to continue but they’re going to be very very concerned. That’s not that’s not great so you need to find people that have that same perspective. Have the same view and say it’s going to work out in the long run that doesn’t mean you don’t need to do challenging things when the times are are Hard. You certainly need to do challenging things when the times are hard but at the same time you just need people who are aligned with that that objective and then it’s just about a meeting of the minds as it is with all all companies and understanding what it will look like to work together. Being transparent about the cyclicality of the business having open conversations about that and finding the people that you want to you want to partner with.
Alejandro Cremades: So incredible stuff what you guys were doing with coin list I mean you know, definitely yeah, a lot of money raised. You know, incredible momentum over a hundred employees or so eventually in 2020 you know that’s really where where you actually started to think hey maybe you know I should I should really jump ship here and you know there was another company that you were you know helping us ah as a founding advisor or perhaps you know on the founding team but but not fully operational. So. What triggered I guess I guess first and foremost how did die that idea that a specific idea or opportunity come knocking initially and then what triggered for you to say I think I got to I got to really take this one on especially when you were. You know in such ah an amazing. You know, writing such an amazing opportunity.
Andy Bromberg: Yeah, it was a really tough decision. So that new opportunity was eco which I’m working on today and eco started in in 172 and it was it was really built around this fundamental premise of recognizing that in today’s financial system. People’s money is not working for them. Working for middlemen. It’s working for all sorts of other people but it is not working for those people and we saw crypto and also just fintech innovation that was happening as a path to putting people’s money back to work for them and building really compelling financial products that were much more aligned with their users. We can talk more about what that means. But. I helped start eco in 17 I helped assemble the kind of founding team put in motion. Got it started with with several other friends and colleagues and then I was running coin list and throughout that time running coin list I was advising eco I was working with eco. Um, and in 2020 like you said I left coin list and went to eco. What did not happen was and I wasn’t sitting at coinless thinking I need to jump ship. In fact, coinless was going great and I definitely was not thinking about jumping ship. But the eco team came to me and said hey we really think you should come in and. Take the reins here. We think you should come and be Ceo of this company and run it that you’ve been advising now for a few years but we think you should do it and you know initially of course I was like I’m good coinless is doing great I’m happy here but the more I dug in the more convicted I was that running eco is actually the right thing for me to do and that’s that was for a few reasons.
Andy Bromberg: First I just fundamentally believe that the power of financial technology whether it’s crypto or other financial technology is to put people’s money back to work for them that is that is the thing. It’s to build more aligned and better financial systems than what we have today and that’s what eco was working on and so I had incredible mission alignment with. This project. The team was incredible. Loved the team had been working with them for years wanted to spend more time with them. Um, and what was happening in 2020 to eco was that it was leaving the r and d phase and entering into just this operational phase. It it kind of figured out as a company what it needed to build. It had early signals of product market fit and it was time to go and build the thing out and operationalize it and that’s the stuff that I’m really good at and so it was one of these situations where I’m looking at it and saying all right huge mission alignment I love the team. There’s signs of it working right now and. What they need is my exact set of skills and when all of those things come together. It’s too hard to say no it just made too much sense and coinless has been a really good spot I had helped build out an incredible team that I had total confidence could continue to take that business and continue to grow it. Um, and so it’s a really tough decision. But ultimately sometimes just something so compelling like that lands in your lap and you you have to say yes and it feels like like life’s work that you need to you need to go and work on and that’s how I ended up taking the gig.
Alejandro Cremades: What happened next right.
Andy Bromberg: Well eco then got on got on its own rocket ship which was really exciting I joined in October of 2020 we’re building a product which is this really simple all in 1 consumer financial product that allows you to take the things that you do in your existing financial life and do them all in 1 place. What I mean by that is that if you have. You’re a normal person like me, you’ve got 12 financial apps on your phone. You’ve got your bank 2 credit card apps cash app venmo coinbase Robin and you’ve got all these products money’s moving between them all the time It’s a huge pain. You’re not benefiting from compounding rewards in them and eco puts that all in 1 place. We’re building towards that and gives you these compounding rewards. And also enables this kind of open rewards currency that we can talk more about and so in 2020, we were just starting to bring that to market. We needed to raise money so we went out and raised an amazing round led by Andreessen Horowitzs crypto their fund. Um, which is which is really great and then just a few months there after is another round. Ah. Led by El Cataran and Activeant capital. Also amazing partners. Um, and just built out the team and built out the product and started to grow really quickly and it was just a really special time that you know the market was strong. We had these these product market fit signals and it was time to hit the gas and and go and so in a matter of matter of you know six months or so we raised $85,000,000 we built up the team. We started to really operationalize and commercialize the product and we’ve been on that on that path ever since we’ve raised just.
Alejandro Cremades: And how much capital have you guys raised to late.
Andy Bromberg: But $100000000 just under a $100,000,000 yeah
Alejandro Cremades: Got it, you were you were talking about a a you know one thing that that that just came to mine is how has it been to pushing this through you know, kind of like a darker macro environment type of thing.
Andy Bromberg: Yeah, it’s it’s a really interesting time. So the number 1 thing for us that matters the most is that eco itself has been has had no direct exposure to or impact to any of the things that have happened so customer funds have remained totally safe and eco of course corporate funds have remained safe like. We’ve we’ve been unimpacted but that doesn’t mean there’s not market headwinds that we need to contend with and people being skeptical of new financial products because they’re finding out that some of the ones they used have been fraudulent as we’re or illegal as we’re learning in in the past few months um and so for us, it’s all about just refocusing on. Our mission to put people’s money back to work for them to do no financial harm and to help people build as much wealth as possible make the right decisions on behalf of our users and just go and execute and you know you can get caught up in thinking about the market conditions and oh it’s so hard and you know pitying yourself for having to work through that. But the reality is the biggest winners in these cyclical markets are those that are able to just keep building through the dark times and you know I’ve I’ve seen that now with a number of companies. It happened with coin list. It happened with you know, coinbase the leading kind of us company in in the crypto space. The companies that are able to invest and grow and build through the winters when summer comes again. It’s really powerful to be in that position of having been building and you know people come and go in the space when the times are good. Um, but if you’re able to work through the winters. That’s when that’s when the real opportunity is for people. So.
Andy Bromberg: Just refocusing on that message making sure we all really feel that and then doing the right thing and continuing to build is is really all that matters.
Alejandro Cremades: So imagine you were to go to sleep tonight and and you wake up in a world where the vision of ecom is fully realized what does that world look like.
Andy Bromberg: World looks like a few things one every single person in the world has access to the best financial services available in the world all in 1 really simple place that isn’t a headache to manage but everyone has access to that. And we’re no longer kind of stratifying financial services by where you live or by your socioeconomic class or anything like that. But you have access to these this best set of financial services in the world everywhere. That’s one piece and the second piece is that the vision of eco’s open rewards currency is also realized and we have this. Realization that there’s so much value in rewards ecosystems in the American Express or chase points ecosystems or the American Airlines ecosystem or any of these rewards ecosystems the Starbucks ecosystem but each of them are walled gardens where you earn value in this little walled garden. You can only use it in that walled garden. And those companies endlessly and senselessly devalue your earnings they give you points. They give you rewards for earning and then they devalue them and we believe that there’s a better world possible where there could be a reward system that is open where you’re able to earn your points somewhere and then you’re able to actually move them out and that. System allows you to be flexible with how you use your points and removes the ability for that single central party to arbitrarily devalue those points and change the thing that you’ve actually earned and so in the long run if we’re ultimately successful everyone in the world will have access to the best financial services available in the world and.
Andy Bromberg: we’ll be using a single open rewards currency that’s usable everywhere and is flexible and isn’t devalued in a way that so many rewards currencies today are.
Alejandro Cremades: And for the people that are listening to get an idea on the size of eco to today I mean anything that you can share you know in terms of maybe number of employees or anything that you’re comfortable sharing.
Andy Bromberg: The team right now is about 60 people. Um, we’ve built a really strong team. We’re working to stay lean and be able to just continue executing as as strong as we can, especially through this this bear market. Um, and yet we’re we’re trying to stay around there for now and and just keep building.
Alejandro Cremades: I love that now for the for the for for the people that are listening. You know I’m sure that they will love to hear you know your answer to this imagine if I was to put you into a time machine and I bring you back in time I bring you back. Perhaps to the moment where. You were you know a student in Stanford and team imagine you were able to have a chat you know with that younger selfvan give that younger aunty one piece of advice before launching a company. What would that be and why given what you know now.
Andy Bromberg: Can I give you 2 pieces of advice I’ve got 2 for myself 1 is starting a company is an enormous commitment and you should only do it if you are deeply deeply deeply passionate about what it is that you’re working on the reason I say that is that.
Alejandro Cremades: Let’s do it. Let’s do it.
Andy Bromberg: Well sidewire was an amazing learning experience for me and I walked away at the timen I don’t regret doing it at all I wasn’t that passionate about the work that we were actually doing I was really interested in the idea of starting a startup at the time and learning and working with this amazing cofounder that that had kind of landed my life and that was great. But it’s it’s hard to put everything you need to put into something if you aren’t deeply passionate about what exactly you’re working on and so I might have done that differently if I were able to rewind time I don’t regret doing it but I might do it might do it differently and so that’s 1 big piece of advice and the second big piece of advice which I would give myself. But you can’t really learn until you felt it is the absolute requirement to focus endlessly on the quality of your team on raising the bar and on building just a hell yes team that is exceptional and talented and you can’t overstate how important. That is how that’s foundational to everything and with every year of my life I’ve gotten more and more rigorous about the talent that I require you know to work with and people that I want to surround myself with and um and I it took me ah a little while to learn that learn that lesson I think that I always had a high bar but. Pushing that bar as high as you possibly can is is the only way to build something. Great.
Alejandro Cremades: I Love that So andi for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Andy Bromberg: Twitter at Andy Underscore Bromberg is probably easiest or I’m just Andy At Eco Dot Com and would love to hear from people.
Alejandro Cremades: Amazing! Well hey Andy thank you so much for being on the deal maker so it has been an honor to have you with us.
Andy Bromberg: Thanks for having me really appreciate it.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Andy Bromberg On Raising $100 Million To Put Your Money Back To Work For You appeared first on Alejandro Cremades.
Stephanie Tilenius successfully led her first startup through an IPO. Now she is taking on the healthcare space, which makes up 20% of GDP in the United States. Her latest venture, Vida Health, has attracted funding from top-tier investors like Centene, Lumir Ventures, Hamilton Lane, and Canvas Ventures.
In this episode, you will learn:
- How Vida Health is changing the healthcare space
- Effective board dynamics
- Servant leadership and leadership styles
- Growing yourself as a leader
Alejandro Cremades · EP 598 Stephanie Tilenius On Running A $1 Billion Operation At GoogleSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Stephanie Tilenius:Stephanie Tilenius is an entrepreneur and intrapreneur who builds products, platforms and businesses from the ground up. She is currently the CEO and founder of Vida, a tech company in the health sector. Prior to Vida, Tilenius held executive roles at Google, eBay and Paypal.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So today. We have a quite an inspiring guest I think we’re gonna be learning a lot you know going from tech to health care. You know from the corporate you know tech world to really going at it and and building you know, um. Her her own company I think that you’re gonna all find this quite inspiring so without farther. Do let’s welcome our guest today Stephanie Teleenius welcome to the show. Thanks.
Stephanie Tilenius: Great to be here. Thank you for having me.
Alejandro Cremades: So originally born in Ohio and I know that you’ve moved a little bit also going to San Francisco eventually but give us a walk through memory lane. How was life growing up.
Stephanie Tilenius: Ah well I grew up in the midwest where everyone had good values and we played outside. There were no devices and so is a fun upbringing and then we moved out to the bay area. Well before tech kind of ah took hold and so we lived in San Francisco and really enjoyed. Ah, the city and um, the you know, just love the experience of growing up here and the city’s changed a lot since I’ve been here, but it’s still a fun place to live.
Alejandro Cremades: Then you eventually moved East You know when you went for your studies right.
Stephanie Tilenius: Yeah I went I went to college and business school backy. So I lived in Boston for like ah like 12 years worked worked and.
Alejandro Cremades: That’s incredible and then you did your Mba and eventually you started your first company. So how do you land on your first company.
Stephanie Tilenius: Yes, ah well I I was trying to solve I was in the venture I was actually at Intel in the venture space and I was looking at problems to solve and came upon. Ah, pharmacy benefit management and chronic disease as an area and so started planet rx and we went public in October of ninety nine and then we were sold to Ri Aid ah and then after that I was um I was either going to start another company I was actually interviewing with a couple of. Folks and I ended up interviewing at ebay with Meg Whitman and I told her I was likely to start another company. In fact, I wanted to meet her because I wanted her to be a mentor and then um, one of our my investors from benchmark had introduced me to her and. Really had all the intentions of doing something else and she convinced me to interview at Ebay and I realized that I could be an entrepreneur inside a big company and then I stayed at ebay I was there for nearly a decade between ebay and paypal.
Alejandro Cremades: And what is it like to work with someone like Meg Whitman I mean 1 of the most incredible leaders.
Stephanie Tilenius: Well I have to say I’ve been really fortunate to work with Meg and then Rajiv or Cf the cfo at the time and all the leaders at Edd Ebay and Paypal tremendous people and then same at Google with um, you know Larry Sergey Susan Jonathan like just. Tremendous tremendous people and I feel fortunate to have those experiences they all like maybe better and still stay in touch with many of them today and Meg was a great mentor Meg. Um, in particular having a woman in a leadership role and watching her. Ah. You know drive the company and build this legacy was is incredible.
Alejandro Cremades: And there you were running on 8000000000 p and l so that’s quite a responsibility. Yeah.
Stephanie Tilenius: Yeah, at the end I I was at ebay early and then I went to paypal and built a lot of what is now public like the Paypal Merchant Services business ah after we acquired them. We scaled it off ebay and built mobile. And then I went back to ebay to do the turnaround and I was Svp of ebay.com which was an $16000000000 p and l.
Alejandro Cremades: And I guess say you know what were some of the lessons. You know that you took away because even though you know different companies you know, still in the same segment and they’re pretty amazing ah companies I mean some of the biggest companies you know ebay google Paypal. So. From all these leaders that they that you were able to work with I mean you were mentioning Larry and Sergey from Google the founders make whitman from ebay I mean were there any specific traits that they or ingredients or patterns that you were able to see from them that they. Perhaps you know like you got inspired and and and and that you really you know learned and and you’re like you know what? if I run my own business. You know I’m definitely going to implement. You know those those things that I’ve learned from them.
Stephanie Tilenius: Um, well I would say you know those cultures had a ah really high bar for high quality people execution and innovation. I mean we innovated our way through problems. Time and time again and it gave me a lot of confidence that you could solve problems that way. Um I think the other big learning was that they changed the world. Um, you know ebay ushered in economic democracy through its platform I mean there were people. Who made a living on ebay and they put their kids through college through the income from ebay they bought their homes I mean it was really remarkable and I I was just so inspired by that and then at Google we were really trying to improve the world on so many levels like not only aggregating the world’s information. But. You know, building things like waymo and having an impact beyond just search and so I got the bug early on to you know, do something that changed the world. But I I think there were like more specific lessons around tech that I could apply to health care that I knew needed to be applied to health care. So. When I first started looking at healthcare I realized that the consumer experience was really lacking and I had you know the the experience of building. Great consumer products and scaling them and Nps and really focusing on the day-to-day usage of the product I remember it.
Stephanie Tilenius: At Google Larry had this expression called the toothbrush test if you if you didn’t use the product 2 times a day then it wasn’t useful and so when I went to healthcare I said we have to build something that passes the toothbrush test. Um, and then the other The other realization was you can build platforms that scale to millions of users. I had that experience personally but I also grew up in these environments where it really mattered that you scaled that you had impact and I mean I remember at Google like if you didn’t have a product that scaled to 100000000 people. It wasn’t relevant. Um. So I had to unlearn a little bit of that when I went into the startup world because you have to start small and scale very you know, systematically, but when I had the vision for Vida and understood how to build a platform in healthcare I thought about scaling to 100000000 users scaling across channels building something that. Um, wasn’t bespoke for every channel or every customer but really could scale and then the the last thing I I embraced um from my experience at Paypal was that regulatory investment can be a strategic moat There was a lot of infrastructure. Trust and safety and regulatory needs that we had to put in place at Paypal that became a real strategic advantage and I recognized it in healthcare you had to embrace the system and the regulations and learn how to build within it and around it.
Alejandro Cremades: Now there is 2 events that you know, kind of like came together. Um, and that were the final push for you to get involved and to and to and to launch it to bring essentially be that to life now one is you know something that you encountered ah that happened with your father. And then another one is perhaps ah becoming in entrepreneurp in residence for Kliner. So how did this 2 come together in order to push you to to bring this company to life.
Stephanie Tilenius: Um, and.
Stephanie Tilenius: Well I was working with Mary Meeker on the digital growth fund at Kleiner and working on companies like my fitness pal and next door and square and others and um.
Stephanie Tilenius: I also when I was at Google my father had multiple chronic conditions and I was looking for a solution. In fact I I would have probably built vita at Google I was just really early in my thinking and at that time Google x was not really interested in healthcare but ah. I knew there needed to be a solution. So my dad had diabetes obesity chf c opd and depression and he had multiple doctors and he was on multiple medications but nobody was looking at the underlying route drivers of these conditions and managing him day-to-day and I knew there needed to be a platform. With connected devices with someone caring for him talking to him reaching out looking at his stress his sleep his nutrition his medication adherence none of that was happening and so I kept tinkering with this idea I I had um I had multiple prototypes and then. Eventually I actually shared it with 2 venture capitalists who are who were friends who are my first investors and they saw the the prototype and they were like you have to go do this. This is amazing and by the way it brings together like. Everything in your career all your skills like it’s ah it’s a platform. It’s a consumer experience. You know how to scale um a marketplace of providers and provide care to enterprises and consumers and and you’ve done things with a regulatory bent to them so you really have to go do this and.
Stephanie Tilenius: And so it all just kind of came together but it was a lot of little things that I did along the way to bring it to that place where um, a lot. You know it’s like when you’re building a brick wall. It’s like you build 1 brick at a time and then all of a sudden it comes together and you realize how much work went into it. But it’s not an instantaneous type.
Alejandro Cremades: And for the people that are listening to really get it. What ended up being the business model of vita. How do you guys make money.
Stephanie Tilenius: Thing.
Stephanie Tilenius: We make money by selling to large enterprise customers. So we have customers like Walgreens and Cisco and Boeing and prudential and Northrop Grumman and we sell to. To them a multi-year contract then they provide it to their employees as a service. We also work with large insurance companies and we just want an 8 year medicare government contract and so we work with a lot of Medicare customers now and they provide it to their members. So we’re either selling to. Ah, a large health insurance company or an employer and then they provide it to their employees and their members.
Alejandro Cremades: So now quite an interesting shift day here for you know we could say you were used to doing tech and now health care. So how was that shift and then also what are some of the comparisons between one another.
Stephanie Tilenius: Well, ah they both change the world and for the better so that’s at the core of it. The most important thing and then when you look at um, the lessons that I can apply from tech in terms of. Ah, building a product that has a high nps like we have an over an ad nps that really is used on a daily basis. We have the majority of our users using our app 5 to seven days a week um and we’ve built a platform that scales. Ah, and then we’ve you know, really done the work to make sure that we. Hipaa compliant and we have high trust certification. So a lot of the strategic investment around regulatory. So yeah, they’re very similar in the investment that you have to make to win in a category. Um, and then in terms of marketing and enrollment. It’s also really similar in terms of. Ah, some of the direct- to-consumer Mark and even though we’re an enter we market to enterprise customers. We do do a lot of directto-cons consumerer engagement and enrollment and so those lessons are very similar.
Alejandro Cremades: Now in this case, you know like part of pushing this and you know achieving that Nps you know Nice score. And and all this you need you need you need the right people so when it comes to really getting the right people and to building an amazing company culture. How do you How have you guys thought about you know going about that with either.
Stephanie Tilenius: You know it’s funny because I had exposure to the early days of Paypal and ebay and so I had this? um I had this sense that you just hired some great first 10 employees and then you all set. The great example and then it all went from there and it was actually relatively easy to build culture I I think that was a false falsehood in my mind and once I got into building vdi I realized wait a minute you actually have to be incredibly deliberate about culture. And set values and align and spend time talking about the values and your values have your mission and vision and values have to match to your business model your customers. So we we spent quite a bit of time shaping. Um our cultural values and making sure they. Really matched to what we were trying to achieve and how we wanted to operate and we celebrate them like in in all hands we acknowledge people that are living the values. We tell stories around them so people really understand what it’s like to be part of our company and actually we just won a very large customer and one of the reasons we won was because of. Our cultural values which I was sort of surprised by. Ah but I think it’s it’s like a garden and you need to constantly tend it and update it and improve it and you can’t just let it ah rest on its own and assume that it will grow.
Alejandro Cremades: So and obviously part of bringing all these people in as well is getting them excited about the future that you’re living into so as part of that How have you thought about vision and execution and to also putting it in a way in which everyone is rowing.
Stephanie Tilenius: Um, webinar.
Alejandro Cremades: You know in the same direction. Okay.
Stephanie Tilenius: Well so we we’ve always been very clear about our long-term vision of eradicating chronic disease. We’ve been super stubborn on that vision and a little bit more flexible on the details to get there. Ah but were really careful about um, communication and. Ah, okrs objective and key results like we’ve had o cares for the longest time now. We we have top level objectives for the company and then they ladder down to every team. Ah and everybody knows the metrics we’re trying to hit and we do. A lot of operational process around making sure that we’re on track. We do pre-mortems and post-mortems before launching a new product or a new customer. So. There’s a lot of process I’ve I’ve really learned to love process. Um, it creates transparency and accountability. Um, and we have a saying inside the company that you know you get 1 % better every day then you’re 30 times better in a year and so we really aim to try to be 1% better every day.
Alejandro Cremades: Now in this direction if you were to go to sleep tonight Stephania and you wake up in a world where the vision of be thy is fully realized what does that world look like.
Stephanie Tilenius: Well you know 40% of the us has like a cardio metabolic disease. Whether it be obesity or diabetes or hypertension. Ah, and it’s even worse. It’s 1 to 2 times higher in black and hispanic communities. So. Vision would be that everyone’s using Vita. It’s embedded in the employee benefits that are offered by employers as well as embedded in health plans and it is the day to day continuous care model for chronic disease.
Alejandro Cremades: And obviously I’m sure that you’ve had to share this with investors too and you guys have raised quite a bit of money. How much money have you guys raised today and what has been that journey of raising that money like for a company like this. Yeah.
Stephanie Tilenius: About 200,000,000
Stephanie Tilenius: Well it continues to always ah surprise me the in the raising Capital. Um, we haven’t we have. We’ve been Fortunate. We haven’t raised capital in a while. So we’ve been hunkered down and executing which is nice. Um. But it’s It’s always a journey right? when you start to raise money, especially now with this new market in front of us I think it’s a different world before it was all about growth growth growth and now I think it’s about ebidda and path to profitability and so you really have to know what market you’re going into And. Ah, how you fit the metrics that everyone’s looking for.. It’s easier in the beginning when you’re raising a series a or B. It’s all about vision and the team and then as you get to C and D. It’s more about your metrics team. Also of course matters. But. It’s It’s more about real tangible. You know Ar R and revenue and margin and it’s it The numbers matter a lot more later stage.
Alejandro Cremades: And obviously when someone is giving you the money they expect to have a seat at the table right? and and to perhaps you know help with the strategic thinking of the of the roadmap that you have in front of you now in your case, you’ve sat in 4 different boards at the public companies. So.
Stephanie Tilenius: Um, ah.
Alejandro Cremades: Tell us about effective board dynamics.
Stephanie Tilenius: I’ve been fortunate to learn a lot on these public boards as to what works and what doesn’t work and I’ve tried to deploy some of it at btime. Obviously we’re much smaller. So Um. We’re a bit more agile and and you don’t have it. Ah, we don’t we we just put in a place a comp committee and an audit committee but generally it’s more strategic and focused on the customer. Ah but really good board communication is vital and then like having a relationship with board members and talking to them in between. Board meetings making sure everybody’s aligned and if they if people have outside um, outlier views or you know they think something totally different than another board member and you’re really trying to hear them Out. It’s important to listen and understand everyone’s perspective. And bring people together to have that really important transparent conversation and then our you know our bringing our team and giving them exposure to the board and having them present and so everybody knows everybody and we’re having a really open dialogue I think is really important.
Alejandro Cremades: And in terms so of as well. The um scope and size of the operation. Just so that the people that are listening to get it. You know anything that you can share in terms of number of employees or anything that you feel comfortable sharing.
Stephanie Tilenius: Ah, we’re about 600 employees so series d company 600 employees
Alejandro Cremades: That’s amazing now. In this case, you know when you think about the different lifecycles that a company goes through and you were alluding to the O Krs and you know just the alignment you know with the team and the culture the values. How how do you think you know people should think like.
Stephanie Tilenius: For her.
Alejandro Cremades: When it comes to scale when when when really shifting and maturing from one cycle to the next like how also do you grow because the Stephanie that is leading be that today is probably not the you know the same responsibilities or the same you know Stephanie putting fires. I mean I’m sure you’re still putting fires nowadays but different types of fires. You know at a seed stage. No. So so how you know have you thought about scale from one cycle to the next and then also how did you rally the team you know around that tomb.
Stephanie Tilenius: Well, you’re constantly changing I think all of our leaders are constantly evolving with the scale of the company and you have to recognize that and put the work in to do that I mean in the early days I remember being in every pitch and designing every you know. Every Google slide or powerpoint presentation and now you know we obviously have a sales team that does that? Ah, so you really your focus changes as you scale it becomes more about people in process. Ah, but as a founder you’re constantly like if there’s a problem you sometimes. Dive in deep and really want to try to solve the problem I I encourage founders that as you scale the company that you have um, either do every job or have some exposure to it before you hire the person that is going to be on your leadership team so that you really understand it. Um, and. Ah, you have to be able to go high and go low and always be strategic but also get involved in the details where appropriate. But but really know how to let other people lead because as you scale you can’t do everything so you’ve got a higher amazing talent people that are better than yourself. And um, and you’ve really got to make sure that you’re having the right conversations so that everyone’s inspired and has full clarity on what we’re trying to achieve transparency ah and is um is also leading down right? So that.
Stephanie Tilenius: There’s like clarity across the entire org.
Alejandro Cremades: Now 1 thing here that is that that really it resonated you know and and that I thought it stood out is how how well you positioned yourself. You know during the you know these different shifts that you were going from from 1 incredible company with incredible leaders to the next I mean the people that you’ve been. Fortunate enough to work with you know alongside and and also all the lessons that you’ve taken from that. How do you do the same now on the other way around where you know you’re more the person that is looking to get people you know around you and and being at the right place to be able to find the right people.
Stephanie Tilenius: Well talent is everything right? That’s all we are is a group of people trying to make something happen and so you really need to spend a lot of time with people and make sure you understand what their dreams are it has to I’ve I’ve always said it has to be a win-win. Like someone who’s on your team. They want to be there because of what we’re trying to do and it has to be a win for them in their personal goals and their career. It has to fit with their life. Everything? um and I realize increasingly as a Ceo I mean you’re a servant leader right? You’re you’re a servant to the mission and vision at a company. A servant to your team to your employees to your shareholders I mean and your job is to make everyone around you better and you know constantly improve yourself so you can make everyone else around you better and but we’re we’re all just here to at the end of the day especially since we’re such ah, a mission and vision-driven company. We’re just so focused on. Achieving scale so that we can help more people.
Alejandro Cremades: Now 1 thing that about helping people you know one thing that really is incredible is how covid you know has say changed things right? and in the. Covid world that we live I mean before you, you wouldn’t even see like doctors or nurses you know and then in covid you know like you would see them on the front pages and now you know healthcare you know it has taken a different shift and there’s people looking at it with a different light where is healthcare going as a whole Stephanie.
Stephanie Tilenius: Well covid was a ah real shift in the sense that everyone realized that telemedicine is here to stay and increasingly consumers are comfortable with you know, asynchronous and synchronous care I mean you know we have an app when people can talk to their coach on video through. Chat we we connect devices. There’s constantly communication back and forth. Um, and so that has become the standard even though it should have been the standard even faster than than it than it has been I think covid was a real shift and there was like like a. Ah, 10 year probably acceleration in the in the service of of how health care is delivered and a recognition that this is here to stay so that’s great I think when you look at the future of health care though. We still have some some big problems in the sense that it’s um, 20% of gdp. It’s. Over $4,000,000,000,000 and we still really haven’t solved some of the fundamental problems so we can’t we can’t wake up in a world where it’s 30% of gdp. That’s a real problem so services like Vita lower the cost to care pretty significantly and so we need more automation. We need more services like what we do. Ah, we need more continuous day to day engagement with the healthcare system by consumers and we we need to redesign the insurance model. Um, and there’s a lot of work. We need to do and and it has to happen because we I mean it did. We don’t really have a choice in the matter.
Alejandro Cremades: And when you’re building a company like this that really impacts the lives of of people I mean not only you’re dealing with the challenges of of really pushing a hypergrowth company like like you guys are doing but then also you have the regulator regulatory side of it. So How do you balance? you know that day. That uncertainty that you encounter from both angles.
Stephanie Tilenius: Well, we ah we watch the regulatory environment and we invest behind you know, like so we we are hipaa and high trust compliant we we’ve done all the work to be deployed from a government and Medicare perspective. Um. In many ways cms is medicare is a leader in driving change in the industry which has been helpful. So yeah, we follow everything they’re doing. We try. We haven’t really done it. We’re too small to do like lobbying or try to influence some of the decisions but we do work with leaders at the Ada and others. Where we really try to influence policy and I think that’s really important I think more more in more healthcare innovators need to come forward and have a dialogue so that we can solve the problem together.
Alejandro Cremades: Now imagine if I was to put you into a time machine Stephanie and I bring you back in time I bring you back in time to perhaps that moment where you were thinking about starting something of your own you know and before even you got started with planet Orx and.
Stephanie Tilenius: That are.
Alejandro Cremades: And let’s say you had the opportunity of giving that younger Stephanie 1 piece of advice. What would that be and why given what you know now.
Stephanie Tilenius: Um I Guess the first would be patience is a virtue which I don’t have a lot of but I’m learning um, be stubborn on the vision but flexible on the details. And hire the best people and ah build a really strong culture and change the world together and then put process in place and really try to get 1% better every day.
Alejandro Cremades: Has there been you know as you have really developed yourself as a founder because obviously you got to always keep pace with the with the company. Ah you know? In fact, you know you see it a lot a lot of times that. The company outpaces the speed you know at which the founder is is capable of of keeping up with so in your case, how have you gone about that so that you could go from one cycle to the next and really keeping track and and pushing things forward have have there been any resources there that you’ve used or. Books that you’ve read or people that you’ve surrounded yourself with that have been very impactful in this journey.
Stephanie Tilenius: I Read a ton I am always ah a sucker for like the new leadership books that come out and I listen to a lot of podcasts. Thank you for your podcasts and I also am part of different groups like ypo and um.
Stephanie Tilenius: Aspen Institute and then other founder forums. So I’m always reaching out to other people that have been in my shoes and asking them for advice and you know also from a health care perspective really trying to learn where policy is headed so we created a set of advisors and I have. Built mentors in the industry and trying to understand how we can influence change. So it’s it’s multifaceted.
Alejandro Cremades: And now there’s probably a lot of people that are listening that are wondering Stephanie how they could reach out and say hi. What is the best way for them to do so.
Stephanie Tilenius: Oh that’s easy I’m just Stephanie at vida.com
Alejandro Cremades: Amazing, easy enough. Well Stephanie thank you so much for being with us today. It has been an honor to have you on the dealmaker show.
Stephanie Tilenius: It’s been wonderful to interview with you. Thank you for doing this.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Stephanie Tilenius On Running An $8 Billion Operation At eBay And Now Raising $200 Million To Prevent Health Issues appeared first on Alejandro Cremades.
Jordan Noone was the youngest person in the world to get FAA clearance to fly a rocket into space. His venture capital firm, Embedded Ventures, has funded startups like Slingshot Aerospace (Series A Round), Chromatic, and KittyCAD.
In this episode, you will learn:
- Investing in space
- The new commercial ecosystem evolving in space
- Creating market leaders
Alejandro Cremades · EP 597 Jordan Noone On Building A $4B Business By 3D Printing RocketsSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Jordan Noone:Mr. Jordan Noone is a Co-Founder & serves as General Partner at Embedded Ventures. He is also a Co-Founder & serves as Executive Chairman at KittyCAD.
Jordan served as Chief Executive Officer at KittyCAD. He is a Co-Founder & Executive Advisor at Relativity. He also serves as Board Member at Chromatic 3D Materials.
Jordan is also an Angel Investor. Likewise, he focused on technical direction and engineering design, including developing printing technology, launch vehicle design, propulsion design, software development, infrastructure development, and government affairs.
Jordan serves as an Advisor at Pixxel. Furthermore, he received a BS in Aerospace Engineering, and dropped out of a BS in Biophysics, both from the University of Southern California.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So super exciting the guest that we have today. We’re gonna be talking about aerospace quite a little bit. You know from having an incredible journey. You know being in college you know without a doubt you know a college experience that many of us would dream of. Ah, to then you know going to Spacex then you know like becoming an operator and now being able to be on the other side of the table investing so without farther ado let’s welcome our guests today jordanrda noon welcome to the show. So.
Jordan Noone: Um, thank you all Ajandra I’m happy to be here.
Alejandro Cremades: Tell us a little bit about that walk through memory lane through memory lane of being born in California so how was life growing up there in Pasadena.
Jordan Noone: I loved it. You know I’ve never really gotten too far. You know I went from growing up in Pasadena it’s where my mom grew up my dad grew up. Um some of my grandparents grew up as well. Then um, and then to Usc and that’s really where I view my career starting I started studying aerospace engineering at Usc Back in 2010 and that’s what I view as the ah the catalyst and starter of the rest of my career.
Alejandro Cremades: Now What is this fascination around aerospace. How does that start.
Jordan Noone: My aerospace fascination I think started my dad um had a dream of becoming a pilot and for a variety of reasons that didn’t end up working out for him but I grew up studying planes then we had tons of ah books on planes whenever a plane would go by my dad and I would. You know, try to recognize what kind of plane it was um and that led to the aerospace engineering degree. You know I always had kind of this fascination with planes growing up. Um and I never really thought about working on rockets which obviously my career ended up taking me quite a bit. Um, it was my first week of College I was in my aerospace you know 1 to 1 class thinking I’d work on planes. The rest of my career and that first week of school a group called the Usc Rocked Propulsion Lab it was a hands on group. Um. In the school. They did a presentation. You know all the handson groups at first Friday of school did a presentation to the 1 to 1 classes I’m talking about what they were working on and they were trying to become the first student group to fly a rock to space which I found absolutely fascinating and I started.
Alejandro Cremades: And and also that led to being the first student to get FA clearance I mean what what it what is that? What? what? what happened there and how are you able to to really accomplish that.
Jordan Noone: Yeah I started hanging out with that group that day.
Jordan Noone: You know that that group I had started as a freshman I remember the first ah that first Friday after um, seeing their presentation I went to their group meeting. It was like four zero p m that Friday and you know the rest of the students went and that was their time to go to their first you know first frat party. And for me I was like this is my opportunity to work on some cool stuff with rockets and and I think it was really what I found captivating was them setting their own goal like you hear of a lot of student projects where they’re trying to fly you know a glider. A mile. They’re trying to fly a rock at a mile high like hit some you know Nasa competition goal that of flying an egg a mile high and bringing it down on a parachute. Um, but what really I’ve found captivating was that they were setting their own goal of they wanted to be this first student group to fly a rock to space nothing anywhere near what a student group had been done before. You know or had done before it was you know orders of magnitude past them. Um, and that was amazing to me so I started with that group. Um, they were starting to fly rockets that year they were flying one out of Black Rock desert Nevada and about nineteen days later building from scratch to flying this rocket at mock four nineteen days later which was this amazing push for me and um, but I ended up taking over the group as a ah junior I ran it my junior and senior year.
Jordan Noone: And in the years in between it went from an idea and some preliminary progress on flying a rock at the space to actually having built the first one and we flew that first one we flew the second one my senior year. Um, but 1 of the biggest bottlenecks on the way was the regulatory side. You know you have to call up the Faa and it’s it’s a pretty complicated process and ask for permission. It’s a whole application process ask for permission to fly something into the atmosphere. You know how do you prove that you’re not going to hit a structure. How do you prove? You’re not going to hit an endangered species. How do you prove? You’re not going to you know, hit an airliner. And you have to go through that entire process. It’s very very detailed, um and the fa was not a fan of a bunch of students doing this. You know what are these 19 year olds trying to do here. Um, but we ended up breaking through it was a very very tricky process and difficult but in doing so I ended up being. Um, been a first student in the world. Youngest person in the world to get an fa clearance to fly um those rockets to space then it was a lot of persistence. Um on the first side and then a lot on a software development side. Actually.
Alejandro Cremades: And how were you able to convince them.
Jordan Noone: And that we had built the rockets but the challenges is proving. You know, based on any variation in the wind any variation in how the rocket takes off any variation in the actual performance of the vehicle that um the faa does their job which is keeping the public safe. Whether that’s airliners airports structures and even stretching into um, endangered species then as far as where there is big enough land area to fly which is Black Rock desert Nevada is where a lot of these high power rockets fly from that you’re not going to land on the endangered Sage Grouse which is an endangered bird out there and it sounds very um, unlikely and a little bit pedantic from an analysis and like likelihood perspective but you have to prove that that you’ll land in this area and not that area that if the wind varies you’ll go over that area and not hit it things like that and um. There were times the fa stopped talking to us there was time the bureau of land management who is the same group ah or a similar group that we also had to have permission from to use the land not just the airspace but the land is well out there. Um, they would stop responding and with the bureau of Land Management we ended up driving in person. As students. We’d find 2 3 day windows to drive up to winnemuca Nevada then was about 2 hours east of Reno then it’s like a thirteen fourteen hour drive then and we would go and knock on the door and say we need to keep talking when they would no longer answer our emails and calls and with things like that on a persistent side where.
Jordan Noone: We ended up breaking through them realizing we were serious and then us ah developing software that I’d say is unlike what any students had developed before to simulate and verify the rockets. Um what you call Dispersion. So how? ah. Much variance. There can be in the performance and landing locations of the rockets as they fly. Um and it ended up winning them over.
Alejandro Cremades: And obviously you ended up graduating too and you go to Spacex. So why Spacex and what were you doing at Spacex.
Jordan Noone: E.
Jordan Noone: No great question and my first job after college was a Spacex internship which eventually converted to being full time I didn’t really know what I wanted to do but Spacex at the time this was in 2014. They just started flying their falcon nine rockets. Those are flying. You know a hundred times a year now and landing a hundred times a year now but they were just flying. Um, the first vehicle I worked on was flight 6 of falcon nine and it was a very exciting time to be um, working at Spacex because it was young. It was you know, kind of brand new groundbreaking projects that they were working on. And and they were local and ah in l a I liked living in l a and I didn’t really know yet where um I wanted to live or kind of try and so staying in l a was a good foundation for me. The first project I worked on. There was the cargo dragon spacecraft so that was taking um. Cargo to the international space station. You know flying from Spacex’s site in Florida and resupplying the space station. Um, which was an amazing kind of entrance to my career to work on something that um was so highly kind of complicated doing real missions like solving real needs.
Alejandro Cremades: And why would you say that so many people in Spacex ended up becoming founders.
Jordan Noone: No, it’s a great question and I think a lot of it is the entrepreneurial spirit that Spacex has you know they despite now being you know they’re kind of 13000 or so employees. You know when I was there it was closer to 3000 um, but that entrepreneurial spirit and ambition of doing new things pushing as aggressively as possible has stayed through that scaling which is fairly rare for for companies and um and the space ecosystem has opened so much even because of the success of Spacex and you know other launch companies that you know ten fifteen years ago was basically no commercial space activity compared to the amount you see today and launch was such a big bottleneck that was too expensive to fly things too complicated to fly things you know launchers going up too infrequently. And now you almost have the opposite problem or launch costs are going down so dramatically that there’s such an increase in in space activity that people don’t know how to handle things like in-pace traffic control then where it’s how you make sure two things don’t impact because there used to be so few things up there. It wasn’t a common concern and. So I think it’s it’s that where people get trained and then that work at Spacex is opening up the space economy then by launch costs dropping so dramatically that um that opportunity opens up for new people to take chunks of that space economy kind of is a direct transition from their Spacex.
Alejandro Cremades: So let’s talk about then how does relativity space come knocking because obviously you know you’re here in an amazing company Ella Musk the founder I mean.
Jordan Noone: Experience.
Alejandro Cremades: Everyone you know I’m sure that is in Airpace you know would love to to to take a stop at working there so it sounds like you were already at the top. So why? why did you thought it was a good idea to to give your notice.
Jordan Noone: Well so spacex even at the time and it’s amazing company with um, what was 3000 people and there are certain things that Spacex does that we started to see an alternative to even Spacex like people tend to not realize Spacex is almost. They’re actually over now they’re more than 20 years old
Jordan Noone: And I think 21 years old as a company Ah they only became mainstream you know, kind of three four years ago that people started to know them outside of the aerospace world and and that’s something where they do have things that are dated. There are things there the the phrase that I remember. Was ah, no science experiments and that’s something where if something involved. Let’s say like scientific level development. It was viewed as a nonstarter in the area that we started to see benefit in that did involve what we’d call a science experiment to grow was 3 d printing. And many people know 3 d printing from like a hobby level of like you know, using something to print a Christmas ornament to Print Print a toothbrush you know to print some kind of do dad. Um, but there’s what’s called metal 3 d printing where you’re 3 d printing metallic parts and high performance parts. And that’s been fairly common in certain parts of aerospace for you know let’s say 10 years but the thing that we wanted to solve that eventually led to forming relativity as a company then was scaling that metal 3 d printing. How do you instead of printing something the size of you know, a one cubic foot you know so one foot by one foot by one foot size object. How do you print something the size of an entire rocket. So let’s say ten foot diameter and one hundred feet tall and that’s where we saw the potential but that involved development.
Jordan Noone: So both for myself and Tim Ellis Tim is my relativity cofounder. He still runs a company day-to-day Ceo and we saw the potential to scale the technology that no incumbent wanted to do not even the startups Tim was at blue origin I was at Spacex which you would still consider kind of startups of that phase then. That’s where me and Tim started going could append a paper and we did what I think anyone would do is you know search on Google how to get venture capital and then the first 2 things that came up was Mark Cuban’s name and we sent him an email. You know his email is fairly public and and we applied to Ycombinator which is ah the startup incubator in the valley and and we ended up getting capital from both. We got accepted into y combinator and then Mark wrote a check. Um, and then we got that capital and then started really going pen to paper on what would it look like to scale those printers up then and develop a company around 3 d printing of um.
Alejandro Cremades: And what ended up being the business model of relativity space for the people that are listening to get it how that’s the company make money.
Jordan Noone: Aerospace vehicles.
Jordan Noone: So what relativity does is sell satellite launch services when um and it sells satellite launch services to companies doing communication satellites imaging satellites logistics satellites a whole slew of applications and so very similar to companies like Spacex and Rob. Rocket lab and apll space systems. All the companies that are flying rockets with customer payloads on them. So it’s a customer is paying the company to fly you know their their satellites their components. The main difference with the relativity though is how those rockets are main. Relatively is vertically integrated all the way from flying the satellites operating the launch pads and the rockets. Um, operating the factories designing the rockets but also designing and operating the printers that print the rockets and that was the main innovation for the company which was. If you build a company around 3 d printing. It’s not because we’re obsessed with 3 d printing. It’s because 3 d printing is an excuse to digitize the factory. It’s a digitally controlled process it’s a process with digital feedback. So if you design the entire fact around 3 d printing. You end up with a flexibility that more resembles software development than resembles firm fixed infrastructure in a traditional factory so it allows you to iterate better quicker cheaper than traditional manufacturing. So there is the ability to let’s say develop faster or catch up to a company like Spacex.
Jordan Noone: Despite what was a kind of 15 year head start at the time and and that’s kind of the model itself is selling those rockets but selling better rockets more reusable rockets faster develop rockets because of the underlying digital technology.
Alejandro Cremades: And I guess with the company I mean it sounds so fascinating. But at the same time so complex at what point do you guys realize hey I think that we’re into something here.
Jordan Noone: No, it’s it’s a good question in the way and I don’t think we had as mature of a framework for it at the time like I was I was 22 when we started Tim I think was 24 25 and this is back in 2015 and that. I think we had a lot of kind of ah win behind our sales because of the fact that the commercial rocket ecosystem and especially Spacex was building so much momentum like if Spacex hadn’t existed prior to relativity relativity would not have been successful and I say that because Spacex proved that a commercial company. Could develop a rocket a traditionally manufactured rocket. They proved that the commercial investment interest could see um, positive returns there’ something that had failed in every commercial launch attempt prior to Spacex you know, no one knows the names of the companies prior to Spacex because they all failed pretty quick then in fizzled and lost a lot of money in the process. So Spacex proved. It was possible to build a commercial rocket launch company and and by doing so the 2 things that helped relativity was make it so and this is kind of the rule of thumb that I I even carried to our investment work today is counting miracles how many miracles need to be solved for the company to be successful. And as complex as relativity is you know supporting rocket development printer development things like that the rocket development while technically challenging expensive operationally challenging had been proven out the printer development was the miracle to solve for relativity and we did that you know over the course of the first you know four or five six years
Jordan Noone: Proving out the printers then in a way where the rocket development in the Rocket production and Rocket launch operation that was supported as we scaled by people who had done that in their previous jobs. They’d done that in spacex they done that at Virgin Orbit. They’d done it at a lot of the other companies in the industry. Where we contained the core development into a very kind of finite tangible amount of risk that we we solved over time rather than something that would have been solving all of those areas at once.
Alejandro Cremades: And in terms of a capital. How much did the company raise how much has the company raised today.
Jordan Noone: The companies raised about one point three billion to date then um, that started with the first round which was a hair above 500000 you know it was something the seed round was 500000 back in 2015 which we considered a lot of money for a seed round when you talk about seed rounds today. There’s still quite a bit more. Inflated than that. But you know it went from 2 of us with $500000 we developed the first subscale printers. We made the first parts it was just myself and Tim in those days and then we raised you know, 14000000 and then we raised 30000000 and then 700000000 and you know, compounded from there and then there was ah another round after that as well. But in doing so we incrementally proved out the printers. The printed rocket technology the team the operation in a way where those higher and higher fundraise amounts were warranted over time.
Alejandro Cremades: And I mean it sounds like you guys were on this rocket ship and and I’m sure having a ton of fun I mean now the company has how many employees have the company now.
Jordan Noone: Um, the company’s around 1300 employees
Alejandro Cremades: That’s absolutely unbelievable like being the co-founder of something like that Jordan congrats to you. so so why? why? why deciding hey it’s time to turn page here.
Jordan Noone: For me I loved the early days I loved when the risk in the product development was truly kind of tangible in the printers then that we had to prove out for the first time it’s kind of that 0 to 1 moment then for companies that you hear about we had to prove out that the printers. Could print rocket quality parts. We had to scale the printers to the point that they could cover rocket size parts then we had to develop and integrate those into full up vehicles and then demonstrate that the printer production scaling could make rockets faster cheaper. You know, iterate quicker then in the company would not be successful. If it wasn’t for proving all of that out and we incrementally burnt down that risk um over the beginning years of the company. You know it was when we were 7 people 14 people kind of 20 people where a lot of those milestones were burnt down by that early team and that’s when we reached an inflection point around. And say like 2019 or so where we started biasing more towards hiring people who had solved other challenges in their previous lives. You know when we’re hiring the printer team when we were doing the printer development then there wasn’t someone who had built the world’s largest metal 3 d printer before there wasn’t someone that had printed a rocket before. Then we had to figure out who to even hire how to build those teams how to train those teams and then came you know hiring you know a Vp that had hired that had scaled production before a Vp that had scaled software development before a Vp that had scaled um you know regulatory operations before for rocket companies.
Jordan Noone: And that for me felt very different like there’s huge challenges with scaling and operating at that level I want to sound like those are dismissive you know or that I dismiss those that but they’re different challenges and I had was less satisfied by those and I was craving kind of going back to the early days of when we were doing that fundamentals 0 to one r and d where there is no textbook. There’s no company to reference. There’s no person to hire that’s done it before you’re figuring it all out from scratch and there’s no one coming to save you. It’s kind of all on you to solve that yourself then. And I enjoy that part.
Alejandro Cremades: So then so then how do you start to think about hey what could be the next chapter here for me and and how do you land on the idea of going to the other side of the table.
Jordan Noone: Now it’s a good question and what ended up happening is one of my friends that I had met my industry friends I’d met along the way at relativity was another investor called jenna’ Bryan her name’s jennabryan then she’s based out of l a she’s from Alabama she was a partner at another fund in Los Angeles and and she had reached out to me originally in kind of 20182019 to join an event series. She was hosting bringing together venture backed founders that had success working with the us government which I was viewed as a ah I didn’t realize at the time but viewed as kind of a shining star of having done that. Then at the time then um and even tracing back into my usc days of working with the us government on regulatory issues and and launch issues and um, she reached out to me to help mentor her portfolio during those events then because she had a passion to see. Us national security development within the startup innovation community. Um, that’s a much more active topic today but rewind four or five six years ago that’s still when it was kind of taboo in Silicon Valley to be working in defense.
Jordan Noone: And um, so she wanted to see how to build that passion within her portfolio. Um and her passion for it comes from the fact that her brothers of e 22 osprey pilot. Then he’s in the South China sea on an aircraft carrier kind of at the front lines of what is growing to be a potential conflict and so she has a very personal interest in seeing. National security innovation. Um for her brother’s sake. You know for the country’s sake and um, but that said, that’s how we met and we shared a lot in what we wanted to see we became friends through that event series. What we shared a lot in what we wanted to see different in venture. And um, and as I was stepping out of relativity I didn’t yet know what I wanted to do next I wanted to spend some time kind of soul searching and she first asked me if I wanted to be an advisor to a new fund. She was starting a fund called them ved adventures and and. Sort of becoming an advisor you know, kind of to kick the tires and you know get my feet went a lot of it to get exposed to what companies were out there because as a fund you get to know a lot of companies and she noticed before I did and I came to accept this as well. Um, very very positively accept it that that opportunity to work with early stage companies. Then at that kind of 0 to 1 phase to help mentor them leverage my previous experience to help them and not end up being stuck in what we call a champagne problem of growing past the scale that you enjoy that would all come together working at the fund.
Jordan Noone: Because I would be evaluating companies investing in them mentoring them over time and then passing them on to larger scale investors over time in a way where I would essentially get stuck at the scale that I enjoy. And she saw that asked me to come on as a general partner. Um, if you ask her she says it was quite a challenge to get me on board if you asked me I say I accept it essentially immediately once it made sense. Um, but that’s what pulled me in is is her recognition of that.
Alejandro Cremades: And it’s a 100,000,000 fund correct. That’s amazing. Good stuff now in your guys’s case you know what are the typical companies that you like to see and and and what what is the investment theses.
Jordan Noone: That’s correct.
Jordan Noone: Yeah, so our primary thesis is national security space technology and um and breaking that down the space technology side a lot of that comes from on see my background and there’s a growing need for that I had mentioned the Spacex side where there’s a lot of. Commercial interest and has been in commercial investment interest in commercial launch that investing in companies like relativity spacex um virgin orbit you know a set of others then um, but there was a lagging interest in investing in the areas that we call you know beyond launch what happens is launch costs come down. Because launch was such a bottleneck and we built such momentum there as an industry and lowering costs that a lot of the investment world was not yet ready to invest in new areas and happen after launch. And a lot of that we credit there’s just less technical depth within a lot of the investor base. There’s less of a vision for how that’ll play out kind of just a riskier area to be investing in. Um, so we the op saw the opportunity to help fill that as far as what happens as launch costs come down. And new things happen in space that haven’t happened in space before or areas that were previously in space get disrupted because of the rapidly changing economics underneath the launch efforts and so our portfolio itself would split about a third in space assets.
Jordan Noone: Ah, third advanced manufacturing pure’re back on earth so very synergetic with um the space portfolio and then a third digital engineering so software for hardware design. How are things designed. How is the supply chain managed how is kind of all the digital innovation in the world affecting aerospace production and development. Which is a fairly untapped area even by dcs.
Alejandro Cremades: And I’ll show you guys are quite unique in the sense that you’re been spinning out companies like a kitty cut. So why? what’s that What’s that model you know what? Why do you guys? Why do you guys spin out companies. How does that work.
Jordan Noone: No, it’s it’s a great question and for us we call ourselves having a kind of a high conviction high concentration thesis which is not what every venture investor has you know you you hear a lot in the venture community on. Sufficient diversification to hit power law returns by being essentially I call it lucky that you hit a unicorn then and for us you know we respect that model. But it’s not really, what gets our wheel spinning. We like having that very high conviction approach with companies. Where we can have less diversification. We still have you know quite a bit but less than most vcs and that often involves building thesises around how the markets will play out how certain sectors will play out how certain technologies play out and trying to find the companies that fill what we find to be ah you know a market winner. Because of that conviction and sometimes that’s done by you know, a company coming to us kind of forcing us to evaluate an ecosystem and us deciding that is a company that will be a slam dunk or us seeing that company and we decide that we want to go after them. But sometimes there’s no company that fills that gap. Well. We recognize a gap. We recognize an opportunity and there’s no company. We’re seeing that fills that in a way that we get conviction and that happened with what ended up becoming Kittycat where it was beginning of 2021. We really wanted to fill a hole in our digital engineering portfolio.
Jordan Noone: And we had some companies we were working with but there was a gap there that we saw and we built a thesis. It was myself. Um, Jenna and then one of the fund advisors. Her name’s Jess Frizeell then she was a cofounder of 1 of the companies in Jenna’s previous portfolio a company called oxide computer company. Um, but Jess and I shared a passion. As people who had managed significant software development before as people who had managed significant hardware development before that all of the advantages of software development in the world. Being able to iterate quicker automatically test software automatically pushing into production all the things that make software kind of just appear in front of you today. So much quicker than ten fifteen years ago then none of those have migrated into hardware design and relatively we migrated them into hardware manufacturing with the. The printers and the digitization of the printers. But none of that software development and kind of the flywheel of software you hear about had gone into hardware design so me and Jess we shared that passion. We shared that kind of hardware software hybrid background. Um, and we brainstormed essentially what would become a market winner. In the hardware design ecosystem kind of the digital engineering ecosystem and Jenna heard us talking about this continually we wouldn’t shut up about it then in the way that we very much had a thesis that we believed in there and she encouraged us to you know? Well, if we can’t find a company working on it or working on it in a way that we thought would succeed.
Jordan Noone: Let’s form that company ourselves and then build a founding team around it so ended up ah forming the company as a spinout then you know and we did the anchor investment when I say spinout that was the sole. Um and a contribution for the seed round of the pres precede round was embedded writing a check. And and then we found a Cto cofounder her name’s Hannah boar and out of Pixar so we needed the graphics animation background for building part of the company up and then the challenge was ah finding a Ceo that was kind of this very haphazard route how we built the company then. I ended up stepping in as Ceo because I had built a lot of the vision for the company I had built um the executive team in mentoring Hannah and I was doing sales I was doing fundraising and kind of the kitty cad team and embedded team settle that it would be easier to promote me to Ceo even part-time. And better for the company for me being part-time than me spending time trying to mentor someone and to take over taking over a company that I had such a large contribution and founding then and setting the vision for um so I ended up coming in a Ceo and then you know long story short or long story long then just came on full-time as chief scientist last year. Then? um and with her as chief scientist and her having that same foundational value to the company. We ended up promoting her to Ceo and myself to executive chairman to round out the founding team but it ended up being something where um, amazing company. We’re super happy with it so far and even the embedded lps have a huge respect for.
Jordan Noone: The style of doing that because it ends up being a very very strong head start on a returns generator that D risks um and balances a lot of the rest of the portfolio.
Alejandro Cremades: But hey I like that if you can’t find a company you just create One. You know you can’t find a company to invest in hey you let’s just build it So That’s pretty cool now. Obviously you build that unicorn yourself you have fame you know, being in it. You’ve done it. Ah, now when it comes to being on the other side of the table and being able to rock to recognize others that have that potential of doing the same thing because you’ve seen it, you’ve experienced that you know how it looks like when it comes to Pattern Recognition. What are the 3 key things that you look in companies when you are evaluating them.
Jordan Noone: No, that’s that’s a great question as far as the 3 key things and for us. Um I break it down the first one is a very strong technical Differentiator. You see a lot of companies that have you know Marketplace moats they have moats in various ways. And at least for us and our best ability to evaluate companies because there are plenty of companies that build on top of moats outside of technical differentiation and how that technical differentiation wins over a market where we feel we have the best asymmetric edge on evaluating companies is those ones with a strong technical differentiator that results in a moat. And strong defensibility over Time. So The first one I’d say is there. There’s plenty of companies. It could be summarized pretty easy as Marketplaces pretty easily is what I’d call like a dashboard company. They’re just an interface on a website. There’s no tech underneath and despite it being code. There’s no kind of tech differentiation Underneath. And those we pass on then so that’s the first one I’d say in differentiation. Ah, the second area I’d say is that they’re under noticed in the market then and that’s a challenge to find because we look for companies especially when you’re looking at you know extreme space technology and. You know, ah some of those areas are heavily invested in like launch then where almost every fund has some exposure to the commercial launch world now and we don’t invest in those areas where every investor is going after them, but there are some sectors in space that are so far out.
Jordan Noone: In expectations on generating returns expectations on market development around them like they’re very immature or none-existent markets today that those companies are going after we can’t generate returns for our ilps if those are on longer than you know, a 7 to 10 year times scalele or it’s sufficiently high risk of manifesting markets around them. So we try to find companies on that cusp where they’re perfectly timed. They’re not so early in market development that there’s not going to be returns potential from them. But they’re not so late in their market development around them that every other investor is chasing them which means inflated prices. Excessively fast or rushed processes that lead to misses on an investment process side and so that’s the second area and then the third I’d say I’d say is um is founder ambition than in potential there and you tend to see that at least for me I really like seeing people that have done things on their own. Not just school projects not just things that were catered to them. It’s they had a passion for something and they went after it um relentlessly and and I’d say that’s necessary because building a company building a startup no day is easy. You have your wins you have your losses. You know, depending on the day. It’s high highs low lows building a company up then um. But you have to push through those then you can’t let the victories distract you from what is actually continuing to make progress and you can’t let the losses get ahead of you either and slow you down, you just have to keep pushing through and it is for me the example I’d use on ah pattern matching mirroring is things like hands on projects in college.
Jordan Noone: On the side. You know if they were at a big job. What were they doing on the side because you know being at Google for 10 years means nothing on eventually creating a startup things like that where the ability to demonstrate. Ambition on their own is huge for being able to carry a company over a decade.
Alejandro Cremades: Absolutely now for the people that are listening that will love to reach out and say hi. Where’s the best way for them to do so. Jordan.
Jordan Noone: Ah, the best way I’d say is just messaging me on Twitter when um, my Twitter handles. Um, the Jordan Noon um and just search for me, you’ll find me and then alternatively my email address for the fund is Jordan at embedded dot ventures.
Alejandro Cremades: Amazing, well amazing. Is he enough? Well Jordan thank you so much for being on the deal maker show today. It has been an honor to have you with us. Thanks.
Jordan Noone: Happy to see messages on both.
Jordan Noone: Um, thank you very much and thank you everyone for listening.
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The post Jordan Noone On Building A $4 Billion Business By 3D Printing Rockets And Investing In Space Tech Startups appeared first on Alejandro Cremades.
Daniel Khachab is the cofounder of Choco which is a food ordering platform that connects restaurants and suppliers. The company has raised $336 million from top tier investors such as Bessemer Venture Partners, Insight Partners, or Coatue to name a few.
In this episode, you will learn:
- How Choco is championing the food waste problem
- Fundraising and staying ahead of financial crises
Alejandro Cremades · EP 596 Daniel Khachab On Raising $336M To Bring Transparency To How Food Moves Around The PlanetSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Daniel Khachab:Daniel Khachab loves the complexity, inefficiency and yet worldliness of global food supply chains. Food waste is the single largest driver of our climate catastrophe, and hiim and his team know that streamlining the global food system will be the single largest contributor towards a sustainable planet. At choco, the company he cofounded, they are committed to solve this problem.
Previous to choco, he started and scaled marketplace-, Ecommerce- and SaaS-companies from scratch to market leadership across 6 continents.
Daniel Khachab strongly believes in rigorous user-centric product management, deep involvement of engineering in product discovery, highly scalable processes and output driven teams built by rigorous selection processes. Daniel Khachab believes that culture is the ultimate competitive advantage and that ridiculous hard work and risk taking are the single best tools if you strive to change the world.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So today. We have a really incredible founder. You know we’re gonna be talking about. You know, really building a rocket ship and now being you know on his way to space I mean it’s unbeliev what they’re doing so. I think you’re gonna find this episode super inspiring so without fartherdo. Let’s welcome our guest today Daniel Cash up welcome to the show. So so so Daniel so give us a little of a walkth through memory lane because I know that the you know although you are you’re like have libanese.
Daniel Khachab: My pleasure being here. Alejandro thank you so much.
Alejandro Cremades: Have German you know at this point you know you had a really interesting upbringing So give us a walk through memory lane. How was life growing up.
Daniel Khachab: You know I think I grew up in the very south of Germany close to the alps on the one one side of my family kind of you know, being really like bavarian christian and off the other side of my family we libanese muslim and so. It was a pretty diverse There was upbringing and and I think I really only realized that once I was much older that kind of growing up between 2 cultures gave me a lot of lot of understanding. Um, and I think also a lot of lot of lot of ease compared to the german rigidness I think it enables me until today. Um. But obal was ah was a lot of fun I believe growing up between those 2.
Alejandro Cremades: So I Guess say for you, you know it was same interesting there because I mean you ended up going to school later on and and it sounds like you know you had the entrepreneurship in you because very early on you got you got going you know with a whole thing of Entrepreneurship. So How did you get? you Know. Bugin and how did you you know like come about creating you know like that first company that you guys did too you know which was you know more like in in school but it was a social network. So So I mean did you have anyone in your family that was an entrepreneur or how did you get that you know business you know drive.
Daniel Khachab: Um, yeah.
Daniel Khachab: Yeah, So I think maybe very different than tech entrepreneurs. But nevertheless my parents and my grandparents and they had all been entrepreneurs and in some ways and so my my grandfather had like ah had like a butcher that also worked in later On. Ah, Mom saw the business together with with my dad and set it like another business. Ah ah, later on and and and and those were all very different kind of businesses right? and on my my dad’s side is where you should Lebanese emigrants and and they were famous usually for doing like used car dealerships used use truck dealerships and so. Those were not techie business at all and maybe not scaled businesses either. But nevertheless they were entrepreneurs and they made something out of out of nothing just by like hard work and and conviction and I think I just grew up having having that as my only role model and I think so for me, there was. There was never even another option other than starting a company.
Alejandro Cremades: So then let’s talk about that. Let’s talk about your first day you know business you did that in school. So how’d that the idea of the social network you know come about I mean know it it was obviously you know back in o 7
Daniel Khachab: Yeah.
Alejandro Cremades: You know they they probably the social media space was not as developed mobile was not here. You know probably you even had to mail your picture somewhere. You know to have it posted. You know, like back in the days. So um, yeah, how was that.
Daniel Khachab: It was a very interesting time because I actually met back to my my cofounder at at School Jonas and we were you know, maybe in like ninth grade and he at that time just taught himself how how to code and. He was like creating this like really interesting network where you could essentially have have friends. Um, where you could like post pictures. You know of the parties that eventually happened on the weekend and and back then there were a couple social networks out there and none of them was dominant really and I think in particular the ones in Germany were just. Like very slow and so we said okay like look if we can build technology at at least as fast and responsive people would like use it more Um, and so we started and then at some point you know more and more social networks came in the question was more like how do you differentiate yourself.
Daniel Khachab: And so for us at that time it kind of felt natural or right like you have ah you have a group of friends that you’re on the same network with you can create um, kind of like events. You know it can invite them to your to your home party or things like this but we said okay actually you should be able to to book a restaurant from that network. And then directly invite your friends that are also on that social network to your to your reservation and and that that was kind of the concept and that’s how we continued and I remember we we grew very early on we had um, but like a really like colorful. Corporate identity a colorful brand and we just went through the city center of munich and handed out flyers and that’s kind of how it really got our first probably five 6000 users on it and so so that was a fun experience I would say it felt though more like a project and less than a business I think we never looked through it for a business lens. Um, but it was a lot of fun and I think we learned a bunch.
Alejandro Cremades: And I think that you know like 1 of the one of the cool things here is that it was early on in your career. You were very young. Um, and as they say you either succeed or you learn so the company ended up winding down and I guess what was the biggest lesson that you took away from from that experience.
Daniel Khachab: So think about there were probably 3 I think the first one is like co-founding a company. Someone else is probably more than a marriage because it’s very hard to to solve if there’s a problem for it and so you need to be. Really be able at all times a particular and tough times because they’ll come no matter how good you are to be able to look into each other’s eyes and to make good decisions that always prioritize the company. Never your personal needs I think the second thing is that and in the beginning just do whatever it takes to grow. Yeah, until you’re not live until you not have the first traction you’re a nobody and by whatever it takes I mean going out there and flyerring in the city center for a social network is about as far away as you can get to how you know Facebook later on grewer instagram later grew or Tiktok is growing today. But nevertheless sometimes you kind of need to do those manual things. Those things that don’t don’t scale to get your initial traction and then um, ah maybe lastly yeah, it’s just all about user value. You can have a great brand and you can have a great go to market. You can even ever you know. Well-built and designed product but the product it just provides the most value to users is the one that’s going to win and that can be in terms of features. You know that can be terms of speed that can be terms of network effects. You know who other people are using it so in the end of the days.
Daniel Khachab: Just about value value value and that’s that’s just very little that can be hide behind that.
Alejandro Cremades: Now in your case after this what happened is you went to the Army I’m sure you got some good discipline and and and I mean incredible experience. I’m sure that was but then eventually you know you you go out of that you do international business and then you while you were there. You were. Doing your internship to what the Rocket internet you know which is this a kind of like a how how would how would you Define Rocket Internet for the people that are listening to really understand what Rocket internet is.
Daniel Khachab: Yeah, so so rocket internet was a company builder but a really scaled and successful. One. So give you a couple of the examples and 3 of the companies that that were built. Rocket ended up to today and and the german ducksy yeah kind of the german blue chip index if you want so um, maybe the most famous 1 being hello fresh or solando deliver a hero is there also a very large exit. We did selling the Amazon of Southeast Asia to Alababa one and a half billion billion the all the first tech ipo ever out of Africa was Zia and we listed that in on the New York Stock exchange and so we really build like very scared businesses and exit them across all major consumer categories and and all um and all geographies and the business model was really to look at businesses that had worked elsewhere. And were innovated elsewhere like for example, the us and to bring into geographies where they had not not been before and I found that very interesting for for 2 reasons. The the first thing that was I mean I wanted to start an own company and I wanted to learn. How to start and scale a business and I found that a perfect place to learn I think that’s the first reason why I went there. The second was that the company and nf the day was very emerging market focused and I always like kind of the pragmatism.
Daniel Khachab: That that you nee09:12.37d in order to succeed in emerging markets I like the additional layer of complexity. Um I like the the amount of risk that is involved if you want to succeed in emerging markets and and that’s that’s kind of where I went there.
Alejandro Cremades: And in your case too. I mean you you traveled quite a bit. Um, you know during this time I mean you went to Colombia you went to South Africa I guess from all these travels what what opened up for you. Because I’m sure that you know there was like a different perspective there too when when you’re able to travel a little bit and see that there is life outside of Germany.
Daniel Khachab: So you know I always enjoyed working many different different countries because I think by working you learn so much more than than just by traveling because you actually you’re working. Day-to day together solving problems with the people that are local to the particular country and not only that you learn how to work in different cultures. But more than you know learning what’s different. You actually learn like like what’s fundamentally the same and fundamentally what I learned is that. People want to be happy no matter where you are and sometimes they have different strategies of of getting there and the second thing I learned usually people have more or less the same desires and the same problems. No matter where you are at different scales. Yeah at different sizes of the problems but usually it’s it’s a similar one and. And I think that was that was really eye-opening because um I think that when you build for example, an online fashion store like like so landode as a business that’s operating across Europe and and we started it for example and in South Africa in the end of the day that the people wanted the same thing you know they wanted a large assortment. 1 that a generates return policy. They wanted a trustworthy online payment now they wanted the same thing but all of these things they were executed differently. So for example, a trustworthy return policy might mean in Europe that you have a hundred days. You know to put a batch on your.
Daniel Khachab: On your on your box and like send it back and you kind of trust the company to try transfer the money back now that is not necessarily a given when you start a company like that out of whatever so of Africa Colombia for example, so you just got to be pragmatic about it. You build your own delivery fleet. You have a driver coming coming to your home to give you the box. The pair of shoes you the driver’s going to tell you you have 50 minutes to try them on you go inside. You try them on you like them. You pay the driver the driver continues you don’t like them. You just hand them back and and no transactions happen happen in the first place and and and it just needs to. Pragmatism to succeed um solve but solving usually always the same problems and I believe that pragmatism is just a very important a very important business lesson um sort of a lot of learnings. In fact, working in different countries. So.
Alejandro Cremades: You know, kidding and obviously working at rocket internet you got to see you know all types of companies launching on every category that you can think of so I guess you know when it comes to idea validation launch and scale. But would you say from from being involved with so many companies you know during this time that you spent you know at rocket you know what would you say you know where your biggest takeaway is because I mean you were there for over five years and that in startup you know dog years is a ton of time. So. What were your major lessons you know around those things.
Daniel Khachab: So I think you have to be bold and you have to be accepting that boldness has a component of of making mistakes and I believe that is the fastest way to learning because at the end of the day you’re doing something. In many cases has not been done before and probably in all cases you have not done before and and the best way to do so is is just to start not to overthink and run I remember with a launch process and kind of before we started building. We had like one week to decide which business model how to monetize which countries are gonna we’re going to expand to because said look the fast way of learning is is this just to go out there to launch to get customer feedback and so so so just be bold and run I think that the second learning was that there is naturally. Parts of the business that people let’s say have more respect of than others so usually geographical expansion and going to another countries is something that you know many people many companies consider complex andavier. But maybe when it comes to like building product. Um. Think it’s less complex because you just ship a first feature you go out there. You speak to users and you try. It’s kind of like a low investment but the same thing you can do with expansion actually too when we when we expanded we sometimes sent like 2 people and we said ok like look.
Daniel Khachab: Let’s let’s do it for three weeks let’s speak to users that’s see if like our value prop works then if it works great. We invest and if it doesn’t work. Let’s let’s move on and so I think I think that was important. Um I think that the best lesson was however that that I believe.
Daniel Khachab: That most people in their lives. They want to go on a mission many. Don’t know of that. But nevertheless they want to go on a mission and in many ways the role of the leader and the role of the company is is to provide that Mission. You know and kind of like ah just a play where people can give their everything or people can excel what people learn people also allowed to do allowed to do mistakes and it just such a thing that creates a great culture in which just everyone is like growing really fast and I think you manage to pull it off over and over again and ah. And think just that like needing to provide a mission for people to excel and people actually wanted very intrinsically I think was ah probably the biggest learning. Yeah.
Alejandro Cremades: So let’s talk about going on a mission for you because eventually you decided that it was time for you to activate that mission and you gave your notice and you left a rocket and all of a sudden you find yourself, you know on those fourteen months where you’re trying to really figure out. You know what? that mission is going to look like so at what point do you? I mean how how why did you take that decision and then also how did you structure those forty months to make sure that you were able to find the solution to that problem that you had encounter and to do it in a meaningful way so that you know you could really you know launch something that they.
Daniel Khachab: Yeah, absolutely So I think the first thing we did So so so we left rocket because said all right look We’re like scared of the challenge but we’re also somewhat confident that we have at least at least learned a fundamental skill set on how to build operations how to build a.
Alejandro Cremades: That was sustainable enough.
Daniel Khachab: at least a simple simple simple product and how to how to at least have to tools it on how to find product market benefit and so so so we left and then we said all right? Let’s start something and our goal was to start something within within three months that was our initial goal. And then we started know very structuredly and we had like this super large axl sheets of on the Y.Xs we have all kinds of business models. You know like saas and marketplace and and so on and the y xs as or in the x-axis and with all kinds of different industries. And then you have like this one hundred by hundred matrix and you see look essentially like where’s an empty spot. But then the problem is you know you’re ending up then with uber for pets or with like a marketplace for luxury watches and what I do think. That there you know might be business value in those problems. The truth is me personally I don’t care about these problems but as a founder if you’re serious about it. You will need to commit to a very long time to this problem so you better care about it. And so it it took us probably one two months to realize alright so that’s not our approach. We didn’t have a better approach either and so we said all right like let’s first do ah, do do a big reset. So I think we just went um, went a month offline and I think that just helped me a lot and training clarity on on on.
Daniel Khachab: At least I wanted and and my co-founders too and we said look in the end of the day we’re not looking for an idea we’re looking for a problem and with 2 expectations towards that problem First it should be a large one. A very large and complex problem something. It keeps us challenged for 20 years like we want a challenge and second an important problem and why was the important problem ah vital for us is because yeah you commit for so so much time. But we also we knew that any company no matter how good you are will go through tough patches and we took away our fair amount of those and I think we we went went through them. Um sometimes more well sometimes sometimes less but in the end we grow after all of them. But. In these tough patches you need to be able to stand in front of the team and tell everyone it’s particularly important that we that we work hard now that we work as a team that we solve our user problems that we push out value faster. Um, and. And you will need to reason on why they should do it and if the reason is not solving for an important problem then it’s just unauthentic. You know I would have a hard time sending front of the team and say you know team we need to push extra hard now because it’s important that we get more oil out of the ground to like fuel more cars.
Daniel Khachab: I think more carbon dikes and so it’s it’s it’s it’s an unorentic thing to do so we said let’s let’s find an important problem too and then we started our real search probably three months in looking for large and and important problems.
Alejandro Cremades: So then let’s say fast forward here. You arrive to month Fourteen what happened there.
Daniel Khachab: Now so in the end very very simple There’s not so many large and important problems out there in the first place. Yeah, we will I believe on on like the largest level There’s there’s 3 there’s climate change that’s education. There is inequality. And all of those 3 are so large that by definition they’re they’re interconnected and so we just started. Um, we we look at all 3 and we started with with climate change and then you dig deep into climate change and then it’s it’s driven by greenhouse gas emissions and then you look where the greenhouse gas has come from. Then you see around 1 1 4 25% come from energy production another 25% come from the food system and then it continues and then like I believe that the fourth or fifth category of 16% is transport and then we were like okay like wait. What. Andron is talking about you know electrification of vcyclals. But that’s only category like 5 or 6 so actually it’s like not our largest lever and electric and and then our electricity production about nuclear fusion that that was kind of there very like a hardware scientific problem that wasn’t us. And that’s also unless necessarily we’re passionate about a real passion. A lot about food and so we dug into it and dig into the to the food system part that is one of the 2 major contributors to climate change and the first thing you realize is that 40 to 50.
Daniel Khachab: Depending which which source you look at for the take of the sake of the day. Let’s say 50% of all food produced goes to waste which means that 50% or all of the greenhouse gass that food produce are unnecessary in the first place because it’s. Just waste It’s not feeding anyone. There’s no benefit whatsoever. It also means that producing double as much food as we need so and and then you kind of you. You kind of dig deeper and you find out alright. How do we produce food who’s doing that and there’s five hundred forty million farmers around the globe and in fact, farming single a large employer on the on the planet and farming happens in particular more in the poorer um regions on the um on the and on the globe and this is where money certainly is is not arriving. And if money is not arriving on the farms. Then these people cannot afford education and not having access to education pays into inequality and so on and so forth and so these things things were interconnected at the same time. Um, but the largest drove of deforestation. Food production right? because it burned down Amazon rainforest to create fields to grow food that we end up throwing away half of it. The largest driver of extinction of animal species is habited loss which is driven by deforestation and so on and so forth. So it’s a very large and interconnected problem.
Daniel Khachab: And in second they’re inter tersary consequence. It has many many ripple effects and so I said like like that’s something that we’re happy to commit 20 years to and we’ll never regret trying to solve that that problem of of food waste and within the food system and. That’s on how we started and the question was okay like that’s our problem now. How do we solve it and in the end of the day when you think about the food system then there’s 2 very important characteristics. The first is that it’s a hypercommoditized market. A cucumber. It’s a carrot. It’s a chicken breast. There’s there’s very little to no product differentiation the second ah thing is that there’s oversupply right? In fact, there’s 50% a hundred percent too much supply because you throw away 50% of everything that that we produce which means you have oversupply. And no differentiation in the product. This means it’s a buyers market. The buyers can choose from who they buy and what they buy they are in absolute control and so we said alright so the buyers have the power. But. But who’s behind and then you do some research and we really traveled around the globe from from us to to Brazil to Singapore and to Ghana and and we found out that between the average restaurant which is if you want so at the end of the supply chain is a buyer of food.
Daniel Khachab: And the average producer if an ever you have um on average 9 parties in between you have the supplier that delivers into the restaurant who buys from the wholesaler who buys from a distributor buys from an export or from an import a harvest manager.
Daniel Khachab: And um, and so we said alright so if we want to solve that problem. The first thing that we have to do is is we have to own the demand. Yeah, we have to own the demand that the the the um at the very big, very end of the supply chain. The money and and supply chain and once we have it we could kind of build technology that goes deeper and deeper into it and and that was kind of offst stretch from the beginning and.
Alejandro Cremades: So then how are you guys making money for for the people that are listening to really get you know how you guys extract value from that value that you bring to the table.
Daniel Khachab: Ah, yeah, so so the first two years of choke we’re 5 years old now. We only build a tool for restaurants. Why did we do that because how do restaurants order the ingredients today. So I assume I’m a chef then I work until 11 p m I clean the kitchen then I sit down and I call on if I’m in the us. On average 6 different supplies and I leave them a voicemail and I say hey this is stio you know from like the the beer garden and my client numbers 1 to 3 and I would five lime and twenty tomatoes and and a pound of of chicken breast and I hang up I’m like that are just all the limes. It’s kind of like a bad process for me and on the other side. A supplier and the large holds in markets on the planet in which you in every every city between 601005 one thousand 500 of them and they’re gonna listen to this voicemail at’s three zero am M in the morning when they start working and it typed things into the system notice. There’s a couple of problems. The first one is I have a heavy accent. Let’s say being a german chef. New York hard to understand then I second I just ordered tomatoes. Okay, but did I actually desire oxad tomatoes or cherry tomatoes. What they actually want so naturally a lot of problems of cure and so we said all right the first three years we just build a technology for restaurants.
Daniel Khachab: And at that point we got attention of the suppliers because we had the buyers on the platform already right? We had that demand at that point we’re probably doing 20,300,000,000 in gmv and when you when you do this kind of amount of gv in a platform. You certainly have the attention of suppliers and. And as you can see is really how the playbook like worked out well by owning the demand and then you get the attention of the supply and then we started building for the suppliers quite a significant software suite and today we automate most of the processes. From the inventory their assortment their offers their um food food waste reduction you know because they can just sell off for example, end-of-shelf life things. Um, we integrate into the earpiece system and and we just charge a commission. Um on all of the products. That the suppliers sell on choke or to their restaurants. So we’re not a marketplace. We connect the supplies only to who they already work with and food you kind of have like this long lasting relationships but we charge nevertheless ah a a commission for for our value and and um, that’s um.
Alejandro Cremades: And obviously this is a capital intensive to no so how much capital have you guys raised today and what has been the the approach on racing it the way that you guys did.
Daniel Khachab: Yeah, so we raised three hundred million Euros so far and I think that that’s there’s a couple of things think the first thing was that I remembered. Someone told me this at some point but up until today I don’t know who and this person told me and the end of the day the best way to raise money is to make a company do good um or do well and so from day one we were so hyper focuseded just on our numbers. Um, that for the first two years we had no advantage of being out there and doing marketing and have a website. We didn’t even have a website with no social media. We had no Linkedin. We had nothing just because I gave a of us focus on finding product market fit and onboarding very manually. Our first users. But what it gave us. Is that we had like strong user engagement and retention very early on and so probably the first 200,000,000 we raised without a deck. You know we had like a monthly update that we would send to our shareholders that was. Derived from our internal kind of wiki business review numbers essentially just like growth and retention numbers and we put them on five six very ugly slides because we were bad at building slides and and we just had them speak speak for ourselves and so up until that day I believe kind of like the act of fundraising.
Daniel Khachab: It’s it’s kind of secondary. What what? you just need to focus on as ah as as a founder. It’s like making these numbers work out and I think it’s always better to spend 10 hours out the end the field talking to 20 customers and getting the product feedback and investing 10 hours and making your deck more. Ah, beautiful. So I think that’s one I think the second principle that I had learned at rocket actually is look in the end of the day. The probability of a startup to fail is higher than the probability of the startup to succeed. And so in many ways your job as a founder is to constantly increase increase the probability of succeeding and one way to do that one very vital way is by having more money on the bank account rather than less because more money just means I have more time to make mistakes if I have money until tomorrow I do a mistake today I have a problem. If I have money until next week and I do a mistake today I still have time to correct and to learn from it right? And so I think we always tried to raise as early as possible. Um, we um, we always looked at of course it will. Would be a fair deal but I don’t think we ever optimized on dilution. Um and and or on valuation and and it took us. Nevertheless it took us around 3 years to go from 0 to to to billion Billion Euro valuation um and I think these were 2.
Daniel Khachab: Very very important principles and and they served as well. So I can tell you we raised our series a from from besemer thirty million Three months later we raised and a series ah a 2 from coach another 30000000 and back and people asked kind of strange raising 2 times. 30 um, but you know two weeks later covid hit and during covid during the lockdown’s restaurants closed and so all our genv all our revenues vanished by 95% within 24 hours and that’s a life-threading situation for a company that is not even 2 years old but at that point in time we had increased our probability of of succeeding just by but taking on more money and so we could kind of invest anticyclically we did not need to do massive layoffs. We could invest in our product. And we could grow throughout the whole code phase and our competition could not um, just by but taking this by by following like that rule and I think that’s where it served us well with another situation where last April raised another 100000000 after having raised 100000000 shortly before that. And same thing we all know what happened last year you know venture funding is is down by by massive amounts. Um, everyone’s speaking of of recession with the first bank runs already and and I think we could also like face the current phase just with ah of a very healthy cash balance and just allows us to go through.
Daniel Khachab: Through different situations for a long long breath if required.
Alejandro Cremades: I Love that always say prepare for the worst and hope for the best man I like that that mentality now for the people that are listening to um.
Daniel Khachab: Oh.
Alejandro Cremades: To really get ah an idea on the scope and size of choco today I mean anything that that you can share in terms of maybe number of employees or anything else that you feel comfortable sharing.
Daniel Khachab: Yeah, absolutely so so a bit about 400 people we operate um across 7 countries that is us Uk and essentially larger countries in Europe we had caught it in Berlin our second largest officer in Chicago and in and and and in Paris but with around 12 offices. We process far over over a billion. Ah euro worth of goods and that the several hundred Thousand tons of food. Um Nea we have and tens of thousands of restaurants on the platform we have around fifteen Thousand suppliers on the platform that is. Close to every second supply across Europe and the Us. Um, so it’s been a wide ride.
Alejandro Cremades: That’s impressive. So imagine you go to sleep tonight then and you wake up in a world where the vision of Choque is fully realized what does that world look like.
Daniel Khachab: Yeah, so I think the first thing it looks like is you know by we will have 0 food waste and or close to 0 food waste and and the effects of this are massive because it means. We’ll have a much greater shot at at reaching our our climate change goals ah global global warming goals of one and a half degrees that also means more money arrives with the producer and as we said before you know with 540000000 producers on the planet mostly in the. Emerging countries on the planet so more money arrives there. so that’s so that’s a major poverty ah relief. It also means that we will be able to to grow more diverse foods right today. We only grow 150 species. Um, that are commercially relevant. Um. And 3 species make up 60% of world food production. It’s rice ah maizee and and and weed and that has a couple of negative ripple effects because we you know degrade our soil always always take a se new chance out of out out of the soil and and by creating a food system that is more profitable. We also be able to to grow more. Biodiversity um, and ah and I think lastly hopefully we can also build mechanisms that um promote more seasonal more regional um consumption of food.
Daniel Khachab: Um, so reduce kind of kind of foot miles. So yeah, um I think it’s a very. It’s a very large endav. Yeah, and it’s it’s probably going to take us another of 15 years but like that’s what we hear for.
Alejandro Cremades: Well hey that looks like a beautiful world to me Daniel so good stuff now for the people that are listening that will love to reach out and say hi. What is the best way for them to do so I love that.
Daniel Khachab: Write me an email Daniel Atchoko Dot com.
Alejandro Cremades: Daniel Khachab: iel it has been such an honor to have you with us today. Thank you so so much for taking the time.
Daniel Khachab: Um, thank you so much for your time Alicando appreciate it.
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The post Daniel Khachab On Raising $336 Million To Bring Transparency To How Food Moves Around The Planet appeared first on Alejandro Cremades.
Rob Frohwein has been starting businesses since he was in high school. Now he’s helping other business owners with their finances. His latest fintech startup, Keep Financial Technologies, has acquired funding from investors like Launchpad Capital, Cambrian Ventures, Andreessen Horowitz, and Thomvest Ventures.
In this episode, you will learn:
- Product market fit versus proving your economics to investors
- Operating in a high-interest rate environment
- Equity versus debt funding
Alejandro Cremades · EP 595 Rob Frohwein On Selling His Last Company For $850MSUBSCRIBE ON:
iTunesGoogle PlayStitcherTuneInRSSSoundCloudSpotify For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
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Your email address is 100% safe from spam!About Rob Frohwein:Rob Frohwein recently co-founded Keep Financial Technologies, which is focused on embedding fintech to eliminate the recruiting and retention challenges facing nearly every employer in the world.
Prior to Keep, Rob co-founded, and was the long-serving CEO of Kabbage, a pioneering small business fintech, which raised $400m in equity, served 500,000 U.S. small businesses, and delivered $16B in capital prior to its sale to American Express in October 2020.
Rob is an inventor on 17 U.S. patents, has written three books on intellectual property, co-hosted a talk format radio show on work & careers, and was named a Top 50 CEO by Glassdoor in 2018.
He also holds a lifetime visitor’s pass to the National Baseball Hall of Fame, which he earned in connection with one of his earliest entrepreneurial endeavors.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today. We have a very exciting guest I mean is a founder that has done it so many times I mean he started you know going at it with his ideas and with how to bring solutions to the world. You know, just as early as being in high school but you know without further ado. Let’s welcome. Our guest today. Rob for a wine. So welcome to the show.
Rob Frohwein: Hey thank you so much I Really appreciate it. Love being on.
Alejandro Cremades: So originally born in New Jersey you were raised there. You know by your parents. Your father was a physician and very close to Philadelphia so give us a walk through memory lane. How was how was life growing up.
Rob Frohwein: Life growing up I I lived in the where I grew up a lot of people when I think of New Jersey they think of ah the Sopranos and um, ah, pretty. Ah, you know pretty much pollution industrial. But I lived in the garden part of the garden state. Ah, really agricultural area halfway between Philadelphia and Atlantic City so it was ah it was a it was a nice rural area. Um had the challenges of being a rural area but ah, but yeah, that’s where I’m from that’s where my parents decided to raise all of us.
Alejandro Cremades: And where do where do you think you got that entrepreneurial book because it sounds like you know you were really into it. You know from an early age.
Rob Frohwein: 2 brothers.
Rob Frohwein: You know it’s that’s actually somebody nobody’s ever asked me that question. But yes I was from a very early age I thought of ideas and I would see a problem and I think it became muscle memory for me. Ah, where I see something not working right or creating a challenge my mind would immediately go to some sort of solution. So when we started separating out trash for recycling I thought well why not have a trash can with 2 compartments you know because it’s really a pain to only have a one compartment trash can when you’re doing that. Little stuff like that and I think I you know but I don’t know where that came from. Maybe it was just I was growing up in an area that was kind of very relaxed, very chill. Didn’t have a lot going on and so my mind wandered and that’s where it wandered I I just. But so fascinated with the idea of starting something.
Alejandro Cremades: Now your case, you know you went to you ended up going to college and then right after that you know you decided that the consulting you know was perhaps the way to go and and I’m sure that the whole world of consulting. Perhaps it they helped you to really you know think about ideas or think about about perhaps. Solutions that you would bring because I find that consulting it helps you to to grab a big problem and then break it down into small problems and then you tackle one after the other. So I Guess how do you think that that consulting experience shaped the way that you approach problems.
Rob Frohwein: Yeah, well I worked for Anderson Consulting which is now Accenture and I was doing really programming software development for them and a lot of it was y two k getting y two Kk complying because we were 10 years away from that and everybody was nervous about that. Um. You know I I went into consulting for the exact reason that you said which was I thought I’d get exposure to a wide variety of industries and I’d really figure out what made me tick what I actually found was was quite different I found that the objective of that organization at that time and it may not still be this way. Was to have a situation where if I was a year and five months into the job or tears and five months into the job and I got hit by a train and I died they could go find somebody else that was there at Anderson for that exact amount of time and just plug that person in and and they’d have no loss in productivity. So the thing that really hit me wasn’t so much what I was learned what I thought I was going to get exposed to a lot of things. It was the fact that I felt like I wasn’t able to be creative enough and I was so desperate to use my creativity and curiosity to to work on things probably at an age way before I was ready to do it. And it actually turned out that way.
Alejandro Cremades: And in your case you know you ended up leaving to start a business now. The business was around collectibles and it ended up not having the outcome that you had hoped for. Even though you got access to the you know Hall of fame for baseball which is a really good positive thing. I’m sure that the as the saying goes you either succeed or you Learn. So What was the lesson that you took away with you from that business.
Rob Frohwein: Well it it. It turned out I learned that you could build a product but you need to understand product market fit was one like do people actually want the product you’re you’re creating a number 2 hey actually in a market it I had a limited amount of money I created a trading card set. Um, at the time I had signed a contract with Randall Cunningham who was the lead who was the quarterback for the Philadelphia eagles my favorite football team to do a like ah trading car set on his life and times. Um, and then the Nfl actually um, did not allow me to actually complete that set so I created a totally different set. And animated kind of sports card set around football. Um, and I just produced this trading card set and I got 6000 of these sets sold which sounds like a lot but not when you’re selling them for about a dollar 50 apiece. It’s not a lot of money. Um, so you know I learned that you really needed to figure out what the market looked like you really needed to figure out how to market and you needed to make sure you had a budget to market and I I just thought if I built it. You know the customers would come that they’re ah. Thoughts on this and their excitement about it would would match mine and and that’s not how it actually works in practice.
Alejandro Cremades: And once an entrepreneur always an entrepreneur in this case, you thought it was law school what it was next for you. Why.
Rob Frohwein: Well, you know what? I so I I got married very young. My wife and I recently celebrated our thirty first wedding anniversary. So I got married pretty young I was 23 and I um I was taking a walk with her one night
Alejandro Cremades: Um, wow.
Rob Frohwein: And you know and we always talked about like our future and you know might have kids I just realized like I’m a bum I’m not making any money I I have to have a skill that I can fall back on even if I want to be an entrepreneur in the future I need to have a skill um you know, separate and apart from just my undergrad degree. So i. Made a plan to go back to law school and that I would just make it happen and so I spent the next year and a half prepping to go to law school but in the interim year before I went to law school I worked for a company called the Franklin Mint which was at the time. Ah, the largest direct marketer in the world of collectibles and I ran a sales channel and that was really important in my life because during that year I learned how to actually market products and market products that you wouldn’t think people would want um like um like collectible. thimbleswithcatpicturespaintedonthem. But what it really showed me was like you can find markets. How do you find the market how do you market people how do you track the data and frankly all digital marketing right now finds its roots. And some of the direct marketing I was doing back in the early and mid 90 s for sure.
Alejandro Cremades: Now after you know you end up leaving or leaving or graduating more than anything. You know you ended up getting really into law and you did become the general counsel of several companies. So first you did the whole law firm thing. Then from there, you jump more to get closer to the operational side and one of the companies that you actually you know were a part of which was sa media. It was a Vc back company and that was around the time where you know the duck com you know, bust you know happened and I think that. You know this this gives you an advantage nowadays because you’ve been able to really experience cycles you know in ah in a in a real way. So I guess what was the experience like to go through that and what did you learn in order to tackle cycles like maybe like the one that we’re dealing with now in a powerful way.
Rob Frohwein: Yeah I learned a lot we. We went through several rounds of layoffs. So I learned about hiring um going through the cycles of having to let people go and the pain that that causes people I learned about you know what. What’s needed to get a product out on the market and demonstrate not just product market fit that you could actually execute and get a product out to the market period. Um I learned a lot about management and how to manage a board and how to manage you know other members of the executive team and people’s expectations mostly learned it because I don’t know that I did it. Particularly well at that time. Um, and when that company was winding down I agreed to help it go through its wind down over the course of the last several months of 20 of 20 ah one 2001 it was from those offices. Um that I actually watched 119 unfold so all this stuff is indelibly kind of marked in my brain and I ah, um, you know I found you know I found that I I learned a lot and I you know and I wanted to build something different going forward that I needed. Ah I needed to still be an entrepreneur that it had the other thing I think I learned is. That it didn’t kill my spirit. It didn’t kill my entrepreneurial spirit and I think when you go through all those things and with the exclamation point of nine eleven happening and you still want to be an entrepreneur. In fact, that is four days after Nine Eleven happened is when I decided I was going to start.
Rob Frohwein: My own set of businesses and go after it myself and so you know I think that’s when you really figure out whether you’re you’re meant to be an entrepreneur or not.
Alejandro Cremades: Well hey I guess that was the universe you know slapping you across the face and saying Rob wake up. It’s time to go at it again as an entrepreneur is your time and I guess saying you know at that point you started laba group of you. Basically you guys were doing stuff on ip. Ah, service-based day more than anything business or not the the bc back the companies that nowadays you’re you’re you’re rolling out and also you started your own offer firm. You know that you built to over sixteen lawyers now I guess that you know this allowed you also the time to really test through things to really. See you know what worked? What didn’t work. But more importantly, this was the immediate steps that needed to happen in order for you to come across the idea of cabbage which ah, really happened you know during a brainstorming session for ah for a client you were preparing for a client meeting and then all of a sudden you know the whole idea of I mean. Ah, massive idea massive market all of a sudden comes knocking so what happened.
Rob Frohwein: Yeah, you know what? I think there was actually some things embedded in that whole experience had when I first started those businesses in oh 1 o 2 3 um I didn’t have a trust fund I had two kids my wife was stay at home mom at that point. Um, we really didn’t have any money and I would lie awake at night literally worrying about how it was going to pay bills I mean some real horror stories from that period of time in my life and I think those things were so embedded within me. The idea for cabbage which was to help provide working capital to small businesses was something that immediately clicked in my mind and and looking back at it I think it clicked in my mind because it’s exactly what I needed um several years before and it was you know it was really a. A combination a confluence of factors that came together one was that experience I had had before number two was I I asked myself this question would you do in some brainstorming which is what would happen if a company like Ebay bought a company that provided credit and at that point they had not bought a company called bill me later which was. Something they did about a year later um and I said well they’d probably provide working capital to those poor small businesses that need it just like that business I had many years ago and I also realized at that point I was working with it for another company I was helping them I was helping another company that was using.
Rob Frohwein: Apis from companies like ebay um to pull down data about small businesses and about things being sold online and I thought what if you could take that data the idea of providing working capital to small businesses put this all together and you could underwrite these small businesses. On a real-time basis that would be pretty interesting that idea stuck with me for about a year over a year until I decided you know what I I have to do this idea. It keeps nipping me in the heel which to me was a sign. It was a good idea sometimes you need to let ideas you know like percolate for a while. Um, and the good ones will stick around There’s a um, there’s a really funny interview with Paul Mccartney where you know he says that you know he never wrote music down and they said oh my god can you believe the number of additional Beatles songs that. If you had just written these things down how many more Beatles songs. Why why didn’t why didn’t you write them down and he said well if I couldn’t remember them then they couldn’t have been very good. Ah and you know and it’s very similar that with ideas which is you know these ideas keep coming back to you. And it’s something’s probably worth a little bit more investigation.
Alejandro Cremades: So all of a sudden The idea comes back to you just like the music to Paul Mccartney and you decide it’s time to pick up the phone and to call Katherine and Mark so why at that point you thought that you had to take action and why you thought that they were. The right individuals to receive your phone call.
Rob Frohwein: It’s also a good question. Um I had started businesses in the past by myself for the most part and they hadn’t they had had varying levels of success. My earliest you know and I I just realized and I also realized something about the company ZaMedia we were a consumer like. Chronics company as well as an entertainment focus company. We had nobody that had expertise in entertainment or consumer electronics in the business. So every mistake we had to remake in trying to build that company and so I wanted to find people who had the experiences that I didn’t have. Mark had a lot of experience raising money and building a couple of other companies and in metro Atlanta area. We built the company in Atlanta Katherine was an expert in the area of financial services and fintech I have a funny story about how I came to understand that about her watch I won’t bore you with right now. But. You know those were the 2 people I felt like had the had those types of skills that I needed to help bring together in order to make this company successful and I think it’s really important to find that those types of ingredients in your founding team.
Alejandro Cremades: So what ended up being the business model of cabbage for the people that are listening to to get it.
Rob Frohwein: Yeah, so when we started we were focused on providing working capital. So basically small business loans with a bank partner to small businesses that sold online. We eventually expanded that to include all small businesses. So think of these not just as companies. Are selling products on ebay through Amazon’s marketplace but also also businesses that are coming and repairing your dishwasher. It might be the person who owns the restaurant or the bar or the dry cleaner down the street all sorts of small businesses out there and and the way we did it which was hyper important. Was. We asked them to give us access to data services that related to services that they used to run their business so this could be anywhere from for the online sellers the marketplaces where they operated on um or it might be for all the other businesses their bank account the accounting package that they use. Could be an inventory system that they use all sorts of different things and it’s funny how sometimes you get lucky because getting access to that data on ah on a real-time basis which means they actually gave us direct access v apis to those data sources. Allowed us to offer them. You know alone immediately as soon as they came to the site we didn’t have any other review period necessary number 2 we could offer them a line of credit and the reason why that was so important was.
Rob Frohwein: Because we stayed connected to the data. We weren’t sure why we decided to have them stay to stay connected to the data but we made that decision early on that more data better because we stayed connected to that data. They only had to take you know if we gave you an offer for $50000 you could take 5000 now and you could come back at any point thereafter and take more capital if you had an open to borrow limit there and because we constantly were connected to data. We were underwriting them on a daily basis and so we know how they were performing then we eventually expanded the business to include bank accounts payments. Ah, credit cards debit cards, gift certificates other things but we grew the business to serve half a million small businesses over the ensuing you know decade plus.
Alejandro Cremades: Now The the the beauty of lending is that you have product Market fit almost instantly and I think that that also you know has The. We see the positive. You know all of a sudden you know you have people lining up but also the negative because you got to go about structuring things and making sure that you’re not going to die out of Success. So How did you guys navigate that.
Rob Frohwein: It was ah it was ah it’s kind of a thrilling thing to think you know it’s that one product where you know everybody knows what it is. They know what it’s valued at they know how to use it so you’d have to explain anybody any of those things you have to explain a lot of other terms. You know, obviously how much they’re going to get and what the pricing is going to be and what the repayment responsibilities are um and when you’re in the money business. You’re always looking for inventory. So it was a situation where we were in due diligence for. You know ten twelve straight years which means we had to keep a data room always up to date. We always either had an equity investor looking at us or a dead investor looking at us and we always had to be able to provide lots of data back and it’s a. Lending. It’s an ebb and flow situation. You get some equity. You build some products so you can release them to the market. You know you get some debt so you can provide that money to your to your customers. You show some success and then you rinse and repeat you have to go out and get more money. Um, it’s a very very and you have to be very careful too because it is not hard to lend people money. Everybody will take money It’s very hard to get people to pay you back and pay you back on the terms that you have requested.
Rob Frohwein: And so that’s really the art and science of it All is making sure you lend to the right people. Um and that you have the right systems in place to make sure you get the money back.
Alejandro Cremades: And obviously for lending people you need to raise debt capital. So how do you go about subsidizing Debt capital.
Rob Frohwein: Ah, so you know the the interesting thing is you when you when you go out and I talk to a lot of young entrepreneurs right now who are starting businesses not similar to cabbage but probably you know in the same area as lending for this or that. And right now they’re trying to optimize for a very difficult capital set of capital markets meaning that cash right now is very expensive and so they say well I can’t take this cash because then off to charge my customers so much more and I don’t want to take advantage of them in that way and and and the rest of it and. What I always tell them is you have to figure out what it is that you’re trying to solve for right now. What you’re trying to prove if you’re trying to prove that you have a great market and you have people who want your product and they’re willing to pay you back. It’s incumbent upon you to go get the capital and frankly probably overpay for it. Doesn’t mean you should turn around and charge your customers a heck of a lot more because of it because they’re not, you’re not proving your model. You’re proving a different model right? A more expensive model. Um, and it’s incumbent for you to if you were if you think that at scale you’re going to be able to access capital. You know instead of at 15%. You’re going to be able to access it at 5 then you create 2 income statements. 1 income statement is your actual income statement that shows you’re paying 15% of capital. The other one is that you show your investors is when I get larger and I be able to access capital for 5%
Rob Frohwein: This is what my income statement will look like and by the way you charge your customers What you would have charged them with 5% capital that way you’re actually proving your model you’re proving what your business is going to look like at scale and it’s a really important thing because there’s just and that means you have to go out and raise more equity Capital. Ah, just the fact of the matter is that’s that’s your burden to bear to prove your business just like everybody’s got a burden to bear to get to product Market Fit. You didn’t have to worry about that. This is the thing you have to worry about.
Alejandro Cremades: And with ca also you guys raised quite a bit of money you raised an over four hundred billion in on the equity side through 6 different bc rounds that you guys did billions that you raised to on the deb side to be able to operate the business and then eventually. Company got a acquired by amexs Cnbc reported it for over 850,000,000 of a transaction but I guess what was that process like going through an acquisition like that.
Alejandro Cremades: So then so then in this case, you know the um, the transaction ends up happening with American Express and then you know you you stay there. You know there I mean you had a conversation with them. But you already had something in mind. You already had something in mind and that was not staying for long with Amic. So what happened there and then what happened next.
Alejandro Cremades: So it sounds like keep financial. You know was decent and enough and also kept coming to you just like music songs. So in this case, you go at it and you know eventually Katherine you know also joins you again, you know on on this journey. So. For the people that are listening. What are you guys doing at keep financial.
Alejandro Cremades: And always he asked everything you know when you are are a repeated successful entrepreneur entrepreneur investors throw money at you and that’s why you raised that killer seat round. You know, not not long ago last year where you have people like andresin I think you raised a allu a little bit over 9,000,000 is that right.
Alejandro Cremades: Wow.
Alejandro Cremades: So Let me ask you this if you were to go to sleep tonight boop since we’re talking about investors I talk about vision two because that’s why you sold them as Well. So if you were to go to sleep tonight and you wake up in a world where the vision of keep financial is fully realized. But does that world look like.
Alejandro Cremades: So like a beautiful world Rob now obviously you know there were talking about the future. Let’s talk about the past. Let’s talk about the past with a len of reflection. Let’s say I was to give you the opportunity of being in a time machine and I bring you back in time you know, maybe back to that moment that you were still in school and. Wondering you know like what you could do you know what kind of business you could start if you were able to have a chat with that younger Rob and give that younger Rob one piece of advice before launching a business. What would that be and why given what you know now after all these companies that you started.
Alejandro Cremades: I Love that show rope for the people that are listening. What is the best way for them to reach out and say hi.
Alejandro Cremades: Amazingson mason well Rob thank you? So so much for being on the deal maker show today. It has been on on earth to have you with us.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Rob Frohwein On Selling His Last Company For $850 Million And Now Raising Millions To Improve Employee Retention appeared first on Alejandro Cremades.
Now on his second startup, Santiago Molina’s latest venture has raised tens of millions of dollars, to facilitate the movement of $90B in merchandise. His latest venture, FinKargo, has attracted funding from top-tier investors like Community Investment Management, ONEVC, Maya Capital, and Pear VC.
In this episode, you will learn:
- The impact Finkargo is having on international trade
- Santiago Molina’s advice for starting a business
- Funding your venture from outside of the US
Alejandro Cremades · EP 594 Santiago Molina On Raising $85 Million To Bridge The Trade Finance Gap In LATAMSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Santiago Molina:Santiago Molina began their career in 2006 as a Strategic Planning Intern at DDB. Santiago then moved to UBS in 2009, where they worked as a Research Analyst, assisting a Financial Advisor in reviewing, analyzing, and rebalancing investment portfolios worth over $30 million in assets.
In 2011, Santiago joined The Social Investment Bank (Banca de Inversión Social) as an Associate. In 2013, they began working at Teka Capital as a Senior Investment Analyst.
In 2014, Santiago Co-Founded and became a board member of Finamiga, leading it in its creation of an innovative asset-based microfinance lending model. In 2016, they Co-Founded and became a board member of FERVAL – Fertilizantes del Valle SAS.
In 2022, Santiago became a Mentor at Latitud. Most recently, in 2021, they Co-Founded and became CEO of FINKARGO, creating Latin America’s first supply chain platform for micro, small, and medium enterprises.
Santiago Molina attended Columbus School from 1994 to 2000, followed by Colegio Bolivar from 2000 to 2004, where they obtained their High School degree.
Santiago then went on to Houston Christian University – Archie W. Dunham College of Business from 2004 to 2009, where they obtained a Bachelor of Business Administration in Finance and Marketing.
Santiago then completed their education at Houston Christian University – Archie W. Dunham College of Business in 2010, obtaining a Master of Business Administration (MBA) in Finance.
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Connect with Santiago Molina:* Crunchbase * Latitud * TheOrg * LinkedIn
Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So I am very excited about the guest that we have today I mean he’s say build a few companies now and he’s definitely now on ah on the next one a rocket ship and we’re gonna be talking to about you know building in Latin America and all that good stuff. So I guess without further ado. Let’s welcome our guest to a santiago moina welcome to the show.
Santiago Molina: Me.
Santiago Molina: Thank you very much alejaro very honor to be here with you.
Alejandro Cremades: So sato you were born in Cali obviously you know you grew up there during a time of conflict. You know I’m sure he was not easy. Ah, but how was life growing up, give us a little if I walk through memory lane.
Santiago Molina: Perfect. Okay, so first of all, um I got lucky at at at Birth won the lottery whatboard to loving parents who prized dedication overall of all so I got to go to the best school in the city and and and they actually said.
Santiago Molina: Actually made an effort and it was a little bit above our means but they made it possible but going to to school and growing up in the 90 s in Colombia it. It was quite an experience because we grew up in the middle of a very violent um situation. Very violent environment. And very soon by the end of the 90 s we got a housing kick crisis one decade before the us had it and everything really went bust so we were in this very violent country with a lot of conflict. Seeing everything going wrong and that just builds gritin you that just builds you character and shows you that anything is possible and not until I left godi did I realized that what I was born in and what I grew up in wasn’t normal and. That same city was the one that built the founders of Lapi Shepet Adi all these guys were born in the same the same ah environment raised are around the same time and I think we owe our entrepreneurial spirit and our grid. That experience.
Alejandro Cremades: That’s incredible. No kidding I mean when you’re dealt with uncertainty then to certain degree you are able to ah be with uncertainty a little bit better now and I find that that’s what we need to embrace us entrepreneurs now in your case at 18 years old you know it sounds like you were a good kicking the ball. So. Kicking the ball. You know you were able to kick it far. You came to the us so tell us about that experience too.
Santiago Molina: So when I graduated high school I was fortunate enough to earn ah a full ride to play soccer in the us. So I took upon it and and moved to the us to get my college degree and and and play play soccer which was a really formidable experience and that. as as I say often athletics builds a discipline in you that very few things can and and now today I tend to hire athletes more than anything because I see I see what what it builds.
Alejandro Cremades: And what about Leadership. What did you learn about leadership from playing soccer especially you were on the defense side of things you know that’s like the last line before the um, you know the the player from the other team you know is’s going to be facing the Goalie and potentially making a goal. So. You were there. You know the last line of of the Battlefield. So So what did that teach you about leadership too.
Santiago Molina: Yeah I mean when you are when you’re the defense same as it happens with the Goalkeeper. You never get the Praise. You know you don’t get to celebrate the goals you make you’re only chastised if if you make mistakes so you always need to perform. But you never get the praise for what you do? So it’s it’s humbling and you learn to to play that way and lead that way.
Alejandro Cremades: Now in your case I mean you ended up helping out the um, the team of of the girls there a university and that allowed you to get your Mba as well. Ah, but in your case, you didn’t want to stay in the us what happened why did you move back to to Columbia.
Santiago Molina: Yeah, so so that that experience that was actually my first job assistant coach to the women’s soccer team and one of the beauties about that opportunity is that I got to work with women solely women teened fairly ah teenage adult women and I learned to lead. Motivate and get the most out of a women and I think that was a huge opportunity because it prepared me for being a leader later in life and then when I was graduating I I really wanted to come back to the region and and make an impact make a difference. So as soon as I graduated myba I decided to come back to the ah to Columbia and work in in investment banking impact investment banking actually.
Alejandro Cremades: And in fact, I mean before you went at it as an entrepreneur you did investment banking I say as you were alluding to and then you did private equity. But I think that one of the things that I see a lot is. People that come on the show is that they either have the consulting background the investment banking background or the investor background either on p or on Bc but in your case you have 2 of them. So I guess how do you think it has helped you later on you know now that you’re an entrepreneur. Investment banking of being able to perhaps see you know what separates good companies from bad companies and deals that end up you know going through or perhaps you know your experience to as an investor as a private equity investor where you develop pattern recognition. You know for identifying winners. Yeah.
Santiago Molina: Yeah, so investment banking is a wonderful school because it teaches you discipline. It gets you to see a lot of industries and find those drivers that make companies successful but in the end what you also realize is that the true stars of the shows are the. The entrepreneurs. The owners of the company that wants to build it. You’re there just for the transaction and that’s what got me in love with becoming one of them I wanted to be 1 of those guys we were advising because those were the real stars that built the business that we were now transacting. but but yeah that discipline and that that ability to look at the details and see what the drivers or businesses are make a huge difference when you when you go out to build your your own company. So.
Alejandro Cremades: So what? what? What were some of those things that they that you found you know and those companies that you were involved with you know whether when you were an investment banker or when you were an investor at the private Equity firm. What were some of the key trade trades that. You found like maybe like those the top 3 that you found from those that you know went on to do great things.
Santiago Molina: Okay, so I’d say the first one you start understanding cash cycles, cash conversion cycles understanding how how the money flows in the business and how much money you need to produce more money. Um, that’s probably the the main one. That not everybody understands the second one is scalability how much additional energy. You have to add to create something bigger and how replicable it can be that would be number 2 and number 3 is where are the efficiencies. What are the levers you can play with to find efficiencies in your business to optimize profitability which is the end game of a business now.
Alejandro Cremades: So While you are the private equity Firm. You know. Also it becomes more and more obvious that you still you still want to build your own business I mean you you were feeling that when you’re on the investment banking Side. You thought that going to the private equity Side. You know it would get you Closer. It would really feel. You know that gap that the that you that you had there for you but it sounds like it was not the case and eventually you know it’s time to take action. It’s time to take ownership of your own future and building something yourself so when when did that moment happen.
Santiago Molina: Totally So I I Want to get my hands dirty. You know I wanted to put my hands at the machine and get them greasy and start building stuff and and really make changes. So What really happened was I was starting to get involved very deep with one of our portfolio companies I started. I Tried to call some shots and they immediately stopped me and they were like no I mean you’re the associate at the private equity here. You don’t call the shots and that’s where I was no I want to be in the game I Want to be part of the game. That’s when I decided I had to quit and build my own.
Alejandro Cremades: So what happened next.
Santiago Molina: My own company but I quit right away without without a plan without an idea how like I’m just gonna force myself into building a company I started chatting with a good friend of mine from childhood who had complimentary backgrounds to mine and we said let’s let’s build a company and that’s how. Been Amigo Neos was born in 2013.
Alejandro Cremades: So what was the business model there of fi Amiga would either for the people that are listening to really get it.
Santiago Molina: Yeah, so we were always trying to find something that generated impact so we went after a microfinance institution trying to blend different underwriting methodologies to to bring access to financing to the and underback. Um. That’s what fi Amigo Newss does it. It. It’s ah it’s focusing financial inclusion lending money to those that are not underanked.
Alejandro Cremades: And you did that for about 8 years you guys raised you know quite a bit of money to in-depth I think it was like twenty five million bucks so how how do you? I mean I guess that that here you know you also learned about how to be effective when it comes to raising debt. You know there’s a lot of people right now on they on on listening to us that are more used to or more familiar with other forms of capital like perhaps equity right? What they? What people would raise from investors but how how why was the um, the depth side of things you know so. Um, helpful for you guys to to really build the operation and how should people think about debt capital.
Santiago Molina: Right? So for that capital. You need to see yourself just as an intermediary what you’re doing is finding a allocation for resources that can generate a higher return and then in the middle you’re in the middle taking a cut and transferring to the next part. In Order’s for that to Work. You have to be both efficient right? and you have to have a performing portfolio. The numbers need to add up so you’re basically paying with small playing with smaller margins and you need to be very careful with how you operate your business because you’re. There has to be enough space for you to make a profit for there to be a loss rate and for the investor to get their money back with their return. So it’s it’s It’s actually you you need more discipline in order for this to work and that’s ah the magic about about that.
Alejandro Cremades: And.
Santiago Molina: You have to have the numbers right? and you have to be very responsible with how you you manage that money.
Alejandro Cremades: I mean with fi Amiga what an impact over 35000 loans 5000 families. You know it’s just like absolutely incredible. The the impact that you guys had you know with finamiga would either so why did you switch gears here. I mean it sounds like you you guys were pushing. You know a really amazing operation. So what? what happened there I know that you received a phone call and that phone call changed. You know the course of action for you. But how how did that happen I mean. If you if I was to be pushing an operation like this There’s no way I would have gotten distracted so why did you feel the need for really taking that call seriously.
Santiago Molina: Yeah, so I’m a builder I like to build things ah Venamicgo was at a point where it was very profitable crawling aggressively but it already worked. Everything was already placed. We had a great management team. A great product. Everything was already. Working at was missing the adrenaline of building from scratch and and and and building solutions. So that’s when my cofounder thomasmas called me one day so he’s he’s an expert in in logistics. He he led mersk in Mexico and Central America the the largest shipping line in the world. That he started his own freightful water that outbreaks Columbia Mexico us China he calls me one day and he’s like Sani I need your help my clients are s and Bs in Colombia and in Mexico they’re doing import operations and nobody gives them financing to operate this their businesses. Is. The only thing they lack in order to be successful and almost like well that needs resonates with me let me let me let me look it up so I started researching came across the trade finance gap which is a ah very well documented case and realized that lat down needs approximately. Approximately three hundred and fifty billion dollars to fund that gap in the region for snb’s for importing usnb and and when I saw the number and the and the impact that we could build and how we could merge a a world of logistics with finance that it it hasn’t.
Santiago Molina: Been mixed very different worlds I said hey but I gotta jump with this I mean this is huge impact I can make and they can really make a difference for the region if I can get this to work.
Alejandro Cremades: And obviously that’s not ah, an easy jump because you had you know this other baby. You know that you had built for 8 years plus so how was that transition to make sure that you would leave people you know in a good place. And that you know you could also you know still be involved and and help out while at the same time you know you’re taking this massive in worry which is the end they were of of really building another thing from the ground up.
Santiago Molina: Right? So The the hardest part was breaking away with my cofounder I mean we built that company with our bare hands and built it from the ground up. But fortunately he he understood what drove me he understood the pastor that I had for building things. And he said I mean it’s it’s your dream I support you he knew I wouldn’t leave him behind I’m still a board member and and I speak with him often and help him in any way I can. But fortunately the the company was at a point where it was already mature and and it actually had and still has. The best reforming portfolio in the industry. So So it was it was in a in good shape to to leave behind.
Alejandro Cremades: So then let’s talk about fin cargo. So fin cargo you know comes to life you know now it’s a problem that you can’t get out of your head. You know you’re able to have this conversation with your cofounder. Ah, you leave things on a really high note and you’re even still involved now helping him out and and the company out and now fin cargo is in the mix. So so so for the people that are listening to really get it. What ended up being the business model of Finn Cargo how do you guys make money.
Santiago Molina: Right? So withmas what we realized it is that we had 2 very different worlds very distant worlds. You had the finance industry and you have the logistics industry and whenever you’re shipping goods you have goods going one way and money flowing the other way so they’re part. Of a transaction but you play it all out through different channels. So what I told Toma is if we’re going to build this. We need First of all somebody that is capable of bringing these 2 worlds into a single platform and having them interact and transact in a single place. We brought on our third cofounder Andres who’s who’s been doing turnarounds in tech companies for the past twenty years he’s got 2 exits under his belt um brought him on board and between the 3 of us what wevisioned was a platform where ah.
Santiago Molina: Emerging Market as a beast can transact in a single place where they can control their supply chain. They can have visibility they can hire the different services but they can all manage everything through one single dashboard all with embedded financing. So that not only can they trade control contract but they can finance their whole operation because 90% of International trade is financed so without access to fincing you’re doomed and that’s the case in Latin and that’s what we’re out to solve.
Alejandro Cremades: So typically on ah on ah on a business like this I mean it’s a how do you think about like for example, like the the biggest problem that you’ve seen you know and really building this company I mean what would you say has been especially at the beginning. What really kept you up at night because it sounds like a complex business to really put together when it comes to you know trade when it comes to commerce I mean all of those different things blending in so what kept you up at night, especially during the early days
Santiago Molina: The hardest part was mixing really strict square world like finance where everything is set. Everything is built. Everything is really standardized with a very volatile world like his logistics where you have. Ah, lot of moving parts and you have delays and changes in time in timings constantly It’s highly unpredictable and highly volatile so developing a financial product that can adjust to the necessities of of logistics and having the world of logistics up. Blend and adapt to the finance world was the biggest challenge and the only way to do to do that was through technology by allowing these 2 worlds to live in a single platform and being able to connect both so that there’s a marginal error of error on both and they can live within that margin of error. So. So that was the biggest challenge that that was what kept us up at night for the first for for the past two years we’ve been around for a little bit less than 2 years but we finally managed to crack it and that explained why why why? it’s it’s moving. So.
Alejandro Cremades: And also you guys have been booming too when it comes to the employee count How many people do you guys have now in the company I mean that’s a lot of people in such a short period of time. How did you go about onboarding people.
Santiago Molina: We’re at 78
Alejandro Cremades: You know I’m making sure that the culture wouldn’t break.
Santiago Molina: And that was that was one of the beauties cultural wise so we had to bring in experts in logistics experts in finance export experts in effects experts international trade. So when you blend all these worlds together. what what happens magically is that all egos disappear because everybody realizes they don’t know anything about the other worlds. So first first off you have no stars you have no shining stars. Everybody’s humbled because they’re in the learning process. That’s where the magic starts to happen because as everybody’s learning. They’re starting to share their experiences and their knowledge and you start putting them together to to basically bring to life a whole new world of opportunities. Um, and that’s been part of the magic within in cargo that. Nobody knows everything so everybody’s chipping in their part of wisdom.
Alejandro Cremades: And in terms of capital. How much capital have you guys raised to date you know into in-depth and equity for the operation.
Santiago Molina: So we raised our seven point five million dollars round in January of 2022 which that really pushed us to to grow scale throughout the year and then we closed on a $75000000 credit facility in September. And start operating in in October. So adding both up that’s eighty four point five million
Alejandro Cremades: And also you know like 1 thing that that comes to mind here is you were able to land incredible vcs I mean you have pair Bc you have fly bridge I mean those are not people from. Mexico or Colombia I mean we’re talking about some of the biggest names in the Vc world especially out of the Us. So being in latin america how do you go about I mean I’m sure that there’s a lot of people that are right now tuning in and and listening and and I’m and they’re wondering to hey I’m outside of the us how how can I also. You know, learn here from the experience of santiago how did he do it. How were you able to land these people from the us.
Santiago Molina: So ah, first of all the the beauty bot what we’re building is that we’re global from day one when you’re doing international trade. You’re global from day one. So we’ve actually connected Latan to 39 countries around the world in 6 continents and so. That really brought brought the attention of investors because they saw we were solving a real problem that has global impact because the same problem we’re solving in right now in operations in Colombia Mexico can be applied to the Middle. East can be applied to Southeast Asia so the the investors understood that we were solving a global problem started started with Latan and second we were lucky enough where we managed to put together a team of investors that covered everything that we needed so we needed our fintech global fintech focus fund and we got won up. Lead around and then we needed a Sas specialized fund. That’s where we brought fly bridge in and and and they have just amazing experience running saas products and then we eventually we want to go into Brazil so we brought on board maga and 1 vc. And we had also the ah the the support of pair Vc that has great experience as well building companies from from the c stage up. So so we got really lucky got to pick the best of the best.
Alejandro Cremades: So when you say support you know everyone really wants an investor that is supportive an active investor right? An investor that is able to add Value. What does support look like because obviously when when we’re hearing you hear you know mentioning it. I mean it sounds and it looks like you really know and see on a daily basis. What that support looks like from your investor. So How do you use that support. What How how that support really pushes you farther.
Santiago Molina: Totally so support comes in many ways it can come be in forms of Intros to other players that can add value into what you’re doing support comes in the in the form of experience. Because they’ve seen a lot of deals come through and they’ve seen the way a lot of companies work. So For example at the fintech side they can help you with crossborder payments and how to optimize for that. How to optimize for funding how to optimize for infrastructure How to optimize for hiring because still they’ve seen so many companies. They know a lot about it. They it can also come in the form of establishing operations or hiring because they’re on the ground that they know the market where they’re in or it even comes in the the form of what you prioritize to build. Knowing exactly what will allow you to have a solid base to grow upon so support comes in many ways experience being one connections network and and and knowledge.
Alejandro Cremades: So now imagine you go to sleep tonight Santiago and you wake up in a world where the vision of incargo is fully realized what does that world look like.
Santiago Molina: This is a world where s and bs in emerging markets can connect across border and buy from anyone in the world having full visibility and control of their entire supply chain in one single dashboard. That’s 1 place. Or the entire supply chain.
Alejandro Cremades: And I mean that’s that that that that looks like an absolutely beautiful World. So I’m I’m wondering here you know as you’re thinking too about you know how to how to get there. You know Obviously you know you have those different lifecycles of as a company. And some of the things that you need to break through you know in order to get you there So How are you guys thinking about you know the company maturing from one cycle to the next and how are you guys preparing yourselves to be able to achieve you know those say those growth. Ah you know Shifts. You know, ah you know, powerful way.
Santiago Molina: It it all comes comes down to building a strong base. You need to make sure your foundations are strong enough. We’ve built a very strong foundation on the wall. Building the rails for these international trade transactions to work and having logistics and finance blend together. The biggest pain point of our clients is access to financing so we had to solve that first and the way I I tell it is I see as the barge you have to make sure the barge floats and once you have. Your barge floating you can put on top all the other services in in in revenue streams and operations you need. But first you need that barge to flow and we’ve really focused that on that and that was’s what speaks wonder of what we’re building. We’ve we’ve done over $90,000,000,000 worth of financing of merchandise. And have let a 1 % default rate because we built that barge to work now on top of that once we’ve solved the problem for these s and b to trade internationally now they can start contracting all the rest of the services to us and transsecting to a platform that just makes their life easier.
Alejandro Cremades: And I guess you know like a lot time. Obviously you know you you’ve had your your experience with the us. Not only you know, being here but then also with the investors that you have been able to land and latime was a little bit green when he came to the venture. You know world and to being able to have the access to the tools and resources I know that it has been. You know, changing and developing but is it getting easier to to be an entrepreneur there.
Santiago Molina: So ladown has gone a long way from in the past I I’d take 3 years the past three years latime has gone long way with we’ve all benefited from the success of the earlier unicorns that that roses in the region. So now you have you see more interest in startups more people wanting to bet baker want to build things want to find solutions. So both on the side of talent you have people with better experience that that that just starts permeating into the whole industry and investors from outside of of the region. Now see that success as possible in the region. Want a bet on it. So so it’s it’s evolving very much so and that us works I mean the us just works in latin there are so many things you have to fix that the opportunities are just endless.
Alejandro Cremades: Yeah, no I can totally get that. So so saniao if I was to put you into a time machine and I bring you back in time I bring you back in time to maybe that point when you were at the private equity firm super frustrated because you wanted to build you wanted to build you wanted to do something of your own. Imagine you were able to go back in time and have a sit down with that younger self and being able to give that younger self one piece of advice before launching a business. What would that be and why given what you know now.
Santiago Molina: I Tell him to take bigger risks to dream bigger and to fail faster.
Alejandro Cremades: I Love that That’s very profound now for the people that are listening that will love to reach out and say hi. What is the best way for them to do so amazing. Easy enough.
Santiago Molina: Better be on linked it.
Alejandro Cremades: But santiago thank you so much for being on the dealmaker show today. It has been an honor to have you with us.
Santiago Molina: Alandro The honor is mine. It’s been a wonderful experience. Thank you very much.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Santiago Molina On Raising $85 Million To Bridge The Trade Finance Gap In LATAM appeared first on Alejandro Cremades.
Brian Fenty has been on both sides of the table as an investor and entrepreneur. He has leveraged that experience, as well as his love for culture, to build an incredible business that delivers six-star experiences. His startup, TodayTix, has acquired funding from top-tier investors like Great Hill Partners, Rubicon Venture Capital, TYLT Lab, and Riverside Company.
In this episode, you will learn:
- How TodayTix is opening up culture and great shows for everyone
- The failed acquisition that turned into a hugely successful startup
- Fighting through financial crises to create new record results
Alejandro Cremades · EP 593 Brian Fenty On Building A $500 Million A Year Business By Connecting Culture To CommerceSUBSCRIBE ON:
iTunesGoogle PlayStitcherTuneInRSSSoundCloudSpotify For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
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Your email address is 100% safe from spam!About Brian Fenty:Brian has led and managed varied private investments across a broad range of industries, focusing on product and talent. He is an active adviser to start-ups, growth-stage companies, and management teams. Previously an MD at Hamilton Investment Partners. Currently, Brian serves on the Board of The Institute for Arts and Humanities at UNC-ChapelHill, where he received his Bachelor’s degree in Marketing and Entrepreneurship.
See How I Can Help You With Your Fundraising Efforts
- Fundraising Process : get guidance from A to Z.
- Materials : our team creates epic pitch decks and financial models
- Investor Access : connect with the right investors for your business and close them
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Connect with Brian Fenty:* Crunchbase * LinkedIn * Bloomberg * ZoomInfo
Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So I’m very excited today. We have a founder that they really knows quite a bit about building scaling financing and all of the good stuff that we like to hear so I guess without further do let’s welcome our guest today Brian Finy welcome to the show. Thanks.
Brian Fenty: Thank you Alejandro it’s great to be here.
Alejandro Cremades: So originally from Connecticut so give us a little of a walk through memory lane. How was life growing up.
Brian Fenty: Yeah, it’s funny I spend most of my life in big cities now but I grew up in a very small town in Torrington Connecticut amazing working class parents didn’t go to college. But. Always were moving from job to job working hard providing a good living I was an only child but was always around music and dancing and laughter and joy and I think that that’s really. Where my love of art and culture came from so it was ah it was a really happy time growing up there? yeah.
Alejandro Cremades: So how did you get into the whole entrepreneurial thing I mean was there something going on in the family or or that developed over time.
Brian Fenty: No, you know it’s I jokingly say that it started when I was three years old because I wasn’t athletic as a kid. We didn’t have enough money to have video games or lots of toys and so I went down to the local theater There’s a great theater in Torington Connecticut called the Warner Theater and I went down to the Warner Theater and I was cast in a show at three years old and I know that that doesn’t really sound like anything entrepreneurial, but it it started a career of really hustling to direct and produced and. I was in over 55 productions before I was 14 and used some of the funds that I made from from that ah early childhood career to pay for boarding school and college and so it really was the the start of my business career.
Alejandro Cremades: No Kidding and I guess that thing that experience too I’m sure it shaped quite a bit the way that you tackle storytelling and you know people people don’t really pay attention to this but storytelling is everything you know whether you sell yourself whether you sell your business. It’s all about accomplishing things on the day-to-day Basis. So How how do you think that shaped up your storytelling side of things.
Brian Fenty: It’s such a great point because I actually think of myself as an introvert which always surprises people you know Ceo of a company 400 employees I spend my day talking about ticketing and theater and technology and financing. But but really I think it all does come as you say from the theater I was put onto a stage at a young age with a script and a part and a narrative and part of a team that was telling a story to an audience that had to believe that it was authentic and true and genuine and so. You’re right I think it does come from that part of my life.
Alejandro Cremades: That’s amazing now in your case you went at it. You know, really studying it before ah practicing it so you went and studied entrepreneurship. You combine it with a marketing you went to North Carolina now 1 thing that is very interesting is that you didn’t go right into it. I mean you went more into the investment side of things I guess you know I don’t know what trigger that or why you thought that was the best way to go because you had it in you. But why did you go after more like the private equity side of things versus maybe like taking the leap.
Brian Fenty: You know if I’m really honest I was in the entrepreneurship program at Chapel Hill and it was an incredible but new program and what was special about it is that all of the teachers were accomplished entrepreneurs. So Ted Turner flew in to teach one of our marketing classes and Buck Goldstein who was an amazing entrepreneur in technology and informatics taught some of our classes and Alexander Julian a famous fashion designer taught what not to do. It was an amazing time to be around great technologists and luminaries. Um, but what’s interesting is I always had a chip on my shoulder about making money. And so because of where my parents came from because we were sort of immigrant family coming to the coming to the states and so for me going into private equity which is what I did out of school. Um, after a short stint at the New York Yankees was really about um finding a creative way. Have a successful career that was also around young companies and so what I loved about private equity was that it’s transactional. There were dozens of companies that I was meeting on a monthly basis I was it was satisfying my creative urges it was. Allowing me to work with founders and operators on what was right and wrong with their business and really learning it from the outside in and it was only at the end of that period that I said well geez I really I miss I’m longing for jumping into the company.
Alejandro Cremades: Now What did you learn about picking winners too because I think that now you have experience being on both sides of the table and we’re going to be talking about your your your baby now you know just a little bit your company which is a rocket ship but I guess more on being on the. Investment side of things you know now that you are on the entrepreneurial side and you’re able to look back I think during that time as an investor. How do you think that has helped you to to really understand what separates good companies from bad companies. What are those ingredients.
Brian Fenty: It’s it’s such a great question and I know that everyone has different ingredients. But I think the 1 common ingredient that we all have are authentic genuine leaders who have vision and purpose I remember 1 of the first investments I made was in the salad company sweet green. And we were in their first institutional investment round and I remember sitting at the table in a restaurant in Manhattan with the 3 young founders who are still good friends to this day and I knew then that they had an authenticity and a passion about what they were doing. That would scale them through any of the highs and lows that would face their business so people number one and that’s the easy 1 um hard to find but easy when you meet them. You just know that you have the right entrepreneur the second one ah is a bit more commercial and it’s ah, an adage that I was told early on which is well bought is half sold. And in this world where the market’s correcting right now I think it’s a good reminder and a good lesson that that really thinking about the fundamentals of a business how you buy it how you structure it. It’s a great opportunity to align the investor and the entrepreneur to set the company up for success and then the final one. Invest in products that you believe in and that you understand I made that mistake early in my career I remember investing in ah and a credit card processing company that I knew very little about and it was a great product. The investment actually did very well but I couldn’t add value at the board table I couldn’t add value as an advisor.
Brian Fenty: And so I’ve always just learned stick to what you know and stick to where your expertise can have value and impact and I think that’s probably why I I ended up starting a business that that traverses technology and theater.
Alejandro Cremades: And you know it’s a it’s very interesting what you just said adding value as a board member. You know there’s probably a lot of investors that are listening to us that are doing their pitch to founders. Oh we add tons of value. You know the truth of the matter is is that most investors don’t add value I mean that’s just like the nature of it now.
Brian Fenty: M.
Alejandro Cremades: When it comes to adding value as a board member. What does that look like because I’m sure that a lot of investors listening are going to get some good value out of this and then also founders to really understand who they need to place at the top to really guide the um, the strategy.
Brian Fenty: Um, it’s it’s funny I talk to a lot of investors and a lot of startups about this and of course they both have different answers on both sides. Um and from my view I always tell companies when I’m joining a board or I’m going to advise that I have strong convictions loosely held. And what that means is I hope that my expertise and my experience can lend value and show a different perspective and I never give advice as you should do this I give advice as I’ve lived a similar experience here’s what I learned in that experience and how you might generate value. From that and and that really is a powerful tool because entrepreneurs then know that we’re not going to try to be the smartest people in the room board members who try to be the smartest people in the room aren’t teaching. What’s really helpful is for the entrepreneur to feel that they can generate ideas. And can see blind spots that they might otherwise have so for me, that’s how I approach being a board member in shaping our own board at today tixgroup. Um, we’ve looked across um, all of the products that we’re building but also the challenges we think we’re going to face 2 3 4 years out staff a board that adds value not for where the company is today but where the company is going to be in 4 years and I think that’s also been helpful. You know not creating a board for for yesterday’s business but creating a board for tomorrow’s challenge. So.
Alejandro Cremades: Now let’s talk about let’s shift gears a little bit here so you were for quite a while on the investment side. You know doing private equity investments and all of a sudden you decide. It’s your time. It’s your time to you know, take the leap of faith and it’s your time to start, you know your current company right now which is to today tick group. So why? Why did you think you know at that point in 2013 that it was your time it was your time to really you know take ownership of your own future.
Brian Fenty: So I’ll tell you there’s ah, there’s a story I don’t often tell which is that this this business actually started with a potential acquisition as a private equity investor so I was looking at buying a digital business. Um, that played in the theater world. And because not many private equity guys also have a theater career behind them a banker had called me and reached out about this business. It was a very interesting business owned by a husband and wife couple that was doing it was generating 5000000 e but die here. Selling coupons to Broadway shows very old school business very archaic model but it was an interesting little market and so we looked at buying that business and in the eleventh hour we had raised the money my my now business partner had quit his job and come over to be an operating partner for us. We were sitting at the closing table ready to buy this company and the sellers never showed up. They didn’t come to the closing table. We had all the money sitting in the bank. We had all the investors lined up and sometimes deals don’t don’t happen and so a week later after wondering where they went. They showed up and as is often the case.
Alejandro Cremades: My god.
Brian Fenty: And an organization with a negotiation. They asked for a few million dollars more and my partner and I looked at each other and I remembered the old adage well bought as half sold and I said this isn’t the right price and this isn’t our deal and we walked away from that business. And we took a few months to collect our thoughts and we said okay if that was the old age business of being in theater. What’s the new age business of doing ticketing and of solving these problems and so from that from the ashes of that deal. Came today ticks which was initially meant to be the tkts booth in times square on your phone and that’s how we started.
Alejandro Cremades: And quick question there I think that to double click on that they came back I mean you were yeah as you were saying you were wondering where the hell are this guys and then all of a sudden they show back and I mean most people would just do that deal and you were just saluting to hey that was not a deal was it more like. Because of you guys were just pissed that of the of the lack of etiquette of not showing up or or you just analyze that the numbers and then you know from ah from a analytical you know, perspective. It just didn’t make sense. You know the the transaction I mean what? what drove that walk away.
Brian Fenty: Um, I think we knew going into the deal before they walked away. We knew that we could build a better mouse trap. We knew that we could build a great product off of this idea. Um, and so the the higher the price got. The more conviction we had that maybe we should take these resources and build this company from the ground up with new technology with a new brand perspective with with all of the experience that we had coming from my business partner and I met at theater camp when we were 11 and twelve years old so we had known each other known this story in this context for so long. So I think ultimately the the sellers gave us the greatest gift they ever could have they gave us a reason to say no and we didn’t have a reason to say no until that moment and so really. Um, I’m very grateful for that journey because without it we might have I think we still would have built the same great company but it would have taken us a lot longer because we would have been saddled with with you know all of the expectation of preserving that business and keeping the model stable. And all of the things that come with running a legacy company.
Alejandro Cremades: Now you decide and and and you realize that you could build a better mouse drop. What were the next steps.
Brian Fenty: So we surrounded ourselves with a bunch of great advisors so you talk about board members and one of my mentors is the restaurant toward Danny Meyer and I always felt like his book setting. The table was one of the great business books of all time. Because it says that business isn’t always traditional that it can be hospitality that it can be about service and so Danny always said to me, you get to choose who you invite to the dinner table and so we surrounded ourselves with a great group of investors. It was Danny Meyer it was John Ladecky it was Jeremy Zimmer who owns a united talent agency. It was all of these various pieces that came together in a really safe place that allowed us to build the proof of concept and we sort of with abandon just built the proof of concept. And the idea was pretty simple. You looked at airbnb you looked at uber you looked at hotel tonight these were companies that eliminated friction created beautiful e-commerce experiences and had design front and center for the user and in the ticketing world. And we’ve all been reading a lot about Ticketmaster and and their experience with consumers. Um, you know the ticketing world always put the promoter or the concert or the artist first not the audience. No one had ever said if the audience wins the partner wins.
Brian Fenty: So what happened was you had a lot of technology out there that were very big scaled amazing amazingly profitable businesses. But the truth is they were viewed by consumers as necessary evils or utilities and what today ticks was initially and what today ti’s group is still today. Is a collection of beloved brands that are changing the face of cultural experiences that are serving the customer first always first and in that um today tix was born so that’s that’s how we did it. We built the first product. And we got very we got a very lucky break early on which is there was a very unknown show down at the public theater that had sold out called Hamilton and they were looking for um, a way to market their show even though they were sold out. They had no way you know they didn’t want to spend money on it of course because they had sold all the tickets but they knew that they were going to go to Broadway and they wanted to get a lot of buzz and so the first thing we did was to say let’s build a technology that solves that problem. So the first technology we built actually after the the core ticketing app was a lottery. Ah, digital lottery called ham for hand it was $10 for 10 front road tickets that lottery in the first eight weeks had to 250000 entries which for a small little business was a was a real bullseye on the map.
Alejandro Cremades: Wow.
Brian Fenty: And the rest is history from there.
Alejandro Cremades: So for the people that are listening to really understand it. What ended up being the business model here. How do you guys make money. So.
Brian Fenty: So the business model initially was a mobile app only that sold and aggregated theater tickets on a very designed forward premium experience app. It was always algorithmically. The lowest prices for the best seats. And you can buy your ticket in 30 seconds or less and while that seems simple now in 13 there was no such thing as an e-ticket so today Tis actually built the first ever e-ticket and mobile ticket on your phone that was how we started and we were paid a small fee from the consumer and a small fee from the show. And in doing that we were able to have a low price for both sides as opposed to you know sending a huge fee to the consumer or a huge feed of the producer and that was the original business model. The company is now a $500,000,000 a year business across more than 250 brands that we both own and operate. And it’s still very much the same design forward experience. So 30 seconds or less all of the inventory for performing arts dance opera theater, concerts, music, etc, anything that you could do on a night out that’s what we service. Um, but it still comes back to that frictionless ecommerce experience for the audience.
Alejandro Cremades: Wow, That’s incredible now for you guys. How has been the experience to of going through a pandemic with a company like this.
Brian Fenty: Oh my goodness. Um, if a cat has 9 lives I feel like we’ve lived through 15 during the pandemic it. It. We went in February Twenty Twenty Two things happened 1 is we had record breaking revenue we had record breaking profit. And we had finally gotten to scale after after seven or eight years in business but then in in number 2 we bought a company. We bought our first we made our first acquisition of a company called encore tickets. Was an expensive deal. It was an international global ticketing platform. It was the £800 gorilla in London and it really put us on the Map. We closed that deal four weeks before the pandemic started and the whole industry shut down so I had 200 new employees. A world away from New York where I was living at the time with my wife and my kids um and and the business shut down and it didn’t just go to $0 in revenue it went to negative revenue because of course there were tens of millions of dollars of refunds and exchanges that consumers all around the world needed. Um, the tickets that they could no longer use so over that next eighteen months we were faced with two decisions fold and go out of business and sacrifice. All the great progress we had made or actually double down and use that as an opportunity to rebuild technology to.
Alejandro Cremades: Wow.
Brian Fenty: Optimize our algorithms to integrate the deal that we had just done with encore to reward our best’s talent instead of laying them off and to say we’re building a big global business. We are going to transform culture and eventually the pandemic will aside theaters will reopen. Governments will celebrate art and culture and the world will come back to normal and I’m and I’m happy to say we’ve just had a record breaking year. We’re backed on top in terms of our revenue numbers our audiences we have more than 20,000,000 consumers who use our products every year um and so I I’m very thankful that we made it through that experience because it just reminds you as an entrepreneur there are going to be rainy days and as long as you’re thoughtful and well-capized have good partners in a sound business model. You can have a great time running those businesses even in the downtime.
Alejandro Cremades: So talking about being well capitalize. What is it like to raise capital for you know, kind of like um I would say like a niche an archaic you know type of ah type of space.
Brian Fenty: Yeah, ah.
Alejandro Cremades: And I guess before you go into that too. How much capital have you guys raised to date.
Brian Fenty: So we haven’t disclosed the the total number but I can tell you it’s over $200,000,000 in in both acquisitions and capital raised. Our investors are great. Hill capital in Bain. Excellent investors, fabulous partners.
Alejandro Cremades: And go.
Brian Fenty: Really strategic and they see the vision for what we’re building. Um, but it wasn’t all roses I will tell you you know they are 2 of the best investors in the world. But when we started ten years ago many doors were slammed in our faces as is often the case with entrepreneurs but especially for us because theater. Everyone loved the idea of a frictionless ticketing now everyone said oh god Brian this is a great idea. We’d love to invest. But why theater and I would show a slide that showed sports as a $20000000000 industry theater as an $18000000000 industry and film as a $9000000000 industry so when we started theater was actually twice the size of the film industry but despite that slide investors would look and sort of scratch their heads and in in a way they would almost say no that couldn’t be true theater. You know I don’t like theater and. What I’ve realized is so many decisions that we all make are based on our biases that come from our upbringing our context our experience and theater to many people feels like a small niche mom and pop business and the truth is it is niche. It is archaic but as a result. It’s a very large market where there is no professional capital where there are no professional operators and so it created a real opportunity for us to be great partners to the industry and so early on we brought in Walden Ventures at Silicon Valley
Brian Fenty: Ah, venture capital firm who were fantastic partners to us art berliner there really understood art and culture. He was an art collector himself. He ah was a founding investor in Pandora so he really understood how culture and art could be commercial. And I’m very grateful for his mentorship during that period.
Alejandro Cremades: That’s amazing. That’s amazing now when it comes to you know, imagine vision because obviously you had to sell the vision to to these investors if you were to go to sleep tonight Brian and you wake up in a world where the vision of the company is fully realized. What does that world look like yes.
Brian Fenty: I love thinking about this and it’s a great question because at the end of the day today. 6 is connecting culture to commerce and if we do our job well in 5 years we have transformed the ability for people to engage with commerce and culture. And what I mean by that is no longer is culture going to be a luxury and something that is hard to achieve because we believe that in finding our company mission is fine to seek for everyone and the reason it’s fine to seat for everyone is that we believe. That the great cities in this world. Whether it’s New York or San Francisco or Nashville or Memphis or Chicago or Berlin or Paris or Sao Paulo that the culture of those cities contributes to the strength of those cities and so I hope that when we wake up in 5 years We’ve built ah, very large multibillion dollar business that uses technology mobile first ah practices around design and commerce to really take art and culture and bring it to the masses to remove barriers to make pricing and profitability for shows and content creators more viable. Um, and to have an ever-expanding global network of theaters producers and audiences to engage.
Alejandro Cremades: I Love that find the seat for everyone. You know, very uplifting I got to say and you were talking about culture to I Love to to Also know you know the way that that you guys have thought about culture as well because you’ve done a few acquisitions and I find that on the acquisition side of things. Integration is everything you know, most deals. Unfortunately they they fail because of the integration Piece. So What have you guys learned about integration and then also how do you think about culture too in the in the big scheme of things.
Brian Fenty: I’ll tell you that we’ve done $100000000 deals now and we’ve done $1 deals and we take both $1 and $100000000 deals equally seriously for the reason you just described which is that culture is everything out of company. And I appreciate. You’re saying that you like find a seat for everyone because it’s a commercial and aspirational goal and I find that when you solve a problem that is both commercial and aspirational teams. Really love that because it appeals to both their competitive spirit but also their humanity. And and it was really important to have that as ah as a north star through this whole experience and I say that because one of the acquisitions that we did is a business called docore show score was one of the on the smaller end of the range that I just described. It was a small niche business. Is the rotten tomatoes of live theater. So it’s a live reviews platform for experiences. This was a business that had an amazingly rich community. It had an incredibly diverse leadership team and audience base which brought great perspective to our company. But most importantly, we brought it in. And a lot of people said well Brian why does show score make sense at today. Tick’s group but I’ll tell you what we’ve done with that business. What we’ve done with that business is we’ve turned it into a real time time feedback engine for producers on Broadway and in the west end right? producers create these 20 and $30000000 shows.
Brian Fenty: And they have no feedback on what audiences think other than their ticket sales because we own both the ticketing business and now the reviews platform we can actually give producers real-time net promoter score feedback on what audiences are thinking about their shows. Whether they buy tickets based on those insights what parts of the shows they like or dislike and as a result we’re actually making shows more efficient and also creating better shows. Ah for audiences by having that data. So that’s just an example of how we look at even a small deal on the large scale. Um, and again as I said we’ve done. We’ve done acquisitions that are you know a $100000000 deals with with 200 employees and in those deals. What is so important is out of the gate aligning on how these companies together are stronger than a part. Because if it’s just a matter of let’s join these 2 companies and it makes us bigger and bigger is better because we’ll get a fire multiple nobody signs up for that employees are depressed. They’re burnt out. They have very fuzzy vision and they assume it’s just the greed of the management team and what I find is. A thoughtful m and a strategy and it doesn’t always mean it’s easy by the way, there’s there’s a lot of hard work that goes into integrating these businesses. But if you have a clear vision and a stated problem. So we we start every acquisition with ah with a town hall meeting where I say we’ve just acquired blank to help us find a seat for everyone.
Brian Fenty: And here’s how they’re going to do it and so we tie it directly to the vision and then we walk them through all of the components of how that business will catalyze a market or supercharge a product that we own or give us access to a new audience segment. That’s otherwise hard to reach authentically.
Alejandro Cremades: Wow I love that I love that now we talked about innovation. We talked about future I like to talk about past but talking about the past with a lens of reflection. So if I was to put you into a time machine and I bring you back in time Brian.
Brian Fenty: And.
Alejandro Cremades: And I give you that opportunity of being able to to have a seat with that younger Brian that younger Brian that maybe you know it’s coming out of university you know, maybe coming out of a university with that thinking of one day you know or eventually I’m going to start my thing and and finding you know your way if you were to. Be able to give that younger Brian one piece of advice before launching a business. What would that be and why given what you know now.
Brian Fenty: Be human build human products I think the success of so many of these brands that we know and love even though they have tenacious founders and they have exceptional business models and they have beautiful products. What sets the winners away in my view is that they have such an authenticity and a humanity to the products that they build and and I mean that technologically too right? So if you think about our products we built an app that sold tickets in 30 seconds or less because we wanted it to feel human. We bought we built and bought with encore tickets. Ah an acquisition in the Uk we built and bought technology that distributes the inventory from 20000 theaters to 250 storefronts from Tripadvisor to last-minutedotcom to the times and the telegraph. All sorts of interesting properties. But what sets it apart is it’s human. It knows how the audience wants to buy and it gives them that experience our north star at today ticks is to have a 6 star experience. So there’s 5 stars in a traditional theater review and we always say how do you get that 6 star from the consumer. They’ll never have to go to another platform so that their loyalty is a given so we do lots of things we do universal ticket protection we do um, concierge service where you get a vip concierge service. Even if you’re buying the cheapest ticket on the app we do customer service in real time.
Brian Fenty: We have humans at the end of our customer service. So there’s all of these little nuances to building a utility that people love and I wish if I could go back in time I’d say Brian don’t shy away from that you don’t need to be the toughest voice in the room. You don’t need to be the most rigid be build human products be authentic. Ah, be visionary and always do it with a lens of solving problems for real people.
Alejandro Cremades: I love that I love the? Um, what you’re alluding to there and and also authenticity because authenticity also helps to build meaningful connections and and and I really find that what you just said there is super profound. So. Brian for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Brian Fenty: I’m on Linkedin I’m available I’m always networking and I love talking to curious interested entrepreneurs investors culture creators disruptors so reach out and say hey.
Alejandro Cremades: Amazing! Well Brian thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Brian Fenty: Thank you so much I appreciate it.
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Philip Kelvin has gone from studying history to investment banking to launching his own startup that seems incredibly well-timed to help others through today’s financial turmoil. The venture, Tranch, has attracted funding from top-tier investors like Y Combinator, Global Founders Capital, Soma Capital, and Clear Haven Capital Management.
In this episode, you will learn:
- How Tranch works
- Decision making
- The new banking crisis
- Debt versus equity funding
Alejandro Cremades · EP 592 Philip Kelvin On Raising $100 Million To Transform How Your Business Pays For ServiceSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Philip Kelvin:Philip is the Co-Founder and CEO at tranch. Philip started his career at Rothschild & Co. in Financial Services M&A before moving to Bain & Co. as a Consultant across financial services, consumer, tech, and private equity. Before launching Tranch in 2021, he was the CFO at Trussle, the digital mortgage platform.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show. So today I’m very excited about the gift that we have today. We’re gonna be talking a lot about building scaling financing all the good stuff that we like to hear and I think that you know also the fact that this foundary you know and the way that they’ve gone about going global.
Philip Kelvin: Are or.
Alejandro Cremades: You know, very very quickly. You know I think that is something that’s going to resonate too and something quite unique. So without further ado. Let’s welcome our guests today Phil it Kelvin welcome to the show. So originally born and raised in London.
Philip Kelvin: Hi Alejandro great great to be here. Thanks for having me.
Alejandro Cremades: Give a little of a walkthrough memory lane. How was life growing up.
Philip Kelvin: Um, yeah I was ah I think I was very fortunate with with with my upbringing, um, big focus of education on my family big focus on just you know as working as hard as you can and not only comparing yourself to others. Um, but Just. Try to do everything that you can to that highest possible standard.
Alejandro Cremades: Now in your case, you know you did your school there I mean you went to Cambridge as well now when it came to studies you know you studied history so out of all things. Why history.
Philip Kelvin: Great question I think one of the things that we’re quite lucky at in the Uk and also to the us as well. But potentially slightly different to Europe is that we are kind of encouraged to do things we’re interested in as opposed to purely professional items. I always got this question when I first started in embanking from my french colleagues to say you know why are you not a librarian um, you should have become a librarian you know, not not doing finance. You know I’ve done been doing finance degrees for the last six years and I think what I what I tell people is why I don’t think I had a good answer back then. But now reflecting back on doing something at your university very much the the job that I do kind of scaling um scaling tranche is very much about how do I absorb lots of information. And we’re all constantly being kind of bombarded with different information information about what we’re doing with our team with our customers with data with things happening outside in the market. All of this stuff and what a history degree you know taught me was how do you take lots of information. Um, be able to to work out what it all means and to be able to distill that and explain that to someone else and so everything else you can learn on the job.
Alejandro Cremades: And obviously history repeats. So so there you go now now in your case you know another thing that I found really interesting is that you did your masters in philosophy. So not only history repeats. But it’s also finding the why behind things. So so why philosophy come on. Okay.
Philip Kelvin: I Don’t know if there’s if I knew the answer to that I would ah I’d be Ah I’d be I’d be in a different role So I’ll hold the course on on on that one out of hand.
Alejandro Cremades: Now in your case, you know when you enter the world of working because I mean you did quiet day some time at corporate before you went at it as an entrepreneur and we’ll talk about your journey now with trancheche just a little bit but the first thing that you did is investment banking. You know one thing that is really incredible here in your in your journey is that many of the founders that I speak with that have gone out to build really meaningful companies. They’ve either been an investor. They’ve either been a banker or a consultant you’ve had in your case.
Philip Kelvin: Please.
Alejandro Cremades: You know the 3 of them really before going into into entrepreneurship. Um, you know you even moved to San Francisco we’ll talk about that in a little bit where you were advising investing and the the investment backing. Let’s start with that. That’s the first thing that you did so investment backing when it came to you know, really finding. Good companies, bad companies. Good management teams bad management teams. What were you seeing there.
Philip Kelvin: Yeah that’s a really good question I think for me I had no idea that I want to go into investment banking and that’s um, I still sometimes question it. But I think when I look back at you know my old team my old company for me. It was it was a learning experience and you know these these jobs especially in the junior level and look I was very junior It’s my first job out of out of college is is is incredibly tough and um, you know in those roles you’re analyzing information you’re learning about finances company balance sheets and you’re seeing kind of a bit of the real-word in action. Um, rather than just in the textbook. So for me going into the corporate side and maybe why we see entrepreneurs come out of the corporate side. It gives you a really good solid understanding. Um, not only how’d you work hard to a really high standard how’ do you work long hours. You know if that’s something or. How to work efficiently or inefficiently but you um, you get a really solid corporate kind of footing that enables you to apply those skills later to your own business. Even if you know you were dealing with massive billions of dollars of businesses etc or even smaller ones. Um, it’s really interesting and I think you know we had. Lot of my generation were coming out of the cycle after the financial crisis so we were still seeing some of the impact of the financial crisis and my speciality was working with financial and institutions you know across Europe um, and we saw a lot of things that we might have experienced because we were too young at the time.
Alejandro Cremades: And you were obviously as well working on doing cleanups now. So when it came to cleanups What what did that meant and and what did you see.
Philip Kelvin: Um, well I can’t go into carve all the information. But definitely I was sent to a few interesting places I I remember a board meeting in cyprus where I was sitting there with my with my boss and then um, suddenly everyone started shouting in Greek. Um, in the board meeting and to this date I still have no idea what was said which could make your job quite quite difficult if you’re operating in another country but clearly something happened at the end of it and and then we left. But so there’s a lot of a lot of really interesting things coming out of that and now you know we’re seeing with the banking system. You know the fragility that I saw back in you know, even still in 2014 where you know we’ve seen in the last month
Alejandro Cremades: Now in that case, you know what? you’re seeing in the last month you know what? what kind of things have you seen you know that maybe that you were seeing before or that you learned on how to prepare you know yourself or the storm I mean what? what were some of the things that. That you learned you know like the top 3 things about preparing yourself for one of those storms.
Philip Kelvin: Yeah I think you know again I was too young when the financial crisis happened so I don’t think there are and yeah when I was working in best banking the opposite happened interest rates dropped massively um and and then they stayed low for you over the last ten years or so so um. Actually the thing that helped us over the last month and we’ve been doing a lot of work supporting the community as well as managing our own internal risk is actually the covid crisis when I was a cfo of the last company that I was working with um and we were a consumer- faced. Facing business in the property sector we were a digital mortgage platform. Um, and when the pandemic hit in the Uk and no one could leave their leave their home suddenly we were thinking. Well what’s going to happen to the business because no one could leave their home how they’re going to buy another home and what you realize is that everyone adapts. And in those moments where you know we’d be looking at you know the Tv broadcast what what is the government saying today. What’s changing, etc and adapting to that on a daily basis over the last month with the collapse of Silicon Valley bank and obviously the other issues in the banking system. All we can do is adapt. We can plan to a certain extent but. When a bank run happens a bankru happens and you have to adapt from that and so I don’t think I learned about you don’t learn to adapt in the bad tie in the good times you learn to adapt often in the times where it’s tough.
Alejandro Cremades: Now the next the next stop for you was consulting and you did bain you know I find that when you work at 1 of those consulting firms. You really understand how to grab a big problem and how to break it down into small problems and then you tackle them each so from app.
Philip Kelvin: Or one port.
Alejandro Cremades: Approach or from a lensov approaching problems from a various strategic ah point of view. What did you get from your experience at Bain.
Philip Kelvin: Yeah I think they’re really valued working on problem solving really on where you had to and not just problem solving kind of general and saying are his problem. Let’s break it down for me the most interesting thing was learning something new very quickly. Often when you’re doing a diligence on a company for for an investment firm. You have you know, less than a month to become an expert in something that you would never encounter before and you’ve got to quickly understand the industry to market the competitive landscape. Um, and you know whether that is a good thing based on everything you can glean in a very short amount of time and I love that. Um you know and you become ah you become an expert in very weird and wacky things. You know I did a big project on whether it was a good idea to buy european train toilet company. I knew nothing about train toilets. But now I’d say I know quite a lot probably too much that I want to know. But um, that ability to get up to speed very quickly to digest information and work out. What’s important and what’s not I think is what gives you is where the skill set comes and after that is problem solving and after other software skills. You’ve got to be very quick at getting to the root of the issue.
Alejandro Cremades: So At this point you were dealing with a lot of operators and you know really seeing like the the stuff that they were dealing with and and their abs the downs the strategicness the um, you know all all ah, all of the above Above. Um. You decide to really shift gears and to go more on the operating side. So what? what trigger that.
Philip Kelvin: Um I think for me I’m I’m very honest about this I Saw a you know, very good career path in the consulting World. You know a number of years in this position a number of years here here here and you kind of climb up in the corporate world. But at that specific time and for me I. Wanted to feel the exposure of the problems being your own problems and therefore being more invested in them rather than solving other people’s problems and feeling disconnected and saying look. We’re here to help you company. A here is our findings go complete this strategy or. This is a good thing or a bad thing. It’s very different from owning that P and L yourself um and owning your p and L owning that owning that P and L yourself and um, really taking on that risk yourself and I think that’s what I was looking to do. By joining a startup at the time and one with a problem that I believed in at the time as well.
Alejandro Cremades: So in this case I mean you you moved quite the um quite up the ladder I mean you started there and then all of a sudden you know, like really doing operations and then all of a sudden you find yourself as the cfo especially during you know some really interesting time. So how was that journey like.
Philip Kelvin: Yeah I think for me, it wasn’t expected I I was doing a lot on the operations and strategy side and then there happened to be. You know there was a change around management and I was given an opportunity and something that I hadn’t factored into my career path if you said hey Philip Jonna be A. Cfo of this company when you’re 27 28 in a global pandemic I probably would have said no or that’s not the role that I’m kind of interested in. But I think what you realize is that everything you do you know from being that investment banker back in the beginning is a building block to something that will later happen and that’s very much philosophy that I that I take and. Um, I think anyone that believes they’re going to have a linear path through life is is going to be kind of surprised because things happen in unexpected ways. Um, so um, for me I wasn’t particularly sure. Um, but I said you know what? I’ll give it my best shot. Um. But we’ll see what happens.
Alejandro Cremades: So here you guys were doing detail you know mortgages you know, pretty much you were a detail mortgage broker ah and eventually one thing that you really got access to was to see how the company went through the different cycles and more importantly to go through an acquisition. The company was acquired by Better. So How was that how how would you say that that gave you visibility into the world of deal making and and and more importantly into the world of the really like seeing the full cycle of a company like going From. You know one stage to the next all the way until reaching the finish line. How was that for you.
Philip Kelvin: Yeah I think well first I would say the finish line probably wasn’t the finish line that the company and investors and originally wanted. You know it was a very difficult time for the company and we thought that there was that was a better route the better route to go. Um. Because it was incredibly difficult to fundraise as well. And so we saw a better combination for everyone with the with the bigger presence and I’m pretty open about that. um so I think it was um I think I learned more in that year than I had learned previously. Um, you know over over the career. And I think you know what you see is we’ve seen this in different times. You know you go through these periods where it’s incredibly easy to raise money and then it’s incredibly difficult and then taking it through the cycle I think the more of these experiences you have and these lived experiences the more it will help your la’s point because you either have perspective or you’ve learned something. And so I think especially at the beginning where you know you really see one part of the cycle now we’re starting now. Yeah someone at my generation is starting to see a ah full interest rate cycle you know where. Being cut to to nothing and then coming you know, not all the way back up but back up and then we’ll see what happens over the next nine months and it’s ah you know a black swan event covid was black swan event. We now have a war going on in Mainland Europe which is infecting inflation across you know the whole world and we also um, have had you know two bank.
Philip Kelvin: 2 what 2 or 3 bank failures in the last in the last month um for the first time in quite a while. So it’s all kicking back off again? Um, and but each of these experiences make you a better leader and a better person to be able to take a step back and think strategically through it.
Alejandro Cremades: Absolutely now in your case once this transaction was done. Basically you moved to San Francisco ah you were experiencing their innovation meeting people advising you know, helping others and why did you decide to do that and how was that the immediate. You know, step for you to really take action and and start your own company.
Philip Kelvin: Yeah, So for me, um, it was ah something that um I moved out with I moved out there and I I wanted to kind of learn and experience a space and kind of understand what other companies were going through and have an opportunity to do so. Um, with a friend of mine and so um, for me, it kind of gave a lot of exposure. It made me realize that I had quite a lot of experiences in my short time that could be helpful to others. Um, and it also made me realize that actually you know the imposter syndrome that I had as a Cfo. Ah, an early stage business not having ever really particularly you know applied for the role or anything like that was the same similar to the imposter syndrome that that many founders have you know, including myself as well and but that many founders have around their career and their choices around entrepreneurship and you know I realized that well actually. You know I you know i’ had gone from a ban advising companies thinking you know, maybe maybe I could work on the inside to then kind of advising founders especially around fundraising and deals and various items thinking. Well actually maybe I could be a founder myself. Um, and so. That’s why kind of led me to say well actually maybe I can take Maybe there’s an opportunity for me here to to explore doing this myself and I went through a process by where we got to the current business.
Alejandro Cremades: So what was that process like.
Philip Kelvin: Yeah, it was um for me, it was all about who I would set up the company with and as well as where our field of Expertise was and I partnered up with my former head of engineering. Um.
Philip Kelvin: At the last company and I said I needed a technical cofounder and someone that I trusted and worked with for a number of years. Um, and so for us we we went through a process whereby we looked at the problems that we had as a business and that we had an orange tree and then we said well where are our capabilities as well. Yeah, we’ve been doing financial services both of us on the technical and the non-technical side for a number of years and we wanted to be able to apply that but also with some things that we learned and we decided not to go down a consumer business route because we knew how hard consumer businesses were and we’d done one of them and we didn’t want to do a second one for them for the moment. So that’s why we weren’t back down the um, we went into the b two b route but we knew that we want to be around financial services and we went through the various pain points and then you start crafting your idea and you start testing on people and you start working out. Ah wow can I do x ys then? etc. Um, and um, you know we’ve learned an incredible amount in the last kind of 18 months.
Alejandro Cremades: And for the people that are listening to really get it. What ended up being the business model of tranche. How do you guys make money.
Philip Kelvin: Yeah, so tranche is a b to b buy now pay later provider that enables software and services businesses to get paid up from while offering their customers flexible payment terms. So we partner with everyone from major law firms to software providers to be able to offer their customers flexible payment terms. So rather than saying please send us a wire Acl check they can come via a tranche checkout for a small fee pay flexiblely over 2 to twelve months to provide working capital management to mean that these larger costs that they can invest in upfront but still spread them out and that’s where the business was. Came out from the ability to split payments into charges.
Alejandro Cremades: And also why do you guys decide to go so quickly. Globally, you know, typically people would do a few cycles of the business and then you know they go global. But in this case, you guys did U K and the us and you know you had that approach but go ahead. Why.
Philip Kelvin: So yeah, really good question Alejandro and and I think for us we um, we realized that there was a lot of opportunity in the us and that the market was a lot bigger and there was also kind of different attitudes around credit and payments. So for example in the Us. Um. 40% of b two b payments are via check versus 1 % in the Uk. So the payment system was very much behind in the us which is where we thought we could make the most impact for customers and that’s why we we also participated in the y combinator accelerator program and for us that was a great impetus. Um. You know as a us incorporated company to say look we’re just going to be a us business and we retain a european presence which is where we have our software engineering and development.
Alejandro Cremades: So how did you think too about the distribution of teams because obviously as they say you know there’s different cultures. You know in different offices. So how did you go about you know, making sure that there was some type of unified culture to certain degree.
Philip Kelvin: Yeah, was.
Philip Kelvin: Yeah I think one one of them is just around how you manage time. So for example, you know we hold most of our meetings that are kind of either in the morning in the East Coast and in the afternoon in in in Europe. Just to essentially ensure that this’s kind of decision making can happen in the common hours and then kind of the individual work can happen at the other hours so for us is all about the time zones and being communicative um having everything within kind of unified workspaces or everything’s either on notion. It’s in slack. Um. Having a structure to the cadence of meetings for different teams information flow and so that we can keep the teams unified and then by myself personally I split most my time between the 2 places so I try and act as a common link between.
Alejandro Cremades: So in this case for you guys. How much have you guys say how much have you raised? you know in terms of capital to late.
Philip Kelvin: Yeah, so you know we’ve raised a mixture of debt and equity and we raised around you know over $5,000,000 of equity and we’ve raised a credit of facility. Yeah, that enables us access to over $100,000,000 to be able support businesses kind of with their with their working capital.
Alejandro Cremades: And how is the equity versus debt work for a company like this.
Philip Kelvin: Yeah, so you know we use our equity for our operating expenses and you know funding some of the credit facility and then and the credit facility is what we use to lend out to um, our our businesses to help them pay flexly on their terms.
Alejandro Cremades: And for our financial services a business like this. How do you go about navigating the rising interest rates.
Philip Kelvin: Yeah, really good Question. So It’s something that we factored into the business for a while and it’s something that we’ve got to manage I Think on the one hand it has increased demand because Equity has become more expensive and it’s become kind of more restrictive in the sense that there’s less but around as interest rates have risen. Um, but also that you know Banks have also retreated in this time so turn to finance alternative payment providers um are really helpful because what we do is we use open banking. We use banking connections to underwrite customers which enable us to essentially be able to provide a different level of kind of credit insight. Than are um, ah than are um than say traditional banks who um, you know are are much slow in this process and typically when interest rates Rise are more restrictive on credit. Um, and also you know with a number of backs kind of going bust as Well. There’s also a kind of a greater opportunity for alternative payment providers as well.
Alejandro Cremades: And is the um, the the the regulator regulatory hurdles. You know another component to deal with as part of a business like this. So.
Philip Kelvin: Ah, less so because we’re in we’re in commercial credit. Um, So there’s a lot of folks on the consumer side and rightly so on the commercial side it it really varies state by State. So Definitely entering into the Us was was interesting because we had to navigate different state licenses and rules in various places. Which means it’s much more Complex. You’re never entering the Us you’re entering into 50 states.
Alejandro Cremades: And if you were to go to sleep tonight Philip and you wake up in a world where the vision for tranche is fully realized what does that world look like.
Philip Kelvin: Yeah, it’s really great question for me. It’s that every business has a choice to pay flexly for any invoice and that they can go through a digital experience. Not just receiving a paper or offline Pdf invoice and that they can manage that flexly in 1 place. Um, and on their terms and we’ve essentially massively speeded up kind of the dealings of commerce. There’s commerce between businesses across the us. Yeah, we think it’s a huge problem. Um, everyone ultimately wants to be paid. Um on time and everyone else wants to pay flexibly.
Alejandro Cremades: Because how big of a problem is this.
Philip Kelvin: So 60% of invoices in the us are overdue right now. Um, and you know we see the impact of you know with Silicon Valley bank first public etc signature bank. There are still people that don’t have access to bank accounts. They can’t even send payments at the moment. So the payment connections in the us and the payment rails are significantly behind what we see in Europe.
Alejandro Cremades: So as people say you know being at the right time in history is everything so it sounds like with what you guys are doing and with you know, shit hitting the fan you know, sort of saying you know it sounds like maybe that wave you know is going to go a little bit faster. The one that you guys are writing so.
Philip Kelvin: Some parts of you least.
Alejandro Cremades: So how are you thinking about that and how are you thinking about writing it in the most effective way possible.
Philip Kelvin: Yeah, definitely so for us. Yeah, um, on the the day that the svb crisis hit. We didn’t have any money in the us bank and we decided that we would essentially offer we would adapt we offered a thirty day credit line product that would enable customers to pay their short-term. Um.
Philip Kelvin: Needs and we had customers apply to us. We’ve never been busier in that same 2 hours I think I work the entire weekend while traveling between the us and the Uk and um clients that came to ours had over a billion dollars locked up an svb and they didn’t know what they would be able to do and so we were there for the community at that point and you know we. Had a lot of exposure trying to support people that weekend and that’s because we made a very quick decision to say that we would support no matter what and we would work as hard as we could to to help to help people so you you never know when as you put it? Yeah, things are going to hit the fan as such. Um, we have to do as a leader is say look I’ve seen things like this I haven’t seen this what are the risks of doing x y and z how do we know? you know how can we think through this but also made quick decisions because we’re a small and nimble team that enables us to support people. Um, and we had to react very quickly and that that wasn’t easy, but you know we’ve learned so much in that two week period as a result as well.
Alejandro Cremades: So I Guess you know dealing with with something like that you know being able to um to obviously capitalize on the on the situation too because I think that that for you guys you know was phenomenal as Well. I mean how do you?? How do you? I Guess you know like maybe you got something from the. Consulting years when it comes to really taking a look at at the picture and being able to understand what is the best course of action and doing it in a very proactive way and making sure that the team is rowing you know towards the same place at the same Time. No.
Philip Kelvin: Yeah I think there’s no such thing as a kind of best course of Action. There’s only as best course of action based on the facts that you have at that time and you know both acting you know as a founder and a cofounder. Um, to to be decisive but also making sure that you bring your team in on that journey so that they feel part of the decision-making journey as well. Even if the accountability and responsibility is with you as Well. So I think you know there’s no such thing and you know certainly we’ve we made Mistakes. Um. But all you can do is play what’s in front of you as I say play? What’s in front of you and with the best facts and with your risk management hat on as well and um, things will always happen that you don’t expect to happen.
Alejandro Cremades: So obviously during you know this time either as a founder or you know working with with the previous company with trusta mean you’ve you’ve learned a lot you know, even you know working at Bain or or at Roschild if I was to put you into a time machine. And bring you back in time you know maybe to that moment that you were you know in the middle of your studies you know history philosophy and you had the opportunity of having a chat with your younger self and you know let’s assume that Philip. You know that younger Philip was listening right because our younger selves you know, typically don’t listen as much. But.
Philip Kelvin: Is.
Alejandro Cremades: Let’s say that younger self was was listening and you were able to give yourself 1 piece of advice before launching a business. What would that be and why given what you know now.
Philip Kelvin: For launching a business I think you know the advice that I give is um, the advice that we learn at Ycombinator which is launch quickly and make sure someone wants your product before you build it? Um, so.
Philip Kelvin: There’s so much technology out to do things very quickly and to do an Mvp but there’s always a tendency in us as humans to be perfectionists make things look pretty make things feel in certain ways and I think the great thing with where technology is at right now is that you can mock something up. And you can put it in front of customers and you can get people to be very interested in something and so I think starting early launching quickly and not being afraid to fail. Ultimately, um I think in the us what I’ve learned is there’s a very different culture to failure than there is in Europe. Um. In Europe if you failed at something. Maybe you need to take a timeout and kind of think again. Um maybe go back to a normal corporate job whereas in the us I think there’s an attitude that says if you fail then what are you going to do next. How are you going to take those learnings. Um. And then the final thing is is you know when you’re young, you think I get into my first job and this is what I’m doing till I retire I was scared of that I saw these people at this bank that ed worked there for 4040 years and I said is this am I going to be in this team for 40 years it’s quite scary when you’re 21 um, and then what you’ve realized is that life’s not particularly linear and that you you know you do move between places and you learn a lot and you you build on each of those experiences and it forms the next thing that makes you a better person and a better leader.
Alejandro Cremades: Absolutely I love that so Philip for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Philip Kelvin: Probably just come on to Linkedin and send me message. Um I’m always on there and pretty activeive so feel free to to connect send me message and now you would grab a coffee or or jump on a suit.
Alejandro Cremades: Amazing, amazing! Well Philip. Well it has been an honor to have you on the show with us. Thank you? So so much for taking the time.
Philip Kelvin: Thank you very much alexander.
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James Lochrie achieved one of the biggest startup exits in Canada with his first company. Now he is investing in other founders to help them bring their world-changing ideas to life. The firm, Thin Air Labs, has invested in startups like Clinify, PayShepherd, Rehabtronics, and PhenoTips.
In this episode, you will learn:
- What Thin Air Labs has been investing in
- Board dynamics
- Growing yourself as a leader
- James Lochrie’s top advice for entrepreneurs
- Managing your balance sheet in the current banking crisis
Alejandro Cremades · EP 591 James Lochrie On Selling His Company For $400 Million And Now Helps Startups Scale GloballySUBSCRIBE ON:
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Your email address is 100% safe from spam!About James Lochrie:James Lochrie serves as Managing Partner at Thin Air Labs. He serves as Advsior at Acuspire. He also serves as Investment Advisor at Child Health and Wellness Fund at UCeed.
James served as Board Member at Leankor. He was the Founder and served as Chief Executive Officer at Exhibition Capital. He also serves on the Board of Directors at InterGen.
James co-founded Envio. He co-founded and served as Chief Product Officer at Wave Financial. He also serves as a Capital Partner at Thin Air Labs. Earlier, he worked as Director of IT at Farm Business Consultants.
James is a successful technology entrepreneur who leveraged his accounting career into co-founding the global fin-tech startup Wave, where he was CTO and CPO.
James has a passion for the progress that innovation can provide and enjoys working with people who create sustainable businesses that solve real-world problems at scale. He also serves as Board Member and Advisor at Athennian.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the dealmakerr show. So super excited about the founder that we have today. He actually did one of the largest exits in Canada you know recently I think that we’re going to be really enjoying you know how that journey went and how everything came about. And then also what he’s up to now you know, really helping founders so without a doubt you know you’re all going to find this very very inspiring so without farther ado let’s welcome our guest today James lucky look welcome to the show so you were born and raised in Toronto.
James Lochrie: Thanks Ali Andrew great to be here. Yes, sir.
Alejandro Cremades: But you know definitely you know my grandparents I’m sure that you learned quite a bit there so give us a walk through memory lane. How was life growing up.
James Lochrie: You know I think ah you know in hindsight you look back after 50 years and and think about the challenge that people had to go through when they immigrated into a new country and um, you know it was really about you know what? my parents did well um, they they didn’t struggle but they they weren’t. Ah, they weren’t flush with cash so it was always a bit of survival and what I look back on now as an adult and and can see is the social structure that surrounds me as somebody that’s grown up in this in this country the support systems that I’m able to access they didn’t have that. Ah, they didn’t have that social. Um, the family and and everything else that helps you know, just people be more successful as they continue to go through life so they had to struggle through all that and I think that was you know one of the things that when I look back at was one of the great helps for me just becoming a resilient person. Is looking back at how they had to struggle through certain things that are you know, nothing terrible but it’s just the financial struggle the social struggles those kinds of things that they had to endure. Um I don’t have to do that and that is something that has allowed me to be able to look into the future and say I can achieve. Things I can try things I can take risks I’ve got support systems so I was really privileged to have that as a backdrop of something that gave me a value system that allowed me to to eventually get into the game ah of entrepreneurship and and take the risks that I’ve taken. So.
Alejandro Cremades: And we’ll talk about that in just a little bit but let’s talk about technology because it sounds like technology is something that really capture your capture your attention and day that was part of the studies that you did too.
James Lochrie: Yeah, really, it started in my own house. My dad was a software developer worked for the hydro company in in Canada or in Ontario and and there was a introduction of. Computers and technology into my life at ah, a young age. So I had that kind of lack of fear or or anxiety around getting into this stuff and fortunately when I was a young kid in between my home and my school there was a radio shack and that’s when the new the the personal computers came out the the t r s eight computer. And I used to go and sit there and just hack away a keys and try and figure out how to make video games on these machines and then just continue to do that in school as well. But school and I just didn’t it’s kind of like ah oil and water is is I did well in school but I just didn’t enjoy it and quite frankly I don’t think the teachers enjoyed me being there either very much. So I just had a hard journey through school so most of what I learned in technology was self-taught or taught in an informal manner and it it actually I think that was the best thing for me to have that type of ah a journey through the the introduction of technology in my life because it made me very self-sufficient. In how I approach those things and it made me very curious. It made me somebody that was not afraid of jumping into new technologies trying new things and seeing what fits what doesn’t so that that was kind of my I always. Ah.
James Lochrie: Enjoy technology and also hated it at the same time and sometimes it’s one of those things you know you’re on these platforms. It’s like ah how does this work and Zoom isn’t working um, but I love it and I hate it at the same time. It’s ah it’s quite a dichotomy with when it comes to tech.
Alejandro Cremades: So We think with University I mean you you drop out I’m sure that your parents were not very very excited about that and I’m sure that for you, you know that was the some uncertain times and you know in the end you know you,, you’re the kind of guy that thrives you know in a certain times. So I think that what what happened there. You know what happened there and also how was it for you to Navigate. You know all of all of that uncertainty.
James Lochrie: Yeah, it was difficult because you know when I’m talking about when I’m 22 23 years old I dropped out 3 times by then which is kind of a testament to um to my parents and their desire for me to get a degree and and what society was expecting of me. Um, but. After I made that decision that university was not going to be in my future. It really came down to how am I going to survive I started a landscaping company did that for about a year I really didn’t like it. There was just you know I kept burning my arms on exhausts and all this I just didn’t like it. It wasn’t my thing. Um. And then I got a job in an accounting firm and a very low-level job. It was one of those things I got my foot in the door and it was I just needed to pay the rent and so that’s what I did and I ended up staying at that company for 16 years and fortunately for me, it was about every three years I was able to advance positions and move into something new and exciting and eventually I I took a role in the technology team after spending a significant amount of time in in the operations of the accounting firm that switch enabled me to understand how technology. Worked in the operations of business and what I had learned previous was how business actually functioned how finances functioned how entrepreneurs thought and applying that technology with that perspective into ah into the accounting world was really a great learning experience and it.
James Lochrie: Took me on a journey where ah back in 2009 I ended up leaving the company and starting wave and it was based on a lot of the um, a lot of the learnings I had had over time around. Ah how how entrepreneurs think what the data looks like. How banking operates all of those things that I had learned in in both the operations and the technology role I was in allowed me to come up with these concepts around. Ah what wave eventually became ah and I don’t want to take all the credit for there was a great team of people that came up with all the products and. And enhancements and all the things that we have within wave today but it was really that starting point came from a journey of of coming through traditional industry and and then just figuring out some innovation.
Alejandro Cremades: Now you did spend quite a bit of time there I mean it was a little bit over 16 years before you know you venture out into into really taking a stab at on entrepreneurship. So sixteen years is is quite the time. How how old were you when when you gave your notice. Wow.
James Lochrie: I was 38 or 38 years old yeah yeah
Alejandro Cremades: And then what what do you think? what do you? why? why? I mean you had it in you I mean your your father Also ah you know had the bug as well as an entrepreneurial. So but they you had it in you. What do you think? what? what? What do you? think it took so long. Yeah.
James Lochrie: I think there is you know that’s a great question I struggle with that when I to be honest with myself with that question I think part of it is was fear of taking a risk I think the. Ah, the longer I stayed the harder it was to leave because of I had three young kids who were in private school they were in ski lessons. We had a nice home. All of the things that are the trappings of a job were at play there but there was another aspect of just. Personal confidence in being able to take that risk I think that’s another piece of it that I had to overcome and you know that sixteen years like I said I was very fortunate to continue to move in in roles and responsibilities and and the way that I was approaching the business I was in which gave me a little bit of that entrepreneurial. Ah, energy that allowed me to be innovative in certain sections but it got to a point where I kind of reached the top of where I was going to go and hit that ceiling and to burst to that next level I had to leave and I just got to the point where that was obvious I think I actually I remember sitting down and. Thinking to myself I’ve got about twenty five thirty years left of working in doing whatever I want if I stay in this job and I look back on 50 years working at this one 1 place I was going to be incredibly unhappy with what I offered the world.
James Lochrie: And I think that was one of the key moments where I was enabled myself to move forward.
Alejandro Cremades: So 2010 what what made it so obvious for you to take that leap.
James Lochrie: Um, I think there was a number of factors. There was the the kind of running out of headroom at the company I was in and that was ah a big motivator There was a desire for for more energy I wanted more energy in the things that I did so there was. There was an internal motivation that was percolating inside of me but at the same time I also noticed where things were happening. The internet was maturing. We were getting into the cloud-based products starting to emerge I had seen. 0 out of ah New Zealand had launched this online accounting platform Quickbooks online had already started but was a shell of what it is today and there was about a hundred other small little players in that market maybe 200 others ah small little players in the in the online accounting space market and. Um, we just came up with a concept that that allowed us to utilize all the technological advances and the migration onto cloud-based tools that was happening in the market to come up with a tool that really focused on the small micro-business owner. And ah, enable them to have features and ah and benefits that were traditionally only available to larger businesses that spent significant amounts of money on products and so we came up with this business model and concept that we thought would resonate to that group in the industry.
James Lochrie: And once we launched it kind of had a slow trickle of you know people coming in and then all of a sudden word started spreading and then it just took off it just word of mouth and um and just lack of different options in the market that serve those people. Ah, really just drove the initial growth of the company.
Alejandro Cremades: And what ended up being the business model of way for the people that are listening to get it How how are you guys making money there.
James Lochrie: Yeah, it’s a financial services company. So basically it was an online accounting. It is an online accounting platform that has all the bells and whistles on it. So it’s got the the general ledger and all the reporting and all that stuff that you you need to have with bank feeds and reconciliation. Got an invoicing platform receipt scanning bill payment those kinds of things and that was 100% free and that was one of the key things that made wave successful was we recognized where the product needed to be free and where we could make money off of it and so the first. Push into a monetization was payroll and so we we went into that first we should have gone into that second that was a mistake because it took a long time to to monetize that tool but that was kind of our our process bring on a whole bunch of business owners. Ah, have them use our free products have them use invoicing start adding on on things and so we started with ah payroll that was our first pay one then we added a payment system first using stripe then we built our own and that was the massive growth engine of wave. Later on we acquired a Neil bank and now we have full the banking function inside of it. So it really is an online financial services tool that small entrepreneurs can utilize in their business and we typically look at $5000000 revenue sizes probably our larger customer base.
James Lochrie: Ah, we’re typically in that smaller 1 or 2 employees now couple hundred thousand to five hundred thousand dollars worth of revenue. But we just do it at massive scale hundreds of thousands of millions of users.
Alejandro Cremades: And at what point do you realize this is taking off.
James Lochrie: There was one point when the Chrome store had just emerged. We had. We had gotten some momentum on customer acquisition through through search engines and and some marketplaces and things like that. But the Chrome store had come along. We threw up a ah listing on there because we just. Decided to span the world with you know our our brand and um, we started seeing quite a bit of traction coming out of the Chrome store and that was surprising to us and so we doubled down we made contact with them. We started building relationships with them. And then one day angry birds remember that old video game angry birds they they put up their first web. Ah, web instance of the game and it was on the Chrome store and so we had this massive angry birds banner and right below it was wave and we just saw an immense amount of customer acquisition come through that channel over a.
Alejandro Cremades: Yeah.
James Lochrie: Significant amount of time. Um, and so like half of our traffic was coming from there and we started seeing a thousand new businesses every day 1500 and it you know it was just this level of customer acquisition in this market that had never been seen before. And it was because we just had the right type of product. Free. Um, we had pretty good engagement of those free users and and we knew how to acquire them. We knew how to talk to them to get them to come and visit our site and that was really the the key to it was giving them a product that they. Normally wouldn’t pay for for free and then finding ways to monetize it on top of it. It’s pretty pretty straightforward freemium model.
Alejandro Cremades: And how much capital did you guys raise to date prior to the acquisition I mean Prior prior to the acquisition happening. How much capital was raised.
James Lochrie: And it was about a 100,000,000 us that we raised. Ah it was.
Alejandro Cremades: And that was a very interesting cup table 2 that you guys had you know first funds a strategics I mean how how did they all blend together and what kind of value were you able to to get from them.
James Lochrie: Yeah, you know it was um you know Omar’s ventures up here in Canada one of Canada’s largest venture investors was our first investor they invested in the seed round of the company and we were their very first investment ever. So we had this very young venture firm. And that was unique in that we actually had 3 partners sit on our board as they continue to mature what they were doing internally. Um they were changing people in and out so we had 3 people on the board through them. Great investors though. Really supportive 100% always there for us. Um. Then we had our series a and that was dev diet yulicar out of um strv who led that so crv is a I don’t know sure forty Fifty year old firm. They know how to do business really really? Well they have their philosophies. They stick to them every partner talks the same. And their ability and especially Dave Dev that’s ah just a beautiful human being his ability to be supportive yet very transparent in his communication. He wasn’t nice. He was supportive. And and that support was really based on his desire to see us be successful as a partner and ah that was you know, really a refreshing person to have in the boardroom and then we had ah chamath Palo Hapatus Fund Social Capital come in and lead the series. B.
James Lochrie: And so another first time fund at the time so there was a ah partner switch that happened in there as well and so having these dynamics at that level kind of play out with 2 first time funds and one very mature fund I would say having Charles River ventures in the middle of that sandwich was crucial to our success and devda in particular being crucial to our success and being able to keep the conversations flowing keep everybody on side. Everybody focused on what we wanted to do without the drama ah of uncertainty that happens in first -time funds ah, coming in sent landing on our table so that was really ah a great stretch and then as we got more mature we added strategics like adp the payroll company rbc of royal canadian bank the largest company in canada was an investor and in wave and australian national bank as well as a number of other. Ah. Ah, funds around the world participated in in some of our later financing as well.
Alejandro Cremades: And what did you learn there I mean some big names you know about board dynamics and then also managing effectively aboard.
James Lochrie: Yeah I think that that is something that you know when I look at Kirk. Ah my cofounder he was Ceo of the company. Um, he had to really ramp up in his ability to do that as the Ceo and and my role in that was to support him. As much as I possibly could to manage our board There’s a lot of big personalities on our board and it really came down to just having a mindset of this is our company. This is our company that we’re running that you guys have been invited into that we need your support. And ideas and your ah your feedback whether it’s critical or or not we need that but it really is our company and we’re going to tell you what we want. And then you can give us the feedback instead of you telling us what you want and us providing the feedback I think that was a big shift that happened probably halfway through the company probably into 152016 where I felt like um there was just a lot more. Um we had just more handle on the board just by changing that perspective. And of course adding in other people around the organization to help us manage the board with reporting and communication and and doing things the right way instead of us being first time founders trying to figure it out on the fly so that was also very helpful but you know I think board management once you get to that state.
James Lochrie: You know once you’re in the series C Series D level can become complicated because there are some big personalities that can sit around the table.
Alejandro Cremades: And let’s talk about the acquisition. You know, obviously for you first company first exit and obviously not just any exit. 1 of the largest there in cu 400,000,000 of an exit. You know, quite a quite an outcome so tell us give us an insider you know seat. On on how that you know ah came about.
James Lochrie: Yeah, we were um so it was h and our block that that ended up buying us in an all-cash deal and um, we had been talking to them so for about 8 years we had made that connection up in Canada first and then there was some dalliances with their Us. . arm over the years but nothing ever stuck. We couldn’t figure out how to work together there was there was an opportunity at one point but they chose another provider and all this stuff and that which I believe failed with that provider and then um, we were in market. And we were raising our series e with the idea of that taking us to a public exit and um that we had actually signed the term sheet with an investor I don’t remember who they are and I wouldn’t name them anyways. But we’d actually sign the term sheet and then the offer comes in. And there was this really unusual time that happened in the company where we needed more capital in the company to execute our plans and we also had this offer come in. So. We had this timing where we were like well we could say no to that forty million bucks that we’ve already got a term sheet on. But if the deal falls through we’re in big trouble. We’re we’re going to have to raise capital in a very short period of time.
James Lochrie: And so there was this dance around how we make this happen with h and r block and h and r block was a great partner through that in understanding where we were and what their interests were in us and they ended up taking the risk off the table for us and so they actually. Ah, came in and and made sure that we didn’t have any capital risk should the deal fall through and and then it was just you know it was about dotting the i’s and crossing the t’s at that point and you know there was some back and forth on price and all that stuff and all the terms but it was fairly straightforward I’m not sure Kirk would say the same thing. Ah, but from what but the seat I was sitting in. It seemed to go fairly smoothly with some some limited exceptions.
Alejandro Cremades: What said our long process. How long would would you say it took from beginning to end.
James Lochrie: I I want to say it was the end of March. So about this time in 2019 so about March Twenty Eight thereabouts 2019 and then we closed I believe it was June Twenty Eighth so but three months from from the time we we said yes to the oh what the interest came into the time we closed.
Alejandro Cremades: Wow and 1 of the largest exits in Canada like the son of immigrants. How incredible I mean anything that you did you know when when when everything was said and done anything that you always wanted to do that. You were able to do on. Ah.
James Lochrie: Of course, of course I bought a poker table for for my heads downstairs because I love playing poker especially with with friends in ah in a really comfortable Environment. So I got that all set up. But most importantly, that gave me. Firepower to be able to do what I’m doing now and that was to to continue investing in it with other entrepreneurs on the projects they were working on and that’s where I’ve applied almost all of my capital is into that you know sure I’ve spoiled myself in in little ways here and there but the the most important thing that I do. Is get out of bed and work with entrepreneurs. It’s It’s a passion of mine I Really enjoy it.. It’s something that gives me energy I Love being around them I Love working on the problems with them I Love working with my team and helping entrepreneurs and that. Amount of Capital allowed me to take risks in those areas and that’s where I’ve been spending my time since the exit.
Alejandro Cremades: So in 2016 you decide to move and basically you know you started you know taking a look at as you were saying you know at investing in companies and and 1 thing led to the next and here you are you know, right now with your next company which is a thinner laps. So um.
James Lochrie: Um, yes.
Alejandro Cremades: So basically in ah, in a nutshell so that the people that are listening. You know, really understand what you’re up to nowadays what is thinner Las what are you guys up to.
James Lochrie: We are a very early seed stage investor. We’ll invest in the seed stage as our first check will continue investing through the seed stage and we will will do pro rata on a series. A um. And that’s really where we focus on is helping entrepreneurs who have great ideas and just want a partner to help them build the business through that seed stage. Ah all the way through to series a and beyond and so that’s what we focus on is really just finding those great entrepreneurs who are working on game changing problems at global scale. And trying to find ways where our capacity or capabilities could help augment their success and that’s all we do is focus on the entrepreneur and their success and we take all of our ego out of it because the only thing that matters in the economics of our business is the success of our founders and so that means their personal success. You know with their families. We care about what’s going on in their lives. It means their business success. Are they growing you know I always talk to my entrepreneurs about the j curve of growth that happens in these startups. That’s also the j curve of growth that has to happen in the Ceo and founder team and and if it doesn’t. That’s when bad things happen. So it’s ah about helping them understand that journey while realizing it’s all about them. It’s all about their company. It’s all about their vision. It’s all about their team. It’s got really nothing to do with us other than the fact that we can help and capital is a piece of that.
James Lochrie: And we we think about capital as one of the tools in the toolbox that helps companies grow even though it is the the economic engine of what we do is making these types of investments. It really is only 1 piece of the pie and that’s. Something that I’ve learned through working with great investors over over the years is that it it really does take that extra step. It takes that you know empathy for the founder. It takes that support of the founder and that genuine like truly genuine desire to see them successful and you know it. Been fortunate to be surrounded by entrepreneurs most of my life and it just this comes naturally to me this is where I want to spend my time and so that’s what we do here.
Alejandro Cremades: So You are talking about great ideas and great entrepreneur entrepreneurs and obviously you are all about investing you know on those at a seat stage where both of those 2 things you know are combined and you know essentially they come together now what does a great idea look like. And also what does a great on entrepreneurp look like based on you know that pattern recognition that you know perhaps now you have after seeing so much.
James Lochrie: Yeah that’s that’s a tricky one. It’s ah you know there’s no magic sauce. They’re you know around figuring out. What is the perfect entrepreneur. Typically what we see in our entrepreneurs are like a huge amount of energy like that’s the the first thing. Ah, the second thing is a level of domain expertise around the problem set that they’re solving and a rationale for the reason for them to be the ones to solve it. You know there’s there’s typically a personal story there and then um, when you talk about um when they talk about their business There’s a way that entrepreneurs that I tend to invest in talk about their business and it’s about the future and it’s an opportunistic and optimistic future and instead of talking about the past or what the challenges might be. They tend to skip over those types of things and. And focus on what could be rather than what is or what? what what? the constraints of what could be might be so it’s really about that. Um, optimism. That’s really flowing from them that we recognized as one of the key components of great entrepreneurs. Ah, it’s not obviously not the only thing because people that are delusional like myself can be optimistic too. So um, but that’s kind of the the key thing when it comes to ideas though. It really is about. Are we doing a step change in function all right? So 1 of our companies is a cancer detection company.
James Lochrie: Ah, they’ve been working on this problem for 15 years recently come to market now proves in 24 countries and the step change that they’re bringing to market is it’s a blood test for breast cancer and it’s also one that can detect cancer at the earliest stages. So when you think about breast cancer and mammography and detection today we are leaving out a huge section of the population out of care. These people are taking this test and and creating a differentiated type of care that could happen in cancer detection and. That step level change in technology is what we’re looking for. We’re not looking for incrementalism. We’re looking for that next big leap and we want it to happen at a global scale having companies built in Canada you can have some kind of. Perspective around. We want to win our backyard or we want to be the best in Canada those types of things. Typically we don’t invest in those kinds of companies we look at companies that can help people around the world with their products or service.
Alejandro Cremades: I Love that now it sounds like you guys are pretty good when it comes to risk management and helping your companies you know mitigating with whatever is in front of them and and they’re risking or helping them to the risk the path forward. Right now there is a lot of stuff happening out there in the world. You know like a lot of uncertainty.. The macro environment is pretty rough So What kind of a do device you know can can you give to the people that are tuning in now and that are worried.
James Lochrie: Yeah, you know I think this comes down to what’s happening today is a lot about balance sheet risk right? And how healthy your balance sheet is versus the milestones you need to try and achieve to get to your next stage and over the past five is years excluding last year um there’s just been so much capital in the system. Whether that’s venture dollars venture debt other other types of debt that have kept a lot of companies very comfortable and comfortable in early stage companies isn’t necessarily a good thing and so. When I look at what we’re doing today versus what we were doing previously around balance sheet risk. That’s not that different today versus what we were doing before because when you’re investing in the early stage a lot of times you’re making investments and you’ve got maybe twelve months of runway eighteen months worth of runway somewhere in that ballpark. But the milestone you need to achieve is so significant product market fit or a huge technical challenge that you have to overcome or a regulatory hurdle that you have to meet those big big chunks are are really hard to do in short time periods. So balance sheet management is something that we really focus on in the early stages and. Just managing your balance sheet to that mixed investment milestone. So that you’re not caught short and the only difference today versus what we’ve been doing previously is the expectation is that your your balance sheet needs to last longer than it did before because capital isn’t necessarily as available. So. It’s really just about timing that we think about.
James Lochrie: We’ve been scared of this stuff like from the beginning so you know the the fear that’s hitting the market. The uncertainty that’s hitting the market over the last year is something that we deal with every single day and we’re used to it so it really is just about ensuring you’re doing the right things. At the right time and making the right decisions when it comes to capital risk.
Alejandro Cremades: So obviously you know at this point in the game. You’ve seen a lot. You know, not only as an investor but also as an operator as a founder yourself I guess if I was to put you into a time machine James and I bring you back in time to that moment where you were thinking about taking the leap at 38 years old and you had the opportunity of having a chat with that younger self and being able to give that younger self one piece of advice before launching a business. What would that be and why give me what you know now.
James Lochrie: I you know I knew this question was coming the the 1 thing that I would say that I look back on and say I could have or should have done differently. It was very personal. It was look after yourself in balance with looking after your business. And when I say that I mean all the things from you know I neglected my exercise I neglect neglected my sleep I neglected my um, my nutrition I neglected my friendships I neglected my marriage I neglected my children at’s on top points. Ah, it’s trying to figure out how to create more balance and. That was one of the things as a more mature person now I look at and really structure my day around is making sure that I am the best version of myself every day that I wake up and have those things working for me because when they weren’t working for me into business. It just creates this. Drag on you and and I recognize that now that was probably one of the larger things I struggled with unknowingly during the build out of of the early stages of wave as I just worked my tail off just trying to achieve and neglected everything else and that was 100% the wrong thing to do. Um, and it just wasn’t something I wanted to repeat so that’s the one piece of advice I would give is just to find that balance and it doesn’t have to be equal. You have to give yourself a little bit to make sure that you’re you’re showing up for yourself.
Alejandro Cremades: Wow that is that is very profound James now for the people that are that are listening that will love to reach out and and say hi. What is the best way for them to do so.
James Lochrie: How you can reach me at James at thinner labs dot ca I’m on Twitter James Lockry um that’s probably the best way to reach out.
Alejandro Cremades: Amazing. Well hey James thank you so much for being on the deal maker show. It has been an honor to have you with us today.
James Lochrie: Um I appreciate it their Honors mine. Yeah.
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Ron Gula built a multi-billion dollar business that went public. Now he is helping other founders make their startups succeed as an investor. His venture, Gula Tech Ventures, has invested in companies like Second Front Systems, North American Wave Engine Corporation, Cybrary, and ShardSecure.
In this episode, you will learn:
- What Ron looks for in fundable startups
- Product versus services companies
- The state of cybersecurity
- His top advice when starting a company
- Planning for success
Alejandro Cremades · EP 590 Ron Gula On Building A $5B Business And Investing In Companies That Protect CyberspaceSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Ron Gula:Frequently sought out by media such as the New York Times, Bloomberg, and Forbes, Ron Gula is one of the leading cybersecurity thinkers in the industry.
Ron started his career in information security at the National Security Agency, conducting penetration tests of government networks and performing advanced vulnerability research. He was also the original author of the Dragon Intrusion Detection System and CTO of Network Security Wizards, acquired by Enterasys Networks.
At Enterasys, Ron helped many financial, government, service providers, and commercial companies to enhance their network security monitoring. He also served as Director of Risk Mitigation for USinternetworking. While working for BBN and GTE Internetworking, Ron helped to develop one of the first commercial network honeypots and developed security policies for large carrier-class networks.
Since co-founding Tenable Network Security in 2002, Ron has served as CEO. Under his leadership, the company has become the leader in continuous network monitoring and is relied upon by more than 20,000 organizations worldwide to identify vulnerabilities, reduce risk, and ensure compliance.
As a community leader and a passionate advocate for education and scientific research, Ron serves on the Advisory Board for the University of Maryland Cybersecurity Center.
He was also appointed to the National Cybersecurity Science, Technology, Engineering, and Mathematics (STEM) Education Advisory Board as part of the National Initiative for Cybersecurity Education (NICE).
Ron has received special awards for leadership from both The Washington Post and The Baltimore Sun and was named Ernst and Young Entrepreneur of the Year 2013 for defense and security.
He has authored three patents, speaks regularly at industry conferences, and is often quoted on topics related to security. Ron holds a BS from Clarkson University and an MSEE from the University of Southern Illinois.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmaker show. So I’m very excited about the founder and also investor that we have joining us today I mean he’s built a remarkable company. He’s also invested in tons of entrepreneurs and we’re gonna be learning quite a bit and I’m sure that you’re gonna find. His journey very inspiring so without fartherdo. Let’s welcome our guest today wrong gula welcome to the dealmakerr show so give us a little of a walk through memory lane so you were born in Syracuse New York so how was life growing up.
Ron Gula: Hi there Thanks for having me how’s it going.
Ron Gula: Yeah, so I grew up in Syracuse New York ah my father worked for Ibm he was a field engineer and I got exposed to mainframe computers and pcs at at a very young age.
Alejandro Cremades: And also you know when he came to resolving problems engineer I mean obviously that’s something that you ended up studying So what got you into the whole problem solving thing.
Ron Gula: It was always interesting I always like playing computer games building my own computers and whatnot. Ah my dad was also in the air force I ended up going into air force r o tc and attended Clarkson University in Upstate New York I really just liked solving problems. The the engineer and me. You know whether it’s a puzzle an engineering design or how do you handle an algorithm I’ve always approached life like that.
Alejandro Cremades: And in your case, you ended up a you know giving it a shot to um to to going like really to becoming eventually a fighter a fighter pilot. But then you know it sounds like you had a problem with he with high ges. So what happened there.
Ron Gula: That’s true. So when you go into the air force and you get a pilot slot typically you have to go to your flight school class and if you’re the first or second you might get an F16 or f 22 that sort of thing and I was lucky enough to compete and get accepted to something called euronnado joint jet pilot training where. Even if you were the last in your class, you still got a ah fighter aircraft turns out when I went to school I did not handle hygies very well I little little had the tunnel vision and all that that kind of stuff but what that really helped me learn is as we got into cyber security and information security. I could speak pilot I could speak military I could speak command and control and that later became a very very useful skill for me.
Alejandro Cremades: So so what happened with it with with a hi gs I mean for the people that are that are listening what what is that about I mean probably the people that are listening that have seen the movie top gun and and how they do like this crazy stuff and and what that puts the body through I mean what? what? what were you experiencing with it. Why Why couldn’t you take it.
Ron Gula: So when you’re when you’re on a roller coast bureau you might be hitting 3 gs maybe maybe three and a half or 4 and you know that’s what the general public feels when you’re in ah, an airplane like that you might be hitting 6 7 eight g’s I was actually only doing something really low like four and a half five G’s and I was experiencing the tunnel vision now unlike a rollercoaster where you might go down and do a turn It’s a quick turn if you’re actually turning aircraft around. You might be pulling gees for 5 seconds 10 seconds 20 seconds long and that’s what causes the tunnel vision where you lose vision in the eyes and what really what’s happening is the blood’s draining from your brain.
Alejandro Cremades: Wow! So um, as they say one door closes and another one opens and the one that opened for you is one that you know really played a ah massive role in your career because that’s you know, Basically what you have dedicated yourself to which is Cyber Security. So. How do you all of a sudden enter the Cybersecurity world.
Ron Gula: It was. It was a couple steps so when you leave the flight program. You know the air force wants to make sure you land somewhere good and I was and like an electrical engineer so I got involved in communications I got to learn a lot about how telephones work. How computer networks work. How how the internet would work. This was really when the birth of the internet was happening websites didn’t exist when I was doing this in the early early 90 s and whatnot and I had a couple tours in the air force and my last tour was at the national security agency. Where I had read the puzzle palace and I had read the the cuckoo’s egg from Klitskol and there were various groups mentioned at the and nsa I sought out a post to work there and I eventually became a penetration tester where my job was to test the security. Of ah various classified and unclassified government and Dod networks.
Alejandro Cremades: And that was the immediate step for you to take a leap of faith and enter the world of Entrepreneurship. So Why were they triggering events for you to say you know what I’m going to start this thing and also starting it. With who is your wife So I mean quite ah quite a journey.
Ron Gula: that’s that’s ah that’s well said so when I got out of the the service I took a job with with bbnbbn is credited for you know, creating the the internet as we know it and it was really in a government services role which I’m based in Maryland this is a very popular thing around Dc where technical consultants you know provide software services mission support to various government agencies and while I was there I was rapidly developing all sorts of technology precursors to intrusion detection work precursors to a wide variety of stuff. While there I got recruited to work for a cloud startup called us interneting I worked there for just just just under 2 years and while there my job was to defend the network from attackers and I was working with some leading intrusion detection technology. It was internet security systems. And these attackers were bypassing it and I came home one day and I asked Cindy my wife could we start a company where I was able to develop a next generation intrusion detection system and we ended up founding network security wizards together and running it as a husband and wife actually I worked for her for that company.
Alejandro Cremades: And 1 thing that is say really incredible. There is that you guys were pushing that for about a year fully bootstrapped and then you ended up getting the company Ac acquiredre I guess before we go into the into that process of of getting the the company Ac acquired I want to ask you 1 thing here that that comes to mind and. You know there is this book called the founder’s dilemma and on that book the the author talks about you know what? it’s like to work with family members and sometimes you know people becoming ineffective in that relationship because they don’t want to hurt each other’s feelings. Obviously in this case, you guys you know have been very successful working together. So what would you say are the ingredients behind that success I mean is it like some level of communication that you use at the office and at the home or or how do you go about that.
Ron Gula: So a lot of communication I mean any marriage I think you have to have continual effort to you know it’s not it’s not easy you got to keep putting stuff into it and then when you’re doing work together. It’s the same thing you have to have that communication. How do you resolve problems. In our case, we like cigars we like wine. And ah, you know that kind of grew into you know, being able to talk out different types of things whether it’s life goals like when we want to do with this company or should we hire 1 more person and spend you know some money and take risks together. So. Ah, really believe that that is something that we we need to talk about more about now it is a risk for companies. It is a risk for that. Ah that you know people do fall out of favor and love with each other and but whether it’s a husband and wife team a father son team 2 twin brothers. I’ve seen a wide variety of family relationships and you know the ones that work great tend to work really great and I’m really lucky to be within it.
Alejandro Cremades: That’s amazing now now obviously for you guys you know, fantastic outcome. You know in the double digit millions and they fully bootstrap I guess what was that process like of of going through a transaction because this was your first company to first company first exit you know is is remarkable. So what was that process like.
Ron Gula: Well, there, there’s a couple lessons we learned from that. So. So first all we didn’t raise any outside capital and I didn’t know we were supposed to do that I thought you know you’re supposed to make a product sell the product you know exchange that product for for capital from your from your customers and. Reinvest that in the company right? That’s kind of what I thought was was supposed to happen so we never really raised any outside capital and then you know we started looking at various economic development things and it just wasn’t Maryland wasn’t set up for that like it is now because the internet was something very new cybersecurity was something ah very very new. So we started getting offers from like name brand you know leading companies. We. We had a competitive product and we ended up taking a deal with and terra’ networks and it was sort of like a competitor to Cisco. It was ah a spin out of the cableron. Ah ah, route switch company for. People who are study internet technology history and whatnot and I always felt that network security should be part of your network and that was one of the big reasons that that we went with that even though we had offers from like antivirus companies and ah you know, newer star ups at in the in the area that had raised more money.
Alejandro Cremades: So what kind of disability. Do you think that gave you into the full cycle of starting building scaling and exiting a business.
Ron Gula: At the time in terrac’ networks I believe it had maybe a couple thousand employees but it was sophisticated enough to have things like 2 wo-tiered channel just twotiered channel support on 2 wo-tiered support ah selling through the channel. You know, ah things like ah you know help desk in Ireland so we were exposed to what I felt was a fairly sophisticated type of company that wasn’t necessarily 100000 behemoth person like ah like a Cisco or a Microsoft so we got to observe kind of what for our tastes worked really well. And what? what didn’t and I would kind of tell you if there’s one secret to to my success I’ve always I’ve had so much opportunity to kind of learn from different people and kind of take different things that I liked or didn’t like from ah situations that I was in so there’s a lot of stuff that interraes did that I was really really happy about and. Actually brought a lot of those things to tenable.
Alejandro Cremades: So Then let’s talk about tenable because you did your as they say in ah in a fun way. The vesting and resting right completing the acquisition the integration and then as they say an entrepreneur always an entrepreneur. So at what point do you realize hey I think it’s time and I think that this problem is. Meaningful enough for me to to go at it.
Ron Gula: So the the problem we solved at network security wizards was detecting attackers on the network and we would just report hey you had an attacker and maybe it’s in server 32 and you need to go fix it and respond to it tenable. We wanted to start a company that would be a lot more proactive. That it would scan all of your assets all of your computers all of your websites and give you a list of all of your potential problems whether it was a compliance problem whether it was ah a hacker whether it was a vulnerability and whatnot and it turns out that the person who led the acquisition from terraces to buy network secure to wizards his name was Jack Huffard so we developed ah a really good working relationship and we had a number of conversations and we decided to start tenable network security and tenable means obtainable and defendable and who wouldn’t want obtainable and defendable network security and for folks who aren’t necessarily in cyber security. Is a big problem. People will kind of patch all the computers. Ah, you know, maybe secure the network and then they go and they do their business and maybe six months later six days later 6 hours later something makes a change and your network is now vulnerable so you know this concept of having a. You know, obtainable and defendable network security was something that was really really popular from day 1.
Alejandro Cremades: So how were you guys making money at tenable.
Ron Gula: So when we started out we had with 3 founders of myself. There’s Jack Hoppper and Renat Darris and Renat was the founder of an open source project called nessus nesa had a fairly large user community and nesus was focused on the practitioner. Could show you how to plug nesses into a network do a scan get a report and it’s all about you if you want to take that data and bring it to the boardroom. You need a whole variety of other things you need compliance framework’s reporting. Maybe you want to do this in a continuous manner. Maybe there’s foreign language support. So we built a commercial company basically around the concept of using nessis to do the detecting and scanning tenable calls it cyber exposure these days because now it means phones and cloud and many many other things. And so day one we started making money by having management software for Nasa and a wide variety of ah commercial support for it.
Alejandro Cremades: I Mean in this case, you guys say did it the right way you know versus you know one thing that we’ve seen now in in the market is companiess that we’re doing very well then they ended up being pushed to raising a bunch of money and then now when this macro environment kicks in then all of a sudden. The ones that were good companies. They’re and they’re not so good anymore right? and it’s now back to the cash flow side of things. It sounds like you guys were you know, very good on the cash flow side of things and and you push that you know very nicely. So How did you guys have that in mind you know as us. As part of the way of of the execution and and yeah, tell us a little bit more about that.
Ron Gula: Yeah, so we started this in the early two thousand s and for your listeners today. The concept of buying software and and and owning that software is a very foreign thing right? Everything subscription now. But back in the early 2000 you sold basically a perpetual license. And you had a residual maintenance of this concept of software as a service just really hadn’t caught on yet so we started getting fairly large um ah contracts from government agencies, commercial agencies and we were able to to by the time we did our first fundraise we were able to actually have $50,000,000 in bank when we did our first fifty million dollars investment from excel partners and the main reason we did that is because we were kind of getting categorized as this like East Coast government services type of solution. What in fact, we were an international. You know we are actually on every continent believe it or not including Antarctica there’s people down there scanning you know networks and in the snow and ice and whatnot. But you know we wanted to really kind of break out of that plus where we were based out in Maryland we had an issue that we couldn’t attract talent to come work for us. Typical entrepreneur working for the and nsa working for the social security administration working for Northrop Ruman look working for you know Lockhe Martin they’re not going to believe and go join a 50 person company. They’re going to view that as a very very risky type of thing. So one of the reasons we did. The fundraise was to look a little bit more.
Ron Gula: Ah, support to to take some of that risk of joining us off Anyway, we did that and we were really really happy with the outcome and the relationship we have with excel partners.
Alejandro Cremades: Because all in all, ah prior to going public. How much did the company raise.
Ron Gula: We we raised a little bit of friends and family. You know we had. You know you’re talking less than a few million dollars I I don’t have the numbers in front me, but it wasn’t a whole lot. 1 of the benefits that we had is that from selling network security wizards early on. We were able to kind of fund the company when we you know when we hit a bumper here. We had some cash flow issues that sort of thing a modern company might have a line of credit possibly from Silicon Valley bank you know that sort of thing today but but in the early two thousand s you know we were kind of floating that.
Alejandro Cremades: Yeah, oh yeah.
Ron Gula: And then once we got cash flow positive It gave it. You know gives really really the discipline to kind of think about every expense and whatnot.
Alejandro Cremades: So So so for you guys too. I mean it was really incredible that the most of the money that that that he was Raised. You know it was ultimately mostly secondary so tell us about you know, especially for the people that are listening what is secondary and. Why did you guys do so much. Secondary.
Ron Gula: Yeah, so they without raising a whole lot of money typical. Typically if you if you’re not going to go start a company today. We have an idea and maybe it takes 10 engineers and 2 years to build this. We might go raise $10000000 build the product and before day one you know we’ve we’ve already got $10000000 on the books. And um, you know there’s some valuation. Maybe we haven’t even sold it at at that point so that’s a direct investment where the company issues stock now secondary is is different secondary is when you take the stock that you already have and you sell it to somebody you literally give them the stock. The company doesn’t issue any new stock. Now they might pay more than what your stock is worth on paper and that might give your company a much higher valuation but that also might take some of your employees and allow them to sell stock to buy a home to buy a car to pay off college. And we had that moment where we pulled all of our employees together. We kind of told them what was going on and we basically said look if you want to you can sell a secondary stock and we actually created some millionaires that day and you know and that was a very interesting time and it’s something I would tell anybody who’s an entrepreneur or founder. They should be aspiring to do. That create a company. That’s so good that um, you know your employees are going to benefit directly from it.
Alejandro Cremades: And also what was the what was the process. You know that journey of going public I’m sure that was say you know quite a quite an amazing journey for you too.
Ron Gula: Yeah, so to be specific I I left when I was ceo ummit uran took over he was previously coming from ah the Rsa corporation and going back to network security wizards he had run a company called riptech that managed the dragon intrusion detection system. They had a long history together. And you know, ah ummit was hired to basically grow the company and take it took it public I got to be right there when we were ringing the bell on the Nasdaq which was kind of cool but a lot of the hard work of going public like that you know there’s a lot of different compliance regulations a lot of road shows you got to do I didn’t participate in that. So you know Steve Vince the cfo of the company Jack Hoffer the rest of the board they take it. They take a lot of the credit for for doing that but setting up the company all the work that we did you know over the past sixteen years while was Ceo Cto was really built the platform to make that happen.
Alejandro Cremades: Now in your case, you were Ceo and Ceo for 16 years I mean typically people would break those into 2 different buckets and have you know other people coming in and and taking that robot in your case doing both. I mean that sounds like a lot of work and also like complete different work. So why did you take that on upon yourself.
Ron Gula: Well I had a lot I had a lot of help and I think you know the cto position in many ways is a very public facing ah position and you know the technical brains of tenable was renot Darris and Renat did a great job. Not only keeping Nasa at the leading edge. Of ah, you know whether it’s ah a windows laptop a mac laptop your iphone. You know some server that you just bought from Google and Google cloud Nessus was always like a year or two ahead of what the market needed and a lot of that was renot’s reaut’s vision of execution of what we would fund. Even like like different types of research projects of that. So my point there is like I had the titles and it was pretty cool to go to a bank or like the dod and and and talk fairly technically about what they were doing and understand their feedback and those titles really allowed me to kind of have. Direct meetings with potential clients that are both technical and nature but also with the procurement people who are like okay, if we’re going to spend money with with tenable what is tenemo going to do for us over the next couple you know couple years and whatnot so I liked having both of those titles now a lot of times if you have a technical founder. They’re not necessarily super good at the business side of things pricing things marketing things and I think over to the 16 years I was I was at the Helm at tenable we had plenty of opportunities that you know I’ll just say that I learned from when it comes to like naming products or you know, bringing things to market and whatnot.
Ron Gula: But it was really unique to have both of those titles but I couldn’t have done it without everybody else who was working accountable.
Alejandro Cremades: That’s amazing. That’s incredible now Tenable you know I believe that right now the market copy is around 5,000,000,000 So what? an incredible journey. What? ah. An amazing. You know feeling to be able to look back and to know that you’ve created that incredible amount of Value. You know all those employees that they have been successful to in their own way and their own nature and tell us about you know at that point where it’s time to turn page and you know switch chapters.
Ron Gula: So I always wanted to do investing I was very enamored with the process that we fundraised at tenable so we raised from excel partners and insight and you know I was very impressed with their operations and what they did. But there’s this concept of seed investing. Where you maybe invest a little bit. You give a little bit of advice and we got series a’s and series b’s and whatnot. We did a few investments while I was Ceo at tenable and you know 2 of them did not go well we lost money on them and one of them was was threat. It was actually ah I meet uran’s brother doug. And we had invested in that we actually had made more return on that because they were acquired by ah by Cisco and we said look we can this is something I think we can do full-time and so Cindy and I said let’s we’re going to start a company. We come up with gula tech adventures not not ventures. But basically we are doing primarily investing under ragula tech adventures a little bit of philanthropy. We run these million dollar competitive grant competitions in cybersecurity and we do a lot of I just think we’re available to do a lot of policy work. We don’t have full. Ah, um. Ah, policy thing or think tank but we get we get to participate in a wide variety of state and Washington Dc level interactions about cyber policy and Cybertech technology.
Alejandro Cremades: Why say the Cyber world So important to you run.
Ron Gula: Well cybers cyrus very interesting I it’s it’s I don’t think we’re done yet like if if we were done with tenable. We couldn’t retire didn’t have to kind of there’s so much that we have to do as a society to fix cybersecurity. There’s a couple things. 1 the average person still doesn’t understand how the internet works how computers work how their phones work if they don’t understand that certainly our politicians don’t understand that and we live in a free society so we have these other societies out there China and Russia that are not free societies. I think we actually have a huge potential to have big problems in cyber security. Whether it comes down to like election fraud or personal privacy or you know our foreign governments going to be wherever you are on these types of policies and technology arguments. Typically you’re not in the trenches so we have these big problems that are out there so we want to be very very active with this. We call this broader concept of cybersecurity. We call it data care and we call it data care because I think the average person can understand how healthcare works. Probably have life insurance. they’ probably been to a clinic. They probably get some sort of medication but they also know that if they break their leg. They have to go to the emergency room. We don’t have any of those type of things when it comes to the cyber side. So if you’re thinking about going to a job in cyber security, you’re thinking you know what is the right thing to do at a board level.
Ron Gula: For cyphership the average person just doesn’t deal with all these different things we’re trying to make it a little bit more personal and a little bit easier for the average citizen to understand their role in this in this technology struggle.
Alejandro Cremades: And and going back to Goa Tech Adventures I mean how how much how much investments have you guys done today. So.
Ron Gula: So we’ve done right now we have about 30 active investments. We’ve had about 1516 I think exits that have happened and actively involved with with a wide variety of companies were only and I think one company where they were like they’re the only investor usually raco investsting. Some of the leading cybersec security funds that are out there but we’re very very active and we tend to invest in companies that we feel give you a secure by design outcome or bring what I consider traditional cyber security hygiene and hunting to new markets like s and b and small. You know small business. Managed service providers that type of thing.
Alejandro Cremades: So what does an active investor mean especially for the people listening.
Ron Gula: We we ask people 5 questions we ask them. You know what problem do you solve and how do you solve it a lot of times you know people confuse those 2 answers but they’re 2 separate answers. We want to see you know what some sort of proof that that they know what they’re talking about. We want to see some sort of plan if they’re asking us for money for engagement. You know what? what are they going to get for for that. But the fit thing we ask them is is what what kind of outcome. Do they want and this is really hard for people to do because if it’s your first time at bat if it’s your first time as an entrepreneur hey great. You might want to go change the world. Um, that that might be not hum humble enough. You know for some of the stars on the other hand people could be very not aggressive. Say oh you know I want to grow a company and sell it the first chance I get you know so trying to find a balance where a founder is working on a problem that not only can we help but their vision of success. Is something that we want to support that’s that’s really really hard and you know a lot of the founders. We’re working with have visions like that and we try to work with them every day.
Alejandro Cremades: So I’m sure that there’s a lot of people listening right? now you know the other day. For example I was speaking with someone and he was like oh my god you know I I was listening to your show with this a guest and that inspired me to start my own company. You know and and right now I mean the guy has raised over one hundred millions I mean it. It was incredible to hear that. So without a doubt. There’s people right now listening to us Ron that are thinking about starting their own company. So for those people that are perhaps you know having some thoughts you know around around this what kind of tips would you give them around. You know how to think about starting a company and ah, what should that be.
Ron Gula: Yeah, a couple couple tips. So the first thing if it’s going to be some sort of technology or software company. You have to kind of decide. Are you going to do a services company where you going to do some sort of product technology company now. The services company you’re typically typically selling people.
Alejandro Cremades: Or what could that be.
Ron Gula: Consulting maybe a retainer but your company is ultimately going to be driven based on the number of employees you have not the number of customers. You have the number of employees you have because people are hard to find you know good people are hard to find then you will be in demand on the other hand. If you go to a technology company where you have to develop this company. You have some some costs and you need to kind of bring a technology to market. You have this risk that you need to develop your technology before you go all the way out. So I tell a lot of people especially on the East Coast who have done services business. If you’re comfortable with the mechanics of running a business take a chance. You know, try to work on a technology or some sort of problem that people are willing to pay for and do that because if you do that you will be rewarded much much much more further versus services companies most services companies are acquired for. 2 x to 3 x of the revenue whereas product and technology companies can be acquired for much much more more than that.
Alejandro Cremades: Now Imagine if you were to go to sleep tonight and you wake up in a world. You know where were you and Andindy your wife you know, wake up in a world where the vision of Gula take adventures is fully realized what does that world look like.
Ron Gula: Wow I think it would look like a lot like star trek where you really don’t see cyberurity issues in Startrek unless it’s a plot device right? Picard never loses hiss password or everything is voice place identified and and and whatnot and that’s kind of the future I think we need to be building. I kind of think we’re heading in the right direction I still think we have a lot more threats to our success right now than than going you know, right? now we recently had ah the Biden administration put out the national cyccber security strategy. It’s a good strategy I I kind of describe it as. You know we’re the Titanic heading towards an iceberg and we’re starting to turn right now. Is it going to be enough. We’ll see because every time we kind of do something right? We kind of bring more technology that that compensates it and past twenty years of my my history working with with the government. We’re always like 5 years too late you know only a framework about securing computers. It doesn’t mention phones. You know if you read the the cyber security strategy. There’s a lot of stuff in there. It doesn’t talk about and you know these are things that are growing really really fast. For example, artificial intelligence. So. I don’t think we’re ever going to get to the state where things are solved things are getting better but it’s really hard to count those things. So it’s good thing good thought exercise but I don’t I don’t think I’m going to wake up anytime soon and the visions can be realized. Yeah.
Alejandro Cremades: Sounds like a lot of work ahead. Run. so so I guess same imagine if I was to put you now into a time machine so we were talking about the future now we’re gonna talk about the past but with a lens of reflection I’m able to put you into a time machine and I’m able to bring you back in time perhaps to the late 90 s where you were. You know, thinking about how exciting you know this whole cyber world is ah but you know that moment where you were thinking you know about doing something of your own. So if you were to go back in time and be able to have a chat with that younger wrong. And giving that younger Ron one piece of advice before launching a business. What would that be and why given what you know now.
Ron Gula: So I don’t have a whole lot of regrets for the the career that I’ve been lucky enough to have so if I was going to go back in time I’ve read enough science fiction. My my thing would be don’t don’t mess it up right? like I don’t think there’s there’s probably you know ways it could have been done things quicker better probably been nicer to people. You know, but but I don’t really have a whole lot of stuff I would try to not do so I would I would say hey look enjoy it more. You know there’s there’s a lot of successes that that are going to be coming if you’re successful so make sure to remember you know everybody helped you remember all that that type of stuff and. This is something I try to tell them a lot of entrepreneurs people don’t plan for success often enough they think it’s Hubris. They think it might be presumptuous and I don’t know how people can reverse engineer malware and and and find zero day vulnerabilities which is amazing stuff that I can’t really do yet. They can’t think about their finances for their family. You know four or five years while they’re founding a company to do these amazing things. So I would just try to tell people you know, plan for success and and make it make it a reality.
Alejandro Cremades: That’s amazing. So run for the people that are listening especially perhaps you know those founders doing stuff around Cyber security. What is the best way for them to reach out and say hi.
Ron Gula: So we’re really active on Linkedin so ro gula g ua our websites gula.techtech we got a lot of different ways to contact us for for fundraising but the best way to hit us up is is over social media on Linkedin.
Alejandro Cremades: Amazing! Well hey Ron thank you so much for being on the deal maker show. It has been an honor to have you with us today.
Ron Gula: Thanks for the opportunity to chat about what we’ve done in the past and I hope everybody enjoys staying safe in cyberspace.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Ron Gula On Building A $5 Billion Business And Now Investing In Companies That Protect The Nation’s Cyberspace appeared first on Alejandro Cremades.
Shensi Ding has already raised $75M for her tech startup. Even though they chose to get started in the middle of the COVID crisis. Her startup, Merge, attracted funding from top-tier investors like Alameda Research, Evening Fund, Addition, and New Enterprise Associates.
In this episode, you will learn:
- The importance of company culture
- How fundraising changes as you progress through different rounds
- The future of Merge and integrations
Alejandro Cremades · EP 589 Shensi Ding On Raising $75 Million To Create One Single API For All IntegrationsSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Shensi Ding:Shensi Ding is the co-founder of Merge. Her initial experience is in investment banking & technology investing, plus her role as the Chief of Staff at a startup and what this experience taught her about running a company. The aha moment that led Shensi and Gil to work on Merge and how they got started.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So I’m very excited with our guest today I think that they we’re all going to be enjoying very much listening about building scaling financing racing money on a downturn to I mean you name it. So I guess without farther do let’s welcome our guest today. Shenxi ding welcome to the show so you grew up in Boston so give us a little far walk through memory lane. How was saying live growing up. You know going there around quincy market fenway park you know and all those goodies. Yeah.
Shensi Ding: Um, hi Thank you so much for having me.
Shensi Ding: And.
Shensi Ding: Oh I think it paused for a second or you’re freezing or am I am I free. Oh okay.
Alejandro Cremades: You’re good. You’re good by the way by, but by the way we’ll edit this but just so you know the audio and the video is going to be picked up from your own computer. So don’t worry if I freeze or if anything happens from my end. Okay, we’re going to have engineers piecing this and and everything is going to be coming out of our own computers. So don’t worry.
Shensi Ding: I oh okay, that sounds good. So oh okay, that’s sounds great. Okay, awesome. Yes, so I grew up in Boston and went to school there. It was very boring and so it allowed me to experiment a lot with different games.
Alejandro Cremades: Okay.
Shensi Ding: And I actually taught myself how to code at 12 just because there was literally nothing to do because it was so cold. Um, and my parents really encouraged it I I built a lot of websites I did a few internships like building different websites for different. You know, research centers and I had a great time playing around with it and so naturally when I went to college. Um I decided to study computer science and that’s actually where I might gil my co-founder.
Alejandro Cremades: So so you went to ah to New York city to study computer science at Columbia and 1 thing that they that really stood out for me is that you did not go into like the whole you know. Tech world and and and and push for the engineering side of things you wanting to investment banking out of all things why investment banking. Okay.
Shensi Ding: Yeah I loved coding and I really enjoyed the problem solving for it. But I always felt like a big gap in my knowledge was understanding if a company was a good business or not I wasn’t able to read financial statements I didn’t know how to evaluate a company. And I also didn’t understand what people were talking about in the wall street journal or New York Times whenever they were talking about company performance and I felt like that would be detrimental to my career, especially since I wasn’t the best software engineer in the world I was pretty good I wasn’t a gill gil was known in our in our college as like being one of the best software engineers in our class. And so I think because of that I was I was really interested in filling in those gaps and so I worked really really hard to break into finance and interestingly it was actually harder to break in because I didn’t study econ um, like as my major um, got a great job and learned a lot from those 2 years I actually focused on industrials investment bankking. Um, but it really toyed the bread of butter of financials evens and you know lbos dcs I alert a lot too and I also got a great workout tech from it too.
Alejandro Cremades: So let’s talk about then about you were talking about good companies. You didn’t know what what? what? A good company looked like or or how to read? you know this stuff I mean what does a good company look like what did you learn from from that experience.
Shensi Ding: Yes, a good company is able to have a unique positioning in the market and a good company is able to generate returns I Also learned a lot about like market forces understanding if a company was going to get destroyed over time because it had no moat. Um, and it taught me a lot that I that naturally now I Just now I think about and a lot of people have to like read up on it but it just became so ingrained like creating presentations about why this company was special and going through financial statements picking up little details about what that meant about each company that has to this day helps me a lot with. Thinking about Merge. Um, and how we can make merge more sustained like a long term sustainable business as well.
Alejandro Cremades: So at what point do you realize that perhaps the finance or perhaps investment banking is not for you.
Shensi Ding: I started reaching a plateau and I wasn’t really learning as much I also felt like it wasn’t something that I was really passionate about and I wanted to find that thing when I was going to be really passionate about and so I thought I I moved to San Francisco after doing investment banking to work in tech investing and. I was surrounded by like people who were in tech I also was meeting founders like every day because they were coming into pitch pitch our firm and it was so interesting seeing how passionate they were about their work because I just didn’t feel that way about finance and so I started recruiting for different startups really wanted to break in and see if that might be the best fit for me. And I got a great job at a company called back then kadium now called expans and then also now acquired by Apollo Alto Networks um as achivasap the Ceo and I loved it. It was so clearly the right fit for me and the right industry for me. And I’m so grateful that I got that opportunity because I love my job and I love coming to work every day and I love doing what I do now.
Alejandro Cremades: And that company actually got acquired for 800,000,000 so I mean quite ah quite ah, incredible outcome. So I guess what did you learn too about the full cycle of a company because at this point you know you’re part of um. Ah, startup you know Hypergrowth Business you know not so much on the investment banking side of things or the tech investment side of things but more like on the operational side being able to see you know the full cycle of a building scaling racing money and then reaching the finished line. So what disibility would you say that that gave you.
Shensi Ding: I think it showed me how I literally didn’t know anything about company building up until I actually joined a company and I became mortified about the dumb questions I used to ask founders when I was investing I was like oh my god why do I even like think that I could advise or like say any of these things because it was just such a different perspective. And it really taught me that it’s not that easy to just change a number or assumption in a model you actually have to like be on the ground and see what’s going on. Um, and I I learned a lot about how every single department was super important I also learned the value of having really smart people working on a team towards a mission. The company I learned a law also from the founder. The Ceo was just such a great storyteller I was so well read and very persuasive and because of that he was really able to pull the company toward success.
Alejandro Cremades: And while you were there. You started to see like some of the issues around integrations. So what were some of those issues that that you encountered. Yeah.
Shensi Ding: Yeah, so we were in cybersecurity space and we would detect different potential risks and we would create like an issue in our own product. But unfortunately we didn’t have any integrations at the time. So the only way to export these issues was to download a Csv and reupload it into whatever remote system that our customers were using. Ultimately, this is not very scalable since there would be thousands or even millions of risks that could potentially pop up and so our customers started asking us for integrations and prospects did as well. There was a point where a lot of our sales team was getting really blocked by the number of integrations that we had and our competitors were waiting some deals just purely based on. Um that feature. And I think what was really fortuitous was that at the same time. My my cofounder gill. Um, he’s actually head of engineering at a diversity recruiting company that needed to build a lot of ats integrations and even though he was head of engineering he was actually building these integrations because they just didn’t have the engineering resources and so we were just grabbing dinner. Like you know are usually week leadeds at speed great. We were just talking about why he looked like shit he looked really bad and so I was like what’s going on. He was telling me about where I and he was like all these integrations are killing me and I was like oh my god we had the same problem and I think just talking through like why was such a big problem for his company and why it was such a big problem for our company. But. Yeahre very different angles I was seeing it from a p and l perspective and we had to hire a lot of engineers just purely to focus on these integrations and it took a lot of time. We even tried contracting it out horrible code how to rip it how to throw it all away.
Shensi Ding: Also very expensive and he just really hated the experience because there’s so many edge cases and it wasn’t that easy people would always think that building an integration just required just you throwing some code in like launching the integration then you were done but the maintenance was much more time consuming and so I think learning that full spectrum from both ends was just very very helpful.
Alejandro Cremades: So when you decided to start merch or doing that process you did interview a lot of people and to really get that to seek that that validation. So.
Shensi Ding: That’s how we decided to start march.
Alejandro Cremades: What were those interviews like and and what were some of those questions and and what were the results that you ended up getting that you’re like okay I think that they we got to go for this first.
Shensi Ding: We reached out to a lot of companies I think we reached out to we met with probably around a hundred companies and people from every single department because we really wanted to understand how their role was impacted by integrations. All these all these meetings happen from cold. Like pull messages. We didn’t really know that many people at all these different companies and so we just had a shooter shot message a lot of people randomly and also back then in San Francisco you had to meet people in person like you couldn’t really meet someone on Zoom or do a call you had to go get coffee with them and so we got coffee with a lot of different people that. To this day I’m still so grateful for because they taught us a lot and gave us a lot of great advice. Um, so like even now decisions that we have made like in our early days have like made a material impact because of the advice that those people gave us and also a lot of them now are customers. Um, and so the reason why we decided that this was a good idea and the kind of validation that we got was. How much money they would be be willing to pay the fact that we didn’t have a product they they wanted to give us advice and wanted to make us successful and also the fact that people were just like this is such a good idea like if you built this this is this is really going to work. But obviously there was a lot of skepticismism too. I think a lot of people were thinking like is this really possible. Why like. Why do you guys? think that you’re going to be able to solve this in a scalable way and it gave us a lot of um ammo to really want to prove them wrong which was also very very helpful too. It’s it’s great to have both of that so that you’re really encouraged to be successful. Yeah, ah yeah, so.
Alejandro Cremades: So what was that day like when you and Jail were like let’s go. Let’s give our notice. Let’s do this thing.
Shensi Ding: Funny story and I probably wouldn’t recommend this for other founders. But um I quit and and gave notice and and then I told Gil I was like hey I quit so you’re gonna have to quit too and he was like dude. Why did you do that. But I was like I I was like I really think that like this. We can solve this because we we came up with the solution. We knew the problem we want to solve like the other details we can figure it out. But um, yeah I just did that and it was so worth it because the timing I felt like if we missed this window. It was going to be too late if we didn’t solve it. Someone else was going to. And I really wanted to make sure that we took our shot that way we could um and then we did it like right during covid so started the company like may June 2020 we never pivoted never built anything else. This was the only thing we ever wanted to build and we were just working in gills apartment. It coding all day like. Working together like talking to customers recruiting people. Um and it was really awesome because it was allowed us to have a lot of deep focus because there was nothing else to do like you couldn’t party couldn’t see your friends. You couldn’t really do anything all you could do was just focus on your company and that was really magical.
Alejandro Cremades: So for you guys, What ended up being you know for the people that are listening to really understand it. What ended up being the business model of merge. How do you guys make money.
Shensi Ding: Yes, so we have a platform fee and then we add usage on Top. So We are very fortunate now to serve over 5500 companies on our platform in just like the 2 years that we’ve been out of stealth and so we have a great generous free plan for SAndBs that want to get started I Want to test quickly. Um, and then and then when they decide that they need more features. They want more security they are starting to sell to Enterprise they can upgrade and work closely with and you have an account manager that can help work with them very closely to make sure that every every detail is perfectly taken care of.
Alejandro Cremades: And also I mean they the 2 of you really took it on you to learn. You know some of some of the good stuff rather than relying on anyone else or delegating early on which I think is a great idea and part of this. You know. For example was really pushing sales I mean you you took sales up on yourselves. Ah, really went all the way up to 750 k and at that point you know is when you brought someone in to really pay lead that so how was that thought process and out what point do you realize? hey maybe we need to get someone else to to take this on.
Shensi Ding: I mean I think it just extends not only to sales but everything too gil and I also built the product in the beginning we weren’t planning on hiring someone to start building it for us I relearned how to code so that I could build the product because I didn’t understand what was going on the codebase. How could I possibly try to tell someone else like. Instructions on what they should be doing once we hired someone I also wanted to make sure that I understood what it was like to build the integrations and maintain them too and so I would understand the nuances of them when we did go through sales motions too. Um, later on. But yeah gil and I we did a lot of sales meetings. We hired this really great team member who did a lot of experimental outbound for us. Um, like the summer of 2021 and we ended up booking like to like oh actually it was Twenty Twenty no twenty twenty one and we ended up booking like hundreds of sales meetings and Gll and I almost died I think it was meetings from like 10 a m to Nine Zero P M and every day I just looked so bad I think it was to the point where like 1 of our team members was like. Hey the worse Jetsy looks the better. It is examine means she’s in more sales meetings but it it really got our like reps in because day to night I was just practicing seeing what was working what wasn’t working Gil was doing the same thing and we really started honing in on what was effective and we would give each other notes to and I also felt like if we didn’t understand like. Who to talk to how to talk about the problem what they cared about how can you? ah again, possibly try to hire someone and try to make them do the same thing and so I thought it was very very important for us to have that experience but also sales as a founder is persistent in every part of the role you’re selling your investors when you’re trying to fundraise you’re selling candidates when you’re when you’re trying to hire them.
Shensi Ding: Um, you’re selling your existing team members for why this is the best opportunity every day when you’re working with them too and then of course you’re selling to prospects when you’re trying to convince them to use the product. So I think it’s very important to like understand that script practice it and hone it into.
Alejandro Cremades: So Let’s talk about then storytelling and selling as you were saying because it’s all about getting people excited about the future that you’re living into whether as you were saying is investors employees Future Employees. What have been some of the biggest key lessons around selling. Or storytelling that you’ve learned you know during this journey.
Shensi Ding: Um I think show some enthusiasm I’ve been shocked from some of these demos and founders that I’ve met and like seen where there’s like oh yeah, this is what I’m building I’m like how are you supposed to excite someone if you’re just like if you’re not that excited about it and so I think what gil and I really have.
Alejandro Cremades: Ah, yeah.
Shensi Ding: Um, as founders that has helped us a lot with both recruiting and sales sales is how enthusiastic we are about this product and I love integrations like I Really love this problem and I think about it all the time and I think it’s really fascinating. But I think for a lot of people who. Try to start a company and they aren’t really sure of the idea they’re not that excited about it I think it’s hard to sell it if you’re genuinely not that excited about it. So I think the most important part of storytelling is having a like having a compelling story through the enthusiasm that you show. Um as you’re telling it.
Alejandro Cremades: And as you’re thinking about team members too and and and we’ve been touching on this I know how important culture has been for for the 2 of you and.
Shensi Ding: Ah.
Alejandro Cremades: And basically you have also been part of every single interview. How many employees do you guys have now 75 people I mean that’s quite a ah few people in there. So so why did you take it on you to be part of every single meeting. Why was that so important in.
Shensi Ding: Um, we now have our own 75 people
Alejandro Cremades: And I guess what was the most important question that you would typically ask people. Yeah.
Shensi Ding: So we have a very distinct culture and it’s not for everyone and I think because of that it’s very important that guilt and gil and I also have a very strong vision for the feeling that we want to have in our company when we hire a new team member. It doesn’t matter how how amazing someone is at their job if they’re an asshole and it doesn’t matter. How? um like it doesn’t matter like how fun they are if they’re also not committed to the team and they’re bringing everyone else down too and so we’re really trying to make sure that we have like a very distinct like profile that joins the company and and energizes everyone else around them. Um, and because gill and I did a lot of sourcing like I think we sourced like that. Sort of people I think we sourced around like 50000 software engineers when we were like trying to find our initial team we have seen a lot of profiles. We’ve also talked to a lot of people and I think having that that the data collection of people we thought were going to be stars and 10 x team members versus people who were clearly not going to be someone fun that would be to work with or would not be like. Ah, strong contributor to the team. It allowed us to now be able to go into an interview chat with a person really gets to know them understand their wants and needs and they also their life story determine whether or not they would be successful here and it’s been very very effective because I think we just have so many data points and it’s really hard to replicate that especially as like. Like a new team member who’s becoming who’s becoming used to interviewing for the first time it is really hard to be able to train that too over time. Obviously we want people to be able to do it at the same degree but especially at the early side on the early side of of your company journey. It’s important to make sure that that early foundation.
Shensi Ding: Um, is really curated.
Alejandro Cremades: So let’s talk about you know, let’s keep on this path of ah of on this topic of recruiting. Let’s go. Let’s go on recruiting investors. How much capital have you guys raised today my god 75000075 people 75 is their lucky number. Ah now.
Shensi Ding: If.
Shensi Ding: We Race around 75,000,000 Ah, yes.
Alejandro Cremades: Now now now Now. Let’s talk about this because you guys raise raise the money during Covid two and I believe this was one of the few investments that some of these firms like for example, excel were actually doing So What was that journey like in. And why did you think that they they were the ones? yeah.
Shensi Ding: I know we’ve never quite gotten our timing right? So we raised our seed um like August Twenty Twenty so right when covid started and everyone is just really nervous about investing in companies and people were starting to get used to Zoom Investments we raised our seeipt from nea um a year later we got a little bit luckier and the marco is more like normal and. Zoom meetings were better. We raised our series a from addition and then more recently our series b we raised that August Twenty Twenty One sorry August Twenty Twenty Two peak of the market downturn for tech we raised our growth round and that was a wild journey. But I think 1 thing that we were very fortunate in doing and also having was. A team that was really focused on making sure that this was a good high quality business or how of finance actually joined us as I think like employee 9 or 8 and from the very beginning. She was very very disciplined in making sure that our spend and also our customer acquisition cost and. Um, our snm spend per dollar of revenue generator was going to be really high quality and that we were building not just the business that was growing very quickly. But also again, a high quality company There are so many businesses out there that I think just do not have the right fundamentals and it’s really hard to scale that it’s also hard to change the company’s Dna um later on. Um, and so I’m just really proud of the company that we built and so that’s why last year um I believe excel only invested in us for their growth ah like for out of their growth fund and then prior year prior to that they had around 23 24 investments
Alejandro Cremades: So I mean you’re throwing in here like some incredible names I mean any a a excel I mean great gray people. So you guys were coming you. You guys were not coming from the startup world. You know you were coming from investment banking. You know you did another company before and and I’ve saw that.
Shensi Ding: Great.
Alejandro Cremades: I saw that you even had you know some employees of that company to you know investing you know on the business which is great and the same thing with with with Gail so what was that process of.
Shensi Ding: Well I I wouldn’t say that we did both come from startups and we worked very oh we knew the investors from the last companies we did. Yeah.
Alejandro Cremades: Oh so you know the investors already got it. So So what was that? So What was that process then like of of really building the network or even Better. You know since you already know these people from from before. What was that push of activating them to jump in and and and to really ride this journey with you.
Shensi Ding: Well I mean I think it was important to have worked at startups before this too. So Gil he was a founding engineer that startup before and he knew the investors of that company quite well just from being an executive and for me as the chief of staff I also got to know the board members quite well from working so closely to the Ceo and. Also assisting with investor relations. Um, so I think like just working really hard and then also showing them what you had and having really great back channels that went a really long way for that initial seed investment where people aren’t sure if you’re gonna pivot later people aren’t sure if the yeah original idea that you think of is gonna work. Um, so. I think just like making sure that you have a strong strong back channel is because the only thing that they’re really investing in the beginning is you as a team.
Alejandro Cremades: And I guess say in this case as you guys were going from C to series a to series B How did you see as well. The um, the level of expectations you know shift.
Shensi Ding: I Think yeah I think the difference between series a series B was quite drastic. The amount of due diligence that came into Series B was just a lot more information and also expectations were higher for the type of data that you were able to provide. Um, thankfully we had a really strong finance and operations team that was able to have collect all that information and also already had it organized but it’s a pretty stark difference and I think that it was something that did surprise me Um, because yeah, because for series a especially at the time when we did raise it. It was definitely a little bit more.. It was still more betting on the team versus like oh is this company just scaling now.
Alejandro Cremades: And I guess you know now Incredible Journey You know with all these people all these great investors. You know that are part of of this journey I Guess if you were to go to sleep tonight and you wake up in a world where the vision of merge is fully realized.
Shensi Ding: All of.
Alejandro Cremades: What does that world look like okay.
Shensi Ding: Yes, So every company that needs integrations instead of building that in-house they’re using us. Um, not only that but I can’t share much but there’s other other things to who that people would be using us for as well. Um, that are related to Apis. Um I software. Yeah. But we have a lot of exciting features that we and products we want to launch but we’ll see when that happens.
Alejandro Cremades: So I Guess I Guess say you know a lot of exciting stuff in store that you know you’re all you’re you’re living everyone you know, really you know, excited about what’s coming I Guess as you are you know testing all these new initiatives and and really deciding on whether or not you know. Which one of them makes sense. How do you go about it. How do you go about? hey you know maybe this is the direction to go you know with this initiative or maybe not this initiative. Let’s go with this other one. What what does that process look like okay.
Shensi Ding: I always think it’s better to lead with action versus just like analysis paralysis I think a lot of times especially like in like the past few years people are like oh well, you can just like you know hack your way to product market fit. But I think a lot of it is just like you need just put something out there to hit to hit it doesn’t hit. hang. You need to figure out like how to fix it. But I think a lot of people are like oh I can use the spreadsheet in order to figure out what product market fit is you can’t really do that means like actually have something out live that someone can test. Um, so that was really important for us. We’ve always really tried to like lead with action and the only way sometimes to have the data because there is none is to. Launch something and then be able to collect the data. Um, so that’s always been something that we’ve really pushed as a company is just lead with action. Get something out there and then we’ll have some more information later.
Alejandro Cremades: Product Market fit. So what did product Market fit at what point do you really experience? Did you guys experience? Product Market fit.
Shensi Ding: Yeah, when our product literally was not working sometimes and people still wanted to use it I was like Wow I can’t believe it and obviously our product is not in that day and these are like the very early days but I remember like back then I was like Wow like you. There’s just so much work to do it like I. Like this this customer like really wants like us to make these changes. Um, but they still wanted to use us. They didn’t want to build an in house and I think that was when I realized like I think there’s really something here.
Alejandro Cremades: So if I was I mean we’re talking we were talking about the future earlier. Ah but I want to talk about the past but doing it. You know with a lens of reflection. So if I was to put you into a time machine and I’m able to bring you back in time.
Shensi Ding: No.
Alejandro Cremades: Bring you back in time you know perhaps to that moment where you were you know wondering you know what? what the future would be. You know where were perhaps to bring a solution you know to a problem that you were encountering perhaps during those chats that you were having with Giil imagine if you were able to go back in time and and have a chat with your younger self and perhaps with gil there too. And you were able to give each of you. You know the same piece of advice and that will be a piece of advice before launching a business. What would that be and why given what you know now.
Shensi Ding: I think the advice would be do what your gut is telling you because there have been several points in our company journey where we made several decisions on what our company direction would be what our company culture would be and people wanted us to change it. And this would happen every month or every week and we would say no and it was really hard to say no, it’s it’s always easier to just say yeah like I’m just going to do what everyone else is doing I’m just going to take the easier route but we didn’t and it was really painful and sometimes we were like oh should we change our minds. And I’m really glad that we did it because our gut was really telling us that like it’s really hard to unwind like what you what some of these decisions would be um and I’m glad we didn’t because I’m so proud of where we are currently and that only would have that only happened from us saying really really really strong and staying stay the course. And it start. It’s been from like what the product like who’re selling to what the product looks like um what we were building who you would hire where we would hire them and I’m I’m really glad we saved the course.
Alejandro Cremades: I Love it now for the people that are listening should see that would love to reach out and say hi. What is the best way for them to do so.
Shensi Ding: Yes, you can always reach out to me on Linkedin um, or email me at chadsky at merge.dev I’m always available. You can also always sign up for free if you’re curious and learning more about merge. But yeah I’m really excited to share more about merch to you all.
Alejandro Cremades: Amazing. Well since it thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Shensi Ding: Thank you so much for having me.
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Your email address is 100% safe from spam!About Uri Kolodny:Uri is a co-founder and CEO at StarkWare and a member of its Board of Directors. He has a B.Sc. (Magna cum Laude) in Computer Science from the Hebrew University, and an MBA from MIT Sloan.
Uri is a serial entrepreneur, who has co-founded several technology companies, among them OmniGuide (an MIT spinoff developing optical fibers for endoscopic surgery), and Mondria (developer of tools for visualization of big data).
Previously, Uri also served as an EIR with two Israeli VC firms, and as an analyst at McKinsey.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So I’m very excited about the guests that we have today you know, joining us from startup nation. You know obviously founders. There are like absolutely incredible and I love founders that come from startup nation so we’re gonna be talking about building scaling. Financing exiting open sources. You name it I think that you’re gonna find this episode very inspiring so without farther. Do let’s welcome our guest today Uri Kolodny welcome to the show. So originally born in Israel.
Uri Kolodny: Um, thank you for having me all handle.
Alejandro Cremades: You know there? how is life growing up, give us a little of a walk through memory lane.
Uri Kolodny: Ah, life growing up was actually quite cool jerusalem in the seventy s um, my parents are academics so over the years a bunch of years spent in the us on sabbaticals. Um, and then sort of the quintessential israeli experience of you know the military service in an undergrad. Um at the hebrew you in in jerusalem studying computer science and and then went on to a business school in the us and basically got busy entrepreneurship.
Alejandro Cremades: So business school in the Us Why coming to the Us what trigger that.
Uri Kolodny: Oh that’s a terrific question so I was actually considering business school so I had an undergrad and in in cs and I really wanted to be an entrepreneur and I spoke to a family friend who was still is actually teaching. Business at at the Stanford business school and and he said look the intellectual content of an Mba you can pick up by reading old issues of business week when you go to the dentist but you know the networking and all that is is is quite something and it’s sort of. You know exactly it happened exactly that way meaning it. It was you know I’m I’m old enough to say intellectually it was underwhelming I was hoping for some something a little deeper in terms of content but I came away from from the whole experience with sort of exactly what I was hoping for meaning I came out of In fact, I spent my second year of business school. Starting my first company and you know oddly and sure.
Alejandro Cremades: So let’s talk about that. Let’s talk about that because you know you go there Obviously the content as you were saying was saying underwhelming but at least you got out what you wanted. You know you got you know the perhaps the path forward. So.
Uri Kolodny: Um, exactly.
Alejandro Cremades: Ah, what point does it become evident that starting your own business is the next ideal chapter after you know mit.
Uri Kolodny: Ah, no, no, there was that this was apparent to me for years before that that this is what I want to do I have no idea why I really don’t know why my dad is an academic. My grandfather was sort of you know one could say an entrepreneur. Um I don’t know why i. Just wanted to I think I so I’ve always optimized for independence and I think that my perception is that as an entrepreneur you have a fair bit of independence and that matters to me a lot.
Alejandro Cremades: So then so so then obviously it was a apparent but I guess it was the the push that you needed to come out of mit and and and perhaps you know that’s what got you to get going with omnigate your first company. So what were you guys doing with omniga.
Uri Kolodny: Yeah, so I um I met a new fellow israeli who at the time was at graduate school in graduate school at at mit and has been a professor there for many years since. And basically we we decided to commercialize his his doctoral thesis his ph d work and developed an a hollow corere optical fiber and first you know we focused on telecom applications and then we pivoted I guess well before we. We are others were’ using the word pivot in 2002 when the optical communications bubble burst. We pivoted to a medical device company and and brought a product to market so that was my first sort of entrepreneUri Kolodny: al experience very is some time.
Alejandro Cremades: And obviously at different time. No because the early two thousand s you know you guys raised for money there too and I’m sure it was absolutely different to the you know the landscape now of being able to raise and how the the perception is about Hypergrowth companies and. The way that you’re plugging in the network from the investors and the value that they bring to the table. So how was it like dealing with vcs back then.
Uri Kolodny: Um, um, it was quite vicious. The Boston scene. Um, it was very different from today and I think sort of the the.
Uri Kolodny: I think Facebook if sort of I have to look back Facebook and you know and Mark Zuckerberg and flipflopps in the hoodie and and all that that sort of changed the maybe y combinator changed the power dynamics between vcs and entrepreneurs. But back then? yeah, you know had to bend the knee and the the boston vcs were really sort of. Obsessive in terms of your desire to control your business in in sort of very fundamental ways we were fortunate enough to get seed funding from Ray State up who started analog devices and um and that was a very different experience for us in that regard meaning that that was sort of. The most patient and and intelligent and thoughtful investor one could hope to have on on your board is it for me as sort of a young entrepreneur that was really a wonderful sort of learning opportunity.
Alejandro Cremades: Well, hey, first company first exit. So um, so not bad reaching. The finish line is the promised land. You know oh an exit is always an exit. So I guess for you especially what kind of um I mean you you guys ended up selling the company to a p firm after about 6 Six six and change years of running this business. So what kind of disability would you say that he gave you being able to now have an exit and having gone through the whole cycle of ideation product market fit racing money scaling and finally you’re reaching the finish line.
Uri Kolodny: Um, it was my first experience hiring people you know and and and sort of this magical experience of trying to persuade very talented people that they want to drop whatever it is. They’re doing and join you as opposed to the many many other options they have in front of them so that was sort of. Was fun and building sort of ah, a team and a culture around that place that was fun. Um the fundraising stuff I didn’t like 1 bit but you know you have to know that you have to learn that and and you learn sort of the hard way now there are a lot of entrepreneurs who come you know to seek sort of. My my input and my thoughts on on their fundraising efforts and all that and you know by merit of having gone through all these fairly painful experiences back then you sort of you learn the hard way. You know that liquidation preferences deeply matter right. And that this isn’t some ah notion that you read on a Wikipedia page. This is something that sort of determines the outcome for your company. Um, so all these things you know I learned at the time I also learned you know the the importance of of you know the match between cofounders I think. How that and how important that is and the dynamics between the cofounding team and how does it, you know how is it impacted by people being full-time or not full-time you know the different levels of sort of of incentives and and focus that that brings to the table so there were a lot of learning that that came out of that.
Alejandro Cremades: But your next day journey with timna you know as they say you either succeed or you learn right? and with Tim now is he was not the desired outcome that you guys had hoped for and the company ended up. Yeah.
Uri Kolodny: Ah, no no I yeah I’ve had way more failures than successes over the years and every sort of dimension that you you can think of and so in that regard timno was one more form of failure. I was hoping to commercialize different form of research that came out of the same my my omnigade co-founders lab at mit his name is yo fink and we were hoping to commercialize another event invention of his I moved back to Israel and um. We were hoping to do this in the medical device field and after a good chunk of time twelve or eighteen months we concluded that this this just doesn’t have the ah we don’t see the the path forward in terms of product and and business model and just doesn’t compute. So.
Alejandro Cremades: So then what happened next.
Uri Kolodny: We put that on ice. So then there was this whole clean tech thing that was starting up and so I guess at this point it’s pretty obvious looking at my career path I’ve I’ve done a whole bunch of very different things in terms of. The underlying technology and the markets and all that and I think I’m fairly easy to sort of find interest and excitement and in stuff I like hard problems I like hard problems on the technology side. I’ve given it a fair bit of thought over the years you know why why? am I attracted to this. So if you know if we turn this into if you charge me I don’t know what the going rate is three four hundred dollars an hour for a shrink session. You know I think this is me compensating for the fact that I didn’t get a proper education. You know like. Ah, ph d and in some ah in some formal discipline. Um, so I’m I’m attracted to these topics and to the the people who are sort of 1 aggregates around these very difficult problems and challenges so clean tech fell to me like that kind of thing. And I decided to join I worked with 2 venture funds as an entrepreneur in residence for a few months. Um, and but we we were hoping to license some Ip from technion in Israel for a particular project. Ah.
Uri Kolodny: And that was the first time I I encountered a wildly rational licensing office. Many years later I encountered the same licensing office being equally irrational. so so ah we you know we didn’t come to ah an understanding and. We decided to put the whole thing once again on ice and I moved on.
Alejandro Cremades: Okay, now when when you did Manria you really experience their open source. So I’m sure that you learned quite a bit too on open source versus patents. So what was that whole experience with Andrea and what did you learn you know around open source as well. So.
Uri Kolodny: Um, yeah, no so Manria I ended up as of an an open source project. But but man was was different from from a different perspective and in that it was ah um, it was for for the most part self-funded and.
Uri Kolodny: And going through that experience. Um I think was sort of a reaction to the challenges of of and my my negative experiences previously in sort of the venture back companies. And I thought there’s something really sort of very attractive about you know about that the discipline and sort of frugality and and independence of a venture of ah of a self fund company and um.
Uri Kolodny: There are also many disadvantages to that that I experienced there and the obvious one is of course limited resources but beyond that um and I think we felt down that particular pothole is the fact that you are accountable only to yourself and.
Uri Kolodny: Given the sort of the cast of characters you could end up sort of optimizing for the wrong things and we optimized for the raw things and we were perpetually building. Um the perfect thing instead of sort of going out there and engaging the world and sort of iterating fast and and.
Uri Kolodny: In in hindsight you look at this and you say you know what were we thinking in real time you’re always saying to know that you know it’s just past that Hill and then and then the landscape will open up and then everything will be beautiful and powerful and efficient and fast and and ah, um. And I remember so talking to ah to my sister about this at the time and and and I said that you know this the independence that comes with self-funding is it’s something you know that we want to explore you know what does that offer us in terms of.
Uri Kolodny: And she she wisely said you you seem to be unable to do anything but explore that and I thought that was very very insightful that that that somehow stood in our way to. At least to fail quickly if not to to succeed. Yeah, you know.
Alejandro Cremades:
Yeah, move fast fail quickly now let’s talk about exploring because obviously now you finally you know launched what has been probably your biggest success today I mean what you guys say are doing.
Uri Kolodny: Um.
Alejandro Cremades: With starkware is pretty amazing. So how do you come across the problem and why did you guys think that it made sense that it was a problem that was meaningful enough to tackle it and and to bring the solution to cover it.
Uri Kolodny: Um, so back in say Twenty Fifteen eli benza son my my old old and close friend of of 35 years um came to me and said let’s start a company around my research at Technion he was working on. He had been working on 0 knowledge proofs for at that point over 15 years and 0 knowledge proofs is this field in theoretical computer science that was like completely theoretical when we were undergrads in the mid ninety s. And then over the years through the hard work of many including eli became increasingly practical and applicative and and he was one of the founding scientists of zcash which is one of like the the og projects of and the blockchain space. Um, and there the focus was on using 0 knowledge proofs for privacy. And we wanted to start starkware and the initial sort of impetus was just we didn’t want to sort of create so personal tension and and use the technology was his latest and greatest technology which is called Starks and we didn’t want to sort of. End up competing with zcash. We just thought that that doesn’t sort of that’s not the right thing to do that’s not the fair and right thing to do so he said let’s you know, let’s look elsewhere and pretty much instantly realized that using 0 ero-nowledge proof for scaling is a very very.
Uri Kolodny: Very ah, sort of interesting match where you find like this field of research that seemed to have nothing to do with the scaling of blockchains In fact, with blockchains prior to zcash sort of now meeting the needs of of permissionless blockchains which which have.
Alejandro Cremades: And what and what? and what? what? What is The what is the difference about blockchain. What is the difference there.
Uri Kolodny: Mass problem in terms of scale. So so blockchains are far worse than existing software systems in every possible way except for the fact that they can be completely trustless. Okay. And so in order to get that trustlessness and the the full decentralization meaning the ability not to rely on any centralized party like Facebook or Google or whatnot you give up on almost every other dimension of the network in terms of performance. And when we started working on Stark where ethereum was doing I don’t know something like 10 transactions a second and it’s not doing much more today and in fact, the the way it’s increased transactions is is not by any fundamental improvements to the technology. And so the the basic challenge there is the following. It’s not there isn’t any fundamental problem in in in hardware or software that prevents the given computer from doing more than 10 transactions a second as we know you can do there are monster machines that can do much more. But if the requirement is to run a monster machine.
Uri Kolodny: Then maybe al Handro and or you can’t participate in the network because we’re hobbists and we want to run our laptop in the kitchen and that’s all we want to spend so in order to get decentralization permissionlessness in order not to exclude participants. You need to to keep the the hardware requirements and software requirements of the network. Very very low. Okay, so this is essentially a social construct. It’s a social decision but that limits throughput of the network. So That’s the problem that we’re hoping to solve and and have solved.
Alejandro Cremades: So then let’s so then let’s let’s talk about that. Let’s talk about that real quick. So let’s double click on that What ended up being the business model of starkware. How do how do you guys make money.
Uri Kolodny: Beautifully. Yeah.
Uri Kolodny: So the ah we started out with Starkx which is a saas business model where we basically think of us as a compression service so entities that previously were interacting directly with the blockchain now we sort of compress with our technology. We compress their transactions. And write the compressed product onto the Blockchain. We’ve ah reduced the cost per transaction by anywhere ranging from 700 x to 20000 x and when I tell people that I you know I say that you know the first time I explain this to my kids that the surfboard’s on the back and the background is is. That’s not me that’s ah so um, you know I tried to explain to them that just sort of impressed this upon them that it’s not many times in life that you walk into sort of a situation where you get to improve something by 20000 x in fact, 10 x is quite fun and a hundred x is pretty rare and 20000 sort of. I’m unaware of you know too many examples of that and this is like a step function in technology and this is exactly enabled by 0 knowledge proofs. So so that’s ah ah so the initial sort of business model with ah stark x which is a saas business model. And then a couple of years ago we started working on starknet which is our layer 2 network and that’s been on maintenance for a good number of months now and actually today Kyra 1.0 which is the underlying language the programming language that we developed to power all of this is coming out.
Uri Kolodny: And so there’s a ah ton of excitement around the capabilities that this platform brings early. Ah February we had a starware sessions in Tel Aviv um 800 people from all over the world showed up and you know this is telviv this is in Paris so so I was I was sort of blown away by the excitement.
Alejandro Cremades: Wow.
Uri Kolodny: And the energy and and it’s all sort of authentic like like the core unit is is a lone developer or a duo of you know, young developers who are just excited by the software stack and eager to build all sorts of exciting applications that they couldn’t up till now on blockchains and now given the capability of Starknet. Suddenly becomes a reality.
Alejandro Cremades: For now now in this case I mean you guys have raised quite a bit of money. How much money have you guys raised for the company so far.
Uri Kolodny: Um, um, north of $200,000,000 actually yeah
Alejandro Cremades: And obviously now you know this is not your first rodeo so you’ve been at it for a while you know you’ve been able to also ah experience and exchange with different investors. So I guess why did you choose the people that you decided to choose ah for this journey. Ah, and they also how have you seen to the expectations shift from one cycle to the next.
Uri Kolodny: Um, um, so when we went out to raise our seeds in January of 2018. Um, it was sort of funny because this was like that in retrospect, this was the tail end of the twenty seventeen bubble meaning it was sort of deflating but people only a few months later sort of fully realized that you know that that was sort of. The market going down. Um, and that was right after a few projects phrased like absurd amounts of money of via icos like hundreds of millions of dollars and we were talking to a bunch of of of vcs and sort of on on the first date we said you know we’re not thinking of of of issuing you know doing an ico and all that and they said that’s terrific and on second date they they sort of said well you know why not actually and. And to us it made no sense and I think this was I’ll explain why? but well the why is actually easy. It’s it’s from our perspective that was like the equivalent of going public before it’s not before you’ve reached profitability. It’s going public before you have a product. And and going you know going public is sort of introduces an awful lot of noise into a startup sort of psyche and and we thought you know the sensible thing is actually first building the the tech stack you know, put out products and when the time comes consider.
Uri Kolodny: Maybe maybe not having a token to to coordinate the activity of that decentralized network and so that ruled out a bunch of folks. We were fortunate enough to find a bunch of investors who actually. Very excited by the power of the technology and the promise of the technology and the fact that you know that Eli with his vast experience and sort of thought leadership in the field was the 1 pushing this forward so we raised a seed round of $6,000,000 in january of 2018 um, now. The fact that that we were so you know we’d been working to together we we’d known one another sort of going back to our formative years in this sort of dynamic of vcs saying well why not an ico and all that you know if it’s if the cofounder is someone you met at a meet up two weeks ago it’s I think looking back on that it’s it’s far more difficult to say this is not what I want to do? This is not the company I want to build no thinking and it’s when it’s someone you’ve known since the age of 18 and you know. Went through all sorts of slept in tents and all sorts of stuff. Um, it becomes trivial you sort of look at one another and say you know this just makes no sense. You know, let’s move on and so we went for proper equity funding. Um, essentially.
Uri Kolodny: Over and over again and um and that’s proved out to be a very effective filter for those investors who share our sort of time horizons if you will meaning. We’re optimizing for the long term and in this regard. We’ve been very fortunate with the investors we’ve brought on board extremely. So.
Alejandro Cremades: Yeah, yeah, because they always the investors they always have their own limited partners that are the investors in their fund and their theses and they put all types of pressure tactics on founders too. So that they can accident so that they can return back the money to investors with The. Return So I can totally see the approach of betting on people that you know are more on the long term and that are going to be there with you in the journey and that really care about you and the project. So I can I can totally get that now quick question here talking about vision because obviously with those investors you had to really share the vision. So imagine if you were to go to sleep tonight and you wake up in a world where the vision of this project is fully realized what does that world look like.
Uri Kolodny: Oh that’s a beautiful question. Um, so oddly enough it looks exactly like this world except meaning that the the lives we lead. Essentially the same. Ah, we use the same apps and we have smartphones in our pockets and and we you know we we do all the things we do today except for 2 fundamental underlying like like silent. Well I should say this silent till it matters right? and then it becomes loud to the point of possibly sort of threatening your existence without relying nearly as much and I’m not naive to say without relying at all but without relying nearly as much on centralized entities. And with far far better control over your own data. Okay, so so you own your data you you you hold custody of your assets. You know um as Silicon Valley bank on Silverg Gate etc right? All these guys.
Alejandro Cremades: Yeah, no kidding. Yeah.
Uri Kolodny: Um, so you you have custody of your assets you own your data in the sense that maybe I want to share my shoe purchases with advertisers but not my t-shirt purchases and most importantly, you are not reliant on any centralized entity. Um, in a way that weak cans. You know that does not mean there aren’t any centralized entities. Okay, it does mean though that in that world Facebook may run monster machines for all sorts of computations. But you and I with the computational power that’s in our pockets on our phones. We can verify the integrity of that computation and that’s that’s quite remarkable meaning shifting the balance of power between individuals and these centralized entities in a way that empowers the individual that would be sort of the major change. In that world.
Alejandro Cremades: I love that now. We’ve been talking all the future. So let’s talk about the past but doing it with a lens of reflection. So if you were able to go back in time and go back in time and have a chat with your younger self. That younger you know self that is in mit already knowing that wants to start a business but you know it’s that that that push imagine you were able to give that younger yUri Kolodny: e 1 piece of advice before launching a business. What would that be and why given what you know now.
Uri Kolodny: So you know it’s a advice I I unfortunately can give myself today but I won’t out where I give others today but I still I still don’t fully heed. so so I’m far better at dispensing advice than acting on it. But umover the years so I would have tried to sort of decouple that now I’m fortun I would have tried to um. Keep a healthier balance you know work life balance. Um I’m still not very good at that. Um I I and my family we pay a price for that. Um I would have tried far better I would have tried I don’t know if I would have succeeded to ah to. Separate my identity from my from my you know my current project and an old friend of mine was an entrepreneur said the problem with entrepreneurs is that you know our vocation is tied so intimately to our identity. No.
Alejandro Cremades: Yeah.
Uri Kolodny: Is it the project that failed is it me that failed. Um and that’s given me a lot of heartburn ate enough to work with Ellie these past five years he’s far better and at both these things. So I just sort of. Look at him and try and emulate these these dimensions.
Alejandro Cremades: I Love that you know I Love this a last point because I think that founders they lose power. Ah when they’re completely attached to the company and they ultimately the fact that your project failed It doesn’t mean that you’re a failure.. It’s just the project failed. That’s it. And I I couldn’t agree more with the importance of being able to detach yourself from the project because ultimately you will be more effective in the long run. So So really thank you for sharing that I thought that was really profound.
Uri Kolodny: Um, yeah.
Alejandro Cremades: Now for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Uri Kolodny: Um, um, I sort of disengaged from Twitter realized that’s not helping my mental health. Um, so I guess they can reach out over Linkedin or email my emails or at Stark where got Seo. So happy to sort of connect with people and see if I know and can help in anyway.
Alejandro Cremades: Amazing, amazing! Well already. Thank you? So so much for being on the deal maker show today. It has been an honor to have you with us.
Uri Kolodny: Um, thank you thank you for having me out of hundred.
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Gene Hoffman has started and sold several startups. As well as becoming one of the youngest CEOs of a public company in the United States ever. His latest venture, Chia Network, has attracted funding from top-tier investors like True Ventures, Richmond Global Ventures, Breyer Capital, and Naval Ravikant.
In this episode, you will learn:
- What Chia Network is doing
- Embracing regulations
- Carbon credits
- Fundraising
- M&A deals
- Gene Hoffman’s top advice for others considering launching a business
Alejandro Cremades · EP 587 Gene Hoffman On Selling His Last Business For $100MSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Gene Hoffman:Gene Hoffman is a serial entrepreneur and former public company CEO. He has built and sold three companies to PGP, Inc., Vivendi-Universal, and Amdocs.
Gene has been a board member at eight different technology and energy companies and served as a liquidation committee chairman and as chairman at the company he most recently founded. He also serves on two non-profit boards, one of which he co-founded.
Gene has been appointed a special advisor to the board of a hybrid profit/non-profit company to provide and initially execute a turnaround plan that led to a successful acquisition.
He is the audit committee chairman qualified and has 21 years of working in high compliance environments with 12 years of managing PCI and SSAE-16 compliance for the storage of 220,000,000 credit cards.
Hoffman has built and scaled companies in enterprise software and SaaS, consumer subscriptions, cryptography, and software development. He has led teams from three friends with an idea to nearly 500 after acquiring aggressively with public equity.
Gene has raised over $150,000,000 in public and private markets, acquired four companies, and sold three.
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Connect with Gene Hoffman:* Crunchbase * LinkedIn * Twitter * ZoomInfo * PitchBook
Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show so very exciting gifts that we have today someone that has done it so many times I mean I think that we’re going to be learning quite a bit. So again, you know the good stuff that we like to hear building scaling financing even exiting you know, multiple companies. So. Yeah I think we’re going to be finding this very very inspiring so without Furtherdo Gene Hoffman welcome to the show. So originally born and raised in North Carolina so give us a little of ah, a walkth throughugh memory lane. How was life growing up there.
Gene Hoffman: Um, thank you for having me.
Gene Hoffman: Well so ah, my dad was ah a former cpa who ended up running a company that was kind of nationwide and the executive offices were there but they were actually like the operational officers were reno so ended up with this kind of weird like living in North Carolina and spending summers in Reno Nevada um but ended up also ah heading on a straight line toward carolina basketball um I had gotten involved with a friend of coach Smith who ran our basketball program at my high school and ah ended up kind of being recruited and at Carolina and in fact, you know we were talking about this earlier. I expected I’d be a sportscaster I had done some radio work and had a recording studio and so it was just that this internet thing came around and it looked like it might need some fixing.
Alejandro Cremades: And let’s talk about that basketball for a second here. What do you think you? you got from basketball and and when it comes to leadership. So.
Gene Hoffman: So coach Smith is just a real scion of leadership is you know a finishing school for young men who are become world famous superstars you know when you look at folks like Michael Jordan Vince Carter you know you get the set of skills that that system teaches and you know, ah. We’ll we’ll kind of talk about those later but I ended up being one of the youngest ceos of a public company United States ever and I could never have pulled it off without what I had learned from count of basketball. You know it’s everything from how do you handle the media to you know what are your core principles and you know thinking about things strategically so it was just a very very powerful set of. Ah, you know as I said fine young finishing school for likely to be successful. Young men.
Alejandro Cremades: So then let’s talk about what you were adding you know what you were alluding to earlier. They’re fixing the internet that came out at that point. So so what happened after you graduated.
Gene Hoffman: Well before I graduated some friends of mine and I were seeing what was happening and you know 9093 when I went to Carolina it was oddly a little bit of a hotbed of the internet sunsight was there linux was hosted there originally and I was watching a ah video on gopher. This is pre-web of an incoming thunderstorm and you know this used to be the hardest thing to find in 9092 or 9091 you know you hope that maybe the television station would cut in and show you that in a ad break or something but the idea that I could just go get the radar and watch it right now. It just made it very clear to me that the internet was going to be huge. Ah. And then when the Netscape Ipo occurred a bunch of my friends were saying hey we should do something you know, let’s start an isp and I was like isps feel very very you know margin narrow and repeatable with no moat and so we all kept talking about things and then hotwired put up the first internet ad and as soon as I saw that I was like. We can fix that we can give people the control over whether or not they see ads and we can go build that that’ll be an interesting way for us to build a real brand as a software company. Well we launched internet fast forward and cookie cutter. Ah you know these days. You know what is ah is generally ad blockers and cookie management in your web browser and it blew up.
Alejandro Cremades: So then what happened next? okay.
Gene Hoffman: Ah, you know cover the business section the New York Times for a little while where every 30 minutes on headline news because of course this was prime ipo season for folks like infoy and excite and all of those and you know watching those guys on squawk box get asked about you know? Well, you’re say you’re going to make money on ads. But how are you going to handle the ad blocker was really amazing. So ah, it blew up ah and it blew up to the point where we decided that it was time to build something that was more of a revenue product instead of a kind of you know, exposure product and that led us toward Pgp pretty good privacy. The the kind of original crypto software for email and ah we went to integrate Pgp in a nescape mail and this is shortly after. The federal government stopped investigating Phil Zimmerman for exporting Pgp illegally so ah, they ended up flying us out instead of us licensing Pgp they turned the tables and bought our little company out of Chapel Hill and moved to solve the bay area.
Alejandro Cremades: Wow now in this case, you know like the company was acquired by Mcafee so by Mcafee so what kind of biibility. Do you think that gave you into the full cycle of a business.
Gene Hoffman: Well, it was also who I got to work with so you know the person I reported to ah in business development was the former general counsel of Borland um, and so you know he had this set of stories and friends. This is Bob Cohn um that really got me a you know. 1 one is not the right term for it. It’s you know the super graduateduate class in how does the valley work that was just really powerful. It was you know the ability to have an idea and be immediately talking to the right person its sun in charge of Java the next day. Um, yeah, that was I think one of the most important things and also seeing you know, not everything went right. Inside Pgp of as to how they raised financing and some of their leadership decisions and so that was actually as valuable or more valuable than you know, being at a place where everything just kind of goes right? and each step just know works.
Alejandro Cremades: Now in this case for you I mean it was like a really nice segue into you know what would be a really nice exit you know, ah for you So tell us about how em music came about as a result.
Gene Hoffman: Well so at Pgp when I knew it was to be sold to Mcafee I was kind of thinking of what am I going to do next and it was a tie between at the time a new cryptocurrency or a music service and both these kind of came through what I was seeing at Pgp um Warner Brothers had come to Pgp to ask if we could help them with. File sharing file trading because we you know there was apparently this huge movement of mpthree files and this was the first time I’d heard about I was too busy. You know running a run a software company work for the basketball team. Ah, and that really put it on my radar as wow you know there is huge demand for this digital music already. And it was really a hard call and it ultimately ended up being my my then girlfriend now wife looking at me and going about cryptocurrency back then so we have to live on a strange caribbean island surrounded by arm guards. Can we go back to the United States probably not, you should do that music thing so you know that plus ah turned out Bob Cohn was my cofounder of your music his. Ah, dad had been very active in music publishing and he and his dad had written kind of the book on the music publishing side of the music business. So you know we had real domain expertise and it was very clear that was an opportunity. It was one of those just you know right? place right? time right? Folks kind of opportunities.
Alejandro Cremades: So you build that up and then eventually you sold you sold the company you sold the company to be Wendy for about forty forty million bucks um so what was that transaction like I mean how how did the transaction come about give us a little of an insider and insider lens in here.
Gene Hoffman: Yeah there’s so there’s 2 things going on. You know we took the company public and so we were you know the Nasdaq forty tech company thing. Um and we ended up buying rolling stone ah dot com so we had the online rights for it and you know obviously sort of part of marketing the music. But what was interesting was we bought it right before the dot com crash. And so a lot of properties couldn’t sell ads after the crash we could but the metrics didn’t work right? The you know deal with rolling stone kind of assumed cpms that were much higher than they ultimately were so it actually put us in the corner but we’ve been building such a relationship with the various record labels because we were out there saying you know look you’re going to have to make music. Easier to buy subscribe and use otherwise you are going to continue to have these piracy problems in the background and it was those conversations that led ultimately to kind of a strategic conversation with um ega bronfman and you know universal music effectively in the Vindi world. For them to say this is a real opportunity. You know this is the only company that’s actually gone out and sold digital music in any scale because we were actually really starting to scale up the sufficient but business side of the music model quite well actually so that was you know, really those kind of ongoing multi-year conversations with the likely strategic partners that would either be a partner or an acquirer.
Alejandro Cremades: So then after the transaction was done What happened.
Gene Hoffman: I became a music executive for a year it was really quite hilarious. So one of the strangest things I saw you ah had to have the right type of car. You actually had have it proved in your employment agreement that your car had to be nice enough had to like you know argue that my car was nice enough for them. Funny stuff like that. But what? what? I found most interesting what they found interesting too was ah you know back during the jupiter conferences or whatever you know there was a question that would always get asked about what was the right way to kind of go about coin to this market and I had been giving them the same answer the whole time and I did it again as an employee and they were all kind of shocked. They’re like you weren’t lying to us I’m like no some of us in tech are actually trying to like help you build a real market here.
Alejandro Cremades: So then so then for you I mean you didn’t stay long as they say once an entrepreneur entrepreneur always an entrepreneur. So how did the idea of being this here I come about because with been this? Yeah actually you did stayve you know they are you know, pushing that for a little over 13 years I mean that in dark years when you’re building a company is it’s.
Gene Hoffman: That’s right.
Gene Hoffman: Um, yes.
Alejandro Cremades: Is is a long time. So so how did the idea you know and the opportunity of being this here come about knocking.
Gene Hoffman: So it really came from being able to operate any music so when we sold it to universal. You know we really got to focus directly on just the business and so you really started looking. Okay, what subscriber lifetime? what’s total lifetime where are all these subscribers going that still want to be our subscribers. And it turns out that the credit card infrastructure was just never really designed for ongoing subscription services. It was designed to sell you a fur coat mail order. Um, and so with that you know we’d spent a lot of time Mark Randolph again the but orlean connection you know Mark was original Ceo and founder of Netflix. He and I used to have quarterly conference calls about how broken the credit card infrastructure was and so it showed me that very clearly you know from 6003 on software entertainment was all going to go subscription for the while and if that was the case. It’s an art. To keep long-term subscriber values so vendc was definitely born of that operational realization that there was a real problem that you could significantly solve and very profitably solve. So you know it took some time for us to get to a place where we believed that major corporations would hand us all of their credit cards. But ultimately they did. We ended up running the backend infrastructure for the Nfl. As they went over the top folks like dollarshaveclub you know you name it. It was easier to tell you who we didn’t support and that was Spotify and Netflix and just because they were early and Netflix had a lot of the same information we did so you know from that perspective. It was ah a true saas build I mean saas companies take longer.
Gene Hoffman: But you know we built something real and had you know, multiple interested acquirerers at the right time and were able to exit to amocs in 2017
Alejandro Cremades: And now in this case I mean you build this company from 2003 all the way up until 2016 and you did raise some money I mean during that range of time I mean we went from like. Completely green area on the vc I mean for example, like the Vc you know the venture space in in in New York was completely green. It was like almost unexistent. So I guess for you. How was that the journey of of raising money because you raised some money you know for this company. Ah I think that you raised about forty million bucks how was that the how was that experience of raising that money throughout that range of time. So.
Gene Hoffman: Well, it helped to have already had some you know, successful exits whether they were big or not. You know you had as an entrepreneur a bit of a track record and so people knew that you could actually kind of navigate the system and you know it’s also really handy when you do have that kind of depth of network to know you know. Which vc should I get a warm intro to by whom and how and you know once you then get started. You know as long as you remember what you’re trying to do for the venture firms which is trying to 10 x ten x some over 5 if you will but these days it’s more 10 x over 10 ah. Then you understand what their motivations are you know you got to keep the business growing and that’s what we did so fundamentally you know it’s a saas business. It doesn’t necessarily grow as up and to the right as the traditionalitional businesses did but that a r you know we had 4 or 5 year customer lives from very very large customers and so from that perspective we had kind of negative churn. Um, we’d actually see more growth in our existing but subscriber base than any losses that we saw of individual customers. So you know it was really being as capital efficient as possible. But in Sas you know it takes some sort of core base to get you to scale. That’s what we did. We got to scale and then we kind of used venture debt from there out to continue to scale up. Um, and you know you kind of knew that you put a dollar in on your one and you got about a dollar 10 out and you know twelve thirteen months later
Alejandro Cremades: So you are alluding to it. The company got acquired by amdos for north of a hundred million bucks but why why did you guys think it was the the right timing to to go for an acquisition.
Gene Hoffman: So it was a couple things. We were really scaling out. Um, you know we were one of those weird deals where in fact, our model was a little conservative in its next year’s operation when we sold it. It was one of those kind of businesses where we really had good control over it really understood how it worked so it was scaling nicely. It meant that we could get good a multiple. Um, it. Also you know at 13 you start to worry about your vcs because you start getting into their ah portfolios that need to liquidate and pass back to the lps so you know it was those various things and as I said we created a competitive bidding environment. We’d really you know, shown ourselves to be the. Kind of core platform that the television properties and the movie properties were using to go over the top and that was obviously a big deal and especially strategic for amdocs who counted all those those folks as customers for a very different sort of product of theirs.
Alejandro Cremades: Now in this case for you. You took some time off and then you know as as you said you know to upgrade the the boat and and do other Stuff. You know when you’re a founder I think that when you have like those downtimes I mean I think it can be sometimes a little weird. So. How long did that time off last and what were you doing during that time off.
Gene Hoffman: So this time around I did get about a year off and it’s something I experienced when I sold emusic universal and took a little time off after the vivendi thing you know there. It took me about forty days to get bored and that was the sign for me that I need to be doing something and I wanted to get to that place again. Because especially you know you run a high skilled saas business and you run a competitive bidding environment I had plenty of stress to like let go of and so you know that year was really me going. Ok when I wake up board. It’s not time. Um and during that year you know a lot of ah. Acquiring my new boat getting it in the right condition also ended up getting my captain’s license during that time so was doing a few things from the sort of hobby perspective that I didn’t get to do when I was you know so busy running day-to-day but it was really going I know I got one more in me and I want to do something important and it was you know very clear to me as soon as I started thinking about It’s time to go back. Well dove. Of course it’s cryptocurrency. But you know when I looked at the market I saw 2 big problems I saw you know bitcoin being almost perfect but using way more electricity, especially if you scale it up than we want and ethereum. An interesting attempt at smart contracting. But you know we see like the north koreans still a billion dollars last year and so it’s just not ready for primetime and so when I heard Bram Cohen who had gotten to know through our mutual venture backers in in 2010 s if you will and had a bunch of friends and common back in the cipher punk era. Ah.
Gene Hoffman: When I heard he had a solution potentially to bitcoin’s energy use I was like do we got to talk I ended up being the first or second meeting the then cofounders took the other guy was naval. So I’ve been with the company since inception I ended up going full time.
Alejandro Cremades: So then what happened.
Gene Hoffman: Approximately four years ago and you know officially became Ceo beginning this year but had been doing the role for a good eighteen twenty four months
Alejandro Cremades: So for the people that are listening to really understand it What what are you guys doing.
Gene Hoffman: So we have built a much better Blockchain. It is as secure as bitcoin. It’s very much in the bitcoin style a lot of bitcoin is exactly right? But we’ve then added a real smart contracting environment to it and that smart contracting environment is highly secure. It’s certainly a little bit harder to develop. So it’s not as easy to use as a developer as ethereum is but that’s because when you’re done it audits you can absolutely reason about what’s going to happen and so you can put you know billions to trillions of dollars on that chain and have it be used with real money. Um, and in fact, already the world bank and the ifc the Repoca Singapore and ia have all partnered with us to go deliver the article 6.2 of the Paris agreement is the voluntary carbon markets. You know, really leveraging what a blockchain does well which is builds trust in information and then let’s see great markets on top of that.
Alejandro Cremades: So now I guess saying there’s a lot thing going on right now. No like on the macro environment. You know also with the banks going belly up. Ah you have also the former cto of Coinbase. Saying that in the next day three months we’re seeing bitcoin going all the way up to a million which you know this point seems kind of crazy having bitcoin at 27000. How do you think that all of like because at the know the day crypto you know to certain degree was built. You know as a response to what we saw in a weight. So How do you think we’re going to see this space behaving now that we’re starting to really you know be in the middle of like shaky waters.
Gene Hoffman: Well, you know I think the last couple weeks outlined two very important things. There is a real reason why bitcoin was built and that real reason is still really valid I mean I joked on Twitter that you know no coiners always tell me that the western financial system is safe. And it’s kind of like I don’t hear that message in the last two weeks because it’s not exactly safe fractional reserve banking has always had these issues. Ah this time around everybody had an option you know in 2008 when I was running vndicia I wasn’t sure whether the money I had raised you know, only like eighteen months before was actually going to be there in the bank the next morning. Ah, this time around we were svb customer but we had 85% of our cash not at svb and I’ve got like a month plus in bitcoin self-custody of our payroll as well. So you know we had choices. Um I do think we’re war to see a major shakeout and it’s time. There’s a lot of projects that. Ah, sold illegal securities or or in over their heads and they’re all like they’re decentralized in name only you know 2 people control a thing you think is a blockchain that’s not what the point was and so I do think you’re going to see the scc and others be very aggressive finally in going through and cleaning house. But once that’s done. There are real technologies here you know, bitcoin’s real. You know ethereum somewhere in between but it is real I mean there’s a market for it. Monero Zcash these are the kinds of things chia that are going to make through this kind of regulatory gauntlet and it’s because if you’re doing this right? The 2 worlds can interoperate. You know the.
Gene Hoffman: Kind of base layer of bitcoin or chia is going to have the kind of I don’t know permissionlessness and pseudonymity and volatility that we’ve always seen but then folks like Vera and gold standard can issue carbon on top of it and it’s going to have any carbon market riding on top and it’s going to have the dynamics of that asset. You know this is where things like circles stablecoins come in too. So I think you’re going to start seeing blockchains be used as money and money adjacent kind of rails for all sorts of finance.
Alejandro Cremades: So can you talk to us as as well about the global use cases for blockchain.
Gene Hoffman: So one of the earliest ones is what I was talking about with the voluntary carbon markets. So ah Singapore I ea in the world bank launched the climate action data trust which runs on top of the chia blockchain what this is is as edgar is to kind of securities and debt markets. This is to ah voluntary carbon markets. So all of the registries vera gold standard the government of Japan the governor uk will all have um ah a table in this database to meta-reistry and so today when you go register it vera vera doesn’t know if you’ve registered somewhere else by summer. 1 of the first things era will do is check this meta registry to make sure that acreage at that time doesn’t already exist and so all of a sudden now you have a way between the nations and the volunteeruntary registries to at least make sure that you know this carbon offset was created once it was sold to However, it was sold. It was retired once and you can trace that on chain. Ah, and then on top of that we’re tokenizing carbon with the iffc. So we’re taking high quality nature-based carbon registering it in that process and then making it available so that folks like Exxon and meta can just buy in a market commodity carbon by being able to most audit underneath. You know what projects are in here and then when they’re done have a full audit trail that shows it. Retiring on chain then retiring down the climate action data trust that you can actually track and see exactly what they bought in public in an audible way. We’ve raised about $80000000 to date.
Alejandro Cremades: Now for you guys. How much capital have you guys raised today and obviously you’ve raised quite a bit you’ve done multiple companies. Why did you bring the investors that you did.
Gene Hoffman: So We again, we’re looking for true venture-backed investors high growth major technology changes I mean this is fundamentally a technology Company. We’re a software company and so you wanted to have folks who both understood that and believed that blockchains were as transformative as we believed them to be so that was very much how I kind of looked At. You know who made sense and who we approached.
Alejandro Cremades: Was it like already people you had an existing relationship with or or was it like new people because obviously there’s a new segment too and you’ve been you know in the venture space for quite a while. So. Was that process of making sure that then that you were able to tap in into the right people with that layer of social proof first.
Gene Hoffman: So I would say that about half and half and what I mean by that is about half of the kind of core drivers where people either had existing relationships with and wanted to work with before um or you know were tangentiously involved in various projects I was involved in the rest were often that next layer out in social network where people be like oh yeah, this is interesting. You should also talk to. And you know that that is very much how many of our rounds came together. It was you know that kind of you know these the folks we know are supportive and therefore these other folks you should be talking to too.
Alejandro Cremades: And I would say vision is something that you shared with them. So to that note, if you were to go to sleep tonight gene and the um, let’s say you wake up in a world where the vision of Chia Network is fully realized.
Gene Hoffman: The funny part about that statement is is that the company’s been distributed to shareholders for a lot of value. There’s a foundation that runs on like the linux foundation to keep the core developers going and this thing is fully and totally decentralized. But we’re not there yet First you’ve got to have the ability to really continue to finance development.
Alejandro Cremades: What does that world look like yes.
Gene Hoffman: To you know, walk through the regulatory environment and you know it’s our intention to be a public company which we think is the 1 right way to make sure that investors get the right disclosures and controls and then ultimately that we distribute this value out to the shareholder base right. So ah, you know we definitely took a different path than a lot of crypto companies did but we took a path because we understood how the regulatory environment worked and how we could fit in and make that work for the ultimate goals because the real goal of Chia is ultimately to be a public good that is the you know data trust layer. And the transaction and finance capability layer that the internet has lacked and in doing that you want to be more like linux. Ultimately where there’s no one person that anybody looks at you know Bram is a bit leanus-like but even Linus is thought started to be less important to linux. Um, and so that’s really the the ultimate vision is that you’ve got this extremely secure. Open source rich capability infrastructure that everybody uses.
Alejandro Cremades: And you you you were talking just now about the the regulatory you know side of it. You were talking all the scc earlier What does regulatory hacking look like what what does that look like.
Gene Hoffman: So you know throughout my career I’ve had this interesting set of opportunities to really try to understand what the regulatory regimes were and how to navigate them at Pgp at the time Pgp was still highly controlled for export. And so myself Bob Cohn and another person came up with the idea of publishing the pgp source code in a book and I was the ah most senior executive with the least to lose so it came to me to actually go export it. Ah I was the second person to ever be officially investigated for exporting crypto but it was understanding what the limitations of the law were you know. Exporting a book is totally first amendment protected activity and that was making it very clear that it was very hard for the government to say hey you can’t build software this way because software is at heart speech ah with music you know it’s an extremely complicated regulatory environment. It’s got one hundred and fifteen hundred and twenty years of really weird. Laws and rules. You know every song you hear on the radio has 2 copyrights. Most people have no idea that that’s how that works and so it was really looking at both. You know how do we better serve actual customers so that they’ll pay and how do we navigate. However, you know the the legal situation because of course. Time you know, Napster and others were just like let’s just rip it all off and we weren’t no, let’s go license this get real real rights to this and actually go out and do it and then here with cryptocurrencies and blockchains. There’s a real problem about how do you finance development and in fact, bitcoin kind of shows some know creakiness on this issue.
Gene Hoffman: Ah, you know because there’s no limited liability entity. That means that the the fake Satoshi has been causing trouble by suing a bunch of developers and that there’s no real way. The developers necessarily get paid that you don’t kind of have a better ongoing advancement there and so you know we looked at the regulatory environment and we went. Okay there’s no reason you can’t follow securities laws. And engaged early on with the scc and have come up with a very different way to ultimately get to the same place but we think the way to do that is to not throw out like 400 years of the joint stock corporation just because we can instead. Let’s use that let’s use the you know, kind of Playbook we all know of building a tech software company. That ultimately becomes a public company and then ultimately at the end distributes itself out to the shareholder base and kind of you know, steps steps away after everybody’s made their returns and their rewards.
Alejandro Cremades: So we’re talking about vision. We’re talking about future earlier. Let’s talk about the past but doing it with a lynch of reflection if I could put you into a time machine and bring you back in time back in time to that point where you were still maybe in. North Carolina they are going after your studies and perhaps you know you were wondering hey you know I want to do something on my own imagine if you had the opportunity of going back in time and having a chat with that younger gene and being able to give that younger gene 1 piece of advice before launching a business. What would that be and why given what you know now.
Gene Hoffman: So ah, my answer here is kind of odd but I think it’s important and that is like personal therapy is the thing I would most recommend um I had this interesting moment at at Vsa you know in the valley companies usually had like a 5 ive-year lifetime you know you you did not necessarily hang around with these things very long but Sas changed that the the way the model worked you, you were much longer and so you kind of got year 5 or 6 and realized there were a bunch of old company things you had to put in place like career development and when I kind of looked around. We did different things for different people on the executive team but it kind of all looked back at me and went. What are you going to do and you know I’ve been kind of a natural born leader. But what it really became clear to me is like you know if I could be even more comfortable. My own skin I would be even better leader and I wish I’d had that realization sooner. You know I would have been. That much more effective in all of the various inputs because I was less anxious about things and you know understood what drove me or you know why I might be mad about something like just kind of understanding yourself emotionally is underrated to be able to be the guy who says in the room when you’re talking to somebody like I had this moment. My entire team. Is talking to these people and they were charlatans and I didn’t understand them nobody else understood them but nobody wanted to ask and I I find that place in my career where it’s like this may be a dumb question but I don’t understand at all what you’re saying and I could see the wave of relief across my team because nobody wanted to be the one who looked stupid but you know.
Alejandro Cremades: So.
Gene Hoffman: Being in a place where you don’t care anymore about that I think is the the sooner you can get to that as a person the better.
Alejandro Cremades: I Love that So gene for the people that are that are listening that will love to reach out and say hi. What is the best way for them to do so. So.
Gene Hoffman: I’m at Hoffmanjee on Twitter that’s probably the absolute best way to get me I’m pretty present present there. So.
Alejandro Cremades: Amazing! Well gene thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Gene Hoffman: Um, thank y’ll, How do I having me on.
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The post Gene Hoffman On Selling His Last Business For $100 Million And Now Raising $80 Million To Build A Better Blockchain appeared first on Alejandro Cremades.
Gregory Sewitz is now on his second food startup. Since selling his first company, he has raised $100M to make your breakfast both healthy and delicious. Gregory’s latest startup, Magic Spoon has attracted funding from top-tier investors like HighPost Capital, Siddhi Capital, Coefficient Capital, and The Chainsmokers.
In this episode, you will learn:
- What’s inside Magic Spoon cereal
- Amazon versus omnichannel marketing
- Direct-to-consumer businesses
Alejandro Cremades · EP 586 Gregory Sewitz On Raising Raised $100 Million To Create Childlike Cereal For Grown UpsSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Gregory Sewitz:Greg Sewitz is the co-founder of Magic Spoon. Greg Sewitz is a native of Los Angeles, Greg studied Cognitive Neuroscience and English at Brown University, writing his thesis on the neuroscience of morality. He always assumed he would be a writer, or a scientist—or a science writer.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the dealmakerr show. So today. We have a very exciting founder our repeated founder he is doing some really really interesting stuff and we’re gonna be learning about it building scaling financing all the good stuff that we like to hear so without fartherdo. Let’s welcome our guest today Gregory . So. It’s welcome to the show. So originally born in a a give us a little of our walk through memory lane. How was life growing up.
Gregory Sewitz: Thank you so much for having me.
Gregory Sewitz: Well I now live in New York so it’s very different from l a where it’s always sunshine and everything closes early nobody you know there’s a lot less drinking involved but I wouldn’t I wouldn’t swap New York for for any other city and we have actually very intensely chose to. I guess build 2 companies in in New York um I think there’s just a big opportunity here for Cpg and and startups in general. But I loved growing up in l a.
Alejandro Cremades: And and out of all things will go you into neuroscience.
Gregory Sewitz: Why went I college I studied neuroscience and english actually to sort of weirdly unrelated majors I always my mom’s ah my mom’s a therapist. So maybe that played some role in it. But I always really love neuroscience I thought I would go into. Neuroscience probably into academia or something never thought I’d start my own company actually um, but 1 thing led to another and I met my cofounder in college and things just snowballed very quickly as we were approaching graduation on our first business and then now here I am with.
Alejandro Cremades: And we’ll talk about the second business in just a little bit but let’s say and let’s double click on that so you meet your cofounder and then you were saying that things noble towards saying building your first company exo. So how was that process like of you guys brainstorming and and thinking about a future where you would bring a solution to it and.
Gregory Sewitz: With my second business. So.
Alejandro Cremades: And the problem that you thought it was meaningful enough for you guys to take action. So how was that journey or that the ideation to bringing it to life you know, kind of journey.
Gregory Sewitz: Gabby. Ah, he’s from Scotland actually and he was studying economics so he was more interested always in having his own business. He was very involved in startup groups. At Brown where he went to college and he was originally planning to join a hedge fund or go into banking some sort of more traditional finance route but he he was always noodling on different ideas and he was really into fitness. Across. It was really big at the time when we were in college and the paleo diet was really big when we were in college so he was sort of deep in those communities he was working on his own protein bar um that he he just had started making for himself. But then. Actually was taking around to various gyms around providence that he would go work out at in different farmers markets and he sort of thought there might be a business there this was before ah rx bar and a bunch of other bars that kind of also were going after similar groups. But. Um, he he kind of wasn’t convinced that he you know was a really to point interesting enough to commit his life to and pass up a lucrative job in finance and I actually was at a conference somewhat related to neuroscience. Um.
Gregory Sewitz: Just a science conference and somebody there. There was a big panel about edible insects because the United Nations had a large edible insect research initiative going and somebody was presenting on it and I kind of came back. We were sitting. We were roommates we were sitting Around. Um and we. I Don’t know I Honestly remember the exact light bulb. Um, but there really was a kitchen table moment where we thought why don’t we take your protein bar recipe and see if you can basically taste any difference if we were to put crickets which were the sort of most.
Gregory Sewitz: Scaled up farmed version that you could get in the us at least in Canada at the time and they’re super high in protein. They require far fewer resources to raise than equivalent protein from cows or or pigs or chickens. So there was a big movement around at the time lots of excitement and. We moved to New York we had these samples we raised a bit of money and we ran exo was called for 3 4 5 years eventually realized that there was this 2 wo-sided problem. We needed to obviously build demand for americans to get comfortable eating insects but also. As the demand grew we needed to scale up the cricket farming side of it and so it actually took us to Thailand to look at cricket farms there to Canada all over the world. We eventually realized that this was going to be a longer time horizon than we initially wanted just to to fully. Get the cost parity to be competitive and then obviously from a consumer point of view make make the case much stronger and so we added up basically exiting that business to a large cricket farming operation. Um, and then starting Mads soon after that.
Alejandro Cremades: So what? So so you were saying that they you learned you know about some of those challenges about you know adoption, you know education and and and also how you go about Innovation. So I think that what is the biggest lesson that you got from innovating in In. You know with all these different things going on.
Gregory Sewitz: It was interesting to try and you know you you have these for us. We our first business we didn’t quite know what we were doing we were we were 22 23 figuring it out I mean as all first time founders are and we were really motivated by. Sustainability mission and just the marketing challenge and doing something so innovative of really trying to bring this new food group to the us and think about the psychology of how to convince people to do it. Um, there was a actually set my the neuroscience background did come in handy to try and figure out like why. Why insects were discussing to people how you might get around that like what arguments worked and what arguments didn’t work. Um, but in the end it was a really hard challenge and in a lot of ways it was like pushing ah a heavy rock a bit a steep hill and we were still super excited about it and um. When we kind of realized that it was just going to take longer to really get over that critical mass and cross the chasm from sort of innovative and niche the mainstream we started thinking about well we spent a few years now really you know taking something super innovative and trying to convince like. Ah, tiny sliver of people to try it then the next liver then the next liver then the next liver and what would the opposite challenge be and so we sort of hit on this idea of well you know, even if it’s like quote unquote less innovative maybe to take a super mainstream product and make it.
Gregory Sewitz: Make it healthier rethink it. But I Still you know it’s not like putting crickets in it I E Cereal. There actually could be net more innovation just by reaching such a larger audience much faster and so we started thinking about Well what? what are what are products that if you were to stop. Anybody in the street they probably would already have had in their house or you know felt super positively about had had eaten recently and there aren’t that many food products at least out there that that’s true for so we really tried to look at some of the very very large categories and see whether we could actually bring some innovation to those. Um, and just have the challenge to be had. You know we’re scaling something really fast versus having something be so innovative that it could only scale incrementally at a time and so that’s how we we came to Magic spoon.
Alejandro Cremades: So before Magic’s point I mean with exo. Obviously you guys send that up a selling the business. What was that journey like of going through a transaction and now you know seeing the full cycle of ah of a company.
Gregory Sewitz: Kings.
Gregory Sewitz: It was definitely bittersweet. You know you put so much time and energy into building a brand and you know we had a team that um, all moved on afterwards as well and ah actually the brand is still around I was in I was in Texas a couple months ago and happened to just see it. At a grocery store but we’re we’re not involved and I think we were. There’s there’s something about starting a new company that there’s just so much energy and potential and excitement about that I think you quickly it just takes over your life again. Um in one way or another and so. Really kind of dove head firstrs into magic spoon I would say as soon as we hit upon hit upon the kind of brand positioning and the idea and actually managed to formulate a product that we felt was meaningfully different than anything else on the market I think it was um, just. Off to the races for us at that point.
Alejandro Cremades: So Why Magic Spoon Why? Why did you guys think that it made Sense. You know this time around because obviously you know with exo you didn’t achieve the outcome that you had hoped for um, still an outcome. You know I think that an exit is always an exit. But. Why Magic spoon. Why did you guys think that the you know the problem or what you have you what you had seen or what you could bring to market was meaningful enough for you guys to take another swing at the back.
Gregory Sewitz: Gaby and I are both lifelong seral eater so there was just the emotional connection. Um I grew up with a pantry where we had 10 cereals at any given time and I had it every morning for breakfast and I think there’s a real There’s a real soft spot. A lot of consumers have for those iconic brands especially people our age you know I don’t know 20 to 40? Let’s say but but really they touch they touch a kid they touch people who are in their 5060S and a lot of these brands have been iconic since the. Since literally the 1950 s and 1960 s um with the kelloggs and and general mills of the world. So we were really excited about the idea of trying to update you know, take everything that people really feel connected to and love about those original brands the the sort of fun and joyfulness and flavor profiles. But update it for a modern consumer and it create a new sort of a new but iconic brand and that’s sort of how we were thinking about it. It needs to feel like it’s channeling all the original classic cereals but also feel like it’s really a category shift in. Product and how we’re talking about health and ingredients. Um, and for us, we’d seen a lot of um, these sort of niche diets like paleo and keto explode. Um, whole influencer in online communities grow around them and we knew that if we could create a product that.
Gregory Sewitz: Really checked the boxes for a lot of those different groups. We didn’t want to hang our hat on any 1 particular one necessarily but we really tried to make a product that any single person would be excited about eating no matter what diet you followed or no matter what product or sort of food you you couldn’t eat. Um. And and with cereal. Especially I mean obviously you know a lot of kids eat it. But most people eat it for breakfast and you really ideally don’t want a bunch of sugar and carbs first thing in the morning and and they just there hadn’t been any update to the category that kind of channeled a lot of modern nutritional thinking. Ah, into into the aisle and the way you’d seen in other large categories like juice and soda and alternative dairy and yogurts and things like that. Um, and so we set about trying to essentially replace all of the grains the wheats and cornrants with protein. And at the time as well. There was a new um, sugar called allulos that was just being commercialized at very large scales. So our timing was really fortuitous because that allowed us to get pretty close to the taste of classic cereals. But allulose. Because of the shape of the molecule doesn’t get processed in the body like regular sugar so it doesn’t have to be it doesn’t go on the nutritional fact panel as grams of sugar and so that was a big unlock as well towards us getting close to the tastes and texture of class materials but with a vastly different nutritional profile and I think.
Gregory Sewitz: Once we hit on that and we had the positioning of you know it feels and looks like a classic cereal but is healthier than the quote unquote healthier cereals. We knew that we really we were. We were very confident in our product Market fit.
Alejandro Cremades: Child like serial for Grownups. So Very interesting stuff here. What we’re talking about now. How do you guys go about financing the operation because this was the second go around you know with a different company and I’m sure that you also learned a bit you know from dealing with Investors. So. How much capital have you guys raised to date.
Gregory Sewitz: Um, well yeah I I can start at the beginning. So basically we when we when we had the really just the idea for magic spoon. It wasn’t even called magic spon at the time we emailed a couple of our earliest investors from exo. Um, some key advisorors. So like collaborative fun for example and a few others. Ah, we said hey guys we have this new idea. We’re really excited about it here’s all the reasons why we think it’s a really large opportunity. This is the rough product that we are developing and essentially based on that email and based on the relationship with Gavin and i. Collaborative fund wrote us our first check um on a convertible note or save so really easy I think we raised about 500 k or to $1000000 to really get the the product developed and they’re actually that one of the downsides of cerial is that. There’s a lot of investment that is required to to produce it. It. You can’t really produce it at a small scale. So even the formulation trials and things like that actually required quite a bit of cash. So there was some startup costs involved and then we did all the branding we got to launch um and immediately we just like we. We’re selling way more than we’d even planned in our most aggressive stretch forecasts and so we went out and raised a seed round from light speed I think um, it was maybe 5 bar or $6000000 and then um.
Gregory Sewitz: Just over time. We’ve raised a couple more growth grounds. Most recently we raised from high post capital which is a sort of middle market fund based in New York City as well. So to date. We have raised. Um, honestly probably. Close to $100,000,000 for various purposes and we’re fairly late stage. So some of it’s gone out gone to kind of buying out the earliest investors some of it’s gone into new product development some of it goes into a lot of it goes into inventory and as we’ve scaled. We recently launched in. 7 or 8000 national retailers this past year which is obviously also very capital intensive and we really want to make sure we did it right? Um, and so we’ve been very fortunate in our in our ability to fundraise because we’ve just had that product market fit from the very beginning.
Alejandro Cremades: So product Market fit. You know when you’re wondering if you have it or not you probably don’t right? Ah I mean I I I guess for you guys you know is what you were saying where.
Gregory Sewitz: Um, that’s true. Yes.
Alejandro Cremades: You Just you were just selling more than what you had hoped for and that you couldn’t keep up with the with the demand. Ah, now when you went out to market I mean were there any tests or anything I mean you were you were talking about it that you needed some cash there to be able to do the trials and that it took a little bit more money than expected. But. How did you go about doing those tests and everything to make sure that you got it right.
Gregory Sewitz: Um, we launched entirely direct to consumers so we were able to do. We didn’t we didn’t do a ton of fully pre-launched pre idea testing. But once we had the rough parameters of what we thought the product could be just based on. Formulation and what tasted the best um, we kind of put together a lot of different landing pages and at the time at least um it was very easy and pretty cheap to rapidly test a ton of different ad formats and value propositions and audiences on. Facebook and Instagram driving to different landing pages that were kind of highlighting different parts of the product or parts of the brand and see what worked so we were able to really zero in on which which reasons to believe were motivating to people and which consumer groups were. Most likely to be our early adopters and from there we then kind of just leaned in and over time of ah broadened and broadened and broadened essentially to a more mainstream customer I think there have been a lot of changes to the e-commerce and d to c industries the past couple of years and. I would I think it’s much harder today to to be able to do that on a kind of pre-launch budget. Let’s call it but we were lucky in that we were able to get a lot of insights ah early by being direct to consumer.
Alejandro Cremades: And how are he? how were some of those issues that you saw on on finding the right channels because on the direct to consumer. Also there has been some challenges too with the new tracking changes with ios and and things like that. So. How does that Work. You know about adapting you know and and finding the right channels to to to take this to to the right people.
Gregory Sewitz: It was definitely a key strategic question for us of when do we go to brick and mortar retail because from the start we knew that we wanted to be everywhere that ciral is sold one day. So obviously the vast vast vast majority of ceal is sold through grocery stores. And so it was always in our plan to be in those stores I think was an open question for us given our premium pricing. We’re about. We’re about 2 or 3 times as expensive as sort of an iconic classic cereal. Whether. Consumer at like that most mainstream of retailers. Let’s call it like a Walmart or something would would support that price point and and how long and how much marketing we’d have to do to really like build the awareness to do that and so we held off for as long as it could and luckily the business was growing so quickly in the early years just based on our owned web channel that we we were able to get our supply chain in a row we were able to really like work out a lot of kinks to then get ready for retail and then the timing worked out fairly nicely in that when a lot of the ios changes came through and. A lot of that to your point ad tracking got scrambled and all the the rates started going up and there was just kind of chaos in the ecommerce marketplace. We’d already been planning to really diversify the sales channel mix into more of an Omni Channel World essentially
Gregory Sewitz: And so we were able to launch in Target last year and now we’re in Walmart and Kroger and um, Albertson’s and ah and sprout. It’s a bunch of different stores and so luckily our business is very diversified now but we we definitely saw ah a much more talenting environment on the. Direct to consumer side once all those changes start to go through and talking to lots of other brands in the space I think it’s industrywide and just a ah big existential question for for the um, the online ecommerce channels like the Facebooks and Googles of the world like how they’re going to help support. This isn’t work around all these changes because they’re they’re working on it for sure and I think it still has a big role to play I mean quite ah a large part of our business is still online direct to consumer. But um, we now are are very much omnian.
Alejandro Cremades: Now in this case for you guys Magic Spoon for the people that are listening to be able to get an idea on the scope and size I mean anything that you can share on how big you guys are number of employees anything else that you feel comfortable sharing.
Gregory Sewitz: Sure. Unfortunately we don’t disclose revenue size or anything like that we cat’s hereless sold and. Wanted to give people who are customers of those classic cereals which we all know and love a reason to buy magic spoon which is you know hopefully tastes almost as good but we feel has a place to play in their diets. It’s maybe a healthier option and also people that have left the cereal category. Who maybe eat Greek yogurt for breakfast or protein bars or something like that. A reason a reason to come back.
Alejandro Cremades: So and I mean you were talking about the I mean we’ve been talking about the direct to consumer changes how to adopt how you guys have now this distribution on all these different retailers. So. What have you learned you know I’m sure that there’s a lot of people that are listening to that I’m like oh my god you know I’m dealing with those issues too. You know those Facebook ads not working and you know I wonder if there’s a different way a different approach. What have you learned around building that. Network I mean that distribution I mean being in 8000 retailers is is is a lot so how did you go about that.
Gregory Sewitz: It was definitely a challenge. We had to wait to really reorient the whole business I would say because everything was built to be direct to consumer. So our logistics operation was all kind of small parcel pick and pack. Um, we were in many different warehouses around the country. There were these shipping times and we were working primarily with the upss and fedexes of the world. Um, and our you know our demand planning and everything was based around really tight feedback loops of. Being able to make product and then sell it really quickly and and react to changes in demand or limited to different flavors and things like that super quickly whereas with retailers I mean you’re working I don’t know six twelve months in advance a lot of the time to plan around launches and. All the paperwork and you know we have to produce it then it has to go to a staging warehouse and it has to go to a distribution center then it gets the retailers and so it’s just a totally different way about of thinking about operations and finance and production and even you know obviously the sales is a big component too. We were lucky in that we. Have a very well-known brand at this point so we were able to work with the retailers and they were really excited about us coming to retailers to retail and we were super excited about going deep with a few of them and so it it has been relatively knock on wood. Um.
Gregory Sewitz: Smooth so far on execution I Think to your point given how money do you’ve launched into but definitely it took a real reorientation and there were some real learning curs to figure out I would say ah people the people on the team with experience from Prior roles. Companies that were in retail or on me Channel played a really big part in kind of helping to coach everyone and and kind of stay flexible. But um, there is I would say you know it’s There’s no new reinventing of the wheel.. There is a playbook for how you execute working with these with these retailers and so it’s. Think about just finding people who can help you implement that playbook and then just having a really solid team that can can execute and stay flexible to kind of change processes to adapt.
Alejandro Cremades: Got it now Imagine if you were to go to sleep tonight and you wake up in a world where the vision of Magic Spoon is fully realized what does that world look like.
Gregory Sewitz: It’s a great question I think for us again, It’s really,. It’s really trying to tap into that Nostalgian enthusiasm that people have towards syral as a product and um, all the brands that we grew up know and loving so for us a magic spoon could be thought of. In that same group as the cinnamon toast crunches and the captain crunches and the frosted flakes and things like that that you know you mentioned to people and their face just lights up I mean we’re all fans of those brands too. So We’re not. You know we’re not trying to necessarily like put them down or anything for us and we’re trying to build. A modern 2.0 sereal brand that is as large as those iconic serial brands in terms of awareness and also size and scale. So again, we’re trying to be everywhere that cereal is sold and if I were to wake up tomorrow and have our cereal boxes next to every box of cinnamon toast crunch in the world. Ah, would be amazing. That’s what we’re trying to build towards.
Alejandro Cremades: That’s so cool now imagine if you were to have the opportunity of getting into a time machine and you go back in time and you go back in time to that moment where maybe you were still in college you were still in brown. And you were there with your with your cofounder and friend and you have the opportunity of having a chat with both of you guys and being able to give the 2 of you a piece of advice before launching a business. What would that be and why given why you know now.
Gregory Sewitz: Um, I would say I think my advice would be pick something that if all goes according to plan.
Gregory Sewitz: Could get really big, really fast because I think to your point product market fit and momentum and scale really solves most issues in 1 way or another um and and any new issues it creates are good problems to have in a sense. They’re all things that you can work on. I think the hardest thing is continuously trying to you know, bang your head against the wall because you just don’t have the demand or the interest essentially in what you’re selling or what you’re building to justidfy. You know everyone’s time and money and. It’s obviously not black and white I mean there’s been moments that magic spoon at exo where you know you’re on a rocket ship. There’s also been moments where it felt like damn like what you know what? it not totally existential, but like what’s going on here and like how do we fix it because we need to we need to fix it or else. But I think just. Really being aware of the dynamics of the market and how if there’s momentum at yourre back like it really it really can take you very far and so I would I would think about opportunities and and solutions and problems from from that perspective.
Alejandro Cremades: Love it for the people that are listening Gregory what is the best way for them to reach out and say hi.
Gregory Sewitz: Um, I feel free to to Dm us on instagrammagicspoeial.com on Twitter or magic and cereal and Twitter and email us hellomagicspoon.com we we answer every email that we get sent.
Alejandro Cremades: So amazing. Well hey Gregory it has been an honor to have you with us today. Thank you so much for being on the show.
Gregory Sewitz: Um, thank you so much.
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Dan Teran took the leap from legal to tech, sold his company for over $200M, and then leaped from entrepreneur to startup investor. His venture capital, Gutter Capital, supports early-stage and mission-driven startups preferring to invest in the education, health, economic mobility, and housing sectors.
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Your email address is 100% safe from spam!About Dan Teran:Dan Teran is the co-founder and Managing Partner of Gutter Capital, a New York City-based venture capital firm focused on building companies to address the most important problems facing the United States and the world’s liberal democracies.
Dan also founded Managed by Q, the world’s leading platform for workplace teams, which was acquired by WeWork in 2019. Following the acquisition, Dan served as Head of Corporate Development and Ventures at WeWork.
Dan has spoken at Harvard, MIT, NYU, and Parsons School of Design about the future of work, and has been recognized by the White House and the United States Department of Labor.
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Prior to founding Managed by Q, Dan was a Partner at a venture development firm, Prehype, where he co-created startups with the world’s finest corporations and entrepreneurs. Dan began his career in community organizing and progressive politics in Baltimore and is a graduate of Johns Hopkins University.
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Read the Full Transcription of the Interview:Alejandro Cremades: Right? Hello everyone and welcome to the deal maker show. So super excited about the guest that we have today. We’re gonna be talking about going from one side of the table to the other. So why you know without further ado. Let’s welcome our guest today Dan Tarran welcome to the show.
Dan Teran: Thank you Great to be here.
Alejandro Cremades: So you were ah born you know and raised in between l a and New Jersey so I was saying life growing up, give us how little if I walk through memory lane.
Dan Teran: Um, it was good. So my parents are both from New York city and the New York area I was born on the East Coast and then we lived in Los Angeles for a few years when I was a kid so I got lots of skating and surfing in and then ended up moving back to. A pretty rural area in central new jersey so that was a bit of a culture shift and haven’t really looked back since I left for for college. So I went to to school in Baltimore and then I’ve been in New York since
Alejandro Cremades: So what got you involved or interested into Let’s say you know working in the public sector and Urban areas and and and issues around them and so forth.
Dan Teran: Um, yeah, so I’d like I said I went to to school at Johns Hopkins and pretty early into my career there I was introduced to a city council member a gentleman by the name of Bill Henry who kind of became my my mentor in all things Baltimore City Politics for my time there. And I just got really fascinated with the city as sort of a microcosm for a lot of problems that exist in the world and and Baltimore in particular had its challenges and I thought it was a really interesting opportunity I didn’t grow up in cities and so moving to Baltimore was kind of a full-on education. Um. I think prior to that you know my family always had a very strong service orientation. So growing up I spent summers going to places like volunteering on a navajo reservation of norphanage in Mexico and I think my parents were very intentionable. Ah intentional about exposing me to the need that existed in the world and it’s always been. As sort of my my professional drive to try to apply my abilities to address some of those issues.
Alejandro Cremades: So so let’s talk about you know after doing the um, the senate campaign. You started working for aarin brokovvich you know obviously for many of the listeners. You know that name you know is going to sound familiar. You know someone that they. That really you know made the headlines you know made history. You know, ah, there was even a movie that was a a Julia Roberts the one that was the main character. Um, you know, but being you know Erin Brockovic so how was that experience of working with with someone like that.
Dan Teran: Yeah, so you know like you said after I graduated college I worked on a senate campaign in Baltimore I then moved to New York to take a job at a law firm as a paralegal and as ah, an organizer working alongside Aaron Brockovich and basically law firm had retained eraron to help organize communities that had been impacted by environmental catastrophes. So similar to her experience in Hinckley you know there’s communities all over the United States that have been ah somehow affected by corporate polluters and they don’t really understand what their rights are and so. It’s 1 thing for a law firm to show up and say they might be able to get some relief but when someone like Aaron comes and shares her personal story and of course some of them have probably seen the movie. It really helps to bring to life. Um, you know that there might be relief for people. So um, it was a privilege to get to spend a little bit of time with her. We worked on ah on a a case in. And Duncan Oklahoma where Halliburton had allegedly poisoned the groundwater and that was a case that um you know I believe ended up settling and getting relief for a lot of people so it was great to have an experience working with her.
Alejandro Cremades: Now for you. You know, really interesting stuff here because there’s like a shift in gears I mean you thought that you were going to be doing law school and then all of a sudden it sounds like this experience. You know like got you to distract yourself or maybe to make a decision against it. So. So What was that thought process.
Dan Teran: Yeah, well you know I mentioned that case and in in Oklahoma and you know the last time I checked like a decade later it was still being settled. So um I think what I saw working in politics in Baltimore and then working in environmental law. Um, you know. Obviously very early in my career and at a very junior level was just the pace at which decisions were made and the way decisions were made felt very 1 very slow but also very arbitrary and I got the overwhelming feeling that no matter how hard I worked the outcomes weren’t going to always be in my control when you’re dealing with. You know, especially entrenched politics in a city and then dealing with you know the the court system which can be capricious and I was living in New York this is like 14011 and I had friends that worked in startups and I was really captured by how quickly you know this was early days of New York Tech you could you know. Write some code ship a product and people around the world could use it the same day and it could change their life and when I saw some friends have some success with that I just thought like that’s that’s what I wanted and I I wanted to make a change in my career.
Alejandro Cremades: So Tell us about jumping into the startup world because I mean this is a little bit different from what you were experiencing like the law firms or the a politics where there’s like more like red tape and and and a different way of doing things. So. So was it like a big shock when when you started to experience the startup world.
Dan Teran: Yeah I mean so first of all like breaking into startups in New York even back then was was not a small feat like there is a long list of people who rejected me from jobs in and startups and in the New York community and so everyone from Google to foursquare to. Joe Markcasey who is a good friend who had a company called social vibe at the time that then became Truex undercurrent I applied to basically every startup in town and got rejected from all of them and managed to find a startup called artsicle which was a marketplace for emerging artists that had just raised money and convinced them to hire me as their first employee. And you know it was a very early stage business basically me and the two cofounders they had just raised a small angel round and it really was exactly what I was looking for in terms of a broad canvas to basically be able to take the reins and try different things I ended up ah building their artist community onboarding hundreds of artists in the New York area but also being able to learn product and product design I found a great mentor who taught me kind of basic product design and I came to the founders and said you know I have a vision for what the product should look like and what it should do and they gave me the opportunity to do that and then I ended up honing my skills and and and for a while worked as a product designer. Which ultimately led me to getting recruited at Prehype which was was pretty transformative for me. So I think ah I meshed well with an environment where I could have a lot of ownership and a lot would be expected of me versus an environment where maybe neither of those things were true.
Alejandro Cremades: And why why did you find it so difficult to get into the startup world.
Dan Teran: I mean I was just coming from like you know on paper I’d worked as a community organizer and I had worked as a paralegal I also was like 21 years old at the time I had left college early. Um, and so you know who who was going to hire me. So fortunately. Happened to live with a ah, very successful photographer who had lots of roots in the arts community and he actually he was one of my references that basically helped vouch for the fact that I’d be able to help them build their arts community. So pretty unrelated to the tech was how I got my first job in tech.
Alejandro Cremades: And pre-hype you know you were alluding to it. It was a venture studio you know companies like parkbox coming out of it and and for the people that are listening a venture studio. Ultimately, it’s where you come up with ideas you get the teams around it. You get some financing you know to get the. Thing going and then basically you let those ideas you know, become companies of their own. So How was that experience for you of being able to see so many ideas seeing you know the ones that had legs from the ones that didn’t have fair legs and and some of the patterns behind the ones that ended up being successful.
Dan Teran: Yeah, so prehype was an amazing experience. So I joined at the very beginning one of the hendrik werdolan who was the the founding partner at Prehype had just started barkbox with Carly Strife and Matt Meeker and so I had the opportunity to kind of have a front row seat and help out along the way with some of the things that was going on at Barkbox which obviously went on to be a public company but also Prehype had a really interesting model where it was a lot of product people and designers sort of made up the team and. To keep the lights on everyone took on corporate venture development projects. So we’d work with big companies to build new digital businesses. Um I worked with Newscorp mondeles unileverge sort of you name it and they would hire us to. Ah, basically incubate a new startup using their assets and distribution and then if they liked it. They could spin it out to raise venture or they could spin it in and run it internally or they could kill it. Um, and so what that did for me at still pretty young I was like 23 at the time. Um. Had a lot of exposure to just 0 to 1 rapid prototyping bringing products to market and I think like the maybe the biggest learning I guess two things we were working with these big companies and I realized pretty quickly that if they were going to listen to me like a 23 year old designer like nobody really knew what they were doing um and the second thing was um.
Dan Teran: You just have to be willing to kill the ideas that aren’t working and move on and so we cycled through a lot of things even when I started my company managed by queue we originally thought we were going to be working with a condo and co-op residential buildings in New York and after six weeks of pitching to them. We realized that it was a pretty miserable customer. Um, and to my cofounder Simon’s credit we just retooled the deck and completely pivoted the business to focus on office and I think it would have been a long and miserable road if we hadn’t been willing to to kill our idea and ah and change quickly.
Alejandro Cremades: So At what point do you realize? hey after seeing all this stuff all this innovation. All this ideas you know I’m feeling pretty good about this I’m feeling pretty good about this idea and then you know thinking hey I think that this idea is the one and I gotta go On. And and bring this to life which ended up becoming managed by q.
Dan Teran: Yeah, so um, basically my co-founder at managed Byqueue Simman Rahmanian who went on to find to found Roe or roman the direct consumer men’s health business. He had been working on this idea sort of. On his own for a little bit and kind of had gotten to the pitch stage of like this operating system for commercials or originally for residential space and him and I had partnered on a project for news corp which we built a language learning app for non-native english speakers business english speakers around the world and we launched that. And Mexico City and in Brazil and the business. The the project had a lot of traction and we were able to spin that back to to Newscorp and so it created a little bit of liquidity for for Simon and I and so basically we decided we were going to finish the project with Newscorp and start to focus on managed by queue and really. It was over the course of probably three or four months that we had this transition period and we decided if we could pitch to 20 customers and we can get 20 customers to say that we were going to they were going to pay us. We would stop everything else we were doing raise money and do it full-time. And when we so first went to market. We literally had a pitch deck. Um, so we’re basically selling vaporware simone was a very talented designer. So the deck looked great and um, you know we were able to sign. Um I think close to 20 customers. Um, to basically let us manage their office for them before we.
Dan Teran: Raised any money before we’d written a line of code before we’d even talk to the cleaners and so that was really we really went ah to ah a pretty far extent to validate um product Market fit and just like demand from the market before we before we threw in.
Alejandro Cremades: So then so then tell us about you know what ended up being the business model of managed by queue for the people that are listening. How were you guys making money.
Dan Teran: Yeah, so basically the the vision for managed by queue is an operating system for for the built environment for the office that could run the physical space with the reliability of software which as it turns out requires a lot of people to do and so we went through a few different business models over the over the years Initially it was a technology enabled service company so we had a at at its peak close to a thousand employees doing cleaning maintenance ons site and we had a stack of software that we built to manage the service operation and to to manage the client interaction. Over time we evolved that into a managed marketplace so we had thousands of local service companies doing cleaning and maintenance. But also it security administrative staffing basically all of the services that an office manager would manage and that was being managed on our platform. And we would take a transaction fee. So the office manager would put in a request would get bids from multiple vendors and they would ultimately transact on our platform and we would take ah a take rate on that on that service and then towards the very end we had built a full set of tools for the office manager so we acquired a french company that did. Ah, employee request management vendor management basically a set of tools for the office manager and that was just a traditional saas business model recharge the subscription fee. So at the end think of it as saas plus marketplace fees.
Alejandro Cremades: And how much capital Do you guys raise for the company prior to the acquisition.
Dan Teran: Ah, over the lifetime of the company including debt inequity like just under a $100,000,000
Alejandro Cremades: Okay, and why would you say that it was so hard to raise money at the beginning for the company. Okay.
Dan Teran: Actually at the very beginning we were pretty fortunate through prehype and through Henrik at Prehype we had a great network of supportive angel investors even at a time when you know there wasn’t a huge community of angel investors in New York and many of those people. Um, are now lps in my fund so people like Scott Belski who’s now chief product officer at Adobe was one of our early investors people like Jay Livingston who’s now the chief marketing officer at shake shack um, ah Josh Abramson who had had founded college humor. So. We had some great angels we didn’t raise a ton of capital. It was like I think 400K was our first round and then pretty quickly after that. Um through Scott Belski we were introduced to hunter walk and Saya Patel who had just raised their first fund at home brew and they they they let our seed financing that. You know, really change the trajectory of the company. So I would say early on we had like a pretty pretty blessed fundraising experience.
Alejandro Cremades: So at what point do you guys say encounter. There was a little bit tougher to to raise the money.
Dan Teran: I think as the business got more mature and like you know reality set in. We had raised early on at very high valuations and obviously like we’re seeing what’s happening in the market today. Ah raising at high valuations ah can make it much challenging more challenging for you later in the life of the business so it wasn’t really I think. You know series a we race pretty easily series b as well and then I would say later in the business. We’d grown to a pretty big scale but there was still some figuring out to do on on the business model and the capital efficiency of the business and I think ultimately you know we the business grew up in downtown New York and it was we had a worldview that every office looked like the office buildings in downtown New York which are largely class b and c unmanaged office space and I think as we got outside New York reality set in in terms of how different properties were managed and so I think ultimately the opportunity looked a little bit different than we thought when it was just um. You know the 2 of us on the idea.
Alejandro Cremades: So So at what point would you say that the idea of perhaps you know doing an acquisition of the company comes knocking and then walk us through you know the different sequence of events that needed to happen for you guys to. To to complete the acquisition by wework.
Dan Teran: Yeah, so we had we were in market raising for the next round of financing we had raised a series c at ah at a pretty high valuation and you know I think we we were coming to the realization that um. It was going to take a lot of capital to get the business where we wanted to go and we had already raised a lot of capital and you know I had met Miguel Mckelvey who was one of the founders of of wework a couple years earlier actually on ah a charity water trip in Ethiopia and Miguel had always told me I should come in and meet Adam and I had I had met him once. Um, and I thought he was ah kind of a crazy person. Obviously a huge vision lot of energy. Um, and you know as we started to raise this last round of financing I started to spend more time with Adam and he started to really pitch me on the vision of what it would look like to build managed by queue and realize our vision kind of under. Under the wework banner and obviously this is before the cracks were starting to show at wework and you know from where we stood. They were super well capitalized. They had a stellar brand and sort of the um, coworking and ah an office space. They were starting to press into this. What was it called built by we or powered by we. Ah, experience where they would do. Basically what we were doing for large occupiers and so we saw a really interesting opportunity to kind of complement sort of the wework offering where you’re in their space and they’re managing your space and the managed by queue offering where you can use sort of this asset light software and marketplace approach to managing any space and so.
Dan Teran: I Think part of it was there were you know the the writing on the wall in terms of the the capital markets and looking at potentially like a highly diluted financing but also at the time it just seemed like a really massive opportunity to accelerate realizing our vision on like you know the the greatest scale that we could imagine at the time.
Alejandro Cremades: So what was the yeah, what was that acquisition process like so.
Dan Teran: Um, basically it started almost a year and a half before it happened. So I think like my advice to founders that are you know thinking they might exit or might need to exit you know businesses are. Bought not sold and if they’re sold. It’s probably not for a price you like and you know it really requires developing a relationship with the buyer. Um and positioning yourself as sort of the answer to their question and that takes years of building a relationship and building trust and so you know Adam had made an offer a year prior to the acquisition. Um, it wasn’t it wasn’t interesting to us and I think over the course of the next year um it became you know we continued to execute on our vision. We continued to prove that we were the the team that he was looking for solving the problem he was looking to solve and then ultimately wework was willing to pay a higher price and then I think also. You know, part of the reason we got such an attractive valuation is at the time me personally and my management team filled some major gaps that were needed at the organization and so ah, yeah, it was ah it was a long process and I think like it was really built on kind of. Building a relationship and and ultimately figuring out how could how could we be the answer to their their question at the time.
Alejandro Cremades: So I believe that the um that the the acquisition was saying was announced to be about 220,000,000 and you know of this there was like different components. Um, and you know obviously as everyone knows we Work. You know, ended up a. Having a failed ipo which I’m sure that that affected every single company that they had a acquired because they had a really big valuation and they were using stock ah in order to complete and fulfill those transactions. So How was that for you guys. How would those events unfold and. And obviously you know I’m sure that you guys were Disappointed. You know with the events that were unfolding which were not the ones that you were promised.
Dan Teran: Yeah I mean obviously like it’s not the outcome that everyone had hoped for I think you know going into the acquisition. 1 of the things that I was really clear about was I wanted to make sure that the team that had built the company and helped us to get to where we were. Um, that they were not exposed to sort of the the the risk that I was taking by choosing to exit and obviously stock was a component of it. So I think one of the things that I am most proud of um in sort of the way the deal went down is my employees got paid all cash and they got paid all upfront. So. Anything that happened after that they were not subject to and I think that’s a big reason why a huge number of those employees still work with me today on the fund. Whether that’s you know as collaborators as lps as founders or as employees within the portfolio. Um, but yeah I mean obviously I personally. Um, was compensated in ah a large amount of wework stock. Obviously my investor is at the same proportion and I think fortunately for early investors. It was a big enough exit that everyone still did well um, but you know obviously. Ah, when a company goes through sort of the financial carnage that we we work went through and you’re holding any of that paper. It’s not going to feel great.
Alejandro Cremades: Yeah, and now obviously when the transaction happened you ended up heading up the a corporate development team helping with with transactions too and and obviously you know like. I’m sure that you learned a lot. You know, not only from what you experience, you know as as as going through this acquisition with wework but then also leading acquisitions for we work too. So What would you say you know have been your biggest lessons learned around M and a.
Dan Teran: Yeah I mean I think like um I would say that one of the biggest lessons is at a founder led or like very strong Ceo led company. Um, you know the m and a team you know for smaller deals they’re they might be looking for things that are kind of fit to a strategy. But I think. Often for the bigger deals. No matter what anyone tells you it’s like really the Ceo is in the driver’s seat and if they’re excited about a deal. They’re going to find a way to make it happen and justify it and if they’re not It’s just not going to happen and so I think like you know for companies that are thinking about selling making sure that you have that strong. Principle-to-p principal relationship and getting executive buy-in is important. Um, and then I think like the flip side of that is the strategy really matters and so you know I was also overseeing meet up conductor flatiron school a bunch of businesses that had been acquired and you know as you know is is now well known. Businesses were not a strong strategic fit to the business and they ended up being you know, divested for much less than they were required for when the business failed to go public and you know that that m and a. Ah, can be a very powerful tool for businesses but it it also can be kind of a shiny object and cause a lot of distraction and strategic drift.
Alejandro Cremades: So how do you think companies should think about M and a on the buy side in order to scale much quicker.
Dan Teran: Well I think like you know there there are forms of M and a when you’re acquiring sort of a direct competitor to to acquire a book of business like that’s a very different. You know if if it’s really just about growth that can be very accretive I think you know where it can be very dangerous is when you. Are using M and a to augment the strategy when you haven’t really solidified the core business in terms of ah you know product Market Fit Strong unit economics and really understanding how you’re going to evolve a relationship with an existing customer versus you know, acquiring new capabilities to engage a new customer in a completely different motion like. I Think that can be dangerous.
Alejandro Cremades: And I heard you earlier talk quite a bit about valuation. Um, you know? Obviously you were talking about valuation to Us. We’re thinking about the transactional side on the money side you were talking about Valuation. You know the way that you guys went through it. Ah the way that you had you know Also the high valuation at an early stage. Or higher valuations at an early stage going through those different rounds. Also what you’re seeing now you know in the current environment. How would you say that your perspective you know has shaped up you know around valuations over the course of time.
Dan Teran: Yeah I mean honestly like I was a perfect example of what I advised founders not to do early in the life of my company. You know I was like 24 when we started the company I had basically no business experience and i. Definitely viewed the higher price tag in the financing as sort of a sign of success and was completely blind to the fact that that can be really damaging and limit your options later on in the life of the business if it’s not rooted in in reality and I think like you know where we are in the cycle now this is. And this this is not a message that would surprise anyone. Um, you know there’s real repercussions when evaluation is not grounded in reality and it does real damage to a company when that has to be rectified. Um, you know, further down the line I think in my we got out by the skin of our teeth that managed by qe so I feel like ah you know we we. We ah, we managed to sell the business without having to do a downro or anything terribly dilutive I think in this environment like that’s just like that’s not happening and so founders need to be really careful about the about what they’re optimizing for in a financing because I also think the businesses that are trained on capital efficiency early. Um, habit just a huge advantage in the capital markets.
Alejandro Cremades: And what was that the the decision to leave we work because that was the immediate. Um, you know event that needed to happen for you to start what you’re up to now with gutter. You know, which is you know going on the other side of the table really? Ah, but they. How was that how was that process like at what point do you realize hey I think it’s time to go.
Dan Teran: Ah, well it wasn’t much of a decision on my end I got ah a phone call from ah the Cfo who had just become Ceo at about five o’clock in the morning saying we were thinking. It’s time for you to move on What do you think and you know it was it was in line with my expectation the last. Piece of work that I did for them was kind of putting together some scenarios to divest everything that I was um, overseeing and so I assumed they would be divesting themselves of me at some point I would say came a little bit sooner than I was expecting but um. Once the ah initial shock of being unemployed for the first time since I was 14 wore off like it’s but probably the the best thing that ever happened to me. Um, because like you said it’s you know, given me the opportunity to to focus on what I’m building now.
Alejandro Cremades: So talk to us about gutter. You know how did the idea of gutter. You know come to mind because I mean you are an operator. You’re an entrepreneur and you know here instead of building another company. You decided to build a fund to invest in in founders.
Dan Teran: Yeah, you know it’s funny like I’ve been doing it for over a year now. So I think the reality is set in that I’m running a venture capital firm. But I think I’m coming out of wework like the last thing I thought I would be doing was becoming a Vc. Um, and I think really. The way that it ended up happening was my partner James and I have been investing as angels since 2017 James and I went to undergrad together. He was doing his masters in computer science and machine learning. He had his own startup in the city that failed and to support himself. He started playing poker on the internet. And he ended up becoming one of the most successful daily fantasy sports player ever. He built a software-driven process to predict athlete performance and player performance and basically took all the money out of the game for 2 years so we started investing in 2017. We built a portfolio. Ah of about 100 angel investments together and we really enjoyed working with early stage founders. We really enjoyed learning about new types of businesses and so when I found myself suddenly unemployed. Um I was just trying to figure out what to do with myself and so I started reaching out to some of the companies I’d invested in. Um, you know in particular. Where there were mission-driven founders that didn’t come from the venture industry that I thought had really interesting insights and I you know wanted to be able to help them build their businesses. So um, two of those businesses are in the portfolio now 1 is called opus which is ah training software for frontline workers. Another is called bicky.
Dan Teran: Which helps restaurants understand their customer data. Um I basically just started working closely with founders ended up helping them recruit some of my former team members and I got a lot of joy out of that I also felt like we were doing something that nobody else was doing which was finding people who had a. Deeply held insight from industry but didn’t have a tech pedigree and that other venture firms might ignore but we felt like we could solve that like we knew how to build software product so we could bring in those people and we did that enough times that it just felt like um something we. 1 we’re really enjoying 2 from a mission and values perspective felt very aligned to kind of the impact we wanted to create in the world and 3 you know when you’re building a founding team and putting in all this work in the early days you don’t want to give away those economics to somebody else once you know the the hard early stage problems have been solved and so we wanted to put ourselves in a position where we could be. Ah, writing bigger checks leading rounds and being a ah more meaningful part of the company as they evolve.
Alejandro Cremades: And and in this case, you know Also for the people that are listening. What are the types of companies that you’re looking at investing as part of the gutter investment thesis.
Dan Teran: Yeah, so we have a belief that the biggest companies that are built today are going to be built in response to the biggest problems facing the United States and the world we view those problems as affordability for the average american mostly in healthcare education and housing second is economic mobility. And third is climate change. The reason that we believe these things to be true. Is we come from the ah the Warren Buffett school of never bet against the United States and if you believe that you have to believe that we’re going to solve these problems because any one of them threatens to undermine the United States and within those buckets we try to focus on ah software as a service businesses and ah marketplace businesses and that’s you know primarily because they are wonderful. Efficient business models and also I have a lot of experience building in them and you know when you look at what we’ve actually invested in to date. Um. We have a really strong thesis thesis around housing we’ve invested in a number of businesses to accelerate the supply of affordable housing in America we’ve invested a lot in electrification. Um, so things like heat pumps and ev chargers. We’ve invested in climate mitigation. So ah, waste reduction floodp plainin management. Scope 3 emissions reporting. So really It’s a pretty diverse portfolio and pretty generalist but like really the north star is ah are these companies taking ambitious shots on goal to solve the most pressing systemic problems facing the us in the world.
Alejandro Cremades: And how different has it been to raise money for this fund because now you’re announcing a $25,000,000 closing to start, you know those investments in companies which is exciting but how different has it been the fundraising for this fund versus the fundraising that you were used to as an entrepreneur.
Dan Teran: Yeah, you know it’s funny. Um it was a lot harder than I thought it was going to be um I had you know a lot of success raising as a founder I had a successful exit behind me. Um, and I thought that we were going to kind of like ah could sleepwalk and do a small fund and you know. It took over a year to raise it was hundreds of conversations and I joke with my partner that if someone had told me in October of 2021 that it was going to be this hard I might have stayed in bed. Obviously I’m I’m glad that I didn’t but I think like the 1 thing that nobody tells you is. When you’re transitioning from being a founder to being a fund manager. Um, really people don’t give you credit for for having a successful exit behind you. Um I think like there is a perception that the skills that it takes to be a great entrepreneur are just different from the skills that it takes to be a great investor and I think that. Is true in some cases but for the type of work that we do I feel like you know it’s a pretty strong match in terms of skill set. Um, but yeah, it was. It was a long process. It was a lot of conversations I would say and on the upside and you probably know this from from your work as well. When you are forced to pitch a million times and you have people constantly telling you why you can’t do it. Ah you get really clear on why you think you can and what your edges and I feel like over the course of the last year it really helped us to refine our investment thesis.
Dan Teran: And to refine what we thought are edges in a market that admittedly does have just a ton of seed funds.
Alejandro Cremades: Love it now. Question for you. There’s probably a lot of entrepreneurs that are wondering hey how do I reach out to Dan and. And perhaps you know like share what I’m up to or get my feedback on what I’m up to because what I may be doing you know could be a perfect fit with his investment thesis or what what is the best way for them to reach out and say hi. Thanks.
Dan Teran: Yeah, so um, our website is ww wwww dot gutter dot cc and our contact information is on there. You can also find me on Twitter at dp turan I’m also on Linkedin. So yeah, we we love to hear from people. Um, we’re a small team so sometimes it takes us a little bit to respond but we do make a point to get back to everyone that reaches out with ah with a personal message.
Alejandro Cremades: Amazing, amazing! Well hey Dan thank you? So so much for being on the deal maker show today. It has been an honor to have you with us.
Dan Teran: Yeah, thanks so much for having me great to see you.
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The post Dan Teran On Selling His Company To WeWork For $220 Million And Now Raising $25 Million To Invest In Mission-Driven Founders appeared first on Alejandro Cremades.
Tom Ellis has gone from bootstrapping his business to finding alternative financing methods to grow and secure big private equity deals. His startup, ShiftKey, has attracted funding from top-tier investors like Clearlake Capital Group, Health Velocity Capital, Lorient Capital, and Pantheon Ventures.
In this episode, you will learn:
- Business pivots
- How ShiftKey works
- Making private equity deals work
- How your business will be different after a private equity deal
- Tom Ellis’ advice when starting your own business
Alejandro Cremades · EP 584 Tom Ellis On Raising $450 Million To Address The Healthcare Workforce ShortageSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Tom Ellis:Tom Ellis is the founder and CEO of ShiftKey, a marketplace technology platform transforming the future of work by empowering licensed professionals to choose their pay rate, define when and where to work, and connect directly with facilities looking to fill open workforce needs.
After spending more than a decade in healthcare staffing, Ellis recognized the limitations of the traditional agency approach and was inspired to create a solution that wouldn’t just create business efficiencies, but would transform the future of work and empower licensed professionals to embrace independence and flexibility.
In 2016, Ellis founded ShiftKey, headquartered in Dallas, Texas. Since then, facilities have posted more than 50 million hours of open shifts on the platform, and Hundreds of thousands of licensed professionals have engaged on the platform.
In 2022, Ellis was named #1 on the Dallas 100 Fastest-Growing Companies in the DFW list and was also a winner of EY’s Central Plains Regional Entrepreneur of the Year Awards.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today. We have a really incredible story and it’ a story here. You know if a founder that has been building scaling fin adcing I mean he really understands you know. How that looks like and also what it looks like. But also we’re going to be talking about the private equity side of things today when it comes to the transactional side of the equation so without farther ado let’s welcome our guest today Tom Ellis welcome to the show first. So originally born in Seattle.
Tom Ellis: Um, thank you Thanks for having me. Ah.
Alejandro Cremades: I know that you moved them eventually to Oregon so give us a little of a walk through memory lane. How was life growing up.
Tom Ellis: Life was good. Ah you know, moving from one city to another one is always an interesting move and then so he first landed in Eugene Oregon and a few years later moved up to Salem I was a bit of a sports nut growing up I played basketball most of my life up there. And yeah, lucky enough to be a part of the ah 96 state champion basketball team up there.
Alejandro Cremades: That’s amazing. That’s Amazing. So It sounds like you had the leadership you know peace covered. You know we change. Obviously you are executing very nicely nowadays you had the dealing with the uncertainty covered you know from Moving. I Guess you know how do you think that all those different you know aspects whether it was the leadership side you know playing sports or the uncertainty of moving to new places making new friends. The unknown How do you think that all shaped who you are.
Tom Ellis: I mean I think playing sports is a big deal I think you know I try and instill this in my daughter today too is that one of the things you get from this is the ability to focus and learn how to work hard and understanding that you are out there. There is competition and. If. You don’t put in the effort. You’re not going to get the reward so. It’s part of ah part of playing sports and a big part of growing up for me. Yeah I mean I think that’s something that just happens basically in anyone’s life. You know world was a little different back then? um I think it’s funny.
Alejandro Cremades: And what about dealing with uncertainty.
Tom Ellis: No one asked me back then if I wanted to move. They just kind of did it? Um, but you know kids have a little bit more control these days and a few more opinions but all in all I think you know it can be a good thing. It can be a challenge and you know just like anything else. You got to find your way to work work through it.
Alejandro Cremades: Now in your case you did a little bit of selling you know, advertising you did the selling of a equipment for fitness. So a little bit of everything you know when it came to selling So um, before that was obviously before you became an entrepreneur entrepreneur but I guess.
Tom Ellis: You know, um.
Alejandro Cremades: How do you? How do how important? do you think selling is and how important do you think really understanding a master in that has helped you in becoming an entrepreneur later on.
Tom Ellis: Well so I mean I think everyone should have a sales job at some point in time in their life I think it was incredibly important to me 24 hour fitness you know really taught me a bunch of what it means to again put in the work grind out phone calls. You know back then it was a. Ah, small area and we all had to learn how to pitch in front of each other. Um, so once I got to staff care and staff care was you know much more of a um you had to make your 100 phone calls a day my recruiting class there was like 27 people within the first two weeks about half of that was gone. And without my time at 24 hour fitness and learning how to grind it out and be there and work. It could be a little overwhelming for some people. Um, so that’s why there was so much turnover I mean by the time I left staff care I think there was only 3 out of 27 left by the time I actually wound up leaving myself. So. You know you kind of start with that foundation and what it means to so to sell and to work and to understand how to make money with a phone and then that translated into being successful at staff care which then as I started my own company. It was a lot about you know, knowing how to just sit down put in the work make the phone calls.
Alejandro Cremades: Now Let’s talk about being successful because obviously you’ve definitely made it happen. We shift key but it was not that easy to get into it because it was shift key the result of a pivot. So what happened there with the pivot I mean what was that original.
Tom Ellis: To try and be successful.
Tom Ellis: Because it’s part.
Alejandro Cremades: Idea you know you guys eventually shut it down and you know eventually you landed on shift key. But what was that sequence of events that needed to happen for shift key to see the light of the day.
Tom Ellis: Yeah, so it was definitely along a long road I made a lot of mistakes along the way learned a lot of things along the way. My first company started in 2011 I was just going to get into physician staffing myself I had a partner join who knew the nursing side. And that became what we eventually turned into shift key because I had walked into his office one day and he was trying to fill a shift and back then it was all done by a phone so it was 1 shift at a time you know it was literally will you take this 2 to 10? Will you take this 2 to 10 repeatedly dialing the phone and I said to him. If ah, if that’s our plan we’re never going to be able to scale this as a business because you’re limited on having time to recruit new nurses and and do more work so I I was basically like let’s post these shifts online see if the nurses will log in and pick them up luckily enough for us. They did. I just had used some third party software to get that done. Um and eventually I approached them about you know I’m working with nurses in particular right now. Um I don’t want to put anyone to work that may have an expired license or an expired credential that they need so kind of can I get some expiration dates built in. And they told me ah no, thank you. It wasn’t part of their business model and so then I had to try and figure out how to get software made on my own I was fortunate after ah, a couple follies I got introduced to a friend of a friend who was running a development shop out of Austin Texas and we started building then what is shift key. So.
Tom Ellis: Took us almost three years to get that built and that’s when we shut down my old company and pivoted into shift key. So there’s 1 more thing that we did along that road. It wasn’t just the credentials but previous company we used to do the the old school way also with the client side and that was.
Alejandro Cremades: My god.
Tom Ellis: You know, call them and try and get the needs out of them to put post them in in the system new one when we got shiftke was allowing the clients themselves to log in and post shifts and the nurses to log in and fill shifts and the nurses to register themselves as they’re going through that so it really created a marketplace instead of. You know a staffing company which is what we have been before.
Alejandro Cremades: Now in this case I mean 3 years to build. You know the the platform the technology I mean that’s that’s that’s insane I mean probably I’m sure that you thought many many times to give up. Because I mean 3 years is a long time. Why why? so long.
Tom Ellis: Well so again, the ah, the guy that I had building shiftkey for me was running his own personal dev shop and along that way a few times he took a few other full-time jobs and so I had to convince him to come back and eventually. He was ah working at under armor in Austin and I was like okay, it’s the time it’s time for you to just join us full time and let’s get this thing started and kicked off the ground. So once he finally agreed yeah I shut down the old company I ah. Ah, hired 6 of the people that had worked for there to move into my townhouse and everybody worked off my ping pong table to try and get shift key off the ground. Um, so it was a very pivotal moment and something that we just needed to do um because you know part of. Even the learning process for me on on getting software developed was more than just hey I need a 2 wo-sided marketplace I had to figure out a lot of that ahead of time so I spent a long long time. The first time I tried to outsource the build I got a wiref frame back that was like 10 pages or so. And ah, over several months I eventually turned that into 72 pages and that’s what I sent down to ralph to get started on version one of shiftkey because it’s it’s a little bit about figuring out. Okay well what happens if I click this and what should that do and what does it mean for the.
Tom Ellis: Worker and what does it mean for the facility.
Alejandro Cremades: Because for the people that are listening to really get it. What ended up being the business model of shift key. How do you guys make money.
Tom Ellis: Yeah, so it’s ah it’s a 2 sided marketplace right? So we have facilities that need nurses right now and we have nurses who can log in request to works shifts. So the cool thing about is it. It really does empower the nurse to do what they want right? So it’s. Work where they want when they want for how much they want and on the facility side. They get the choice too right? So they get to post the shifts they get to approve shift requests. They you know, get to fulfill their schedule in that way so most of it right now is in post acute market which is you know long-term care skilled nursing. Assisted living facilities. But at the very onset you know we knew that this had potential to do more and so that’s why we built you know shift key not nurse key so it’s really around ah specialties skills, credentials and shifts all right? So if you think of a specialty. It’s like your RN versus lvn. Skills is what are they comfortable doing the credentials that verify that they can do that work and then shift-based so we do think that there’s a lot of potential for other industries in this although we’ve tried to remain very focused on the post-acute market for right now. And we’ll eventually expand into other ah other avenues.
Alejandro Cremades: Now in this case I mean building A marketplace is very complicated I mean you have the supply the demand you need to have the liquidity in the marketplace. So that people are able to find what they’re looking for in a short period of time I Always say that there’s like the chicken and the egg right? Ah I mean you want to. Shoot the chicken and step on the egg you know because you are so frustrated in the process of building this now. How did you guys go about making sure that you had that liquidity in the marketplace and and and how did you go about finding the weakest side of the equation so that you could You could really build that up quickly.
Tom Ellis: How? ah.
Tom Ellis: Well so there’s been a nursing shortage in the us for years right? And um, we had already been posting shifts at the previous company online. So we knew that the nurses would log in and start picking them up if we built the demand side up with the facilities. So the big question when we pivoted over to shiftkey was are the facilities going to log in and post shifts and sometimes that was a bit of a challenge right? because as a a nurse or a staffing coordinator working in a building if they needed help they were used to picking up the phone and calling someone instead of logging into a system and posting needs. So was a lot of education. But luckily we had had you know some good clients who have worked with us and were willing to continue to post shifts to then build up the supply side of the nurses to be able to come in and eventually you know work.
Alejandro Cremades: Now you guys bootstrapped the operation I mean which is remarkable because typically on those marketplaces you need. Ah you know quite a bit of money to really get the networking effects going in the right direction and and get the community the marketplace to really work in the in the in the right ways. Now you guys fully bootstrap this why why did you bootstrap this you know versus maybe taking some Vc money and and having a little bit more oxygen.
Tom Ellis: Yeah, so I like I would have loved to have had some Vc money at the very beginning. But unfortunately I wasn’t too good at at raising any capital back then I didn’t even know it was possible. So when I I started. It was just an $80,000 sba loan with my first company. Um. Eventually got that to be more I thought the banks would work with me through a lot of this and it was funny like we we got. We went from the 80000 to like 300,000 and we outgrew that by putting people to work and I went back to the bank and I said hey I did it. Did my job I got all this money deployed can I have more and they said well come talk to me next year so it was one of those things. But also when we made that transition I went to a factoring company and a factoring company is one of those that will just buy your invoice from you and that they get a bit of a ah ah a bit of your revenue. But. It allowed me to scale in a way that I never had been able to before. So even though I didn’t have the vc money I wasn’t working with runways I just or or burden rates I I had the ability to still scale my business in the way that I needed to but it also relied on me needing to get the sales and have the people go to work. In order to be able to do that so we had to be profitable. You know very early on and we were you know it was it was how I made my livelihood and what we needed to do so from that sense. It was great in that you know we’re we’re not a company that’s out there that has you know 0 profitability. We we do make money here and we.
Tom Ellis: We are going to continue that as we move forward. It’s ah, kind of 1 of the core things that we do.
Alejandro Cremades: Would you say that perhaps bootstrapping also was a little bit a little bit challenging too because you’re on a very thin line and you don’t have that much room for errors because obviously an error could be fatal. So ah. So Yeah I mean I’m sure that you probably dealt with with some of those moments that you’re like oh boy, you know here we go this is we’re like about to hit the cliff.
Tom Ellis: Yes, I’ve I’ve got a few good stories about that. Probably the funniest one was even at the first company I had to walk into. Ah my sales guy’s office and say if you book 1 more shift this week. We’re out of business because we won’t be able to pay the nurses. So one of the biggest problems we have is actually getting too big too. Fast was was one of the main things and then later on you know I I found myself you know, driving down to our biggest clients office every Friday afternoon to collect a stack of checks to go put them in the bank before four o’clock so that way I could pay the nurses who had worked over the weekend. So yes, we’ve we’ve definitely walked some very fine lines to make sure we got all this done but you know that’s that’s part of being an entrepreneur and part of what you got to do in order to get the job done.
Alejandro Cremades: Um.
Alejandro Cremades: And then what about growing the team because I mean obviously now you know you guys and we’ll talk about that in just a little bit. You know you, you’ve now landed some money some capital There’s like 300 employees another 300 from another investment that you guys have done so what’s the um. How did you go about also growing the team in a way that that it was sustainable so that you wouldn’t you know, grow too fast on the on the on the payroll.
Tom Ellis: Well I mean I guess the first thing first is ah you know in the sense of some of those hard lessons that you learn along the way is we had a few debates back about you. You grow team top down or bottom up. And we learned through this process the top-down is the is the way to go all right? You go get the best leader you can and let them build their team and I think that’s important for a lot of reasons but probably the most important if you’re at a rapidly scaling growing company if you have someone that’s ah you know, kind of more of the worker that you’re hoping to make a manager that’s great. But they’re not going to scale at the speed that the business is scaling. So if you have someone who is you know good to great. They’re going to have the ability to still scale and grow their team and manage it all in the right way. Um, but that was one of those first things I learned from private equity as well. Um. You know when I when I first did the deal I actually told them ah now that I’m a real Ceo. What’s the expectation of me and they told me be a good recruiter so that really played on my strengths because I had spent you know quite a bit of years being a physician recruiter at one of my previous companies.
Alejandro Cremades: Yeah, no kidding. So let’s talk about the um capital side of things because you know in this case, you guys took money from private equity and after bootstrapping the operation. You know you had this profitable you know, ah a company.
Tom Ellis: Yeah, okay.
Alejandro Cremades: Why did you think that it was the the right thing to do at that point in time to take you know that 150,000,000
Tom Ellis: Yeah, So um, I Guess best place to start with that as a story is and when we first started doing this and we’re looking around and and nobody else is doing anything like what we were so we eventually got a couple years down the road. We started seeing some competition out there. And we knew as a team that it was probably time to try and mature a little bit as an organization to go out there so we made a plan to do that. Um, and you know.
Tom Ellis: I guess one of the other funny things to say is our our accounting process when we got the deal done was just export to Quickbooks from shiftkey and I didn’t have a single financial person in the building. So I don’t have any background in finance at all and I had largely done most of the jobs myself that shiftkey had so. As I’m going through and trying to recruit people I know what they’re going to have to be doing at scale to be able to you know succeed. But that’s really what it was it was it was time to mature the business to try and go after even more market share to be 1 of the industry leaders.
Alejandro Cremades: Now when you got the money I mean how? ah I mean obviously first and first and foremost before you been getting the money. How was that process of um, you know they they. Getting the p firm and and closing the deal. Also you know you had built something meaningful so making sure that you were you know, looking at all the different angles and making sure that things were done right? So what? What can you tell us about that.
Tom Ellis: Yeah, so it was early Twenty twenty that I met with ah an m and a company first and told them that by the end of the year we were going to try and get a deal done with private equity. They said great come back and see us in November. Um, but obviously then going through covid and the the increased demand and all the stuff that happened there. It became a ah you know, ah even faster scaling business for us because nobody else in that time could fill shifts the way we could fill shifts. Um, so I went back to them and you know I want to say it was may so not that not that much longer and said hey I think that we might need to get something working earlier and they said that they thought they actually had someone for us on a buy side. Um, so they were going to represent the buyer. Um, instead of us. Um, so it took a month or two they became uncomfortable. You know we obviously didn’t have the financial functions in-house at all. We’re doing the best we can. But so they passed so then we started our actual formal process after that so that kicked off early November we had Lois I think.
Tom Ellis: You know we probably had 10 or more um, by the time we were done with that started going through diligence after picking one and they started trying to change the deal on us a little bit so we had had multiple offers so we went back to um, ah laureent and said hey if the deal still stands. We’re in.
Alejandro Cremades: Um.
Tom Ellis: They did all their diligence and we finally got it closed on st patty’s day of 21
Alejandro Cremades: Wow. So then how how much time all in all.
Tom Ellis: Ah I mean I’ve spent a lot of time in market at this point because you know even growing faster and faster after the transition. You know there’s more and more opportunity. So you know it hasn’t slowed down at all I Guess it’s probably the best way to say that we continue to.
Alejandro Cremades: Um, yeah.
Tom Ellis: Ah, be out there and in front of investors and and working and you know getting the latest deal done was obviously a big win.
Alejandro Cremades: And we’ll talk about this now. So obviously 150000000 there was a minority. It was a minority investment now how how would you say that the dynamics changed. When the money came in you know, especially the corporate structure. You know you were used to broadly they you know doing things quickly quick books you know, like more like the boosttrappy way now when you receive external money you know probably gets a little bit more serious and professionalized know the yeah the operation. So. Were there a lot of changes in that regard.
Tom Ellis: You know there’s some ah you know, not everything moves as quickly as what it used to um, but a lot of that is just around security and making sure I I don’t think we’re so big now that we don’t still move with speed. But. You you know when you’re doing it all yourself obviously things can move a little faster now they help me be more professional and get the right people in the door so we could scale faster. Um, but 1 of the big things you know with with us is you still you got to be able to get the work done. So there’s there’s no excuse of. We’re going to do things slowly around here. We’re still moving very quickly as as quick as we can.
Alejandro Cremades: So tell us about the 300,000,000 that they got injected. You know, um a little bit later so all in all 450000000 first tranche one hundred and fifty and then the second trench of 300000000 more of a continuation vehicle sort of saying so.
Tom Ellis: Most yeah.
Tom Ellis: Both yeah.
Alejandro Cremades: Tell us about that team that deal too and how would you say that has impacted Also the the operation.
Tom Ellis: Yeah I mean so that’s not money. That’s just directly injected into shiftkey that’s more for our private equity company to be able to pay off some of their investors. Take some chips off the table and and allow the company to still grow. So. Day to day for us. It’s still just about going out and trying to accomplish the goals that we have and it’s about you know, having the vision and the mission and the values all done So that way you can go out and do those things. Um, but you know getting deals done with private equity is great. Obviously you know you get to take home some money along with that. But. It doesn’t really change how we operate the business on day to day and I I’ve been very fortunate and then our private equity company has been a true partner to me so things that I need to bounce off of them ideas that they have we we work really well in Tandem together. So Laurean Capital’s been great.
Alejandro Cremades: Got it now. Let’s let’s let’s so let’s shift gears here for for just a little bit if you were to go to sleep tonight and you wake up in a world where the vision of shift key is fully realized.
Tom Ellis: And.
Alejandro Cremades: But does that world look like.
Tom Ellis: Ah wow. Um, so I’ve been working a lot in this post-acube market right? We did our our strategic investment of onshift and so onshift does the scheduling side. Facilities. So if they want to schedule their employees. That’s what that tool is used for but we noticed going through and doing the deal with them that you know those facilities were missing a ton of shifts and so this would give us the opportunity to use our work workers to fill those positions. So that’s kind of step 1 is being able to take and give to the market this you know machine that helps them with a lot of their problems. The majority of the problems that they have on a facility basis is ah revolved around staffing and how do they staff their people. How do they get the. Ah. You know, independent workers through shift key and have it all blend into 1 unified place now expand that even further. Um, you know there’s so many industries that could benefit from this. Um, you know I I don’t have them all down. We’ve dipped our toes a little bit into dentistry just to see what that looks like there’s the therapies that are out there. And there’s lots of industries that are just even outside of healthcare altogether. Um, so again, it goes down to specialty skills credentials and shifts if if we can bring this you know and we can be the platform for licensed workers right? to have the ability to work independently choose you know where they work when they work.
Tom Ellis: For how much they work. That’s the the long-term realized vision.
Alejandro Cremades: Now here we’re talking about the future. So let’s talk about the past with that lens of reflection. So if I could be bring you back in time you know back in time to that moment that you were thinking about building something and you were able to give 1 piece of advice. That younger self what will that be and why given what you know now.
Tom Ellis: Well I mean the the most important thing is it’s all about the people right? you you can do a lot of wonderful things with a lot of wonderful people around the table with you. Um and understanding that is incredibly important and I got really lucky with some of the people that I worked with. I’ve been fortunate also with the people that I’ve recruited since getting things done a little bit more but you know there’s no perfect answer I think the thing for a true you know entrepreneur is understanding that you’re going to have to put in the work. Still um, but knowing that. There’s also great people that are out there that could help you do that. You don’t have to do it all yourself. Although sometimes it’s going to feel like that.
Alejandro Cremades: Now I guess in the in this in this journey as a founder tool I mean I Guess as a follow up to to to lessons learn and learning I guess for your development as a founder so that you were able to grow at the same pace as the company.. What would you say has been the Book. Or maybe like the resource that has impacted you but the most when it came to achieving breakthroughs as a founder.
Tom Ellis: Um, so for me a lot of that was understanding What my job was going forward right? and I got a lot of that from laureent when I had that conversation. What’s the expectation around me because if my job then is to grow this executive team and be a great recruiter.
Alejandro Cremades: M.
Tom Ellis: And get the right people sitting around the table with me that makes a lot of things go a lot smoother than otherwise they might um so there isn’t a particular book that I thought was just that changed my life I did really like tribe of Mentors If You haven’t read that one I think it’s great. It’s a lot of different perspective around the same set of questions which I thought was great because you know there isn’t one answer to anything. There’s different approaches to a lot of things and I think that’s what I liked about that book.
Alejandro Cremades: I love it now for the people that are listening Tom that will love to reach out and say hi. What is the best way for them to do so.
Tom Ellis: I yeah I mean we have lots of options for you. shiftkey.com obviously is the is the main one but there’s also you know we have Linkedin and Twitter and all all of the normal social media avenues.
Alejandro Cremades: Amazing. Well hey Tom thank you so much for being on the deal maker show. It has been an on earth to have you with us today.
Tom Ellis: Thank you Sir appreciate it.
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Michael Ronen has gone from investor to entrepreneur and back again. He helped the massive Vision Fund, and raised over $100M for his own venture. His startup, Branded, has attracted financing from top-tier investors like Kreos Capital, Lurra Capital, Target Global, and Declaration Partners.
In this episode, you will learn:
- Billion dollar investments
- Investing versus building an investment firm
- Starting and managing a company during a crisis
Alejandro Cremades · EP 583 Michael Ronen On Leading SoftBank’s $100B Vision Fund For StartupsSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Michael Ronen:Michael is the Co-founder and President of Branded and a Board Member at Falcon Capital Acquisition Corp. He was the Managing Partner of Softbank Investment Advisors where he focuses on investing in next-generation Automotive and Transportation companies, as well as Artificial Intelligence and Communications companies.
Michael joined Softbank in 2017 after 19 years at Goldman Sachs where most recently he was a Partner Managing Director and served as a co-chief operating officer of the Global Technology, Media, and Telecom Group and a member of the Investment Banking Operating Committee.
Michael was a member of Goldman Sachs’ M&A Group and the founder of the Automotive Technology effort at Goldman Sachs. Prior to joining Goldman Sachs, Michael served as a non-commissioned officer in the Israeli Air Force Intelligence Corps and later worked as an attorney, specializing in bankruptcies and financial restructurings.
Michael earned an LLB (JD) from Tel-Aviv University in 1994 and an MBA, with distinction, from the Stern School of Business at NYU in 1998.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So I am very excited about the guests that we have today. We’re gonna be talking about all the good stuff that we like to talk about building scaling financing and also being on both sides of the table because our guest today has seen it all so I guess without further ado. Let’s welcome our guests today Michael Ronin welcome to the show. So originally born in Israel give us a little of our walk through memory lane. How was life growing up there.
Michael Ronen: I Used to be here. Thanks for having me.
Michael Ronen: Well, it was Israel of the 1970 s and early eighty s so it’s also different Israel at the time. So yeah let’s just say that it was quite different than New York city and Silicon Valley I grew up in a rural. Town in the northern part of Israel I grew up that town was very close to an air base a very large air base of the israeli air force and so my dream was to be a. An air force pilot and I never got to do that. But I got ultimately to be part of the Israeli Air Force Intelligence Forces so I did some very very interesting things that I still cannot talk about certainly not on a podcast but certainly shaped shape my life.
Alejandro Cremades: How do you think that shape your life your future.
Michael Ronen: So um, I would say the the both growing up in Israel during some difficult times you know the 1970 S still had significant wars and conflicts in Israel and when I was a very young kid. Um the yon kippur when 1973 was ah was a big event. I think it creates resilience and perspective at an early age. Um and gives you gives you some strength that otherwise um, you know my kids grew up in the last ten fifteen years in the us and it’s just a different It’s just a different level of resilience and and strength that comes out of that. And then I would say in the air force intelligence. You know you you start that you do this just after high school so I graduated high school at the age of 18 and within 3 2 3 hree months I was in a very intense program as part of the air force intelligence and and some kind of. Very intense events happen. You know I had ah a syrian air like air pilot take a mig and defect to Israel within my first year of of being in charge of some of the operations. This is six twelve months after being in high school and suddenly the consequence of. Things not going well is not just getting a b on your math exam. It’s you might you know first put people in danger and maybe even a country in danger people can get hurt. Obviously there’s lives at stake and fundamental kind of national issues that are at stake and second.
Michael Ronen: You’re kind of you’re on for yourself and you need to take care of yourself and and if you’re doing well, that’s great and if you’re challenged and and things are hard. You know there’s there’s no one to talk you and you need to kind of figure it out and the consequences of of screwing things up in. And and the army is not just being you know again getting a a bad grade or being you know out of the school for a day. It’s being in prison and losing your freedoms or doing you know, very very It’s very high stakes and so one said okay, found this on the web for is there. Hairline.
Alejandro Cremades: Now.
Michael Ronen: I am tiingish defect to Israel within my first and operations this is six hundred and twelve months after being something is wrong at my end got enough. Oh well is not just.
Alejandro Cremades: Very much shaped your future influence you as a person as a professional and eventually you go ah study law and then from law you did your Mba why didn’t you become a lawyer.
Michael Ronen: So um, well let’s start with why did it I even get to law if I’m honest about it. It was really I was just searching for what would be the path that will take me forward and my mother god rest her soul would like a good jewish mother wanted me to be a doctor. You know it was all about kind of having a profession and law was a way for me to get a perspective on on business life. Um, that is different. Um and and I so and I practice it for a year or 2 actually in Tel Aviv and it was very clear to me that that it’s a very narrow way of experiencing business and experiencing life and my ambition was to be to leave the country to kind of move to the us I frankly didn’t even know exactly how and why? but I just wanted to participate in business in a big way. And lawyers as much as the work is great and um and could be quite fulfilling have basically the the job is certainly the corporate side is to when everything is said and done and a transaction is complete. They they allocate risk in in legal documents between the two sides and to me all the interesting stuff happens before that when the business deal actually is getting cut when ah you know people build and and work to build businesses and and that’s that’s what I wanted to participate in.
Alejandro Cremades: So you ended up going to the investment banking side of it so you became a partner eventually in Goldman Sachs in New York and you were involved with them for quite a while almost twenty years that is many many many years working like crazy hours and like like they will do there typically so I think that this experience without a doubt gave you access to be able to meet with tons of ceos also be able to. See what works what doesn’t work in companies. So perhaps you know that pattern recognition. So what was that pattern recognition. How did that shape up for you. How were you able to see you know good ceos from bad ceos or good companies from bad companies.
Michael Ronen: So yeah, it is obviously the biggest chunk of my professional life was this experience and I didn’t leave because it was a combination of an amazing firm that went through a lot of ups and downs but is comprised of really really strong. People that I constantly learned from and a career path where you grow and you do more and you become a very influential and and kind of complete leader and and frankly it’s it’s every time I thought about doing something else. The job got more interesting and bigger. And yes, you’re right? Oh ho I did see a lot of different kind of industries and experiences it. It was always what and what we call Tmt so it’s always telecom media and tech and I always like to work across these sectors which are quite different and. Ah, but they all share kind of the disruption of technology and and when I joined telecom this is late 90 s early two thousand s telecom was disrupted the old telecom business became a broadband business first wireline and then wireless. Um, and then you know obviously tech and internet and media became a ah growth business by fueled by the broadband and the transition from physical to digital and look the the things you see in small and bigger companies is how people react and adapt to change.
Michael Ronen: And the old saying of you either adapt or you die I’ve seen this time and time again the old some old telecom companies never adapted and they became basically extinct and went bankrupt some companies adapted became broadband companies and grew. Same thing with media right? You know you see something like Spotify essentially taking a piracy model and making it a legitimate. Well well-con constructed profitable business globally and now we see this in in tech adapting to Ai et cetera. So the. The like the the thing that I clearly saw is the exuberance that always get through when you have um when you have big changes and that could be quite disorienting my first year or 2 of Goldman I was. Private jets funding companies without revenues in the first internet bubble and that seemed to be completely normal because that’s what I got into and then when it all implodes in your face. You realize? Oh oh that was that was actually not the normal There’s actually a normal below this that I just discovered. And then again you know seven zero eight nine when the bubble you went you go through another one. We are just going through another one right now you kind of learn to not be too disoriented by these bubbles. Yeah I always joke if there’s a bubble I kind of want to participate early and leave before before the.
Alejandro Cremades: Yeah.
Michael Ronen: Before the party is over. It’s very hard to do because you never know exactly when and how but you certainly understand when it’s exuberant and when when things are are not right and the best ceos the best leaders have a steady hand. They’re able to participate in a. Kind of thoughtful way in the growth parts of of these of these cycles and they they manage the risk of the cycle turning on them and they’re able to keep their team together throughout that journey and these are you need. Experience you need vision. You need culture. You need stability to be able to do that and those who do that very well including companies like Apple and Google and many other companies Microsoft which went through decades of difficulties and now he’s emerging as a leader. In Ai you know those companies with those strong cultures and and leaders can really make a difference.
Alejandro Cremades: So obviously 20 years at Goldman you know tons of great experiences there. Obviously you were you know doing pretty well. Um, I’m sure as a partner at Goldman for so many years. Why making the switch and joining softbank for their vision fund I mean obviously obviously. Ah, crazy idea with a crazy vision as the name of the fund is a 100000000000 which was completely unheard of but how was that shifting of gears for you.
Michael Ronen: So it all starts with Steve Jobs in Masa right so I in my years of goldman 1 of the most fascinating ceos obviously worked with was masayoshi son with Masayoshi son which was softbank and I later joined but also Steve Jobs and and I work with Apple. As it entered from pc into wireless through the iphone at the time was working with Motorola as well and blackberry and so I saw that collision and at the time Masa was leveraging his relationship with Steve and Apple to take on telecoms and became a very wealthy investor in telecom. So ten years later I’m a partner in Goldman and I’m working across different industries masa comes up with the idea of of the vision fund and and is talking to Middle East investors about it and I frankly went to see him and said exactly beyond what what? you just said which is. It is a crazy idea as always masa comes up with those and that’s one of the reasons people admire him and I told him masa I don’t know what you’re going to do with one hundred billion in ah in tech I I know what to do with a 100000000000 telecom. You know these are big and capital intensive companies. But at the time 2016 into 17 you know it’s it’s just too big and I said masai if if anything maybe 1 area where I begin to see capital intensity and and disruption. Maybe there’s there’s a wave there to to ride is transportation which was not something that and logistics which is not something that was on the radar at the time.
Michael Ronen: I said look tesla is ah is a small company but is super disruptive and most people think it’s not going to make it but it seems like they will make it uber is a startup that is disrupting transportation a meaningful way. There’s companies disrupting logistics these are capital intensive industries that maybe could. Require ah, you know this this type of strategic scale investing and masssa literally turned to me and said instead of telling me what not to do and and how stupid this is why don’t you come and do it and so. The opportunity to be aligned with a very large fund and to try and participate in those markets was very hard to to pass despite being in a great position at Goldman and so yes, my mother wasn’t pleased. It would have been more at. Traditional and safe to stay but it was much more exciting to move from New York to Silicon Valley start start investing and I did invest behind these themes that that I shared with masa in in that first meeting in early 2017 and including companies with general motors and and things like Cruise. And flexboard which is disrupting freight et ceterat cetera so it was quite quite fulfilling and and I must say that I really enjoyed it.
Alejandro Cremades: And without a doubt you know perhaps the trigger for you to become an entrepreneur I guess say maybe like being able to ah rub elbows with some of those incredible founders that the that division fund was able to invest in I mean tons and tons of unicorns. I’m sure that you were able to um to really get that bug too. Ah and and eventually you decide that is time for you to start a company. So how did that happen.
Michael Ronen: Yeah I think um, it was a privilege and I would say that in on investing in general. It’s a privileged perspective as an advisor I saw a lot of companies but I saw them always in the juncture of a transaction going public merging a company selling a company. When you’re working with companies as a growth investor. You see this cycle of growth and you see how they deal with all the adversities of of building a company and and you learn a lot again and and obviously this was a time of excess. There were clearly ah, kind of ah things to to deal with and and mistakes that were made. But there were actually as you said great entrepreneurs inside. There was more than 80 companies ultimately in in the vision fund and I invested in quite a few of them and saw probably you know I invested in over five six or 7 companies in in those 3 years so very large concentrating investments but probably saw. 500 um in in that period of time. The reason I ultimately chose to be an entrepreneur was frankly number one it was covid by the time I I left and starting something was hard but starting a company with great co-founders which was the key ingredients. Was possible given the shift in technology and the way the world worked and I really wanted to be on the other side of the investing business to see what it is to what it feels like to build and to receive capital and and be a steward of capital as and as a builder not just as an investor.
Michael Ronen: And frankly test test myself test my ability to ah to do that and do that well and it was an incredibly humbling experience because as much as I did great things and interesting things and worked incredibly hard over the years in different positions. Being a founder is my god it is the the most difficult thing to do by far. Um it is um I would say it’s if you compare it to driving you know I drove you know my career was driving very fast cars on highways and. Ah, maybe as a partner in Goldman some luxurious cars and very fast highways and then you’re on a motorcycle. Ah you know in ah in ah in a kind of in a dirt road and there’s there’s kind of suddenly everything you do. Impacts the company immediately and you can see it but you fall and you have to stand up with that motorcycle time and time again as an entrepreneur and that’s that’s just a different. It’s it’s still getting from a to b but it’s a very very different experience and certainly will make me a better investor as well.
Alejandro Cremades: So the company branded. What were you guys say doing at branded and how why did you think that this company or this problem was meaningful enough for you to take action and go at it.
Michael Ronen: So it was again covid days and ecommerce clearly was getting and a massive boost going back to the point of of cycles. It was very disorienting. It was very hard to tell how much of Ecommerce Growth Amazon growth is coming from the secular trend of. Obviously every year Amazon was growing very fast and how much of that is cyclical from lockdowns and and and whatnot but it was clear. There’s a lot of growth. The thesis was there were many Amazon opened up its e-commerce platforms so similar to Aws and compute Amazon made. Made the the subject of opening up your e-commerce business available to anyone with very little capital but just great entrepreneurial skills and so people were building small brands on Amazon and selling through them. And you can become a profitable business with two million five million seven ten million dollars of revenues and and that was not possible before the Amazon platform was essentially democratizing e-commerce we so my partner Pierre who’s now the sole Ceo of the company myself who co-founded. It. With him and 2 other co-founders thought that if we acquire a couple a handful of those smaller brands and put them on a common ecommerce tech platform and inject into them capital and the ability to grow them with expertise that small business owners. Just don’t have.
Michael Ronen: We’ll be able to do better than what they can do themselves and create a diversified brand holding company that is online and quite compelling and that’s essentially what we did and so so while Amazon started shrinking at the end of covid branded is still growing. It’s going organically without acquisitions. It’s now. North of $200,000,000 in in sales and couple hundred three hundred people or so around the world and it’s profitable. Um, and so the thesis clearly worked despite the volatility and in the markets and the good news for me was I got the experience of a lifetime building it. Um I now can really empathize with founders who are struggling day to day with their businesses and the company is doing well and the Ceo Pierre my friend is um is fully in charge and I’m able to extract myself as an entrepreneur take a deep breath. Do this fun stuff with you. Well I contemplate kind of my next steps.
Alejandro Cremades: And also you guys raised a 50,000,000 plus is that right.
Michael Ronen: Yeah, raise more than that in both in equity and debt and going back to the theme of of just be a steady hand while we certainly grew very fast. We grew from 0 to turning a million in in a year or two we didn’t over leverage. We didn’t. Overextend ourselves. We try to stay strategic. We try to stay in some market niches that where we thought we can add value and look. We were all living and this was another example of it in in a period of time that I don’t think we’ll see again in our lifetime I certainly in a way hope we won’t. Where money was essentially free and flowing everywhere and you could leverage both with debt and equity and create huge things quickly. Um, you kind of need to see through that to the underlying business fundamentals and not be intoxicated by it so leverage it. But. Kind of be steady steady hand and that’s what we did and so we used the capital to buy good businesses and manage them and once we stopped raising in 2021 late 2021 when we saw the markets well before the 2022 cool down. Begin to turn that way we kind of hunker down and manage the business for cash flow or profitability which proved to be the right thing to do.
Alejandro Cremades: And how much capital in total. Did you guys raise you said that you race a little bit over the one fifty okay got it now in terms of um, you know your’re, you’re an acceptor I mean why did you decide to.
Michael Ronen: Yeah, 100,000,000 and and both debt and equity. So.
Alejandro Cremades: You know, leave branded more as a part time Gig you know versus dedicating yourself full time to it because I mean it sounds like ah like a rocket ship.
Michael Ronen: It is a rocket ship and so if you think about the rocket ship I participated in the first stage of launch so zero to that first thing peeling out and then there’s a second usually in a second stage. Maybe I participated in that. But now we’re kind of um. Branded is becoming a more mature growth company but in a more mature stage part of what we needed to do is given the the world we’re in to take cost down so shrink the us expensive footprint and move things. Overseas. So I really. Um, did this for the company as much as I did it for anything else to make sure that the company which pierre is based in Europe much cheaper than the us we have Southeast Asia um and we have other low-cost locations to kind of put it a position where it can be profitable. And continue to grow in a more modest way. So my role of standing up the company building the fundamentals raising the capital helping establish the team really came to to a natural end. And and I’m very involved I’m a board member investor advisor et cetera so I’m there’s not a day where I’m not somehow involved with branded but it it it opened me up to pursue the passion which is now take that experience and all the other experience and go back most likely into investing.
Alejandro Cremades: So then let’s talk about most likely into investing. So what does this I know that they you don’t want to spill the beans here yet because it’d say it’s in the making but what can you share with the audience. What’s gonna be that the next chapter for you and why did you decide.
Michael Ronen: Like.
Alejandro Cremades: This next chapter as the one that made sense at this point in your career.
Michael Ronen: Um, yeah I won’t I won’t spill the beans but you know let’s let’s let’s kind of give a little bit of of a preview. Look I think that between the experiences that we touched on the goldman the Softbank brand as an entrepreneur I’m ready to build an investment business. So not just invest but build a firm that invests and so to me, it’s time in my life to. Participate in building bring a team together to build something that when and if I retire we’ll see how that all shapes up and whether it’s fifteen twenty thirty years from now. Whatever it’s going to be I actually leave behind something that is much bigger than me. And the experiences I think that I’ve experienced until now actually prepare me for that terms of building a culture and and investing etc. So the business I’m I’m going to build is is is going to be an investment business. Um the thematic kind of. Um, focus of of that business will leverage again, you kind of need to play through strengths in life and and it’s really thinking through strategically in some of the sectors that I’ve invested in so transportation logistics where climate issues continue to influence outcomes and.
Michael Ronen: Huge matter. But you know I’ve been in consumer I’ve been in fintech now I’ve I’ve done media I’m I’m going to be prolific and the other strength is strategic and and structured so I took masa essentially into general motors to try and build a. What is now one of the premier self-driving platforms in the world. Certainly second to none perhaps with Google and there was nobody else that was prepared to do that type of investment and it was a highly structured investment where general walous clearly was a partner and we would have had some downside protection. But. Unlimited upside and that was exited with over $ $1,000,000,000 of profit and in 2 years and and and cruise got catapulted to to a number 1 position structured investing partnering with corporates having strategic partnerships so doing more than just putting money into a company but actually. Being partners with big companies and thinking through how to do that in a structured way I think is a strength I think companies will need it. The world will be constrained with capital over the next several years we’re in a very different cycle and then building an investment platform around that will be very very exciting. So I am um. Actively exploring the right partnerships and capital to see whether that can become reality soon.
Alejandro Cremades: Amazing and I’m sure that to ah build a firm that is long lastsing. You know that you leave behind and and that is bigger than yourself as you were alluding to you know I’m sure that there’s a lot of ah things that you’ve learned from. Being close to people like Masa or you know other leaders that you were mentioning like Steve Jobs or or people like that. So I guess if you had to pick the top 3 traits of this of the of the most incredible inspiring leaders that you’ve had the opportunity to meet and and to work closely with what would you say are those.
Michael Ronen: It’s completely.
Alejandro Cremades: Top 3 key traits that you think for sure you’re gonna be. You’re gonna be applying as you’re building this next chapter this firm that they you probably are considering the biggest the you know thing in your career.
Michael Ronen: Yeah I think it’s a great question. The the. The first thing I would say is ah any organization is a reflection of the top people in the organization. So. It’s just like being a parent. You can tell your kids not to do something. But if you’re doing it yourself is. Just doesn’t matter so you need to model the culture that you’re trying to build in the way you behave with your team and the messages ah that you convey it’s in the way you carry yourself with people strategy etc. That will be the culture. So the first trait is be very authentic and be very visible in the way you communicate culture Goldman created a two hundred year culture through that through the perpetuation of these traits hiring people that align with that culture. And always from the top down exemplifying it and everything you do and hiring and promotion and et cetera. So that’s that’s point 1.2 is it’s like driving a fast car on a track or doing any type of sports or require a handeye coordination. You. You can’t look at the next turn you have to look very far down the track so you have certainly need to take care of business in the day-to-day but your job as a leader is to have the vision to know where you’re going and to communicate that constantly to the team.
Michael Ronen: In a very clear and articulate way right? You can’t um as as the leader you can’t just be ah trapped by the but the mundane you have to deal with it but your vision and and the way you communicate it to ah to your team will be will be critical. And then look There’s the kind of the last part of it which is maybe going back to the theme of this discussion which is is it’s a steady hand and it’s a steady hand through Ups and downs. Now you’re the experienced person. There’s going to be people that are half my age working with me I’ve seen cycles I’ve seen ups and downs and just having the kind of going back to that vision but not just the vision but the actual steady hand on the wheel. Um, to. Guide the team through the ups and downs and just be a great mentor as we do that and not kind of be swayed by some of the by those movements I think is is critical. So maybe those 3 traits? Um, ah would be a good summary of what I’ve seen from some of these ceos.
Alejandro Cremades: Love it. So um, so Michael for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Michael Ronen: Hope. Well um I think they can ping me on Linkedin I get quite a lot of those and that that will be maybe ah, a good first filter and from there we can. We can leave ah details and show notes and whatnot. But but that will be a good start.
Alejandro Cremades: Amazing. Well hey Michael thank you so much for being on the deal maker show. It has been an honor to have you with us today.
Michael Ronen: Thanks Alana Andra have fun to be here I appreciate it. Thank you.
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Eliot Horowitz is now on his third startup. After building a billion-dollar company and taking it public, he is now creating the technology that is fueling a new generation of robotics startups. His latest venture, Viam, has attracted funding from top-tier investors like Union Square Ventures, 12 West Capital, Tiger, and Union Square.
In this episode, you will learn:
- Business models and product market fit
- Simplifying robotics and autonomy
Alejandro Cremades · EP 582 Eliot Horowitz On Building MongoDB Into A $14B BusinessSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Eliot Horowitz:Eliot Horowitz is the CEO and founder of Viam, a software company. Prior to starting Viam, they were the CTO and co-founder of MongoDB, Inc., a database software company.
Eliot also served as the CTO and co-founder of ShopWiki, an e-commerce company. Horowitz began their career as a software engineer at DoubleClick, Inc. Eliot Horowitz studied computer science at Brown University, earning an Sc.B. degree.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show. So what? Ah what an episode that we have ahead of us today. We have a very exciting founder. You know one of those founders that has actually helped to shape up the tech ecosystem in New York I remember back in the day when I was. Starting my first company you know like they were you know already paving the wave for many many many different stars that would come out. You know at the end of the day and mine actually being one of them. But in any case you know I think that today we’re gonna be learning a lot about building a lot about scaling a lot about financing also about going public. And product market fit of course so I guess without further ado. Let’s welcome our guests today elot holer horowitz welcome to the show. So originally originally you know you were born in in Connecticut living between Connecticut and New York
Eliot Horowitz: Ah, thanks I’m excited to be here looking forward to it.
Alejandro Cremades: Give us a little of a walkthrough memory lane. How was life growing up billiard.
Eliot Horowitz: Ah, going up, you know life was ah was pretty good Connecticut or New York definitely lots of ah computers I was always interested in computers and programming and such things also spends a lot of time playing in the in the water and.
Eliot Horowitz: A lot of marine stuff which has definitely shaped some of the more later robotic stuff. We’ve been playing with these days So pretty good. You know Computers boats. It’s a good combination.
Alejandro Cremades: And how how how did you get into the computers. How how do you get into the Computers Eliot.
Eliot Horowitz: So Both my parents are doctors. My dad was pretty big into computers and he actually bought a radio shack computer that was in our living room and he would occasionally write very silly on his early eighty s. Very silly computer games that I would play and then I started wanting to modify them and then writing my own and so very early on I was just you know, hacking on these random computer games that my dad was playing with and ah, kind of just went from there.
Alejandro Cremades: Now your case you ended up going to brown and obviously no surprise you study computer science and and after after brown you know you did your I mean obviously during brown you did your internship at Double Click and then you ended up going to work with him and I think that that they really put you. On the map and also you know help you to really build a network that they would help you to to get into the startup world later So tell us about that Experience. You know a double click and then what happened right? after that with shopwiki.
Eliot Horowitz: Yeah, so in college I interned at Doubleclick I was working with Dwight Meriman who was one of the original founders of Doubleclick and he and I kind of hit it off and I ended go interning at double hookck twice. After college I ended up coming to New York and I worked with Dwight again at Doubleclick and then so that was in 2003 I was at doublehood for about a year and a half and then in 2005 I started a company with Dwight. And Kevin Ryan who was the Ceo of doublecling at the time and yeah I mean I’ve been working with Dwight and Kevin mostly on for the better part of you know, almost basically almost twenty years now um and um.
Alejandro Cremades: That’s amazing and we we’ve also we’ve also had Kevin Ryan you know as well on the show. So definitely you know, recommending and listening to that episode so with with with shop wiki I mean obviously you go there to double click you hit it off as you were saying with Dwight and team.
Eliot Horowitz: Yeah, you know.
Alejandro Cremades: Eventually shop wiki you know comes knocking the idea of shop wiki. So how did that come about because that was the the first real you know startup that that you would actually you know be part of of the of the founding team.
Eliot Horowitz: Yeah, so the original impetus was you know this is way back when but Dwight was trying to find some bespoke parts for a bicycle and this was in 2000 and you know four 2005 era and Amazon wasn’t you know the e-commerce giant then it was obviously day but it wasn’t you know everything this is in the era when people were buying lots of digital cameras because you didn’t really have cameras on phones and you know people would comparison shop for how do I get the most number of megapixels and optical zoom in a reasonable price. When um price comparison shopping was a big deal because trying to find the best deal on a digital camera or Tv online was all the rage and you could actually go look at 10 different sites and at 10 different prices depending on the day and so we so and there was no 1 place where you could go and be like great I just want to find. Everything I can buy on the internet across you know 100000 stores and search and find things and comparison shop and so we’re like okay great. We’re going to go build a ah crawling engine for the entire internet of things you can buy on the internet and put it all into 1 place and make it really easy to find everything. And find the best deals. Ah we did a pretty good job. Actually we built a pretty cool product but in the interim in the time that we could build the product. The internet kind of changed Amazon kind of became much more of a behemoth Google kind of became the front page of the internet and so trying to change.
Eliot Horowitz: People’s patterns for how they shopped seemed um, not terribly viable at that point I mean that of selling shopquiki did well but it was a you know it was not quite going to be the company. We thought it was going to be.
Alejandro Cremades: Well definitely not the company that you ended up building next because that was quite a smashing success with Mongodb now we shop wiki at least you know like when the when you guys were able to sell the company that at least gave you access to really see the. Full cycle of a company. You know, like from inception all the way to the finish line. You know what kind of visibility did that give you.
Eliot Horowitz: Huge you know I think um, starting at how many the first time is a huge learning experience and second times and you know Mongo is a huge learning experience as well. And yeah, having now started a third company. It’s just a completely different world. There so many things that were like complicated or you don’t know what to do or you just make certain kinds of mistakes because you just have no idea what’s going on and then doing it the second and third time you you know what to do right? things that you’re really concerned of but before you just don’t have to worry about. Um, whether it’s how to hire certain kinds of people. The kind of people you want to hire how to manage meetings right? How to do all hands meetings. Just basic things that every company has to do that. The more experience you have doing it multiple times. Just everything changes.
Alejandro Cremades: So let’s talk about Mongo so after the exit of shop wiki. How did the idea of Mongo come about and how did you guys ended up polishing the business model to make it to something that they will be appealing to customers.
Eliot Horowitz: So the idea for Mongo came from a lot of shared frustration that Dwight and I had had in in quite a number of products both at shop wiki at doubleclick and other places and the basic idea was that working with databases was way too complicated the existing tools at the time. This is the fall of 2007 just weren’t good enough right? Whether it was the data models and how to scale them how to manage them. It was just much too complicated and so in some ways it was an easy problem to solve because we said great. Let’s build the database that we want. It wasn’t we have to go find users and do your researchers like no let’s just build the products we want and the assumption was that if we did that then other developers other users would be like actually we want that same thing too turned out. We were right right? getting the details right. Understanding how to make it easy to use how to you know, add all the features they need how to prioritize what really matters to the biggest breadth of developers. All those things take a huge amount of time and effort. But fundamentally you know developers wanted the same tools that we wanted. Because we’re not completely crazy and we built what we wanted and they wanted to do.
Alejandro Cremades: So what ended ended up being the business model of mongodb. How are you guys making money there.
Eliot Horowitz: So it was a big transition right in the beginning of mongodb we were selling fundamentally commercial support for the database and enterprise features on the database itself neither of which was sort of a an unbelievably great business model. We ended up. Starting to sell more enterprise management tools which was a better business and then in they get the year wrong 2 of them 15 or 2016 we launched Mongodb Atlas right and Atlas is the hosted version of Mongo. Um, and that has turned into the the massive growth engine for Mongo um, because everything is just fully managed any user can just go to say Atlas and get a database in seconds and it will to scale with you forever and it handles all these things for you right out of the bat and that’s huge right in that I don’t know the exact details anymore. But it is a the majority of Mongo’s revenue and is growing incredibly fast these days it also sort of is ah a really interesting concept of how you can take sort of open source software and now monetize it in the cloud in sort of really interesting ways.
Alejandro Cremades: Um, and what were what were the early signs of product Market fed at mongo.
Eliot Horowitz: So when we first you know you launch Mongo we hope you know I remember we launched it was we called it version 0.8 we put it out into the world. We had like 2 users and and nothing happened. It’s like cool. We did this thing it’s out there on the internet. Great. That’s it nothing happened at all and so what did we do? We went to meetups. We talked about it to people and 1 guy wrote a blog post but how he migrated his small website to Mongodb. And he did just a really great job of describing what and why and what he did and then over the next three months you just saw more people just kind of like trying it asking tons of questions and about a year later we held our first. User conference in San Francisco and it sold out in like 48 hours and we did it again in New York about two months later and that sold out 48 hours and that’s when we knew we actually had something but a lot of it was you know lots and lots of very small seemingly unimportant changes in details that we had to get right. And the only way we figured that out was by spending an inordinate amount of time working with users right? You know I remember being in irc in the user forms on emails with customers felt like twenty four seven just you know people would ask questions that were seeing me like okay well.
Eliot Horowitz: What’s wrong. Why isn’t this work. Why isn’t the documentation make this clear. How do we make this as as good as possible and we just spent a huge amount of time with users making sure that we understood what they’re doing what was easy. What was hard and how to make it better.
Alejandro Cremades: And how hard was it to to do all of this and to get started during an economic downturn because now you know you’re a master at launching companies when you know there’s a correction in the market. You know you’re doing it now with your latest company which we’re going to be talking about in just a little bit but. With Mongo you guys got started in 2007 so how was that experience like.
Eliot Horowitz: Very mixed right? So some things were were great. Hiring wasn’t that hard. Um, the real estate market was not great which for someone like me at the time who had no money and was trying to stay in Manhattan it was great.
Eliot Horowitz: The biggest challenge for us at that point was raising money raising money in 2008 2009 was not particularly easy. The good side was that Mongo was you know the cheap option relative to oracle for sure and so we had a lot of interest. And a lot of people were like looking at Mongo as a cost saving measure both from an actual database cost direct costs and also from a development standpoint right? The premise of Mongo was hey use the database. It’s cheaper and your developers are going to be more effective meaning you’re going to save time and money. So the the prospect was great during an economic downterm ah raising money was really hard besides that it was actually okay, it wasn’t the kind of product that was required a frothy market or needed. You know billions of dollars of venture capital to get going. It’s a big product for sure. But not nothing crazy.
Alejandro Cremades: And what were the um they I mean 1 of obviously the challenges there were they long cycles to get the customers. So how did you guys go about that and and and really optimizing.
Eliot Horowitz: Yeah, at Mongo and again at Vm now one of the big challenges is in a platform like that you’re sort of ah a 4 step process to to really being a successful business first step is getting users right? You got to get users users turn into customers. Customers slash companies customers and companies have to start then using using your product because both you know mongodb Atlas and Vm are consumption-based products. So your customers have to start getting customers of their own and generating their own revenue and then their revenue turns into revenue for to us. To the platform and so it requires a certain level of patience and long-term thinking right? You know neither business is a let’s see if we can you know make some money in the next three years and and leave or flip it or sell it. They’re like no these are big businesses. Big platforms. Huge spaces. Huge amounts of interesting problems to solve. How can you make really seminal amazing businesses over the next ten twenty years
Alejandro Cremades: So show with Mongo how much capital you were alluding about raising capital earlier before so prior to the ipo. How much capital had the company raised and what was the experience of going from one cycle to the next.
Eliot Horowitz: You’re ah you’re pushing the limits of my memory here feel like it was in the ballpark of about 300,000,000 over the course of about a decade. It’s that’s pretty close to right.
Alejandro Cremades: That’s correct.
Eliot Horowitz: You know, but the first rounds were very small. You know we did like I think it was like a million dollar seed round and we didn’t you know a couple million dollar a you know none of the early rounds were big as is again in an air. The rounds have gotten much bigger teams have gotten much bigger. We’re doing a lot with very little very early on you know I remember when we launched. Mongo 1.0 in the summer of 2009 and I think we did our a then that was a couple million bucks we were 8 people and trying to act much bigger. We got a call from ah a pretty big company that wanted to use Mongo and they were asking if we could send over a.
Eliot Horowitz: Salesperson a solutions architect or a consultant something like that I mean we’re looking around to each other like we don’t have any of those things. So I guess we’re going you know and it was much very much that kind of vibe.
Alejandro Cremades: That’s how I doing now. Now you guys ended up going public. Um, you know, really incredible experience. I’m sure how how was that how was that experience of going public and then also what was it like being the founder of um. You know before private company and now dealing with all the regulatory you know hurdles that you have you know when you’re a public, a publicistic company.
Eliot Horowitz: Going public was you know, kind of surreal mongo was is the kind of company that if you’re a developer if you’re really in the tech ecosystem people knew about mongodb before the ipo. But you know, no one outside of the tech world knew about longbodb and then it went from being like oh wow, there’s this company and people kind of know what it is and what’s going on and that was that was weird the actual ipo experience was kind of surreal the ah, the really interesting part and sort of the more emotional part is sort of actually. Continues to happen I continue to talk to people who are at Mongod be the and or I’ve been a mongo be since or at any point in time and you invariably hear stories like cool mongodb. Let me pay off all my student loans or let me buy my first house or let me put my kids through college. Ah and those are pretty cool, right? And that’s ah. And that continues to happen right? The next thing but that is it’s not like a ah one and done at the Ipo right? I still meet people who still have done incredibly well because of mongodb and that’s sort of a a very special feeling.
Alejandro Cremades: I mean Mongo they be today with a market cup of 14,000,000,000 so I mean having that the that level of impact. You know that level of value that you’re creating too. I mean it’s absolutely incredible now for you Eliot you know eventually came a time and that was in 2020 where you realize it’s time to to take a look at what and what is next and and perhaps you know turn page on the chapter. What was what was that experience like for you I mean at what point do you realize that is the time to turn the page and why.
Eliot Horowitz: Um, it had been. Yeah, yeah, so it had been about 13 years and you know when I as I said before when we started mondb we set out to you to build a database that we wanted. And at that point mongodb was the database that I wanted right? It was ah a big company who was successful. The product was great. A current company vm uses mongodb or a happy mongodb Atlas customer so it kind of felt like I had done a lot of the things that I wanted to do and wanted to look for. You know, really big, really new. Interesting problems to solve and so left in March of 2020 and took a little time off and then started looking at what are some really big unsolved problems that can really move the needle on moving things forward for people.
Alejandro Cremades: I mean six months off that you took I mean was it was it was it weird six months doing nothing like after being for so long in the hypergrowth environment.
Eliot Horowitz: It was we at a multiple levels. It completely. Coincidentally I announced that I was leaving you know two days after covid lockdown and happened in New York so the timing was bizarre. Ah but it was definitely weird. It was definitely very weird going from being very busy to being not that busy I did have 3 kids so harmless will do have 3 kids? Um, so wasn’t that bored and um, yeah, and then after a few months definitely was like itching to get back into something.
Alejandro Cremades: So then what was that? So so let’s talk about finding new interesting projects. What was that process that you went through you know, maybe like thinking about ideas thinking about problems until all of a sudden you know you came across the idea of Vm and.
Eliot Horowitz: And you know try to find some new ah interesting projects.
Alejandro Cremades: And and and and really bringing it to life.
Eliot Horowitz: Yeah, so I started you know with all like all good processes starting with things that really mattered to me that I really cared about and I started looking at things like the first one was ah and I mentioned before that I you know into boats and marine and water and I started looking at things like ocean cleaning. And ocean cleaning is this big amorphous problem and there’s all sorts of ideas at the heart of all of them is ah is a labor challenge right? There’s no way you’re going to get millions of people actively working on cleaning oceans because there aren’t people living in the middle of the oceans right? It’s a really hard problem then you look at other things in climate change. Like you want to plant a trillion trees. Cool. There’s a lot of people who need jobs in places where you don’t need to plant trees or can’t plant trees and how do you solve that problem you look into things like food quality or shortening supply chains. Ah you end up into a lot of different problems that all end up being labor challenges getting people. In the right places do the right kind of work. So the obvious solution to a technologist is then sort of robotics and automation. So I was like cool. Why aren’t there more robots doing useful things like you know I live in New York city why aren’t there robots fixing poddles I’ll be a nice thing to happen in the below. The mate. So i. Did what most normal people do is I bought a really high-end robot arm put it in my livinging room and tried to make it play Jess against me and it was kind of a infuriating experience I consider myself a pretty reasonable programmer and trying to program this robot arm was incredibly frustrating.
Eliot Horowitz: And incredibly exhausting and so I made it work I was not very happy about the process and started looking at sort of the robotics space more broadly and decided it was time for a new robotics platform to make it much easier for people to go ahead and build ah build robots.
Alejandro Cremades: So how do you guys make money with vm.
Eliot Horowitz: So Vm is a a software platform for robotics right? It’s everything from the hardware up so it makes it really easy for developers to interact with everything from motors to cameras to arms right? If you ask your average software engineer. Go ahead and build a robot or work on a robot. They’re not really going to know what to do so we solve those sorts of problems on robot and then we have cloud services to handle things like code deployment data management. All the things that you need to do alongside your actual robot. So everything that runs on robot is open source. And all of the cloud services are commercial and consumption with consumption based pricing. So let’s imagine you’re using Vm for data management and you want to store data from your robot and push that into the cloud so you can build more machine learning models or just keep track of things. Something really simple. You want to build a really fancy cat food feeder. So every time your cat eats. You want to take a picture how much how much you was eating taking a picture of thing on a food at the beginning man food at the end you want to store that in the cloud for the next three months you can go back and look and see what’s going on so we manage getting the data from the cloud. From the robot to the cloud and we charge you for managing the data in the cloud. Ah so it’s a completely consumption based pricing entirely based on on usage. Um, and you can go into more complicated things. Let’s say you’re building a construction robot that’s building. Something.
Eliot Horowitz: Then you might want to store a lot of very high-res pictures for a very long time in order to know that hey something happened to make sure the robot didn’t do something wrong three years later so it’s all about consumption. We we make money when our customers make money not any not anyway else.
Alejandro Cremades: And in this case I mean it has taken it has taken no no time ah as well. Ah, because you guys got got going in 2020 and you know you guys have raised about forty two million bucks from amazing people like Tiger Battery union score ventures amongst others. So.
Eliot Horowitz: Um, yeah.
Alejandro Cremades: Why raising so much money in so a short period of time. Especially you know after your Mongo experience. You were you know, pretty well financially. So what was that thought process of bringing these people and and also all these money you know so quickly.
Eliot Horowitz: Yep, so yeah and including in that list of people of money and is you know me and myself ah as well. The interesting part about the robotics platform space is that the the surface area of an Mvp is pretty large. This isn’t a kind of project where 6 people in a garage can go build a prototype in six months and we thought i’t know how to do that right in order to actually be useful to actually in order to actually make it easy for a startup to go build a successful robotics business using our platform is just a lot of things to build. And I wasn’t interested in spending the next ten years very slowly building out the platform I was like no let’s see if we can actually build a platform over the next few years that is super interesting that can move the needle on what it takes to launch a robotics business and that’s what we set out to do and I think we’ve done that but it’s all about like let’s. We know what we want to build. We know what people need we’ve talked to a thousand users. We know exactly the problems we’re trying to solve and let’s go build. Let’s go build the thing they need.
Alejandro Cremades: So how do you talk to users to really be able to understand the path a forward. What does that look like to be effective.
Eliot Horowitz: So I think it’s 2 things right? It’s one. It’s making sure you’re talking to a wide range of customers and users and people in the space and more importantly is when you talk to them. Making sure you’re not letting your own biases and assumptions overtake you right? It’s very easy to ask leading questions that let you you know? assume you’ve made the right choices because you just are asking the wrong questions. It’s really important to actually understand what they’re trying to do why they’re trying to do it. The struggles they’re having what they want to do and move in that direction I’ve seen so many ceos or heads of product or product managers go into a customer call or a customer conversation with an assumption about. What they want to build or what you know why they should build something and then on the customer side. They have assumptions about the exact product they need and what they want are looking for in ah in a product and you sort of see them talking past each other and a customer is like I want this feature X and a product manager is like that feature X sounds cool I’m going to go build it. And in reality neither really understands what the other one is saying and they certainly don’t understand how to take a lot of feedback from a lot of customers and turn that into something interesting right? It’s really all about really getting to the heart of okay, great I Understand what a customer is doing I understand why they’re trying to do it.
Eliot Horowitz: I can imagine myself trying to build that same product and I can imagine what I would want to build in those cases and with the tools I would want to use and then go build those tools.
Alejandro Cremades: Now in this case for you. Very interesting transition because you’ve been very much on the technical side of things as the Ceo of the previous ventures. So how has it been now to really shift in the. And really take the reins as the Ceo. What is that the transition. How does that look like.
Eliot Horowitz: You know in some ways. It’s a big transition other ways. It’s really not right I think that you know at Mongodv you know I as ah I just talking to someone I worked with at mongodb in its capacity. You know I was always. Talking to users and customers I was always trying to figure out how to message and market to developers and how to convince customers to use mongodb. Um, so I was always thinking a lot about marketing about sales about go-to-market things. And so and those are things that you know people are often surprised but I actually love working on those things I love working on messaging and game market strategy um, on 1 hand the you know being Ceo is sort of ah ah. Different job on the other hand when I left mongodb I think my team was around my direct reports or direct reports and my direct team is 60800 people somewhere in that ballpark and so being the Ceo of an 80 person company is not particularly challenging in management. And those things and that is where a lot of the experience of being a third time founder of being at somewhere like mongodb just is like okay, great like I’ve seen what to do I know what worked I know what didn’t work and so we can just go and copy what worked even a lot of the process stuff. It’s like okay, great I know the engineering and product process that I used at mongodb that we liked.
Eliot Horowitz: Developed it over the course of many years and I’m just going to do the same thing here I’m not going to go and reinvent the wheel and start from scratch I know how I like to work we’ve hired a lot of people that I’ve worked with before and let’s just keep going.
Alejandro Cremades: So imagine you were to go to sleep tonight earlier and you wake up in a world where the vision of Vm is fully realized what does that world look like.
Eliot Horowitz: Lots of mundane problems solved and lots of really interesting novel problems solved and humans doing more interesting things. So let’s take some simple examples like plothos. No one likes bados annoying but also. Having construction crews working in the middle of the day fixing poholes is also not great, right? That causes other problems at night. It’s hard. No one wants to work and 2 in the morning. So how do you solve this with robotics. But 1 of the big things that we see is that a lot of companies think they have to go from no robots or no automation to fully autonomous and sort of like really amazing 100% autonomous systems. We don’t believe in that you have people in other parts of the world who would love to work at 2 am New York time and why can’t they be driving around robots around New York city fixing poles in the middle of the night. Um same with cleaning oceans same with planting trees right? We see a lot of things about as hey like great. There are people working we can make robots that are semi-autonomous and have people anywhere going and helping them to use problems. Um, same with lots of things like you know construction you know again making a fully autonomous construction robot really hard making a 50% or 80% autonomous construction robot much easier. So there’s lots of robots and lots of things we want to see I think the the biggest thing for me in the short term.
Eliot Horowitz: If we really solve the developer problem is that you’ll see way more robotic startups right? There are I know of no company trying to solve the pothole problem I think there should be 10 startups. We’re going to work on that problem and the reason is that in order today. You need a lot of very specialized knowledge. And like most software engineers are scared of robotics. They think har is too hard and they’re intimidated about how to get started and how to go from a sort of’s like a little toy to a real project. How do I know because that was me I had always been interested in robotics I had always wanted to go and. Tinker with hardware and build little autonomous systems and I would always spend like 2 hours and I would always feel like okay, but this is like a toy. Yeah, of course I can go follow this tutorial online and build this thing that does something but to actually turn that into a product or to make that more robust didn’t feel like the tools were there and so I kept playing at this you know the space for. 20 years and I never really made Headway and when I talk to other software engineers a lot of them are also in that same place. So like yeah you know it’d be cool to build something a robotic but like I don’t know what to do I don’t know where to start and then you talk to robotics startups and they can’t hire. Regular software engineers because the regular software engineers are intimidated or don’t feel like they have the right knowledge and so sort of 1 of the big things I want to see is you know your one of the male average software engineer being excited about robotics and like they can actually make a difference.
Eliot Horowitz: And you know I don’t know what all the problems are are going to solve and I don’t want to know it’s actually 1 of my favorite things about Mongodb and Vm is that we’re enabling programmers and developers and engineers to go and come up with their own ideas and go execute and the coolest part is seeing. Everyone else’s vision for what’s going to happen come to life using your tools right? That’s the really cool part right? because again I can give you 30 robots that I wish exist is tomorrow but I guarantee when we let a million software engineers start building robots easily we will see way better way cooler way more ideas than I can come up with.
Alejandro Cremades: I love it now if I was to put you into a time machine and I bring you back in time back in time at that moment where you’re coming out of brown. You know you’re thinking about entering the world now you’re seeing you know like Hypergrowth companies. All of that stuff. And imagine you had the opportunity of having a chat with your younger self and being able to tell that younger Eliot one piece of advice before launching a business. What would that be and why given what you know now.
Eliot Horowitz: I think with all businesses the most important thing is really understanding your users right? understanding what they really want and what motivates them right? It’s very easy to understand superficially the thing that’s bothering them today but really trying to understand. What their goals are not just for their technology but for their business changes everything when you understand where someone’s going not in the next three months but the next three years the next six years you can both help them sort of articulate that and then you can make sure that you understand how you can partner with them. To make them as successful as possible because the best businesses are partnerships with their clients right? If if you’re just a tool. You’re probably relatively easy to swap out if you’re a partner because you understand where they’re going and you’re going to help them get where they’re going and.
Alejandro Cremades: I Love them.
Eliot Horowitz: You know there’s a lot of people who say that’s what they do but to actually do it that is unique and that makes very special companies.
Alejandro Cremades: Absolutely now for the people that are listening Eliot that will love to reach out and say hi. What is the best way for them to do so.
Eliot Horowitz: I’m easy to find you know, find me on Twitter at Elliot Horowitz or Linkedin Elliot Horowitz technically I’m an Instagram but don’t really do anything there. It’s um, I’m easy to find I would love to hear about anything from robotics ideas to. Other interesting stuff.
Alejandro Cremades: Amazing! Well Elliot thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Eliot Horowitz: Thanks a lot. It’s been a really great chatting and hope to talk to people soon.
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The post Eliot Horowitz On Building MongoDB Into A $14 Billion Business And Now Raising $42 Million To Bring Robotic Ideas To Life appeared first on Alejandro Cremades.
Rishi Bhargava exited his first company for $560M. Then raised a seed round for his latest venture, which is more than 20x the average size for a brand-new startup. The startup, Demisto, has attracted funding from top-tier investors like Accel, ClearSky Security, Palo Alto Networks, and Greylock.
In this episode, you will learn:
- Category creation
- Getting your company acquired
- Rishi Bhargava’s top advice before launching a business
Alejandro Cremades · EP 581 Rishi Bhargava On Selling His First Startup For $560M And Raising $53M To Make Login LikableSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Rishi Bhargava:Rishi Bhargava is Co-founder and VP of Marketing for Demisto, a cyber security startup with the mission to make security operations “faster, leaner and smarter.”
Prior to founding Demisto, Rishi was Vice President and General Manager of the Software Defined Datacenter Group at Intel Security. A visionary and technology enthusiast, he was responsible for delivering Intel-integrated Security Solutions for data centers.
Before Intel, Rishi was Vice President of Product Management for Datacenter and Server security products at McAfee. As an entrepreneur at McAfee, he launched multiple products to establish McAfee’s leadership in risk & compliance, virtualization, and cloud security.
Rishi joined McAfee by way of acquisition in 2009 (Solidcore, Enterprise Security Startup). At Solidcore, he was responsible for Product Management and Strategy.
As one of the early employees and members of the leadership team, he was instrumental in defining the company’s product strategy and growing the business.
Rishi has over a dozen patents in the area of Computer Security. He holds a B. S. in Computer Science from the Indian Institute of Technology, New Delhi, and a Masters in Computer Science from the University of Southern California, Los Angeles.
Rishi is passionate about new technologies and industry trends and serves as an active advisor to multiple startups in Silicon Valley and India.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmaker show I am thrilled with the founder that we have today joining us because it’s a founder that not only you know he has done it but he has done it successfully from building it to scaling it to financing it to xing in it. So. And how part of theredo let’s welcome our guests today rehi bargava welcome to the show hi.
Rishi Bhargava: Thank you so much Alejandro excited to share my experiences with the community here.
Alejandro Cremades: So you were originally born and raised in India so give us a little of a walkthrough memory lane. How was life growing up.
Rishi Bhargava:
Well um, lots of fun I would say amazing memories with the with the single focus on how do you continue to improve your life. How do you continue to learn at each stage of life and that’s that’s what I kind of ah. Ah, remember my childhood as which is starting from kindergarten how do you figure out ah to differentiate yourself move to the next step be the best in class. Ah and so on as forth and yeah, growing up in India and Education System India is always about being the best.
Alejandro Cremades: Yeah, no kidding I mean the culture you know the way that you either become an engineer or a doctor. It’s unbelievable, but that’s it that’s it now now in your case you know talking about being the best in classes you were saying you graduated there from Delhi you did your computer science degree and then eventually.
Rishi Bhargava: Um, us.
Alejandro Cremades: You see that it’s time to come to the us why why coming to the Us.
Rishi Bhargava: Yeah, so I think um, the the journey to us was an interesting 1 right? I mean graduated from 1 of the premium colleges in India in engineering and the first step was if I look at education system in India it’s. Amazing at the bachelor’s level but from a masters and ph d level. There is a lot to be fulfilled. There is a lot more that is offered by universities in United States so the goal was to come here. Ah. Do a ph d in computer science. That’s what my goal was and especially in a particular field of networking and systems. So I came here to do a ph d and learn more ah but ended up dropping out before doing a Phd so finished my masters and says well Psd is not my thing.
Alejandro Cremades: First and what happened after the masters.
Rishi Bhargava: So dropped out after masters. So after the masters I think um took up a job I as as part of the masters journey what I realized was I really enjoy solving customer problem. So. That’s best done in a startup so when I joined my first job after masters it was in a public company but relatively small public company in iystems and I was as a fresh grad coming out the promise was that I’m going to given an independent project being able to build my own thing. That’s what attracted me to that company. Ah, but again it was tough times I graduated in 2001 after masters and it was tough in the sense that you know what 2001 was all.com bust started with that company the stock continued to slide down down down down.
Alejandro Cremades: Oh yeah, oh yeah.
Rishi Bhargava: Um, projects got terminated so started on as a telling somebody this morning. It ah started on experiencing the toughest time we have all seen but then saw it again in 2008 and probably now so that’s that’s how my beginning of the career was.
Alejandro Cremades: And obviously your career I mean very successful. You’ve worked for really big companies. You work for companies like Mcafee you work for others like Intel so it took a little bit of time for you to really go at it as an entrepreneur I think that you know the question here that comes to mind is. What do you think you know needed to happen for you to really feel that you had you know the docks in a row to really make that leap of faith.
Rishi Bhargava: Yeah that’s actually a good question and and honestly looking back because like hindsight is always twenty Twenty I feel that ah coming out of engineering in India and then masters it was not that I was dreaming to be an entrepreneur right? It was like hey just continue to learn continue to grow. But. Right? after the oi systems and Cnn job I joined a startup called solid core systems. That was my first experience as a true startup and what I realized very quickly was there is a thrill in starting from a blank slate right? I mean I really enjoy saying hey. What is the problem we are solving and I was like engineer number 2 in solid core then became their first product manager and that was my thinking which is like as ah as a product manager in the early startup I really got to see the customer problem. How can I solve it how can I solve it better
Rishi Bhargava: And then continued with that journey so in some senses even though I was not a founder at solid core system I experienced building a product and a failure I mean solid core systems was not a very successful outcome. It was acquired by Mcafee for as much as it had raised but then also. Macafee was an amazing experience right? I mean I learned how to build big products scale products which has millions of users and those kind of learnings always helps me as an entrepreneur to make sure what I’m building will scale eventually. So lots. Lots of good learnings and then I found an amazing team I I always say for me, it’s team First idea later as an entrepreneur big believer in the right team big believer in my cofounders high am is high amount of trust and that’s that’s when I took the leap of faith.
Alejandro Cremades: So then let’s talk about taking the leap of faith. You know how was that like because obviously the misto you know, ended up being a smashing success. You know, incredible outcome. You know first company first incredible outcome I mean that’s that’s incredible hrishi so why. I mean you had already been you know for a while now in the corporate world. Ah you know, obviously your parents everyone in India was probably super proud. You know you had like the 9 to 5 you know the paycheck coming. You know you know that everyone was taken care of. So so why going you know after the uncertain.
Rishi Bhargava: Yeah, that’s actually an excellent question I handle the the parent and the family part coming from India is a very interesting one because back then now the now the indian outlook has changed but back then.
Alejandro Cremades: Path.
Rishi Bhargava: The company brand mattered a lot leaving a company like macafee Intel was like oh my god who leaves a well good paying job for an outcome taking one third or one fourth almost of the salary that you’re making at that company. What is that like so. It was a shocker when I told my parents and my my father and mother both worked in a single job their entire career so it was like wow. What are you doing this did you get fired what is going on and I think the the answer is why take that uncertain path is ah this itch to go. Create something new to solve customer problem I believe big companies are excellent at scaling but it is very hard to innovate at a large company. Very very hard and I think it’s not a function of which company it is is just when you’re serving. Ah, very large customer base changing or innovating something new is not easy and I I went through this thought process introspection and says I’ve always now having experienced solid core. Want to do something ground up. Want to solve a customer problem. There is thrill of building something new building something of your own. So let’s do it. It was a big debate right? I mean right around that time. Um, right before we started demisto I had ah I had one kid at home and we were going through this whole.
Rishi Bhargava: Discussions like as a family am I doing the right thing. What is the risk and we said no, it’s okay I think let’s take the chances I’m a believer that there’s always a second chance if this doesn’t work out corporate job take another corporate job but wanted to give it a chance and the second start by the way. as as I said I’m I’m ah I’m really lucky to have cofounders. Ah solo entrepreneurs are very It’s very hard for solar entrepreneurs and for me there was support sat down discussed with 3 other cofounders went through it had clarity on the idea we were all in this together.
Rishi Bhargava: So there was there was support together to go through this and I think that that had to not.
Alejandro Cremades: So Why I mean you were talking about the um perhaps they they the lack of innovation in larger corporations. You know they focus more on scaling versus you know the the you know innovation with the misto. Why did you guys think. But this problem was big enough or was meaningful enough for you to really take the risk.
Rishi Bhargava: Yeah, so I think even with de misto and now with disco I think this is one area where we have always taken a very I call it open mindded approach to go survey the market at deistto. Um. Before we started. We interviewed roughly 50 customers over a period of two months and we started our theory was working on 1 idea which is doing a better endpoint security with a different angle. We started to pitch that idea. Every customer said no, that’s not the problem I’m worried about I have many other products solving it and after first set of ten fifteen interviews we switched our questions to these customers. We says okay, tell me your number 1 problem that you’re facing and how can we solve it. So I think why did we think it’s a big space to go after the answer is because the potential customers told us to I mean it was literally I tell it’s like we didn’t think of something new. We just asked the people. What is the problem that is worth solving. What can we help you with and then go from there and that’s what happened so we said okay this is the problem that people are facing and then we had all the writing clings around us that another company phantom cyber was.
Rishi Bhargava: Winning the rsi competition in innovatortas which means they are doing something amazing some other company resilient systems was acquired by Ibm which is doing something amazing. So we said this problem of security operations is a problem worth solving. How do we build a complete solution and then we’ve started there and validated that.
Alejandro Cremades: So for the people that are listening to really understand it. What ended up being the business model. How did you guys make money. Okay.
Rishi Bhargava: Yeah, So I think this one this is where by the way our learnings of working in a big company. All the founders ah comes in handy right? I mean it’s It’s not about building that amazing product. That everybody wants. It’s also about building that amazing product and figuring out the right go to market write business model and ah from my experience. What? what? we really ended up doing was the business model needs to reflect. Who’s your buyer. What’s the product. How does the product work and sell all of these combined so we innovated a lot right? So the business model we said hey it’s an enterprise sale Large organizations need us. It’s not that a startup for buyer product which means you need to have sales people which means you need to have sales engineering. But at the same time. The user of our product is that security engineer and if that is security engineer can we create a free tool for the security engineer can we go out reach out to them by other means So Lots of different innovations on building a community. We build this large community of Security engineers. Who then started to love our product but the buyer was their manager or their director. But when we walked into the enterprise they already knew about us. So It’s it was a 2 wo-pronged approach to the business model.
Alejandro Cremades: And they also how much capital did you guys raise prior to the acquisition.
Rishi Bhargava: So we we had a total of 3 rounds first was 6 then was a 20 um and then the last one was 42 something like that. So.
Rishi Bhargava: Close to 70 or little over seventy. That’s that’s how much we raised over three rounds. In fact I think the story of acusation is interesting one we were onto our executing very well. Um, raised our sea round with an amazing venture capitalized gray lock team was amazing working with that team. We were heads down executing and then for all 2 networks came around and made an offer that we couldn’t refuse as a entire team.
Alejandro Cremades: Well well we we can’t leave it just there. We got to double click here for the people that are listening rii because the outcome was smashing smashing outcome I mean 560,000,000 I mean unbelievable. That’s that’s literally you know they are the 10 x that people were hoping for you know on the investment side. So. So definitely you know, tell us make us make us like an insider of that process. How how did that process you know got started. How did that unfold and and what was it like all the way up until the closing. So.
Rishi Bhargava: I think it’s more it’s more 20 x than 10 x in most cases from an investment. Yeah, ah but I think so the the the way I think I say all of these things happened in.
Alejandro Cremades: Even better. So.
Rishi Bhargava: Ah, because of the amazing customer growth in the product adaptability. So the way like I would take even a step back right? I mean ah, the first version of our product. We released in middle of ah 2016 so company started. 2015 September october middle of 2016 first version of the product and the first seven months in sales we got roughly a million dollars in sales so that was like hey the product is needed by the market. We really need to go? Um, ah scale. It. Ah the first full year of selling we quadruple that number the next year we could we we did 5 times the previous year. So from a scale perspective. We are seeing amazing business growth and. Right around that the market also realized that this is a category I mean when we started there was no category for security operations automation and research reporting by the way. The sore word came around multiple acronyms changed and gartner changed it many times. And the point is between us and the other players in the market are competed as we created a proper category. We created a proper market and that’s what triggered really the conversations with the likes of pauldo networks which is like okay this is a category that is emerging. It’s going to be an important.
Rishi Bhargava: Place where for auto networks need to play in and the first conversation was ah ah like okay how can we build this partner acquire all of the opens. Things on the table but this is an important place. This is an important category that they wanted to play in and then things started from there and eventually came to the number 5 60 But I think it was all a function of the customer growth we were experiencing and now if you look at that product that is an extensive like. Leader in its category doing very well kotex xo is the product that’s called very proud of the team continuing to deliver on that inside of Monoter networks.
Alejandro Cremades: And how did you guys when when you were discussing this at a board level you know and you had now the the interest of Palo Alto and networks and and you guys like you were saying you were quadrupling. You know the the size of the business you know year over year selling to them versus keep building. What was that conversation like why did you decide it was time to sell.
Rishi Bhargava: Yeah, so I think that one is I so it’s very. It’s a very tough conversation right? because as a company we are doing well and everybody is bullish optimistic business going very good. Our competitive in rates are in high eighty s so on all fronts. There are signs that this company can continue to grow and do well as an independent company but at the same time I think there is an opportunity where from a financial outcome. It’s an amazing outcome for everybody every investor every employee every founder so that’s a good path Could you continue to grow yes and I think there was a lot of opinion on the table I mean I think it was not where it started. No everybody said yes is like no no, no, we have a huge opportunity you can grow independently continue to grow and then there was this like hey we have come a long way and. Ah, Polo Alto Networks is an amazing partner like all of my memories at Polo was amazing memories right? I mean they did right thing to invest in the product when we engaged with the poo al netflix team. It was like guys. This is not a product. We are acquiring to slim down the investment. We’re going to invest in it double down grow the product. Eventually we believed. It’s an exciting opportunity where even after going in we can go and increase the adoption of the product grow the customer base aligns with the mission. So eventually I think everybody aligned on it. It was not that.
Rishi Bhargava: Ah, there were a positions I Just like this whole debate which is long term growth short term growth but everybody aligned eventually.
Alejandro Cremades: So everyone aligned 560000000 I mean I’m sure that felt good hrishi you know what? what was tell us is there anything that you wanted to buy that you were finally able to buy.
Rishi Bhargava: It’s very interesting. Um I don’t know a hundreds this a very interesting question is like financial outcome. Yes, very happy, Very comfortable outcome wise. Ah excellent outcome for the family for the founders. Every employee was happy but I Think. Looking back I wouldn’t say I was able to buy something um that I wanted to buy it was more of I really feel that like if if you really ask me my biggest accomplishment. What I really from the bottom of hard is every employee that worked for demisto. Wants to work with this again. We really had thrill working together and that’s that’s ah, that’s the biggest accomplishment but of course in transparently honestly, Yes, It’s good to be financially independent. It feels good as like there’s no I’m not going to say it’s not good. There.
Alejandro Cremades: The impact.
Alejandro Cremades: I mean financially the benefit that’s financial freedom 560000000 come on now now in your case, you did the um the the vesting and resting as they would call it. You know then you join Palo alto networks you know you did the whole integration thing and you stayed there for about 3 years and as they say once an entrepreneur always an entrepreneur. So here. You go again. So tell us about now what you’re doing with your latest baby. You know what point you know the idea of solving a problem that was meaningful enough you know came knocking and and how did you decide to go about it. So.
Rishi Bhargava: Say.
Rishi Bhargava: Yeah I think ah, first of all, there is no resting if you were to know nikesh Ceo of Paul Alter Networks there is no resting I think we worked very very hard in a different way. Um, but amazing journey there right? I mean product growth. Adoption integration. Ah new modules. So overall I think all all amazing experiences there growth wise. But again as as you said yes entrepreneur always an entrepreneur I think goes back to the same thing. Amazing team. We said guys I think we have given. Are all for this product to grow put a very strong succession team in place and we said okay, let’s go to our next challenge and I I truly believe is like if you want to be a successful entrepreneurship. Ah entrepreneur again, you need to go back to 0 so we all said okay. Back to the basics. So again, very very um I call it first principles start to think of the idea of building this time we have taken on a very big challenge I think the challenge is how do I enable authentication in applications like if I look at. Every application that is being built around us right? Any application they need to build a user login experience and that needs to be secure and that needs to be easy like how easy can it be a b two c login experience just an otp that’s what Whatsapp did.
Rishi Bhargava: Ah, we live in a world where most of the B Two C applications of B Two P applications have horrible login experiences right? User name Password you forget the password you reset the password. So I think the mission here is can I Enable simple login experience for every app out there.
Rishi Bhargava: With 10 lines of codes right? 10 lines of code passwordless login in your app and that’s what we are enabling. Ah, big challenge I mean in fact, if being being ah completely transparent and honest here. It is not an easy challenge I mean enabling these passwordless experiences with the simplicity needs a lot of innovation on the product side needs a lot of innovation on the go-tomarket side making it aware every application can build it. But that’s we have taken on. Ah very excited where we are in the stages. We raised our first round of money. Um, launched the product amazing feedback so far in the last we we launched it on feb fifteenth ah about a little over a month ago and amazing customer adoption already in traction that we’re seeing.
Alejandro Cremades: And for the people that are listening to get it. What ended up being the business model. How do you guys make money.
Rishi Bhargava: Yeah, so I think by the way this ah on the business model front there. We we are big believers that we will be able to do ah good as a business only if we focus on adoption at even smaller startup level. So. What we are doing is there is a free forever tier and that is available for startups that are early in carrier early in their journey so up to 7500 users. It’s free. They can adopt it. They can build it really quickly and don’t need to pay till this scale to a much later later stage. And once they start to scale we charge by monthly active users or number of their customers. Um, and the model linearly scales I think one of the things I hated as I built de misto and other start ah worked at other startups is anytime. There’s a step jump in money. The startups hated right? yours. Starting to pay nothing nothing nothing and now you are paying a big amount of money so we want a linear scaling model. Let the startup scale we are there so that’s one and then there’s an opportunity to go to larger organizations and actually enable password list login for those as well.
Alejandro Cremades: Now you’re you’re a very humble guy hrisi you know and I’m sure the people that are listening are probably you know, really getting that too. I mean when you say raised our first round we’re talking about a seat round of $53,000,000 hrisi you know the median the median seat is 2,000,000 I mean wow I mean how I mean we’re talking about people that invested in this seat round like ggv capital life speeded venture partners I mean a seat financing 53000000 from this rockstars. Why so much money and also from this people.
Rishi Bhargava: Yeah, so I think in a hand The the answer is um, the the problem is a big problem the money coming from investors is always I call it um to be to be honest, right. I look at myself as a founder in Aras as a founding team. This is this is ah this is not really a luxury or this is not what I’m saying hey I’m proud of raising 53 This is a debt to us right? I mean investors are putting this money in to build a scalable company. So Why this size because.
Alejandro Cremades: Oh yeah, oh.
Rishi Bhargava: We founders and investors believe that there is a huge problem to be solved here right? Applications are being built at a faster pace than ever before and all of them are struggling from a security and an onboarding perspective So big problem. Ah also to build a.
Rishi Bhargava: Scalable service. You really need to build this globally scalable globally distributed infrastructure wise a lot of technology innovation right? I mean we want to do it at a scale which can help. Every customer in the world. It’s not like hey let’s start with the us customers and go from there. We’re already talking global scale global customers and even a customer in the world will have users globally in today’s world right? I mean every app wants to become global so lot of um technology innovation being done. That’s another reason. We need funding and 3 I think to me um the way I think of this as this is a long cycle I’m investing in free forever tier. We’re going to spend money in that customer acquisition cost so we wanted something which lost us a good. 3 years timeframe so that we are able to build an amazing product for our customers launch it globally and scale it before we need to go worry about funding.
Alejandro Cremades: So Obviously there you know is a big big vision now that then that you guys are going after you know, big problem. Big vision Imagine you were to go to sleep tonightrisi and you wake up in a world where the vision of the scope is fully realized. What does that world look like.
Rishi Bhargava: I think the at a personal level and slavic our Ceo tells this story amazingly well, it says his family is not using password managers. My family is not using password managers I’m not dealing with password. So. That’s the first thing right? imagine I’m logging into a website. No password needed. I’m logging in zipping through so that’s first thing in this world where this vision is realized to I think again I have mentioned this many times I’m I’m all about the team and my proudest moments were that everybody in demisto wanted to work with us again. That’s my second which is I’m excited about which is hey there is a team. There is a buzzing team. Everybody is excited working and realizing this vision of no passwords and then happy customers is the third thing which is to me if there is some pride about telling my kids and saying hey you know that application uses my product and. Reason why you were able to zip through into this new app that you as a teenager is using is because they use us. We onboard it. It was easy. It’s what I dream of this.
Alejandro Cremades: I love that so we’re talking about the future here. Let’s talk about the past and let’s talk about the past with a lens of reflection Richie. So imagine I was to put you into a time machine and I take you back in time I take you back in time to that moment. Where you’re in corporate America you are experiencing the frustration for the lack of innovation. You’re wondering about maybe doing something on your own. You know, taking a problem that is meaningful enough for you and you’re able to have a chat with your younger self. You’re able to go back in time and have a sit down with that younger hrishi and give that youngerrishi one piece of advice before launching a business. What would that be and why given what you know now.
Rishi Bhargava: Tough, fun, interesting. 1 So first of all I think as I mentioned right? Even Macafee every I look back and I’m maybe I joke around is like I’m a very optimistic person. Be positive. It’s in my blood but I think the the. The fundamental thing I believe is every job in my past including the larger companies have taught me something one of the thing that I truly believed is you can learn a lot from scaling a product. So if I were to go back and give my younger self advices. I would say ah be a better networker build more bridges at the larger organization with your customers and I am starting to do more and more of that which is ah all of us. When we are very busy day-to-day, especially for entrepreneurs. You have so many different things that you can cover one of the things that gets deep prioritize is that connection with your customer is that connection with your peer and that’s what I look back right? Um, and growing. Um. Like the early stages in my career at Macafee I met a lot of customers I learned a lot but I never connected with them after I had that first meeting. So if I were to do something different I would become a better. Um.
Rishi Bhargava: Networker I would connect with our customers more engage with them more maintain that connection. So that’s one thing I would give tell every entrepreneur is like 1 of the one of the biggest asset is as you meet new customers meet new peers founders you learn from them. But maintain that connections continue to enhance those connections.
Alejandro Cremades: I love that so Richie for the people that are listening that would love to reach out and say hi. What is the best way for them to do that.
Rishi Bhargava: I think ah Linkedin is the best way I mean I truly believe Linkedin has ah kept us connected I’m a ah big believer in connecting with people learning more. So Linkedin is the best way to reach out connect and I usually i. Actually attend a lot of founder conferences founder ah places so you’re there would love to chat.
Alejandro Cremades: Amazing! Well hrishi thank you so much for being on the dealmaker show. It has been an honor to have you with us today.
Rishi Bhargava: Now it’s been very exciting for me as well I think ah I loved your questions of taking me back to the fast help me relive my fun memories.
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The post Rishi Bhargava On Selling His First Startup For $560 Million And Now Raising $53 Million To Make Login Likable On The Internet appeared first on Alejandro Cremades.
Waseem Daher sold his first startup to Oracle and the second to Dropbox. He’s now raised millions of dollars from some incredible investors to help other founders grow their companies by handling their backend office and accounting needs. His latest startup, Pilot, has attracted funding from top-tier financiers like Akkadian Ventures, Empede Capital, Whale Rock Capital, and Jeff Bezos.
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- How Waseem thinks about competition
- Hiring well
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Alejandro Cremades · EP 580 Waseem Daher On Selling His First Business To Oracle, His Second To Dropbox And Raising $160MSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Waseem Daher:Waseem Daher is the CEO and co-founder of Pilot, which specializes in bookkeeping, tax, and CFO services for high-growth technology startups. He is a three-time entrepreneur with two successful exits: his first company, Ksplice, was acquired by Oracle in 2011, and his second, Zulip, was acquired by Dropbox in 2014. He has a degree in computer science from MIT.
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Read the Full Transcription of the Interview:Alejandro Cremades: Righty hello everyone and welcome to the deal maker show. So I’m very excited about the founder that we have today someone that has done it multiple times you know he’s built finance scaled exited I mean you name it so many times that they I was kind of like losing already. You know the. The my head you know out of how many times he’s done it but without further ado let’s welcome our guest today Wasim the hair welcome to the show. So your parents. You know we’re from lebanon you know, obviously you know when you have immigrant immigrantparents and and and.
Waseem Daher: Thanks for having me great to be here.
Alejandro Cremades: You get that inspiration too because you see them working so hard I mean I’m an immigrant myself. So I really understand you know what? what that looks like so give us a little of a walkthrough memory lane. How was life growing up. Yeah.
Waseem Daher: Sure I mean it’s kind of as you expect which is I think in in many ways a very classic as you said, kind of raised by immigrant parents who came to this country with very little sort of story which is both of my parents were born and raised in this tiny village in the middle of Lebanon. And they and basically their relatives and friends like everyone from that village pretty much moved to the United States in the kind of 70 s or 80 s mostly in the kind of like Cleveland area and like half of them became small business owners of various kinds like bars coffee shops that kind of thing the other half became doctors. My parents were a little bit of an outlier in that way. But it’s like I was surrounded by this notion that yeah you know, really valuing hard work really valuing family. You’re really valuing community.
Alejandro Cremades: And you also were this nerdy kid in school. So so so so what got you into the whole computer thing because you ended up landing at mit later on. But um, but the computers. How did you you know, get into computers.
Waseem Daher: Oh absolutely.
Waseem Daher: That’s a good question and so you know it’s interesting. Um, my uncles I collaborated to buy the first computer for me and my brother and my sister it was like I think a Christmas gift 1 year and I was just I don’t know I was very into it like there were computer games and stuff but also just like me. It. It was an opera. It was a place where you could just explore and do stuff and I think I always liked that kind of thing like of course I was very into legos and building things like all of that I think is kind of related.
Alejandro Cremades: And then you ended up going to mit and Mit O E Z you know made a pivotal you know thing in your in your career. Not only because of the lessons learned but then also because of the network.
Waseem Daher: Absolutely I mean for our 3 startups. They mean my cofounders have done together. It’s been the same founding team basically and we all met an mit undergrad like we were all there we were studying computer science together we were in the computer club together like the the network impact. Was huge. Absolutely.
Alejandro Cremades: And for you I mean it was a a little of here and there as a software engineer you know at the beginning you know you were doing some internships I mean you explored how it would look like at Amazon at Google I okay, cupid. But. Literally right? away you went at it. You know as an entrepreneur you know with the cofounders that you made at mit. So why did you go at it like so young you know I I kind of like write right? after you know, school kind of thing.
Waseem Daher: Yeah, in some ways. So first of all, it’s that Mike one of my cofounders Jeff had developed this technology as part of his master’s thesis and he actually was quite excited about it. He said hey I think this thing really has legs I want to do a startup. Do you want to do with me and my it wasn’t an obvious decision. But I think my thinking at the time was like I want to do it eventually I’d like to do a company eventually and what is the downside to doing it now and I think my perspective was and look this is ah a luxury to be able to say this my perspective was well if this doesn’t work out. I’ll just go back to the Google or the Amazon or the whatever as you saw you know I had a bunch of these internships previously. So I sort of had confidence that if this totally failed. You know I could return to being a software engineer somewhere and so as a consequence it did not seem as risky as maybe it it might have.
Alejandro Cremades: And quite techy. What you guys were doing a case splice. What were you guys doing there.
Waseem Daher: Yeah, so we had some technology that could take software updates and install them without rebooting I’m sure you’ve seen that pop up that’s like you must reboot install new updates we had tech that could take those and kind of magically transform them so that you could apply them on the system while it was running and that’s. You know that’s not really that useful on your laptop or your phone. The idea is these server systems where the downtime is really expensive. You might have thousands and thousands of them like the target was these kind of like large scale server. It administrators.
Alejandro Cremades: And you were alluding to earlier I mean the different companies that you’ve built now 3 of them. You’ve always had the same cofounders Jeff Arnold and Jessica Mckiller so why what makes this say trio or these 3 more sketeers. You know so effective. Ah, building companies. Why are you guys? So good together.
Waseem Daher: Sure? Well at this point I think one of the reasons we’re so good together is because we have worked together a lot and so it’s sort of like you know there’s a virtuous ah you know virtuous cycle in that way here’s what I would say I think like the key elements to making it work are. Deep mutual trust and respect and actually like clear and distinct areas of ownership like we work together well because we know when we need to actually work together and we know when we need to not work together. In other words, what falls into any 1 person’s domain and like. No one’s relationship is perfect of course like obviously there’s still occasional voices raised or tears shed or drama. We occasionally still annoy the heck out of each other but it works and is productive because we know how to work well together and what that means is. We can actually focus on making the business successful as opposed to focusing on the logistics of figuring out how to work together.
Alejandro Cremades: And what about on the logistics because for example, on caselies you were there. The Ceo O and now you’re the Ceo of pilot. So how do you think that the dynamics between you guys have also shifted. To you know for you now to take the Ceo versus taking a Ceo role like you did on caseplays.
Waseem Daher: Yeah I think the title change actually has not really materially changed what it is that Jeff and I each spend time on I think if you looked at the portfolio of what were we each doing a k splice what we’re each doing at Zulla. What are we each doing at pilot. It’s actually probably pretty similar to how it used to be in the sense that I do think. For the really big strategic and important decisions of the company. They are really made by Jeff Jessica and me together and I I think there’s there’s something interesting about that which is if we don’t all agree I’m not saying we run the company by consensus, we don’t but if we don’t all agree. But look. They’re smart talented people probably what that suggests is maybe there’s something they see that I don’t maybe we should talk it through a little bit more It’s a good prompt to say let’s spend a little more time together on this and if we still don’t agree and the decision has to be made well look I’m the Ceo I will make the decision. But as I think a healthy prompt for. Well maybe there’s more here than you might you might initially think.
Alejandro Cremades: And how do you get to that point of trust.
Waseem Daher: Well I think you just got to put in the hours right? It’s like the the reason it works for us is we were all friends together at mit we were all you know we we’re a bunch of classes. We’d work together on Stuff. We’d worked on projects together. But I think the the place where that deep trust was forged was that that first company which is. Actually just doing it together and experiencing the highs and the lows and the pains and the joys.
Alejandro Cremades: So would you say that after this experience of now having built 3 companies with them team versus idea what are your thoughts. So.
Waseem Daher: Strongly strongly team and just to make the point even more explicit for both the second company and for the third company like when we left oracle we were like we want to do another company together. We all got together and we said okay, what are we going to do and same for the third company and the point is. For each of us was like we know this is a good team. We want to work together with this team I want to work with smart talented people who are going to challenge me to do good work where I feel like I’ve got a great dynamic and what we do matters but it actually matters a lot less than the team I would work on basically anything with this team.
Alejandro Cremades: So then let’s talk about case place. Let’s let’s go back to so to case place. How did you guys capitalize the business and how was that process to getting it all the way to the acquisition which was acquired by oracle hey first company first exit. Not bad.
Waseem Daher: Sure.
Waseem Daher: Yeah, not too bad at all. So the case by story is a very interesting one because there’s sort of a combination of things that enabled it we bootstrapped it. We did not raise any venture capital for the business but we got we did a couple things sort of nontraditionally to finance it one is we won a cup. Couple of business playing competitions. Actually there was one at mit called the mit one hundred k competition which we won we’ had entered the business in the early days and then we got a grant from the Us government from the national science foundation. There’s thing called an Nsf sbir grant so through the combination of like a little bit of grant money. A little bit of just initial capital from that business plan competition and then we just had a product. We sold to people now. It also helped by the way that we kept our expense rates super low and that we were all you know, 22 and eating ramen and living together in a like kind of crappy apartment in Cambridge. So our expenses were low. We kind of had that initial capital and then we just worked very aggressively to get a product into the hands of our customers that generated revenue for us so we we bootstrapped it and I think importantly, that led to I think a very very healthy appreciation for basically the value of the dollar and like. Hey you actually have to build the business with sustainable economics was a lesson that was deeply ingrained in us in that first venture.
Alejandro Cremades: So let’s talk about the acquisition. How did the acquisition you know happen with with oracle.
Waseem Daher: It’s it’s interesting because to this day I feel like I still don’t really understand and here’s what I mean by that one of the things that I think is a bit of a misconception is I think many founders or entrepreneurs believe that like oh. 1 day I wake up I decide I want to sell my business and I like go out there and I look for buyers and I’m not saying that that isn’t possible but that’s probably not going to get you outcomes that you’re particularly excited about because to really get an outcome that’s going to be. Interesting for you and for the acquirer there kind of has to be the strategic alignment. It’s like why strategically does this company benefit from having what we do in in the case of Oracle I think like you know, 2 years prior we had met with them and we talked to them about hey this is our. Capability. We could do this rebootless. Update thing on Linux we think it could be of of real interest to your enterprise customers and then we like just didn’t hear anything for a while like a long time like years and then just one day kind of out of the blue they sort of got in touch with us and I think the thing that was puzzling to me was like. Why why on that particular day did they choose to reach out what actually was the catalyst and the inputs that are very complicated right? It’s like what else is going on with the company. There are other strategic priorities. The mood of any given person at a given day. It’s like there’s a lot of serendipity that goes into this stuff and I think.
Waseem Daher: The only thing you can really do I think to sort of maximize the probability of a good acquisition outcome is a little bit paradoxical which is don’t build towards acquisition build a thing that your customers actually want and want to give you money for. Grow The customer race demonstrate that it’s valuable and then potential acquirers end up seeing that.
Alejandro Cremades: And I was he ended up being in the 7 figures. So quite a good outcome for for everyone. So you guys were there for about a year a little bit over a year doing you know what? it’s called a vesting and resting ah maybe not so much resting. But I’m sure that.
Waseem Daher: Ah, sir.
Alejandro Cremades: You know there was a point you know in time where you know the 3 more sketeers you know, got back together. You know, thinking about another problem that they were excited about and you know, bringing that solution to cover that problem and Ita eventually became sulip you know which was the next company I mean how did you guys time that I mean. Did you guys like count to 3 and they gave your notice at the same time at oracle how did that happen? Okay, nice.
Waseem Daher: So first of all, I was an 8 figure exit. Not not that the details really matter. But yes, exactly what you said which is basically a year and a day after the oracle acquisition we sort of knew we still wanted to do another startup. We wanted to get the band back together. It’s basically exactly as you described which is we make clear to the team. It’s not like one day we surprise them we sort of make clear to the team listen we think Oracle is a great company. We’re glad you’re excited about this technology we are committed to making this transition successful. But I want to just be clear. This is not going to be the long term home for the founders. We intend to go and do something new.
Alejandro Cremades: So then at what point do you realize that that’s something new. You know is knocking and it’s time to get going.
Waseem Daher: I think for us we sort of had this idea that we thought a year would be a good amount of time to kind of transition over the tech and there were of course some incentives to remain for a year but we sort of basically a year and a day we all got together. Like in 1 of our apartments and said okay, what’s the next thing going to be how do we get started on it.
Alejandro Cremades: So give us ah a little of an insider view on that you know what happened in that apartment get together.
Waseem Daher: I think the question was okay, what problems do we have that we think need to be solved where we think we are good potential solvers for those problems or maybe here’s a more structured framework I think for every business I think for a successful business. You need a couple of key elements element number 1 is you need a large market size. You need to be solving a problem that is big and painful. So that when you succeed you have actually potentially built you know a billion dollar or multibillion dollar customer or multibillion dollar business so you need to Target. Kind of a big media opportunity. So the importance of the market size is key the second kind of question is like why now meaning what has changed about the world to enable this company to exist like probably again the scarce resources not the idea lots of people have great ideas. Why doesn’t this company already exist. What has changed about the world that makes this the time and place for this business and then the third question is why this team why is this team uniquely going to be able to execute on this particular problem and that that’s kind of the framework that we used. I don’t know that we had it so explicitly nailed when we were thinking about the second business but certainly by the time that we were thinking about the third business that was kind of the framework we had to say fine. How do we evaluate the caliber of any idea which is market size. Why now why? us.
Waseem Daher: And and basically like how hard is it going to be or what? what’s the easiest way to really test that the market is interested in this particular thing.
Alejandro Cremades: So tell us then about sulip. So then you guys you know land on the idea of sulip. So what was the business model there and how you guys make money.
Waseem Daher: Sure so the insight on zulip um, which I think was was spot on I think I have some comments in our execution. But I think the insight was spot on at the time this was I think like August Twenty twelve and the insight was listen. The. The group chat experience at work is actually pretty awful and in many ways it has dramatically lagged behind what consumers were used to in their personal lives like in your personal life. You know August 2012 you had the iphone or the Android phone like you had pretty robust kind of 1 on one and group messaging but at work you were still using like I don’t know this like almost like early two thousand s late 90 s like chat technology. And it was 1 on 1 base. There was not really robust group chat your options were sort of like I Rc which was kind of the domain of you know nerds like us or basically like a jabber server. It was like the the state of the world was very clearly going to look different in the future than it did in the present. And that became clear to us because again we had sort of played around with this stuff ourselves. We said we think we can build the solution that will actually you know make make workplace chat at work a lot more robust and a lot better and I think if you look at the success of slack as a business. They really really did a solid job of executing on.
Waseem Daher: Kind of that insight or that thesis.
Alejandro Cremades: But this company I mean it was a it didn’t take that long. It took get a choir I mean we’re talking not even about not even 2 years before the acquisition materialized with Dropbox. In this case I mean you guys had some liquidity you know from the previous acquisition from. From oracle from case plus so how do you go about financing the operation.
Waseem Daher: So with this company. It was ah with sulip. It was much more kind of on the traditional venture capital path meaning we had raised a bunch of money from angel investors kind of right out of the gate I think it was like one point five one point six million something like that and basically we called up. Essentially investors and advisors who we connected within our first venture and we say you know we’re getting at it again. We’re going to do another company with this founding team. Are you interested in getting on board. So we raise a fairly substantial at the time um angel round and the plan was to go raise a venture series a and all that other stuff and. While we were kind of in market exploring the series a options. The Dropbox offer kind of came on the table and was very interesting. You know again, it’s like these these things are so driven by things that are broadly out of your control. So in the case of Dropbox specifically like.
Alejandro Cremades: So how did that offer come on the table. Yeah.
Waseem Daher: Drew and Arash the founders were mit alums and I knew Drew specifically for my time at mit and so he was aware of actually what we had been doing with case Splys he had followed along with that journey. He was familiar with the tech. He’s familiar with the caliber of the team and so one is that he personally kind of like knew and could vouch for the team being great. And 2 was that it was very aligned with kind of Dropbox’s strategic priorities at the time where the view at the time was look We’re really good at the kind of file sync file sharing thing but we want to sort of do more at work. We want to not just be about files. We also want to be ah. About communication about collaboration about collaborative editing and so there’s a bunch of other stuff. The Dropbox was doing at the time that that the kind of concept of like a group chat at work sort of folded into that very nicely.
Alejandro Cremades: So then here you go again, you know second company second exit how many figures are we talking about my god got to respect the 8 figures now in this case for you guys you know again, you know you pass the 2 year Mark you know that vesting.
Waseem Daher: Sure this again, a kind of 8 figure outcome.
Alejandro Cremades: Um, a period and then the 3 of you you know again, got together on the apartment. You know to discuss about market to discuss about the why now and then you arrive on your latest baby which is pilot now with pilot. You guys have been added.
Waseem Daher: Yes, that’s true.
Alejandro Cremades: For over six years which is like in dog years especially you know the startup live and and given your previous you know experiences with caselies and and with with sulip. You know, obviously it’s it’s the longest you’ve ever been at a company pushing things together. So why.
Waseem Daher: Yes.
Waseem Daher: Sure so pilot was motivated by pain. We felt very viscerally and very directly in our previous ventures. So first maybe 2 seconds about what pilot is we do accounting tax prep fractional cfo work.
Alejandro Cremades: Pilot.
Waseem Daher: Principally actually for high-growth startups. But for other companies. So. In other words, you hire us and we do your accounting for you and the way that we do it is we employ a bunch of accountants who are full-time employees of ours who sit in our office who do the accounting. And then we’re kind of building the iron man suit for them under the hood. We have an engineering team that builds a bunch of software that we use internally to do the work more accurately more reliably more consistently and and the way we got here is that this was a huge paint point for us in our previous ventures in two ways. Pain number one was again remember the first company we bootstrapped so we had no money and so having no money I think sometimes causes us to make good decisions and sometimes cause us to make bad decisions. One of the bad decisions we made in the first company was not to hire an external accounting firm. It was I bought a copy of Quickbooks and I was like I’m pretty good at math. I’m just going to figure this out and so as I was doing the bookkeeping again along with my co-founders and other and other folks of the company I think 2 things became very clear thing number 1 is wow this is tricky you you really do want the help of experts to get this right? but insight number 2 was There’s also a lot here that is really mechanical and tedious that the computer should be doing like we should be writing software to help do the work and the reason to have the software do the work is not because it makes it more efficient. It actually makes it more accurate and so those 2 ideas together are ultimately what form pilot it’s.
Waseem Daher: Computer can help out a lot here. But also I don’t want to buy accounting software. What I want is a partner who can actually solve the problem for me and that’s a little bit like that’s a little bit of a strange shape for a technology company. Probably the average. Technology founder would have said I’m going to make an accounting software package that you buy and you use yourself and we said no we want to solve the whole problem. We Want to be the accountant for the company because that’s what we wanted ourselves in the previous ventures I didn’t need another piece of accounting software I needed like a trusted expert. Who effectively could be on my team.
Alejandro Cremades: I mean and and in this case, How do you guys make money.
Waseem Daher: Well, it’s very straightforward. It’s a subscription. You come to us, you pay us monthly or annually to help out with the accounting with the tax prep with the cfo services and the same you hire us basically instead of hiring the firm down the street that you might have worked with.
Alejandro Cremades: And why would you say especially now that you’re on your third rodeo. Why is it so important to be laser focused on the customer.
Waseem Daher: Well so this is something I feel really strongly about which is as a founder you kind of have 1 job in a way you have to make a thing that people want that they’ll pay you for and that they’ll tell their friends about and. If. You’re not doing that it sort of doesn’t matter what else you do it doesn’t matter if you’re exceptional at everything else, but you fall short at that particular objective. The business will not be successful and so I think that’s really clarifying. It’s tempting to spend a bunch of time worrying about what are my competitors doing or. You know what how should my office look or how should we think about this you know decision Abc it’s like if it’s not ultimately in service of building a thing that your customers love and want to pay you money for like don’t waste your time on it.
Alejandro Cremades: And also while you’re being laser on the focus and and and really focused on the customer. How do you go about not getting too much in the weeds.
Waseem Daher: Sure So I actually I would say almost the opposite I Love to get in the weeds I think you should get in the weeds and the reason yet it’s a little bit counterintuitive I think a lot of people think like oh you’re building a thing at at significant scale like.
Alejandro Cremades: Why why? why? go ahead.
Waseem Daher: Surely, you should just build a process and like let the process run and that would be true if you were one ah hundred percent sure that you were building a process around a thing that was correct and I think the thing that I’ve seen time and time again in startups is. You have an imperfect view of the world. You have an imperfect view of the world formed by what you’re hearing from your customers from your prospects just like from what you’re what you’re hearing from other folks and over time that view is refined and the way that that view is refined is by getting exposure to almost to more data. And the problem with kind of like trying to build it into a scalable thing all at once is you are removing yourself from kind of that additional learning about the world that impacts how you think about what your customers want or don’t want and so I’d encourage folks to be overly scrappy to overly get in the weeds. Rather than to try to build the perfect process from day one and let it run.
Alejandro Cremades: And as you’re building the perfect process or the perfect company. How do you think about competition to.
Waseem Daher: Yeah, so this is a this kind of goes back to my first point about if it’s not in service of making the customer experience better. You shouldn’t be doing it and the danger with competition or with like thinking too much about your competition is your competition actually does not really matter. And here’s here’s why I say that in almost every business again almost every business not universally true. It is very rare that there is truly a market dominating winner take all like even in categories that you think. Have obvious leaders like for crm salesforce is like the obvious name there. Salesforce’s market share is like 30 but twenty thirty percent that’s that’s a lot but it is not 50 or 70 or 90% like there is a robust system of of other providers that do this stuff and so it’s. If. The market is not winner-take-all you should care less about what other people are doing. You should care more about what your customers are saying if your customers are happy and they’re giving you money and they’re referring other people to you and they’re promoting you your business will be successful independent to what anyone else does and if your customers are not happy and they’re not promoting you. Doesn’t matter what your competition is doing your business will not be successful and so the danger about spending a lot of time thinking about competitors is if it if it is done instead of spending that time talking to your customers I think that’s a big miss.
Alejandro Cremades: And just for the for the people that are listening to in this case I mean you did finance capitalize very well the operation. Um, how much capital have you guys raised today.
Waseem Daher: Yeah, we raised about $160,000,000 from Sequoia Stripe Jeff Bezos and a bunch of other great folks.
Alejandro Cremades: I mean a bunch of other amazing folks I mean you have hoard Luman from yext. He actually was on the podcast. They very recently Adam D’angelo the founder of Quora Drew the founder of Dropbox we have a paul english founder of kayak.
Waseem Daher: Nice.
Alejandro Cremades: I mean and I could keep going on and on and on with all these like absolute rock stars that you have in how how the hell did you land this people.
Waseem Daher: It’s a good list. Well again, it’s like this is this has been our sort of whole career in the making it’s like these are folks that we encountered either through the mit connections. Through the case place connections through the oracle connections through the zob connections through the Dropbox connection. It’s like over time just like folks that have been in our network that have been excited about what we’re up to and who wanted to kind of come along for the journey on on this third one
Alejandro Cremades: And what does that process of activating your network. What does that look like especially for the people that are listening that are wondering hey you know I’ve gone to great schools I built some great people that I have access to how how do you go about activating that.
Waseem Daher: It’s a good question and I think it requires like some real authenticity meaning the way that we cultivate these relationships was not like oh there’s a task on my to do list to like go network. It’s. Really just sincerely like keeping folks up-to date on what’s happening with you and your business asking them for help when and asking them for help when you need it and I think that that’s a little bit counterintuitive in the sense that like the the thing that’s so exciting to me about so many of those investors are. These are folks that I would pay money to get advice from and so the prospect of being able to get advice from them and being able to get funds from them is like very very interesting and that is only possible because we’ve sort of cultivated this relationship with them over in some case literally decades.
Alejandro Cremades: Now obviously you guys have been at it for about 6 years so if you were to go to sleep tonight and you wake up in a world where the vision of pilot is fully realized what does that world look like.
Waseem Daher: So The the basic I think desire sort for what are we up to ultimately I think the the mission and the mandate is pilot is your trusted partner who runs your back office for you which causes your business to be more successful and the like fundamental problem we’re trying to solve is. Everyone in the world who starts a business of any kind whether it’s a tech company or a coffee shop or a doctor’s office or whatever it is they start it because there’s something they’re trying to do in the world. There’s a product they’re trying to make or a service they’re trying to provide and they’re excited to commit their energy towards causing that to occur. And so they get started. They start their company or they you know they have the company up and running and what they soon realize is there is way way way way way more to running your business than just providing that product or service. There is all of this back-office stuff and the backoffice stuff is like particularly tricky because one it’s. Really important and the reason you can tell it’s important is because big companies have entire teams devoted to running these operations well and two is it’s rarely the area of expertise of the business owner and so really I think like what is pilot look like in the limit if we’re super Successful. It’s. We should be doing all of this stuff for you. We should be doing it better more reliably more accurately more scalably certainly than you could do yourself or than anyone else can do it and the consequence of that is your business should be more successful like if we could give you.
Waseem Daher: Finance team and the legal team and the recruiting team and the it team and the real estate team like we give you the powers that like a fortune 500 company has in these departments but we could use it to turbocharge your small business somewhere like surely that would make your business more successful. And I think that’s ultimately what we’re looking to do. We’re kind of like trying to democratize the capabilities that these huge companies have and we’re trying to bring them to the average business. That’s out there starting with the accounting or starting with the financial back office but certainly that’s not the limit of the ambition.
Alejandro Cremades: And definitely you guys have been. You know? Well you have been well on your way there because you’ve been growing like crazy I mean just on the employee count in the last year alone according to Linkedin insights. We’re talking about over thirty two percent on the employee count. So. How do you go about adding people so fast without breaking things on the culture.
Waseem Daher: I mean it’s hard. It’s hard and I think it is ultimately requires you to lean very heavily on our robust hiring and onboarding process which is like first of all, you have to understand what the roles you’re trying to hire are you have to really crisply understand like. What is it that we’re trying to do with this role and what does success look like and then you need to build an interview process that actually tests for that and I think that sounds obvious but people don’t really do it people like these kind of like gimmicky gotcha interview questions or like well would I be friends with this person like that’s actually not the question the question is are they going to excel in this role so you have to design an interview process that really probes deeply on all of the things you think are needed for success in the role and can actually like form good decisions in a really principled you know way that minimizes bias that actually. Sets you and the potential employee up for success if you bring them on board.
Alejandro Cremades: Now we were talking about the future earlier. So let’s talk about the past but let’s do that You know with the lens of of reflection here imagine if I was to put you into a time machine and I’m able to take you back in time.
Waseem Daher: Sure.
Alejandro Cremades: Back in time you know to that moment where you were still at mit you know, maybe at that point where you were you know, getting together with Jessica with Jeff he was the 3 of you guys. You know, starting to ah brainstorm about a future a future where you could do something together. Build a company of your own. If you could enter that room and be able to look at the 3 of you the younger selves and be able to give 1 piece of advice before launching a business now that you are on company number 3 exactly with the same co-founders. What would you tell your younger self. You know. Obviously and also Jeff and and Jessica if the 3 of them were to listen because typically our younger selves. You know they they don’t listen that much. But let’s say they were actually listening.
Waseem Daher: Sure I think probably you know, interestingly the first company we kind of almost stumbled into by accident which is again it was kind of Jeff’s master’s thesis we’re like the tech is cool but like we didn’t know anything about how to run a business or how to evaluate a business or so probably I would leave the team with. Kind of framework we discussed which is being really thoughtful about market size being really thoughtful about why now being really thoughtful about why us and that really laser laser focus on staying extremely close to the customer to make sure you’re really validating. You what you? what? you ultimately have is a hypothesis about the world. You think the world behaves in a certain way and your job is to kind of prove or disprove that hypothesis and the way that you do that is you kind of have to really test it in the field you have to talk to the customer you have to make sure they’re excited like there’s no substitute for that kind of like. Proximity or closeness.
Alejandro Cremades: I Love that now for the people that are listening. What is the best way for them to reach out and say hi.
Waseem Daher: Great question, a kind of bunch of options. Um, certainly email is always good I’m just wasim at pilot.com you can also find my substack. It’s wasimm dot substack dot com and I’m at withsim on Twitter as well. And then on Linkedin I’m just Linkedin Slash in /wdother so any any of those would be great and then pilot is at pilot.com we’d love for you to check us out there.
Alejandro Cremades: Amazing, well amazing. Well was him. Thank you so so much for being on the deal maker show today. It has been an honor to have you with us.
Waseem Daher: Thanks for having me this is it was great I loved it.
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The post Waseem Daher On Selling His First Business To Oracle, His Second To Dropbox And Now Raising $160 Million To Simplify Accounting appeared first on Alejandro Cremades.
Bibhrajit Halder has been a big part of the autonomous wave taking over the world. He’s already raised nearly $70M for his own AI software company that is helping to build the future. The startup has attracted funding from top-tier investors like Brick & Mortar Ventures, Newlab, Autotech Ventures, and Vimson Group.
In this episode, you will learn:
- The new world of autonomous equipment
- What SafeAI is doing for heavy vehicles
- Building a SaaS startup
Alejandro Cremades · EP 579 Bibhrajit Halder On Raising $68 Million To Accelerate Autonomous Mining And ConstructionSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Bibhrajit Halder:Bibhrajit Halder, Ph.D., is an industry expert in self-driving vehicles, autonomous robotics, AI, and Deep Learning. He has been working on autonomous robotics for over 15 years.
Dr. Halder completed his Ph.D. at Vanderbilt University, Nashville, TN, and has an MS degree in Mechanical Engineering and Applied Mathematics from Ohio University. During his Ph.D., he worked on fault detection and isolation and supervisory control architecture that allows autonomous robots to identify failures and take safe action.
Dr. Halder joined Caterpillar and worked on Autonomous Mining Truck for 7 years, which is one of the first commercially available fully autonomous trucks in the world. At Caterpillar, he worked on the Vehicle Health Management system, which is critical to any autonomous machine. He also developed an algorithm for localization and perception for autonomous vehicles.
After Caterpillar, Dr. Halder joined Ford and built a team to develop a self-driving algorithm. Later he worked at a start-up, Faraday Future, where he led a team to develop self-driving software for next-generation smart cars.
Dr. Halder architected and deployed AI algorithms and Deep Learning models in self-driving applications. Later he worked at Apple as Sr. Architect working on an autonomous solution. Currently, he is the Chief Executive Officer and Founder of SafeAI Inc. SafeAI is building the future of autonomous mining by creating autonomous mining equipment that just works.
Halder has published 1 book on autonomous robotics, over 15 journal papers, and filed more than 40 patent applications.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today today we have a very very exciting guest. We’re gonna be talking about the good stuff that we like to talk about building scaling financing. You know all the above. And very interesting. You know like what he is doing. You know in this rocket ship that he has embarked in and they you know, especially we’re gonna be talking a lot about autonomous autonomous stuff so hang. There. You’re gonna find this very inspiring and without further. Do let’s welcome our guest today. Be brajit. Let’s see if I say it right? Halder welcome to the show.
Bibhrajit Halder: Thank you Alejandro and really excited talking to you and thanks for having me today.
Alejandro Cremades: So let’s do a little of a walkth through memory lane be rajid how was live growing up in India in Calcutta.
Bibhrajit Halder: Yeah, so I was born in Calcutta I. Loved it. It was very you know it’s a beautiful, beautiful city. Lots of good food. Lots of and I might had a large family so it was fun growing up I think I was playing a lot starting a very little. So. It was a very good childhood.
Alejandro Cremades: And what’s going on in India with that social pressure towards becoming a doctor or becoming an engineer. What’s going on.
Bibhrajit Halder: Yeah I was the fourth kid so we had the 5 kid I was number 4 so one of the advantage I had that because I was number 4 parents didn’t have time to take you know like you go to school you stay there. That’s all they expected out of me. They said whatever you do. We don’t care. We got too many to take care. So I was that was that works for me.
Alejandro Cremades: So so in your case actually you did mechanical engineering but then then you knew you wanted to come to the us I mean why? why? why to the Us.
Bibhrajit Halder: I know I came to Ohio University who has to in know our university and one of the question I remember the second day somebody asked me that how did you find us, you know you were in calcutta. They realize what calkata is how far you know India and and just my my experience don’t generalize it. But. If you are a guy and growing up in India and you are in the middle school. You pretty much know you’re going to go to us for study I don’t know why so it was not a big decision for us. So I pretty much by that I ah seventh or eighth grade I already pretty much knew that I was going to go to us for grad school. So no I think that we had ah I had opportunity. So I really was. Appreciative of that I finished my undergrad in India in mechanical engineering as you said and then came here for graduate school early 2000.
Alejandro Cremades: So now for you, you know like you did everything you did masters. You know you were not. You didn’t have enough with one so you decided to do 2 masters you know and on top of that a ph d so wow now you know after you do all these studies. Basically what you decided to do was to really ride the whole autonomous you know by stuff you know and you did it. You know first with caterpillar then with Ford I mean what caught you the your attention from from this autonomous wave now that they was forming.
Bibhrajit Halder: Yeah, and I was one thing I would say about this whole journey of my career I was always super lucky. So I was always very excited about robotics back in when I was doing my undergrads when I came here I was working on the robotics. So really, this is where the self-driving and autonomous. Started with the darpa grand challenge in us and as part of my grad school I literally got sucked into that and I could not be more happy for that. So my ph d was actually an autonomous vehicle. So my paged work as an auto autonomous vehicle. So when I graduated. Caterpillar just started their autonomous mining project and I joined literally a week before the kickt started their big project and as about to take my ph d work and that was my first patent in caterpillar so you don’t get lucky like that. So yeah I mean I and I have ever since doing autonomy. And I cannot be more lucky and happy that I got I get to do the such a cool stuff.
Alejandro Cremades: Now there’s probably a lot of people that are not so technical and that are not so familiar with the the world of autonomy so give us a little bit of you know the history behind the autonomy you know in general and why so important.
Bibhrajit Halder: Absolutely just maybe in a step back. what is autonomy is autonomy basically what we talked about any vehicle. It’s not just a passenger vehicle think about passenger vehicle big truck other thing the thing that we you know ship it into moon event. You want to make this machine completely. Navigate drive. Do their job without any human intervention. So this is where the world is moving that machine will get the job done and when I was in a grad school one of our focus is to make the the robot that we are shipping to the moon make the mononomas because you cannot possibly send human there right. You have to have this vehicle running autonomously and the way you want to think about the technology is that give them a eye that it can see things give them a brain so it can make the decision and give them a you know a control so that it can move around so auto autonomy got started actually back in 90 s. Ah, we say defense industry was doing it early 2000 in the defense industry said can we give it to the everybody else. This is where the darpa grand challenge happened amazing success. They put about 2 ah 2 challenges $1000000 you know, kind of prize money. But that two couple of million dollars of investments sparked the whole industry into this path. So I think this is some of the thing defense does that people don’t realize how amazing they are to kickstart a trend setting technology so they really started this whole thing and when they did the gradarpa grant challenge.
Bibhrajit Halder: You name all the big universities right? Carningham Mill University Cmu Stanford Berkeley you know, caterpillar oshcosh all the gm for all the company was part of those competition and everybody 1 thing got proved out of that competition that yes we can do it. Not as a one company not as a 1 thing but as a humanity we can do this and having just dep pickedt it up before anybody else I think caterpillar and Kumar Suz of the world they realize that big mining truck and think about a mine is a constrained environment running twenty four seven and really doing very repeatedive job but also in a very safe you know safety concern is very high so making those autonomous was no brainer so catapularmao started about 10007 and by that time we were doing it I was at catapular. Google came into the scene twenty eleven they said we want to do passenger vehicle autonomy and that just started the firestrom as you know today then forward and Gm and volsberg and everybody started doing and and I think what happened in 2016 Gm Bought Cruise for a billion dollar and cruise is another startup company that time it was very small that really parked the interest of the investment community. They didn’t see that gm is going to buy a software company for a billion dollar
Alejandro Cremades: And I’ll show you without that much in revenue I Believe Cruise didn’t have that much in revenue going on. Yeah.
Bibhrajit Halder: No crus at 0 revenue. Not so that was really just the idea few people doing things and that got bought for $1000000000 and that just kickstarted the whole industry from the funding side of aid.
Alejandro Cremades: Wow.
Bibhrajit Halder: And just to kind to wrap it on that just a dollar valuewise that probably about $8200000000000 got invested into autonomy or self-driving ecosystem starting from about 19016 so over the in the last seven eight years eighty two hundred billion dollars got invested. I think that’s a huge huge number for moving a technology forward. Ah so I think you know after that is a little bit of all over the news right? every oem you know every startup was doing selfdriving car and now here we are today. You you see that is’s still going on lot of effort is getting obviously we are focusing on the heavy industry because we know what we know, but that’s kind of the long history of self-driving if you will.
Alejandro Cremades: So I Guess you know so that we can just dive right into it with what you’re doing with your business but before that you know I’d like to get the one lesson learn that you got from the 3 companies that you worked at before starting your own business First One. Lesson learn at caterpillar.
Bibhrajit Halder: That’s very easy. The biggest lesson learned is that you know as complex as the technology of autonomy is deploying into operation is a different beast. So I was there for 6 year or almost seven years first 3 year we are developing. Last three years we are deploying the amount of thing I learned in the last three years is like pale compared to the first 3 year I think developing the technology what the way we say is a 10 % effort actually deploying and running on a day-to-day is 90% so I think that is the number 1 thing I learn in caterpillar and I’m so grateful about that that experience really shaped my kind of learning so much I think now if you look at food and Apple I think they’re what I learned the number 1 thing is that how fast the technology has been moving. Every aspect of it. The lidar got super super mature. The compute platform you have the gpu the new way of doing Ai the dnas of the world. So both at at Ford and Apple I learned that I think specifically for Apple 1 thing that blows my mind is that. Kale and the scope they work with the amount of people they have the talent they have the infrastructure they can throw into that you got to see otherwise to believe it like I I obviously was in a big company. Both caterpillar and Ford is big company. But when we see it in Apple the amount of infrastructure and resource they can utilize.
Bibhrajit Halder: A just mind blowing. So I think I I learned a ton from every aspect of our of the 3 company.
Alejandro Cremades: Now I mean it’s it’s kind of like interesting how you go from caterpillar and from Ford where you’re like working more like with cards where with something like Apple is more like devices now I mean that’s quite a change when it comes to autonomous stuff.
Bibhrajit Halder: Um, I mean Apple was I mean Apple is doing autonomous car right? So I was still working on auto autonomous car. But you say you are right? It’s a different setting because they’re software company compared to so I get to learn the what a somebody like Apple what a software look like.
Alejandro Cremades: Yeah, and you know it’s interesting because not everyone knows that Apple is actually you know experimenting with with cars. So I mean that’s that’s pretty amazing I mean are we gonna see eventually you think a car that is a done by Apple and all.
Bibhrajit Halder: The way I see I do not know that will be the honest answer but the way I say that autonomy they are definitely working on and if they’ are doing autonomy if they were decided to do the car. They will do the car but I don’t know exactly what they will decide because the your biggest. Motivation here is to make the vehicle autonomous and if they decide then I need to make my own vehicle to do a great user experience then they will do it. It’s about that user experience.
Alejandro Cremades: Got it? Well you never know maybe Apple and ends up buying Tesla got knows but in your case. Basically what happened is that Apple was literally the most immediate step to you launching your own business save ai so. Give us a little of a walk here through the sequence of events that needed to happen for you to say you know what? it’s my time to shine is my time to go out it on my own.
Bibhrajit Halder: It’s it’s an industry level decision. It was not really because I am not a you know I’ve been in the big company. All my kind of career right? It was really I saw the. The massive improvement happened in the overall self-driving ecosystem right? as I mentioned compute platform sensor the ecosystem the talent the technology and I realized that we have done autonomy in the heavy industry back in the days almost ten years ago we put it into production but we went into production with one point zero. And I’ll explain what I mean by that and this Apple Google way of doing autonomy can greatly benefit the industry I come from which is the mining the construction the heavy side of it and nobody is doing it. Everybody got sucked into the passenger side as like somebody got to do it then I look around then I was like. Somebody might be me because I have the both experience I have the heavy industry background I have the auto autonomy background I have seen how 2 point 2 is done so that’s really the trigger point is that we know that heavy industry will significantly benefit their safety. Their productivity. Their overall efficiency will go through the roof. If they somebody can bring the technology to them and I was in a best position to do that and that’s really the trigger point that can I breath a bridge can I be the bridge where I bring that this newer technology back into the industry where I come from where I learned my you know learn for last seven years.
Alejandro Cremades: So Then how were the early days like we save ai because I mean I’m sure that for you. It was all also quite a humbling transition where you’re used to these massive companies and then all of a sudden you see yourself maybe like. Distributing flyers at the you know engineering events to to hire people I mean I’m sure that they it was quite humbling. So.
Bibhrajit Halder: It is humbling event today if you can believe it and I still I remember the first presentation I had peach tech to my investor for the preeed round. So we raise about a million plus on the first check on the pree round. I would never show that presentation to ever again. It is so ugly so done so bad right? So yeah I think it is still humbling what we are doing and I’m I’m learning on everyday basis but also super lucky I mean we’ll talk about that like the support I got whether it is from the investor community with the partners just friends and. In ecosystem that help help me through that and obviously then amazing team. We we had about hundred people today. We we just have amazing team that we build up over the time. But yes, it’s a it’s a learninging every day still.
Alejandro Cremades: And for the people that you know are listening to be able to get it. What ended up being the business model of safe Ai how do you guys make money.
Bibhrajit Halder: Pretty simple. So think about this mining vehicle this construction vehicle any e equipment and you can think about they run almost and you are from 2 hour a day to 24 hour a day and currently they are using human to drive this vehicle and what we are doing. You’re taking human out of the harms way. And we are driving the vehicle with the software and we letting human do the organization orchestrating and planning side of it right? So that which they can do it from the in the office area if you will so our business model that we charge a yearly licensing fee for running the vehicle so they are already. They have the operating cost to run those vehicle. We charge a software licensing fee. So so we are pure software company. Yes, we integrate hardware but we are a software company where we charge as a software licensing fee year over year par vehicle.
Alejandro Cremades: So then I guess you know. Also you guys have raised quite a bit of money for this. How much money have you guys raised So they.
Bibhrajit Halder: So total accumulatative we raise $68,000,000 till today we closed our be round last quarter and and obviously that money help us keep delivering and providing to our customer. What we have have committed already.
Alejandro Cremades: And how was that journey of going through all the different rounds I’m sure that was also quite a near to you.
Bibhrajit Halder: Absolutely I mean my background is engineering right? I never did it before but so we did as preced. We did a c then we did the a and then we just closed the b only thing I can say that I’ve been learning right? Every aspect of it I’m learning how to do it and. We have an amazing, not just a supportive investing community but also very visionary and understanding the market I think that is very important and because when you are early stage. They don’t have anything to really see why they should invest that there is no revenue. There is no product so they get to see they actually had the same vision that. I have and they’re able to relate to that. So I think that is a very very amazing. So over the time it was a lot of learning but at the same time. Huge amount of support from the investor and the in a Vc Community so
Alejandro Cremades: So so in this case I mean pretty interesting going from the engineering side to now the business side. You know how have you been able to blend both because not a lot of technical people are able to really you know cross that a bridge.
Bibhrajit Halder: Yeah that’s a very good question and I think I will I will kind of go back to my caterpillar days and and kind of credit to that I have seen how maybe as an engineer but have seen how you know oe yeah caterpillar for my example has. Transition from a technology to actually giving value to the customer. So my not serve was always what value does my in customer which is a mining company construction company think about victims of the world in us. What are they getting and if you think about just a simple example, you’ll realize that. Typical construction company. Let’s say they’re doing a project for five year hundred million dollar operating cost building a bridge building a dam building a road. This technology can make that time instead of spending 100000000 and they will can get it done in $75000000 and instead of 5 year they can get it done in 4 year at the same time 25% cost reduction 20% time reduction fundamentally changed the way we do construction or building the things if you will so I think that was my not star when I go talk to the end customer I said this is your benefit this will change your industry and that is really the. You know my learning from the business side that what is the value to our in customer and as a startup I cannot go or we cannot provide a 5% 10 person increment and value. You cannot sustain that you have to give them a step change. You have to show them the new future I think that was kind of my way of learning the business.
Bibhrajit Halder: What is a real value to the end-user.
Alejandro Cremades: And obviously you know like the um, the transition to and you know what we were talking about I mean you raised over $60000000 and you were coming from corporate America so it was not like the venture world. Not like you already. You knew you know friends from other startups or you were working at another Vc firm or anything like that. You know, let’s say you just dove into it. So how was it like to. Also. Learn and get up to speed not just on the business side of things but more you know, specifically on the financing side of things under that umbrella business where now you know you need to get to know the people you need to know the technical jargon you know on the financing side and understand how different things are going to impact you. As you continue to go and you take on that money. How was that how did you tap into that you know pool of investors and into that community because it’s very difficult to access.
Bibhrajit Halder: Now that’s a very good question and I get this question from some of my other friends across the globe I would say you know that’s one of the things super lucky that I am in Silicon Valley I think I cannot say it any other way. There isn’t you know. This place is just magic the amount of people that are willing to help you support. You. You know they understand the vision. They understand the you know work you are trying to do I think I probably couldn’t have done this outside Silicon Valley I think that support I got is just incredible. Whether. People making introduction people giving me guidance people are telling me what I’m doing wrong which I do you know you know every day I do something wrong, right? So I think that’s that ecosystem that support and the people winning is to kind of listen to you and relate to your vision I think I would say I got lucky. It is when you say how do you get? you know up to the speed I don’t I don’t think I got up to the speed yet I’m still learning and I’m still going and running every day making sure I don’t fall. But yeah I think I really relate to that the support and the overall ecosystem that silicon valley provide. We have invested across the globe now we have invested from in Europe Uk you know, even Asia quite a bit of investor but really the support we got from here that got me going and I I’m learning the linos I learn as we go and that’s another good part of this job is that.
Bibhrajit Halder: You really have to have your learning almost on a daily basis because there is always going to be 5 new thing throwing at you literally on a daily basis.
Alejandro Cremades: So in your case I mean you’ve been able to raise money from sixteen. You know, notable investors and when it comes to the support that you’re alluding to how do you go about using in the most effective way your investors so that they can be really Helpful. You know as you continue to build a business whether that is on giving you access to talent giving you access to more money giving you access to a man a on buy side or a sell side or even distribution you know in the formal business development deal Some partnerships. How do you go about using their help.
Bibhrajit Halder: Yeah, and we have a extremely diverse group of but very talented investors in our kind of portfolio right? We have pure financial investor work and laid out around some of our around we have our strategic investor who are partner. We also have some of our customer as our investor. So I think we got 3 group of people as our direct customer our potential customers. Our partner and strategic strategic partners and obviously the financial people I think each group brings very unique thing to the party but 1 thing very common among all of them. They are ready to help you anyway. They can wherever you need I did not have an experience I probably have a texting relation with pretty much all my investment you know key member and they were anytime I I remember I have texted some of them at twelve twelve in the night and I got responded at twelve thirty something I asked right? so. That kind of they’re always ready to help whatever you ask I think from the customer side. The biggest you know, biggest support they provide. they really give you the north start of the you know market what they really need they were very open and that share with you. You know and that is the that is a goal when you’re doing a business. Hearing from customer what they need that is the goal because that’s where you you lose your one of the thing we are doing amazing at say if you have besides the team. What I don’t think I’m very proud about is that product market feed what we are doing something that customer wants. It is not something that we are just smart and we’re doing because we love it and we are looking for somebody to use it.
Bibhrajit Halder: Really, this is customer saying we want it. We want it today. Can you make it faster. Can you make it better I think it doesn’t get any better than that I think the partner brings a huge support whether introduction to the customer just being working with us giving us the credibility because all of our customers are. Multibillion dollar behemoth so they’re like the big name in their country if you will will as I a bigels of the world so they brings the credibility and I think the financial investors are like literally every way they can help hiring people introduction to other investor. You know they really roll up their sleep and healthy. Anyway. To grow the company.
Alejandro Cremades: Now for the people that are listening to get on understanding on the scope and size of save Ai today I mean what can you share around number of employees or anything else that you feel comfortable sharing.
Bibhrajit Halder: Yeah, we are. We are about 100 people. We are about 98 today we are based in Silicon Valley our offices in Santa Clara but we have also an office in part Australia we are deploying in Australia we have a office in Tokyo we are deploying in Japan. We also have an office in India. But we we want to expand so we are pretty globally expanded if you will about 100 people you are looking to grow the team. We double the team last year ah for about 4200 almost and ah sizewise as I said we raise about $68000000 but more importantland do we have a. Very dedicated customer commitment. We are deploying into multiple area in the us Australia and Japan we have a customer who has given us a you know hundreds of millions dollars of commitment so that a that we are we are delivering as we speak.
Alejandro Cremades: So imagine you were to go to sleep tonight be bragitta and you wake up in a world where the vision of safe ai is fully realized what does that world look like.
Bibhrajit Halder: That’s an amazing question. So I think what that look like is that over 70 to 80% of the equipment that is building your world. So think about this way that we use this machines and all the thing to build our world our infrastructure right. We do mining. We do build ports. We do. We are airport 7 to to 80% all is just getting done by machine and as a humanity we are just planning and organizing the whole thing and we are building faster and we are building with a lot more so in a just sustainable way but doing it at a lot less resource. I think that is ah that is the future we are going towards and as we work together that future will come faster and if we don’t work together. It will take longer but that future will come.
Alejandro Cremades: Now We’re talking about the future here. So Let’s talk about the past. But let’s talk about the past with ah with a lens of reflection. Let’s say I was to give you the opportunity of getting it to a time machine I’m being able to. Go back in time and being able to have a chat with your younger self with that younger be vergit maybe that younger Bee verjit that is thinking about doing something maybe a company of your own and imagine you were able to sit down and give that younger. Be Rajit one piece of advice before launching a business. What would that be NY given what you know now.
Bibhrajit Halder: Very good question. 1 thing let me answer to that question. But I mean I think the career I went through I probably won’t change anything I learned so much. But 1 thing probably I would give advice to myself is that you know. You want to jump and you want to start something even when you think you are not ready at all like it is okay to be not ready, not knowing and just do it because I think if you take your time to be ready. You will still be not ready so you just you know run that. Time right? So I think if I do advise anything I will say whether to be younger myself or somebody else that if you feel like you’re not ready. You are absolutely not the time you want to take a couple of more year to learn just do I think you will learn like hundred times more by doing when you’re not prepared.
Alejandro Cremades: I Love that now for the people that are listening that would love to reach out and say hi. What is the best way for them to do so.
Bibhrajit Halder: Yeah I’m on Linkedin I’m on tutor. So Linkedin you can find me with my name. 1 thing is very that because my name is not just unique I’m literally the only one in the world. So if you type my name in Google like b I B H a it will show up the whole thing. But joke aside, you can find me on that name on a. Linkedin on a Twitter I’m very active on both of them and i’ll’ll definitely reach out and respond.
Alejandro Cremades: Amazing will be right. Did thank you so much for being on the deal maker show. It has been an honor to have you today with us.
Bibhrajit Halder: Ah, this is great and I love the way you set up the questions and you know I as I mentioning at the beginning I listen to some of your podcast.
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Alexandra Zatarain is on a mission to help others optimize their sleep for their best lives using new software and hardware technology. His startup, Eight Sleep, has attracted funding from top-tier investors like Jesse Robbins, Kris Bryant, Anthony Pompliano, and Sophia Amoruso.
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Your email address is 100% safe from spam!About Alexandra Zatarain:Alexandra is the co-founder and VP of Brand and Marketing at Eight Sleep, the world’s first sleep fitness company. Eight Sleep designs tech-enabled products, content, and services that make people sleep fit.
In 2017, Alexandra was named by Forbes to the 30 Under 30 list of young professionals making an impact in the Consumer Technology industry. The same year, she was a speaker at the Forbes Under 30 Summit on the topic of longevity, sleep, and technology.
Prior to Eight Sleep, Alexandra applied her marketing experience at various startups, academic institutions, and Wall Street organizations. She was raised in Tijuana, Mexico, and now lives in New York City. She holds a B.S. in Communication Science from Tecnologico de Monterrey.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show I am thrilled you know with the guests that we have today. We’re gonna be talking about building scaling going to market. Product market fit brand positioning you know revenue being a category builder. You know all the challenges that come you know with that the ups and downs you name it so without furtherdo. Let’s welcome our guest today Alexandra Zatarain welcome to the show.
Alexandra Zatarain: Yeah, thank you for having me I’m excited to be here.
Alejandro Cremades: So originally born in Mexico in Tijuana so give us a little of a life through a little of a walk through memory lane. How was life growing up there? yeah.
Alexandra Zatarain: It was great I really always remember my childhood with amazing memories. I was very lucky to grow up in a household that had a father who was an entrepreneur who came from sinanoa in Mexico built his own life with very little education. Ah, mother who was a professional. She was ah a doctor and having that sort of balance of just you know parents that have to go out there and build their businesses every day and that’s a lot of where I learned to be the person I am today. And Ijuana was such a great place contrary to what many people may believe it was a great place to grow up in the 90 s or maybe I was just very privileged to grow up in a great environment while I was there and I got the exposure of being so close to american culture as well. So a lot of my dreams professionally were all with. Geared stewards one day coming over to the United States
Alejandro Cremades: Yeah, because I mean when you are talking about sinaloa a tijuana obviously is tough not to think about you know the lack of security the craziness with what’s happening with a cartel so I mean did you did you experience any type of you know. I don’t know uncertainty around that how was how was like growing how was like growing up with with that type of environment first.
Alexandra Zatarain: Yes I think everyone who grows up in places like this your life is touched in some way or another and sometimes it’s the small things like you just learn to grow up where you have to or you want to know right? who are your friends where they’re coming from what are their parents do for a living and you know like just little things like that that. For us seemed so normal growing up but you realized that they’re not and they shouldn’t be and we shouldn’t normalize them. But you know how you build your homes how you protect your properties and all of these things. Um, thankfully it was never anything that hit us in a major way. Ah, but it is. Certainly something a promates through society and everyone can feel it especially as time has gone By. It has become worse.
Alejandro Cremades: Yeah, no I hear you now having your dad an entrepreneur. You know you have it. You have it in you. So How was like growing up also being able to. Experience You know him? you know they’re embracing the struggles the abs the down. So How how was it for you to to be able to see that.
Alexandra Zatarain: We saw it in a very very ah, big way because at some point my dad actually lost his business He had a company for many years probably over 30 years and at some point the company was just not doing well and he had to shut that down. And obviously that hits your family right? that that it makes you consider what are your options and can you still go to the good schools and can you still pay for your home and what I learned is that at the end of the day entrepreneurship comes with a lot of risk but it also gives you the ability to build your own path. And seeing that firsthand and seeing my parents not giving up um, was a big thing.
Alejandro Cremades: So your father was an entrepreneur too. So I guess you know you were able to really experience the ups and downs. You know the struggle the building something from the grown up. So how was that for you first.
Alexandra Zatarain: Yeah, what I learned really seeing my dad go through his own journey and the good times and also the bad times because at some point he had to shut down his business. Um was that entrepreneurship gives you the opportunity to in a way control your own destiny right? You build your own path but it also comes with a lot of risk. And when I was seeing him growing up I never thought that I would become an entrepreneur not something that I aspire to so something I really considered um but I did like the fact that you know he he really had to work really hard. He had to build his own Path. He could figure things out. Um and a mom had to do the same and so. I Think that’s what you learn when you grow up in a household where you have parents that are business owners.
Alejandro Cremades: So I guess say did you at that point you know when you were experiencing that you know where you like I want to be an entrepreneur one day. Yeah.
Alexandra Zatarain: I Never thought about it. Not even once.
Alejandro Cremades: That’s incredible and now I know that the for you coming to New York was quite a quite a career shift quite a life changing experience too. You know I’m sure it was shocking because you know New York is New York I’m sure that a little bit different from what you were. You know, used to in Tijuana. So why. How was how was that change like how was like arriving you know in the land of opportunity.
Alexandra Zatarain: I absolutely loved living in New York and lived there for around 10 years and when I was growing up I always wanted to move to to New York it was I think a place that many of us see in movies and and Tv shows and for me it. It was very appealing to see that level of energy and to to be in. Feel at the center of the world. So when I had the chance to move there after college. Um it. It was just obviously I I took the opportunity and it was very intentional, right? I if I wanted to make it up and I had to find a job. My parents couldn’t just support my move and pay my rent for months on end. So I applied to. So many jobs and you know I was still in college and it’s very hard to get interviews because I was in school in Mexico and I I just really wanted to get a job because I wanted to move there and at least kick things off and I knew that eventually I could build my career towards where I wanted to. But. Um, it. It is I think like many people when you’re young you you have to make it happen and scrap things together to get where you want to go.
Alejandro Cremades: Absolutely now for you when when you you know took on your studies. It was.. It’s very interesting because you studied politics business Communications. So. It’s like a very interesting intersection of all like the different things that are very useful when building a business. So. Why did you study those 3 things why combining them. You know as part of your you know, ah degrees.
Alexandra Zatarain: Um, it probably goes back to what I wanted to originally do so you were asking me whether I wanted to be an entrepreneur I never thought about really become an entrepreneur but I was really passionate About. Communications Crisis Communications politics and all sort of communications related to politics So when I went to school I went to get a degree in international communications but I did compliment that with with many courses and even summers that I did at other universities um with courses around politics and business. Because that’s what I wanted to to do originally? um then business sort of came through out of nowhere and the opportunity to be a founder in a tech company came a bit out of nowhere but that was originally where my path was going and to your point it became really valuable to what I do today.
Alejandro Cremades: So you what once you graduated, you actually took um a few roles at Pr firms. So what have you learned about storytelling. Why is it so important.
Alexandra Zatarain: It is such a critical tool and it starts with one thing and I’ve actually been reading a book by a friend the book’s coming up in in June Paulina menova she wrote this book called hidden genius and she has an entire chapter on storytelling and how. People of great success use storytelling as a tool for their own achievements and it starts from the stories that you tell to yourself so when you learn that sort of art and science of storytelling. You can also shape the stories you’re telling yourself every single day. Whether your days are going well or they’re going badly. It can really motivate you and propel you forward if you know how to use storytelling to put yourself in the right mindset and then second to that. How do you use storytelling especially as an entrepreneur to sell your vision. And you need to sell your vision to yourself every day you need to motivate yourself to keep working on what you’re working on right because days are going to be tough but you also need to sell them to hire great employees to bring on investors and you’re constantly selling that vision. So that’s where the storytelling comes in and and that’s something we’ve learned at 8 sleep that we have both done badly and also learned how to do well it takes time. Not everyone has the ability to distill the story of the why and the long-term vision of their company in a very concise way when you’re just starting out.
Alejandro Cremades: So when you were you know, actually doing these different jobs and you were at this same. You know some of those fintech companies too eventually the opportunity of 8 sleep. You know, comes knocking so how did this happen. How did you meet the cofounders. How do you become a cofounder. And how do you guys think about also bringing this to life because you even had to leave your job move to San Francisco so that’s quite a you know taking the leap of faith there. Especially if this was your first day company.
Alexandra Zatarain: Yeah, it was definitely a huge risk and I think at the time honestly I was maybe just more naive and I think sometimes being naive placed to your advantage because the more you know the the more risk avers you become the opportunity came around because. Mata who’s actually my co-founder but also my husband he’s our Ceo at 8 sleep. We’ve been together for like 12 years now and we had been while we were living in New York starting to embed ourselves into the like nascent tech ecosystem at the time if you think about like 16013 all those years. New York was booming there was a startup alley. Everyone wanted to build startups and kind of recreate the success of Silicon Valley in New York city so outside of our jobs and he had been an entrepreneur a couple times before. So. Outside of his time building his company and then me having my regular 9 to 5 Job we would go to all these events and meet all these people and try to understand what is happening in tech what is tech. How do you build the startup we had absolutely no idea so we had been experimenting with a few ideas for some years we would do things on the weekends. The 2 of us together with. Very bare bones capabilities that we had to like build a website and you know try to come up with ideas of products and at some point in that journey. We met Massimo who’s our co-founder and our chief technology officer and.
Alexandra Zatarain: We started to try to convince max to build some things with us and he’s a great guy. We got along right? and that’s where the journey as founders started and getting to know each other and working together and then it was around 2014 when Matteo started looking into sleep. What he realized is he started struggling with his sleep. He has ah a condition called restless-like syndrome and um, that was hurting his ability to get good sleep. But at the same time he was thinking well how can I optimize my time of sleep and it was just this sort of inside where he realized that there were no products in the market that could help him. Optimize his sleep both to sleep better and eventually be able to sleep less and get just enough quality sleep that we all need every night and that’s where it started. It was that that moment for him and that realization he started talking to some friends. Um, he comes from a background where he grew up as an athlete in italy and so he went to some friends who were athletes that were doing that professionally. How do you manage your sleep had manage your recovery and he’s really realized there was an opportunity that there were people out there who were already kind of optimizing it. But there was not a lot of knowledge. There was not a lot of products that could help. And that’s how it came around. He actually started building the prototype with masssimo initially max is an engineer and so they created this prototype and then at at some point they told me well do you want to help us like put together a little presentation. We want to show this to some friends at a dinner see what they think and that kicked it off is the the famous.
Alexandra Zatarain: Ah, pajama party that we talk about as the inception story for an day’s sleep. They hosted a pajama party at massma’s house in San Francisco and a friend of theirs said well this looks like it has some opportunity in the market. It’s promising I’ll give you a check I think it was like $25000 you know the Silicon Valley story where people and angel investors just for some reason feel compelled to support entrepreneurs and that’s what got them thinking? Oh okay, maybe maybe we should actually do this full time and see where it goes and that was the beginning of 2014 and eventually they decided to ask me if I wanted to more formally join them leave my job in New York move to San Francisco and get it done and and that’s what happened.
Alejandro Cremades: That’s incredible Now What ended up being the business model of aid sleep for the people that are listening to get it. How do you guys make money.
Alexandra Zatarain: Yeah, so what do we do? We develop technology to help people sleep better and we have hard technology and software technology. So we really are a consumer business. We sell you products you come to our website eightleep.com you can buy our technology and you use it every day. You buy the hardware that you install on any bed so you put our central layer or what we call the pot cover on your mattress and then you pay a membership every year so you have this plan where every year you’re paying $180 a year for all of the intelligence and the services that the product provides. Intelligence is what is actually tracking your sleep and your health how you sleep how long your sleep faces your heart rate at rest respiratory rate heart variability all of these trends that are very valuable to see how your sleep and health is doing over time. But then also managing the temperature through that information in real time to make sure that you’re always at the perfect temperature that you need to get optimal sleep. So it cools down and warms up your side of the bed to whatever you need to sleep at your best.
Alejandro Cremades: So You know one thing that comes to mind here is there’s this book called the Founder’s Dilemma. You know it’s ah it’s a great book and I’ve built a company with with my wife you know in the past and then you know obviously you need separate levels of communication. I would say and you know on that book. If for the people that are listening. You know it goes in one of the chapters on how you really need to have this incredible level of communication because tough love is important when you’re building a company. And in many instances where you’re building a company with like a family member or something like that. You don’t want to really give the actual feedback because what you don’t want to hurt each other’s feelings and I think that at the end of the day that you know creates Ineffectiveness. So How have you guys gone about you know those dynamics too.
Alexandra Zatarain: I think that the way that we do it and the reason why it has been successful is because we are willing to give each other that tough love and that tough feedback primarily because we understand. And not just between mato and I but even with with Massimo right? The relationship with founders whether your family or not is really complicated but we all understand that every time that we’re speaking to each other giving feedback or getting mad with each other or disagreeing comes from a place of. Wanting the best for the business and wanting the best for us as individuals we are helping each other grow and become our best so that we can continue leading the company and that I think you need that level of honesty with each other. You need to be able to talk about that and to. Feel that everyone is in it for the same reasons and towards the same goal and that will maintain that relationship in a healthy state. What I’ve experienced and even when I’ve seen other couples work together in companies or siblings you know or best friends. What I’ve seen is that it can actually be a huge asset. Particularly if you are able to work in that in that transparency in the communication because especially with a couple sometimes no one knows you best in the world on your partner so you can use that to your advantage.
Alexandra Zatarain: Where you know exactly?? What’s the best way to challenge them to give them that feedback to give them that idea to suggest them to adjust because you know them you know which buttons to push and if you’re both with the same intention and we want the same goal. You can use that to push the right buttons and get each of you as individuals to be your best and as a result to your business. We’ll get the best out of you.
Alejandro Cremades: I love that now you know very I mean for me the importance of sleep. It’s a I mean I really take sleep. Seriously I mean I for example I had the last year a concussion you know playing soccer and as a result of that I realized. How sleep would impact the way that I could recover you know faster from from the symptoms that I was dealing with also I had a founder here. We actually published the episode. You know a few weeks ago and he talked about how his co-founder pushed him to sleeping and how that a you know really helped with. Depression with they being more productive you know with the different initiatives that they had because it’s very highly demanding to be the founder of a hypergrowth company that has venture backed. So why is sleep so important.
Alexandra Zatarain: It is the most important pillar of health I think people don’t realize that sleep is the most fundamentally important pillar of health you would die sooner of sleep deprivation than food deprivation that is just how much your system needs it every single day. And it needs it in the proper doses and it’s hard to recover when you haven’t gotten the right amount of sleep or quality of sleep for many days in a row so we forget about it maybe because while we’re doing it. We’re not really conscious and so we don’t realize everything that’s happening in our bodies. But it’s really fundamental and particularly to your point of being a founder of being an entrepreneur or being a high performing individual or someone who wants to be performing at their best sleep is the best tool that you have in your toolkit that you should be deploying and utilizing every day to your advantage. It’s going to give you this. Unlock the superpowers of your brain is how I think about it I would rather get my right amount of sleep instead of trying to squeeze in a workout and a meditation and the journaling and you know all the other things that people try to do nowadays with their routines if you would only have to focus on 1 thing that’s going to get you further. With that brain performance. It’s going to be a good night of sleep.
Alejandro Cremades: I love it now in this case I mean I I was just really exposed to this and I keep hearing it now you know the importance of sleep growing up. You know I didn’t really hear about it that much you know and especially ten or fifteen years ago it was all about like hey you know hustle as much as you can don’t sleep as much. Now. There’s more consciousness more awareness also for you guys too. You guys have been a category builder right? I think that you guys are paving you know, really this this new path with with this with this stuff that you guys are are doing but I guess how hard is it. To be a category builder because I know that for example, the first years for you guys of growth also were a little bit challenging so walk us through that.
Alexandra Zatarain: Yeah, building your own category is quite challenging particularly for startups because you know your capital in your runway is like what you have against you right? You’re always sort of running against the clock because you only have so much money in the bank. So it building category will take money effort time but it can also be built by having a great product and a little bit of luck in timing and I think that’s where we have benefited over the last that would say like 5 years where exactly with what you’re mentioning the conversation around sleep has changed and it has increased especially for the last like 2 years So if you find yourself in that position then you can take that and leverage it for your business. But unfortunately sometimes it doesn’t work out sometimes you’re really swimming against a current trying to get people to prioritize something or think about something or talk about a topic that they don’t care about right now. The world just doesn’t want to embrace and so it will be really really tough to build your category and that’s a little bit of what happened to us initially the first I would say maybe 3 years of 8 sleep. Um. The the world didn’t care much about sleep. It wasn’t something people were talking about and little by little there were other companies getting into the space. So. There were many more of us than were more advocates. There were more researchers talking about it. There were more athletes.
Alexandra Zatarain: And celebrities starting to talk about their sleep and so you start seeing the media stories you start seeing bestselling books around the topic and that is what really created the momentum around the topic and we were able to also pair that with a moment when we decided to reposition our our brand. That is a big moment for us in terms of the ability to build the category. You also need to be able to come in with a very unique and appealing message. You need to stand out and that is something that we did around 2018 it was the time when we had raced I believe our c or b. And Keith Raboy who was at the time with Kosla ventures and is now at founders fund. Um, he told us he he let that round for us and he told us one day you will have to reposition your brand because right now no one understands your vision and people just think of you as a mattress company and if you stay there. You’re not going to be able to gain success and no one no investor is going to want to give you money and when he told us that and you know I was overseeing marketing and so that fell on me that was my responsibility I didn’t even know what he was talking about I think like many entrepreneurs you learn a lot of what you do by just doing it. Right? It’s not like you go to school and learn everything in a perfect course. So it was a journey even just to understand what do you mean with reposition. Why do I have to do who I have to talk to and that was maybe 1 of the biggest.
Alexandra Zatarain: Unlocks for our business because we paired the momentum of what was happening and just the consumer chatter and people starting to care about sleep with our very unique message that we came through with which is really we are a mission driven Business. We. Measure our success and our ability to help people achieve sleep fitness we created this thing that we call the sleep fitness category and we defined ways in which our products can help you achieve sleep fitness and so when we came in with that message very strongly. We stood out. There was no other company that was talking about sleep or selling you products in sleep. Would appeal to you in that way and that would talk to you in that way about sleep and something that can be measured prioritized and optimized that you can use technology to your advantage. So That’s where we’ve been able to build that category slowly of our own in our own space and over time we’d want to see more companies come into that category with us as well.
Alejandro Cremades: So how much you are alluding to it with a Keith and in and and the and the different rounds that you guys have raised how much capital has the company raised to date and how has it been also going from 1 lifecycle to the next.
Alexandra Zatarain: Over 160,000,000
Alejandro Cremades: You know and and and and especially how those expectations have shifted from one round to the next with investors.
Alexandra Zatarain: Yeah, early on when you raise money. It’s all about the promise and the investors are willing to take some risk and to give you capital to test the market and test your hypothesis and see what you can learn and see if you can find product market fit. But as time progresses that is not true anymore. And especially at the stage where we’re at and growth. It’s all about the numbers. It is 100 % about just how your business is performing. What are your unit economics. What is the predictability and scalability of the channels where you’re deploying money but also in our case, there’s the added complexity of innovation. So we’re not just category builders in terms of the brand and and. All of the conversation around sleep. But then we also need to build our own category and literally the products that we build There’s no space in the shelves for it if we were going to a retailer and said oh we make a cover with technology that you put on any bed. They don’t know where to put us right? Is it consumer electronics is it a health device is it betting no one knows. So we’re innovating in that technology. It’s proprietary technology. It has patents right? So there’s all of that r and d complexity. Um, and so that is also part of what investors value of our company. There’s there’s the performance and in what consumers are paying for it and how much money we make out of every unit. But then. But continues innovation that we’re able to make in our hardware and software.
Alejandro Cremades: And also how have you guys thought about the remote working environment.
Alexandra Zatarain: Yeah, so we actually went remote in 2020 like most companies and in this year I’d say probably more towards the end of last year is when we started being a bit more hybrid meaning we have 2 main hubs one in San Francisco one in New York and those hubs are very necessary for us and there’s people in the team that go there almost every day because we built physical products. So it’s easier to keep a remote organization. Maybe you’re primarily software based or you’re doing a lot of things around marketing or operations or finance but we built hardware products too and they’re pretty complex. And so there’s a lot of prototyping. There’s a lot of testing a lot of Qa. Um, and so those hubs exist for that purpose for these teams to get together. There’s also you know the the clinical research part which is a new function that we added to the business last year that’s in-house now and so the team that needs to get together and actually they run clinical tests. With individuals on our product so that we’re able to demonstrate the efficacy of our technology and how it influences your sleep. So we’re a bit of sort of that hybrid right now with always that mentality that is remote first and people. Can live anywhere and that’s allowed us to attract tremendously talented people from all over the world over the last three years
Alejandro Cremades: So what kind of products. Do you guys say have right now in store I mean the one that one that you’re thinking and and and also like right now mean you are alluding to that you have you have created this hardware device.
Alexandra Zatarain: The ones that we’re planning to build next. Yeah.
Alejandro Cremades: Also it keeps a temperature you know of the of how you’re sleeping and all of this stuff. So can you like share with all the people that are listening. What are you currently selling? What is that what is that hardware product.
Alexandra Zatarain: Um, yeah, yeah of course so our signature product is called the pod. So if you go on our sideaizi.com you’ll see us talk about the pod and the pod is a technology that you can add to any bed to manage the temperature to perfection. Temperature is the number 1 factor that gets in the way of good night’s sleep and if managed properly. You can also be the number one sleep aid people need to actually drop their temperature their core body temperature by a few degrees in order to fall asleep. That’s just biologically what happens with our bodies. Um, but then it also plays and ah, a really big role in helping us stay asleep and achieve deeper sleep. So what we did with the pot is use that signs that hadn’ already been proven and create a product that will aid you and influence how you fall asleep and and stay asleep. Um, it’s able to do that because it has sensors the sensors are tracking how you’re sleeping when you’re sleeping how you’re breathing your heart rate at rest your recovery with your hrv your sleep faces and using that information in real time to tweak the temperature of your side of the bed to your liking that can be influenced by the temperature in your bedroom the local weather all of these other things is taking into account. All of those metrics. So there’s all of that sort of machine learning in in the backend. There is the experience of the product when you get in bed you’ll actually feel the difference in the temperature and then when you wake up, you’ll be able to see the difference. It made in your sleep because you wake up to a full detailed sleep and health report.
Alejandro Cremades: Have you seen like a the pream post a of someone using aid sleep like what was the impact that they experienced when they started using 8 sleep.
Alexandra Zatarain: Yes, as we’ve seen that so the technology in the pod has been proven to improve sleep quality by up to 32% also give people up to 34% more deep sleep and an increase of around 19% in your recovery measured by your hrv.
Alejandro Cremades: Wow.
Alexandra Zatarain: And that’s because of that micro climate that it’s creating personalized to you so that you never feel too hotter to cold and that’s going to allow you actually fall asleep faster and stay asleep in a deeper state.
Alejandro Cremades: And I know that this varies per person. But what is the ideal time of sleep. You know of of someone.
Alexandra Zatarain: The length of sleep should be around like 7 to 9 hours and that’s based on what we know today about sleep. That’s another thing we talk often about at 8 sleep which is um, we we know a lot based on what has been able to be studied so far about sleep but the reality is that it’s been really hard to run. Really large-scale fully representative studies about how humans sleep. Ah, mainly because of lack of the technology but products like atit sleep and other sort of wearables that are entering the market are going to allow us to actually see that and to understand. What do we really need? How does that differ as we age as we go through you know, even backgrounds and where you live in the world and all of these things. It’s much more probably personalized than we think right now the standards and the recommendations around sleep are are very much black and white. But I think over the next ten years we’ll be able to discover much more.
Alejandro Cremades: So Alexandra let’s say you were to go to sleep tonight you know since we’re talking about sleep. You go to sleep tonight and you wake up in a world where the vision of 8 sleep is fully realized what does that world look like.
Alexandra Zatarain: It is a world where one everyone is getting great sleep every night. So that means we’ll all be happier healthier in better moods and not cranky with each other and not starting fights and fully energized. So even just that is a big plus. But second our full vision is going to enable for people to stay on top of their health while they sleep. Um, what we have envisioned is that the bed is actually going to be turned into a preventative health device when you go to bed it. It will be like going and getting a health checkup and that health checkup can be asked. And depth as you want it to be depending on the night or it can be more superficial today. The pod already tracks your heart rate at rest your heart rate variability your respiratory rate. So if you want it, you could already see trends about what’s happening with your health about how you’re recovering about whether you’re getting sick. Even though it’s not a diagnosis device but data is there. It’s in your app you can already review it and one day it will be able to diagnose for you and it’ll be able to tell you that something may be happening but the next versions of products that is. Already sort of part of our vision. We’ll add even more capabilities of sensors that could be imaging that could be contactless ultrasound and that is our vision is we want to be able to detect when there is something happening in your body that you should be paying attention to whether that is things growing inside that could be Cis that could be tumors.
Alexandra Zatarain: Ah, whether there is you know eventually could there be technology that could tell us that there is cancer. Um the the sky’s limit it all depends on what are the technologies that are already being built that we could bring into that space that is your bed and your bedroom. And people could be able to wake up with peace of mind knowing that if something was developing. They could actually catch it early on Thanks to the hours that they’re sleeping on the pod.
Alejandro Cremades: That’s amazing now. Imagine if I put you to a time machine I put you into a time machine and I’m able to bring you back in time you know back in time maybe to that moment where you know you were working you know in different companies in New York city and and at this point you know like. Maybe you had the opportunity of of sitting down with that younger self and being able to give that younger Alexandra 1 piece of advice before launching a business. What would that be and why given what you know now.
Alexandra Zatarain: I would tell her to spend much more time building a strong network of really smart people that has been undoubtedly the most valuable asset for the company is. The people that you’re able to surround yourself with either to hire or to go for advice um or to bring on as investors. Um, the network is really important and I think especially when we’re young, we don’t realize that it’s not just about your friends that maybe you love to spend time with. But it’s who are the smartest people that you know wherever you go whether you were in high school and college and a course and you know your community or neighbors your different jobs staying in touch with these people being able to understand where are they really smart in which areas where are they the best at in the world pursuing people who are the best in the world at something. And maintaining those relationships over time will become really important for your business and it’s something I didn’t think about at the time.
Alejandro Cremades: I Love that. So for the people that are listening. What is the best way for them to reach out and say hi.
Alexandra Zatarain: On Twitter Twitter is the best place to reach us whether it’s me or my co-founders or even at sleep. And yeah, we’ll always love hearing from people who are in our community whether use our products or not or you’re thinking about them or you just want to chat about sleep and health. We’re always excited to talk about people who are into the space of sort of sleep optimizations and sleep fitness.
Alejandro Cremades: Amazing. Well hey Alexandra thank you so much for being on the deal maker show to aid has been an honor to have you with us.
Alexandra Zatarain: Of course, thank you for the chat.
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Imran Khan went from becoming one of the youngest managing directors at JP Morgan to taking Snap through raising $4B, and becoming an entrepreneur himself. His venture, Verishop, has attracted funding from top-tier investors like Lion Capital, Cassius Family Fund, Upfront Ventures, and DCM Ventures.
In this episode, you will learn:
- What Verishop is all about
- Effective relationships with board chairs
- Lots more
Alejandro Cremades · EP 577 Imran Khan On Raising $140M To Make The Discovery Of Independent Brands EasierSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Imran Khan:Imran Khan is the co-founder and Chief Executive Officer of Verishop, an e-commerce platform that champions independent and emerging brands. Additionally, he is the founder and CEO of Proem Asset Management, an investment firm that focuses on the technology space.
Prior to co-founding Verishop, Khan served as Snap Inc.’s Chief Strategy Officer, where he oversaw the company’s corporate strategy, revenue generation, business operations, and partnerships. Under his leadership, Snap’s annual revenue run rate increased to $1.6 billion from zero in less than four years.
Previously, Khan was a Managing Director and Head of Global Internet Investment Banking at Credit Suisse, where he advised on more than $45 billion worth of Internet M&A and financing transactions. Before joining Credit Suisse, he held the role of Managing Director and Head of Global Internet Research at JPMorgan Chase.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the dealmakerr show. So super excited about our founder today I mean we’re going to be talking about going from corporate to startups hyper growth companies and now you know launching you know his own companies. And also you know being chairman of others so without further ado. Let’s welcome our guests today Iran can welcome to the show. So originally born in Bangladesh so give us a walk through memory lane. How was life growing up there.
Imran Khan: Thank you for having me I appreciate it. Thanks.
Imran Khan: So ah, it was wonderful. I had a wonderful parents so you know I think that’s very very important. The parents who are loving I grew up, you know in a small town in Bangladesh and ah my mom was very young when she had me and and ah. You know my dad was working for government and then ultimately we moved moved the capital went to public school in Bangladesh I went to high school there I had a lot of great friends and then I moved here for college I did play cricket I was better at cricket than soccer.
Alejandro Cremades: And I assume that you were playing a little bit of cricket. That’s incredible. Good stuff I know that cricket is a really big deal there now you did high school there but eventually you came to college you know in the us. So what was you know? what? what was that triggering event that. You know, brought you here to the Us.
Imran Khan: And so my dad you know had a lot of exposure to international businesses. He was in shipping business. It worked for Bangladesh government at that time and and he always encouraged me to you know expand my horizon and do different things. You know. And learn new things and I thought it was you know he and my family encouraged me and I thought it would be interesting to go to a different country learn different culture and learn. You know you know new things and that really led me to come here for college.
Alejandro Cremades: So how was coming to the Us How was that the you know shock of all of our something you come here. The land of opportunity. You know how was that.
Imran Khan: I yeah I’ve never been to the us before I came to college I know I found my college literally I I told the story to Jerry Young when I first met him I went to an internet cafe and searched for schools in the us and went to the Yahoo us news. But the search engine that I used was Yahoo. And my first you know one of my first exposure was aol instant messenger and ah and I met Yui Verde and I told him that story also and and and Yahoo so ah, ah, you know I think you know classwise school was very easy. Ah but culture shock was you know there’s a lot of. Nuances I had to run learn. You know? Ah, ah, right? you know like in Bangladesh. For example, we do like doing a lot of jwalking here. You know in Denver if you try to do jwwa you want to get killed. You know one of the most interesting cultural nuances is that in Bangladesh. You know there’s not really a personal space people close talk. Very close to each other you know, but in the us you have a personal space. You know? So ah so a lot of the interesting things. Ah so I think the first year was learning about it I had a great roommate Neil Plagg he was with his family was very very very ah welcoming. Ah, but ah, but in general I thought. Denver was a great place and and and people were super welcoming and and school was ah not that difficult. Um, so after a year one year year two it was great
Alejandro Cremades: So for you, you took finance then you ended up joining wall street as a result of having a friend that you know enter the the segment the industry and you know you you ended up scaling through the ranks you know through investment banking then research and then you end up becoming a pretty big wig. You know in in Jpmorgan. So what were you doing at Jp Morgan and and and what kind of things that you learn you know from you know, being ah a senior executive and ah at a large large bank like Jpmorgan.
Imran Khan: So few things I was incredibly lucky you know, right? now you know, um I you know I picked up the coverage of internet stocks in 2002 at the bottom of the market you know and you know what 2001 did you know it discredited so many analysts you know. Because they were paid by banking and and and and really pumping the stocks without highlighting any risk with these companies. Ah, it really opened up the opportunity for new generation analysts like me to come in and build credibility. You know and and I picked up. As a senior analyst covering internet because there was really nobody there at the age of 25 and by age 26 I was one of the top ranked 1 or 2 ranked analyst number 1 or number 2 ranked analyst depending on which survey you look at in the in wall street. So and internet was coming back really fast. You know 2004 Google went public. Um, and ah Amazon stock came back from dead you know became a runway success and really you know I was recommending all these stocks and ah and so my star rose very quickly and you know I became one of the youngest managing director at Jp Morgan at age 27 I think the.
Alejandro Cremades: Wow.
Imran Khan: Biggest thing I learned at this few things. Biggest thing I learned actually not related to internet but more related to risk management. You know I think the fundamentally I think you know going through the financial crisis while staying at Jpmorgan. Um I still remember when I became and a managing director and it was a big deal like only. 2 oneha three percent of the Jep Morgan ah banking team was Md and we spent some time that incoming class spending some time with Jamie Dimon and one of the things he said still remember that it takes years to build trust and credibility. But you can destroy it in a minute and.
Alejandro Cremades: Oh yeah.
Imran Khan: And and and and during the financial crisis we saw that you know banks like bear stearns and Lehman you know they had built a franchise for 100 years but was destroyed overnight because they lost the trust and the credibility the entire wall street is built on. Trust. And financial system in the United States built on trust right? when you buy a stock you don’t get the you know security you know when you when you transect you never see the money. It’s all happening. You know, ah digitally and it’s even becoming more and more digital. So the entire financial system is built on trust and look and going into this cryto industry. What’s going on. It’s actually very important and and and and I think what we learn my biggest learning lesson from ah Jv morgan days that no matter who who you are if you fail to build trust with your investors with your customers with your partners. Your business can be destroyed overnight. So don’t take shortard. Build trust. It’s better to take the near term loss but build trust because the entire financial system in America is built on. Trust.
Alejandro Cremades: So in your case I mean you were doing pretty well you know as you mentioned you know you became an Md. You know one of the youngest guys there to be an Md at jp Morgan you know pearly doing very well you know, incredible salary going on too and. Why do you decide to jump ship and go to credit suite.
Imran Khan: So first of all, you know so funny story. Um, in 2010 you know I was having drinks with Joe Chai who is the co-founder of alibaba at that time he was a cfo now. He’s the vice chairman of Alibaba and also owned Brooklyn Nets a really wonderful human being um and ah and I was telling him that hey I you know I’m kind of bored being a research analyst and I’m thinking should I move to Asia because there’s so much growth there and you know he said listen I really like how you think maybe you should think about going to investment banking or do you consider that.
Imran Khan: I was like sure I didn’t think much about it. 48 hours later I still remember my son was born in 2010 and I was just hanging out with him and I got a phone call from Joe and said hey I talked to few banks and they would really love to talk to you is it? Okay, if I give them your phone number I said sure and and then. Really led to me joining the investment banking one I was bored and I really valued and even date I really respect what Joe’s advice is on many things in life and he’s a great mentor of mine and ah and that’s really led to you know, join credit swiss to do ah internet banking. Um, you know I learned so much by being a banker and and that opened up what I’m doing now. So so it was a great opportunity to.
Alejandro Cremades: And in this case I mean you were you were for close to 4 years I mean you grew the operation at Creditwis really nicely. But then all of a sudden one day you receive a phone call from Evan Spiegel the co-founder of snapchat you know snap and they. That can like a unfold it I shift in gears you know for you in your professional career so give us ah an insider view of what happened that day when you received that call and the events that unfolded from there.
Imran Khan: And yeah, so it’s interesting right? because um, banking was great. You know, ah like during that time we grew credit swiss revenue from 12000000 you know the year I left in 2014 we did two hundred and fifty million dollars but the number 1 franchise in the internet in wall street in 2014 ah, and ah so I you know I was not really thinking about leaving financial institutions I loved New York loved and living in New York and so once I got that you know. You know, like invitation to go meet Evan and I was familiar with snapchat but I was not using the product. You know? Ah I was 2010 I was 33 years old and at that time so 2014 I was like even lower I’m 37 at that time ah snap was. You know, really used by college students because snap was student founded in 2012 you know and so so I was familiar with snap but I was not super I was not a user ah and so I went to I remember that I went to all the first year analyst at craswiss you know the bull pen and said hey do you guys use snap who you snap and literally 100% of the people raised the hand that they use snap I was like wait a second 100% of the entire credit Swiss first year analysi class use the product there got to be something on it. So I called them bunch of them in my office.
Imran Khan: And said, okay let me show me how to use the product and at that time it was just a messaging app. They didn’t have discovered. They didn’t have anything you know, just you just send text and pictures. You know they didn’t have a grove chat nothing just 1 to 1 on one chat and so so when I start playing with that you know I was very familiar with tencent. You know? Um, um. And I was like wow that messaging app can be built on top of it in all the features and services the business could be really really interesting and so I went to see Evan and we went for a long walk and you know one of the most incredible. Um. Benefit and and privilege of you know, covering internet you know in two thousand s was that I get to meet so many incredible people who are iconic figure. But at that time they were very young right? You know, ah right in like a lot of these companies. That’s really really big. You know they were not that big at that time you know, many of them were like few billion dollar market cap here and there you know, ah and so I met lot of really really smart people you know and ah and I was blown away by Evan’s intellect his vision his thinking.
Imran Khan: And I remember after the meeting I got on a car and called my wife and said listen I think you will offer me a job and if he does I will take it and we probably have to move to l a and ah and so so really, you know the product was incredible. Avan’s vision was incredible and his it’s truly and special special human being and that really led me join snap.
Alejandro Cremades: So tell tell us about joining snapchat because I mean obviously what a career shift. You know you go from big institutions from the stable you know 9 to five s obviously you know like with her.
Imran Khan: I Never mentioned about goal.
Alejandro Cremades: Deal of stress and and ups and downs and all that stuff. But now you’re in a hypergrowth company. You know, incredible amount of pressure because also you were tasked with the you know, figuring out the whole advertising side of things. So How was how was that transition for you and then how did you go about. How do you guys go about building the the ad you know side of things on the revenue side.
Imran Khan: Yeah I think ah so you know I make this is my fourth career change right from investment bank is research to investment banking to credit. So is now being a founder first year is always tough right. It is probably the hardest thing you do first as I said first year in college was very very hard. You know when you come from Bangladesh to the us and so first year it was tough clearly because I had to and I had to develop new kind of muscles to be effective in the business. Ah, but I think you know. 1 of the greatest thing about snap was you know we rereated some incredible talent. Really really great talent you know and ah and and and and and you know I think ah that really made my life easier because I worked with some of the smartest people I’ve ever met at snapchat and um. And it was very inspiring you know because they’re building. Great product. It’s and it was an incredible innovative product. So ah so work felt you know exciting because you were doing something fun in terms of building ad business. Um I think you know I never you know I knew ad business well because as a research Ana but I never ran as an ad business. You know from a operating site I think you know so we learned from our mistakes you know? Um, but I think one of the biggest thing was you know at first we really focus on that. How can we extract the brand advertisers because we had a lock on you know a young audience and you know.
Imran Khan: And say you know how can we get this young audience. You know people who want to reach that young audience. You know how can we attract them really focusing on the brand advertising advertising ah that but was a relatively easy you know and then we tried to transition. Ah we we transitioned to direct response at business. Can we build more direct response and and and ah and and and and bring more ah small businesses come to our platform. Ah you know, um, you know I think 2015 and 2016 you know we’ve probably generated most of our revenue from top 500 advertisers but how can we take twenty thirty forty Thousand advertisers how do we diversify it. That required a lot of technology investment and ah and you know again I think one of the greatest thing at snap was we were able to try great talent and I had an incredible team. You know guys like nima who runs Vp of engineering now at snap Peter Sellis who is the Svp of product at Discord ah per senda who a Vp of ah product at Spotify Now all these guys did have done an incredible job building the product and with an awesome team and and you know, um, it was not a smooth ride like it never’s a smooth ride but ups and down but we figured out and we were able to grow the ad business from 0 in January Twenty Fifteen you know we’re raising money and investors are giving us hard time because we are all. 0 revenue in 2015 ah, by the end of q 4 of 2018 and 15 we’re doing one point six six billion dollars annualized revenue. So so so so but you know all credit goes to Evans Vision you know of building an incredible product and the amazing team that we’re able to attract.
Alejandro Cremades: Wow.
Alejandro Cremades: So Obviously you know the company goes public tremendous Success. You know Also for you being part of that experience. You know it sounds like a wild you know Journey a wild experience. You know you were always looking at it from the outside you know more from your. You know a comfortable seat. You know at a big bank. You know now you were actually you know in the weeds of it. You were part of the execution part of the being in the Battlefield. So at what point do you realize? hey you know what I think I can actually start something on my own and what was that moment where you realize it’s time to. To go at it and take action.
Imran Khan: And I think the big thing is I always like to torture myself and take on really really new challenges. You know, um and you know at the end of 18 yeah I was running hard for a very long period of time you know the four years I was at banking was. very very you know do like I went to China for one day I went Hong Kong for a day like I would fly in in the morning and fly back at night and it and and and went at snap I opened you know, ah offices in like 17 countries you know and and hiring people you know. Recruiting is one area that I really really focused on because we always knew Evan and I always knew that our team is as strong as our team. Our company is as strong as our team and ah so so I was really tired and ah one I needed a break and second you know I feel like I needed. To develop new kind of skillset you know, ah you know the thing at snap is you know by the time I showed up, you know the company I had around 50 to 75 people something like that. But you know we had 70000000 users. You know the company had incredible product market fit ah and and and that’s you know? well.
Imran Khan: Once you have a 70000000 users you know and it’s growing. It’s not easy, but you know I think I always like to think if you have a great product monetization. You can build ah and so so I appreciate people give me a lot of credit for it. but but I also think that real credit lies with people who build it from 0 um, and so I wanted to try something. You know, try building a bunch of things from 0 and and so that really led to you know, start taking on this new challenge.
Alejandro Cremades: So let’s talk about the new challenge. You know how did that the incubator and how did you bring it to life.
Imran Khan: Yeah I Think the biggest trend I saw when I was at snapchat and living in La is this creators economy. You know, ah all these creators were creating amazing incredible content and disrupting the content industry particular and. Second leg of that trend I saw was that a lot of the small businesses were creating. They’re building incredible product with a great product vision you know and and they’re They’re really trying to build a brand you know and and and at the end of the day. What is a brand a brand is a promise. And we lose connection to startup Ro New. Okay, so at the end of the day. A brand is a promise and ah and and did this great individuals who are Grant building. Great product with great promises and and and my thesis was that we’re gonna see explosive growth of these brand creators.
Alejandro Cremades: Yep.
Imran Khan: And what I realized that the world needs the platform that supports this brand community you know and that really led the creation of verhop group. You know what workshop group is is really a community for independent brand creators and we support this brand’s community 3 ways number 1 we help them sell more product. Through our owned and operated site like vshop.com. Ah second we help them on marketing solution. You know we created a premium media at and network for these independent brands because if you’re a small business as he only can advertise on Facebook or maybe Google ah so what we did is we brought in ad invently from. Connect tv by partnering with the media company or partnering with a lot of the written publications and bringing premium media plasma opportunities and helping these independent brands get opportunity to tell the story beyond the social platforms you know because that’s getting really crowded with Apple etc issue. It’s getting really really challenging. So and the other thing is what we found that you know if you just spend money on any ah 1 channel 100% your ah Roi is lower if you diversify and and tell the story or social or performance marketing channel does better and so that really really creation of our premium media ad network. And then the third thing we saw all these independent brands. They’re really struggling with on the cost side because they don’t have enough scale everything they do is cost them more money and as a result they are a difficult spot compared to their larger competitors. So what very sharp group as a community. We’re like an union right.
Imran Khan: We go to all the vendors that our businesses use and negotiate a lower rate. Ah for our merchant so you can get packaging at a 30% cheaper rate you get shipping as a 40% cheaper rate you get all these software companies at a 25% cheaper rate. So when you join very sharp brand committee. Not only you can sell more to our owned and operating site. Or tell your story to a broader ah broader network through your ah through our media network. But also you can access a lot of services at a significant a cheaper rate and save lot of money so that you can reinvest in your business to grow your business and so that’s really where sharp is our mission is to help. Independent emergaging brands thrive create a lot of jobs and that’s that’s what we’re really focused on.
Alejandro Cremades: And how much I mean how how do you guys? capitalize here here. How how do you guys make money.
Imran Khan: So we make money ah two ways number 1 is to ah when brands sell to our platform. We take a percentage of itup. So. It’s a no risk you know you come you only pay as a fee if there’s a transaction happens and second to our advertising solutions. So um, so you can you know use our marketing solution to tell your story beyond Facebook and other social network a world govern platform to grow your brand to equ more customers. You know like we have this partnership with Nbc Nbc which is 100000000 how people in the United States you know. So now you can tell your story through this. These partnerships you know and connected Tv and other areas and and and and and what our brands found by advertising through our new media network their overall adoi improves because you know they’re diversifying their channel. The mix gets better and and and and the storytelling gets better. So so those are the 2 ways we make money ah and on hundred and 40000000 so.
Alejandro Cremades: And how much capital have you guys raised for this company imran hundred and forty million and how have you gone because obviously with a snapchat you know you were able to really understand you know like the relationship with investors. You know how that works you know the dynamics with the early backers. So. Were some of the lessons that you learned you know when it came to fundraising and to investor you know, communication and relationships that you knew you wanted to apply to very shop and and and how and why did you go about bringing on board the investors that you did.
Imran Khan: Yeah, and and listen I raised like over like one point eight Billion Pre ipo and two and half billion at ipo so over four billion dollars at snap. Also um, and ah you know I played you know I worked with the team. Obviously it’s not a myself. But. Brought a team worked on it. Ah, and so I have some experience there as well. Ah I think you know the the big thing here is a few things learning right? So again I want to go back. You know the first lesson I learned trust right. When investors give you money they give you the Trust. So you really have to deliver on the trust and so that’s single most important things. So I think you have to be careful what you communicate and how much you can deliver because if you break trust very early on it will get difficult to raise money down the road right. So that’s number 1 don’t over promise you know promise things that you can deliver and be very objective and very transparent about your business. You know, ah by doing so you know not only it will help you build a credibility and raise money in the down the road but it will also make your relationship with your investors better. Right? Because if you overhype or investors overhyve you know you get into a relationship with a lot of expectations if you open up the book and get into relationship in a very transparent transparent fashion and and consistently be. You know, um, the objective about your business.
Imran Khan: What’s doing well and what’s not doing well I think investors will give you also a lot of leeway. You know your relationship with your board going to be really really good I think that’s really really helpful. Um, and then the third thing is you know? Ah I think what’s most important thing is you know when you negotiate the funding. If. You don’t understand a terms or if it’s too complicated. You know take a pause you know and then I would you know Ah and I really bought into this evans philosophy that if somebody tells you that something standard. Don’t. You know standard is never sign of something because quote unquoted standard. You know it’s standard care. It’s not right? So so really understand these things you know and ah and and and be mindful of and then the last thing is don’t over focus on optimizing valuation. But focus on terms right? because I can make up the valuation I can tell your business is worth $1000000000 by putting four x preference liquidation preference or or adding coupons and things like that you know I think you’re better off having a lower valuation but a simple cap structure that would star you.
Alejandro Cremades: So imagine you were to go to sleep tonight Imran and you wake up in a world where the vision of very shop is fully realized what does that world look like.
Imran Khan: Better down the road.
Imran Khan: What the vision of ver fully realized is that you know alejandros wants to start a business can come to worshiphop and version of solve. Ah you know caverhop can brings your vision to the life from supply chain to ah customer acquisition to telling your story. Your packaging everything you want to do workshop is your 1 stuff shop.
Alejandro Cremades: So I Guess that here we’re looking at the future but let’s look at the past with um, you know, lens over fraction if you if you were to go to um back in time. Let’s hit to a time machine And. You’re able to go back in time you know maybe to a point where Imaran is is you know a little bit younger and you’re able to tell your younger self one piece of advice before launching a business. What would that be and why given why you know now.
Imran Khan: And yeah, listen I think you know one of the most interesting thing is that ah I have a lot of experience but you know when it comes about building a company as a I’m a first time founder you know so I think in many ways. Ah I know a lot of things about the world. Ah, but. I’m by no means I’m an expert quote unquote founder you know and it set’s a new journey. So I learned a lot in last four years and it was a very humbling experience. Um I think one of the biggest lessons I learned as ah in terms of well we’re in the topic of fundraising. Don’t raise too much money. You know one thing that I regret that I raise too much money I raise one hundred and forty million dollars you know I had a lot of credibility and people gave me money and I took the money you know and if I have to rewind back five years ago I would not do that and um and the reason behind it. I think constrained drive innovation primarily and it’s true for every level having a lot of people doesn’t solve your problem you know and because that means you have more people means more hr more more meetings more internal. You know, politics you know and. Ah, so I think you know building a business you know, ah with constraint is is really drive innovation and drive productivity and ah so I think looking back one of the biggest mistake I made is ah raise a lot of money as a result we try to do.
Imran Khan: Lot of things and you know I wish I just focused on 3 or 4 things and you know I’m just not raise that kind of capital and so that’s 1 thing you know? Ah I think when you’re building a business you know I think your biggest strength is your constraint and your nimbleness so when you raise a lot of money that.
Alejandro Cremades: And I hear you that now you’re also the Chairman of the aliff group I mean why is the yeah, what? what? what? What does? you know, an effective Chairman you know that role look like and also what are you guys doing at the lli group.
Imran Khan: It goes away that.
Imran Khan: So Ali is a fascinating company. It’s founded by a gentleman named Guston Tarautta he’s an argentinian guy start the company with $5000 in his pocket and in 2005 and really what they do is they represent Facebook Google snapchat pinterest in the emerging market. So Nigeria if you’re buying ad from Facebook Facebook they had the Facebook exclusive partner or if you’re in Bangladesh, you’re buying ad from Google you’re partnering with them. You know and ah the job as a chairman i’mm I’m ah, really a governance guy. You know I’m the chairman of the board and I’m not day-to-day operations. So my job is really. You know, help advice you know, give you know my experience as an you know as a senior exec of a large organization. You know af has become a pretty big business over the last you know um you know last 10 years and ah so really, you know advice the founder you know how to you know. His thought partner and.
Alejandro Cremades: Got it now for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Imran Khan: Ah, you can email me imran@vershopverish o p imran is I am RAN imran at bearshop.com
Alejandro Cremades: Amazing! Well hey imaran thank you? So so much for being on the deal maker show today. It has been an honor to have you with us.
Imran Khan: Thank you for having me it was it was honored to be on your show. Thank you.
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Ryan Morris has been on both sides of the table as an investor and an operator. His latest venture has already raised close to half a billion dollars to tackle a huge problem. The company, Turntide Technologies, has attracted funding from top-tier investors like JLL Spark, OGCI Climate Investments, FootPrint Coalition, and Keyframe Capital Partners.
In this episode, you will learn:
- What Turntide is doing for energy and the planet
- Inflection points
- Scaling teams
- Operating at different levels of scale
Alejandro Cremades · EP 576 Ryan Morris On Raising $485 Million To Optimize How Humanity Uses EnergySUBSCRIBE ON:
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Your email address is 100% safe from spam!About Ryan Morris:As a founder of a bootstrapped software company prior to investing in & building larger companies, Ryan Morris has great appreciation and respect for the operational details and entrepreneurial efforts underlying the financial numbers of a business. He loves building things in areas that others do not have the pain tolerance to follow through, like industrial & hard tech.
Ryan also has a public markets investment vehicle Meson Gravity that heavily utilizes machine learning in its investment selection process, particularly for shorts/hedging to neutralize and benefit from future market volatility/declines.
Ryan and his team neutralize things they cannot control, like stock market fluctuations, allowing them to be sharply focused on things can control, like building great businesses with great people.
Ryan’s Meson Capital’s goal is to achieve the maximum possible long-term returns while minimizing the risk of permanent capital loss. They will occasionally seek to get constructively involved with public or private companies or acquire outright where they can drive value and growth.
The most predictable thing in capitalism is the exponential price-performance trends driving technology. First observed with Moore’s law in semiconductors, now this dynamic spills over into batteries, electric motors, solar panels, robotics, etc.
Ryan invests in and helps companies positioned to benefit from these unstoppable forces by harnessing input costs that will predictably decline with time. His largest investment is in Turntide Technologies (formerly Software Motor Company).
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So today. We have a very interesting and exciting founder. You know we’re going to be talking about being on both sides of the table whether it is on the side of investing or on the side of building scaling financing. And all the above all the good stuff that we want to hear so without further ado. Let’s welcome our guest today Ryan Morris welcome to the show. So originally born in Canada in Toronto how was life growing up, give us a little fun walk through memory lane.
Ryan Morris: Hey you there Thanks for having me.
Ryan Morris: Well cold colder than California I’ve been in the bay area for about 12 years now and I don’t know took took me a while to figure out that all the interesting stuff and good weather is here but got got good 22 freezing cold winters in Toronto and then the northeastern college before. Moving out to California and appreciating all the all the great stuff here.
Alejandro Cremades: Now typically at the age of um, you know where where I guess kids nowadays they’re either getting into video games and you know maybe playing sports you got into nuclear fusion and then also. Reading letters. You know the letters of Buffett I mean that’s pretty unique I’m sure you were the only one in your class looking into this kind of stuff. So how did you get first into nuclear fusion and then also more into the business side of things of reading Warren Buffett’s letters.
Ryan Morris: So I was definitely not ah 1 of the popular kids doing the the normal fun stuff so that that freed up a lot of time for other maybe more intellectually interesting pursuits in the long term for 111112 year old but yeah so for all the. The the nerdy nerdy kids out there. There’s there’s a pathway to doing an interesting things as an adult. But no, it’s funny it’s kind of funny store actually so there’s this documentary for those who are born in the mid 80 s so Pbs had this school documentary called the voyage of the mimi the Mimi was a ship and. 1 of the the cast. Um, the captain was ah actually a plasma physicist and they would have kind of a show and tell at the end of every episode of you know how to be resourceful in nature or something and he was a positive physicist at ah at mit and so they went and gave the main character who is this little kid who would kind of ask all these. Obnoxious questions and it turned out that little kid was ah the future Batman Ben Affleck so that was his first big acting break the voyage of the mimi so it was kind of ah there’s a funny story that ties things together for that. But um, you know fusion sounds really deceptively simple. You know the sun does it. It works. Just have a magnetic confinement bottle and contain hydrogen and boom you’ve got unlimited clean energy. So that was as an eleven year old. Ah very very exciting that hey you could use physics to kind of save the world and and solve all the energy problems.
Ryan Morris: And so I like I got deeper into I was reading. You know all these physics textbooks and stuff when I was really young and learning about it. It was all kind of exciting. You know is real science but to me as a little kid. It was sort of like sci-fi interesting as interesting as any sci-fi would have been because it was all new and then I remember distinctly having this. Ah. Lesson from my my father when I was kind of 2 years into this where he’s like look like even if you’re the best scientist in the world. You can’t just make fusion happen on your own. You have to figure out to build teams build businesses and get capital to put behind these really hard problems and that went out I was like ah okay sure so like let’s look at the forbes four hundred I think it was bill gates number 1 bill. Ah, Warren Buffett number 2 at the time with berkshire and you know so I started learning as much as I could about about business and you know how did these guys amass all this capital that you know if they could go put towards really important problems obviously bill gates and I was an investor of ours in turntide. So kind of ended up being an interesting closed loop with some. Mission alignment there. But yeah, that’s what got me into again a deceptively simple thing. Warren Buffett makes it sound like anybody can go you know invest as well as him. It’s ah sort of sounds sounds easy if it’s a little more complicated under the surface but you know he’s done an amazing job educating on the on the principles of how to think long term and.
Alejandro Cremades: So and let’s talk about rowing because rowing. Also you know has been something that has a marked you and you know training getting better getting faster I’m sure that there’s some leadership you know that you were able to get as well from from rowing. So how do you get into rowing.
Ryan Morris: And business and investing.
Ryan Morris: Yeah, it’s interesting. So I I wanted to go originally to Princeton because they had the best plasma physics lab at the time and I remember talking with a family member I grew up in Canada so like didn’t really have any family in the us or any knowledge of the Us colleges. Who are you know some of the best the best in the world and I remember distinctly. Ah an uncle of mine who did know something about that. He said you know those ivy leagues they like rowers. You know that’s sort of an ivy league thing and so I remember I I was the only person in my high school. My high school is in Toronto and ah. Toronto has a big lake Ontario so there’s a number of schools that have rowing there and I was the only person I think that went and sought out the rowing team normally the rowing team at least in Toronto because it’s freezing in the winter they look for big guys. They get cut from the football team. So I was like the only person who actually looked looked for it because I had this motivation of. Ultimately going to Princeton for fusion thing I was passionate about at the time when I was like 13 years old and um, ended up joining it I was like the weakest person on the team when I started as like a little nerdy scrany kid and by the the end of high school I was this strongest and winning national championships and the kind of leader on the team and ah. Would say there’s a lot of things you know when you read about them like reading about Buffett and reading about business that you can think or I could get into this mode of thinking you know I actually knew something and it’s very easy to read a book and you think oh I know this stuff I could write this book writing a book is a lot harder than and reading a book.
Ryan Morris: And rowing was that kind of in some ways rode awakening for me where it’s like wow you really go put yourself out there in a competitive playing field and you get to see how how difficult things are um when you when you get your your butt kicked for like the first couple of years I was doing it. Even if you you know thought you knew some even though I thought I knew something about it. Um, but then at the same time There’s also this really clear pathway to have discipline and keep chipping away and keep improving so just training you know a couple hours every day you know accumulated over 4 years of having good discipline and you know that turns into a national champion. And so there was kind of this interesting mixed lesson of you know, don’t don’t expect instant gratification. But if you stick at things for a long time you can actually you know become pretty pretty world-class at stuff so that that is pretty formative for me.
Alejandro Cremades: That’s amazing. No kidding and that and then you go to Cornell. Ah you did your masters there and then you decided to take a year off so why a year off.
Ryan Morris: So I I really like the idea of contrast. So ah, you know there’s there’s kind of if you get stuck into kind of just one field and not able to lift your head up to kind of the broader perspective or. You know the the context of where something fits in I think it’s it’s hard to come up with really interesting innovative things so you know I was doing cornell problem sets like all the other people there. It’s like it’s a great school and engineering really really rigorous ah stuff there cornell and. A couple years into that I I thought hey what if you know I’m I’m in I’m in college like I’m gonna I’m gonna finish my degree what if I just go take a year off like some people take a year off after they finish I think it’s actually better to take it in the middle because you know exactly where you’re going to be a year from now and so you can take more risk and so I I actually. Saw this discovery channel top 10 most dangerous jobs. Ah tv show like twenty years ago or something and the number one was the alaskan crab fishing and I think that turned into its whole series think number two is forestry which turns out it’s really unionized so kind of need family to break into it and then number 3 is oil and gas. So. Like okay, great like what’s the most dangerous job I could go get I’m 20 at the time so in Northern Alberta in canada they kind of have this oil industry and it’s like minus thirty in the winter and so I ended up basically finding a ah job out in the field just kind of working around rigs and surveying and kind of in the knee-deep snow.
Ryan Morris: Ah, winter and that was just a really interesting contrast to to see something again in the real world versus this kind of artificial construct of of problem sets at ah you know an engineering school. Um, so yeah I had had a had a kind of unusual ah bridge crossing there where. Definitely the the guys I guys and girls I was working with were very very different than the people that I was at Cornell was so I just thought that was an interesting thing to see kind of a wider spectrum of things in the world.
Alejandro Cremades: That’s amazing. Then you return back and once you completed your masters then you decide to start your first business. So what were you doing there with video note.
Ryan Morris: Yeah, so I I had another gap year where actually I raced a road bike so I kept kind of the athletic thing going for a while with rowing and cycling again. Just like not easy happy-go lucky sports like all very much you know put in put in the hours you know, have your body catch up. But. Was finally ready to join kind of the real real economy after figuring. Okay I’m only really young once and nobody’s going to trust a 20 year old running a business anyway. So I may as well just focus on athletics but you know once I once I graduate my master’s Ah, graduated at the perfect timing in may of 2008 as the world is imploding and all the job offers are being rescinded in the great financial crisis for all the people who recruit and especially as an immigrant I’m Canadian so at the time you know the extra hurdle for for companies to go get a work visa for somebody. Um, just made it. You know that that much more difficult so I had a lot of friends there who were really amazing but had to go back home to their own countries and and being a canadian actually it’s not even that much easier. It’s still the same visa hurdle of wherever you’re from. Um so I ended up starting a company so is one of these you know when your opportunity cost is really low. But like I had some amazing cushy job. You know that was going to be easy to get and I was like well if it’s going to be hard anyway like I may as well just do this entrepreneurial thing and I had come up a couple years before with ah a business idea and I think there was like an entrepreneurial class where we had to come up with a business plan and um.
Ryan Morris: And I had to miss class a lot because of sports. So I’d be away for like a week you know for some cycling race and it was always really hard to catch up on all the ah all the schools so it kind of I started as like my own first customer in that case and so I made this video note which was kind of like an early courseras back in 8 where you know it wasn’t it wasn’t easy to. Set up, you know, streaming video servers and like the bandwidth was a huge issue and and databases weren’t that easy to work with but i’ was a software engineer so me and a cofounder whose friend is ph d in power electronics just as it happens that was important for me later. We set up this thing and you know basically got it to work and we’re kind of our own first customers. Um, really super hard first year just like a lot of lessons again of you know going from like reading a lot of books about business to going and jumping into the the real world and having to sell things and I mean to build things so that was a really good interesting first lesson. So I guess I’ve been building companies now since you know fifteen years ago so it’s kind of jumped jumped in feet first.
Alejandro Cremades: Now with video note you know rather than going you know the hypergrowth you know, approach growing like crazy racing money I mean basically you guys you know, really got it to a cash flow positive um approach and you know that was really the way that the company run for about a decade. So so any any any thoughts on why you guys win that route versus maybe like you know, injecting a bunch of Vc money and and growing the thing like wildfire.
Ryan Morris: You know it was. It was a problem I was interested in but it wasn’t an area that I was like so passionate about that I wanted to go dedicate kind of 10 years full full time on and also my co-founder. You know when he finished his ph d he wanted to go work at another company. So I would say it. It was. It was a small company. It was enough. Um, successful enough to kind of pay my rent for the next ten years while I could go work on other things I kind of had got it to a stable place and actually interestingly there’s another company that started by another Cornellia and classmate at the same time course hero. And now I think they’re a unicorn so like he’s sort of stuck with it and has built a really great company. So but just in this in this particular case you know it was more of a project kind of in my mind than something I was super passionate about for long-term I was I was also working on on the investing and started. Mason Capital in February Two Thousand and nine which if you remember was kind of the bottom bottom tick time of the great financial crisis and so I was really passionate about investing in some you know, bigger companies and transforming turning around companies was something I was kind of more intellectually passionate about so you know I basically worked in a video no for a year and then ah.
Alejandro Cremades: Now.
Ryan Morris: Turned into kind of a passive thing. So a lot of amazing lessons. But I think it’s just really important to you know, put your put my energy into where I was really passionate about something and I would you know get you know, be able to be energized working 70 hours a week on stuff.
Alejandro Cremades: Absolutely now with my own capital I mean you, you’ve been pushing that since ever since actually you know and and and you’ve been out enough for about 14 years with this ah 75,000,000 in assets under management. And really great the experiences too where you went you invested in companies and then also you were able to participate you know as part of the operations some of those companies like inuseyste Lucas energy or surf gone now I want to ask you about listen learn. From being involved with those 3 companies. So for example with a few systems. You know where it was all about trying the turn around what did you learn about turning around a company.
Ryan Morris: Yeah, so in into system came about well so just for some background so amazing capital it started as a public markets fund and you know we’re not a typical kind of a fund it was more of like a vehicle to go build companies. So. Ah, the way actually Warren Buffett started before way before berkshire back in the 50 s and sixty s is he had a fund and he would go by controlling or influential stakes. You know, maybe ten twenty percent of a public company and then go and work to um, you know, improve the value because the management wasn’t very good in those companies. Or they’re very sleepy for example, so infuystem was a case where there’s a big bloomberg article about it in 2012 but ah, it’s very unusual. So the shareholders are extremely upset so I was affected I was an active shareholder. So kind of the I don’t know the batman of the public markets going to help the the shareholders who can’t do anything about it when they’re. Companies are sort of taken hostage by you know, ah not aligned or bad boards. You know it’s it’s kind of an edge case. Interesting edge case in capitalism but so I did that for about 7 6 7 years or so and you know I definitely was was really proud to be able to go transform a lot of companies. Um, that were otherwise on a path to destruction or decay soy system was kind of on its way to bankruptcy I was only 27 years old this was eleven years ago when I got involved and so very steep learning curve and.
Ryan Morris: You know I guess I just got to see what it was like when companies got really dysfunctional and political and ah so I sort of joke I like to start with the hardest problems and work backwards from there. So um, there’s a motorcycle racer racer Valentino Rossi is like a modo gp world champion and he has an autobiography and he says. His first turn in a new vehicle. He always spins out in the first turn so he kind of starts with like overdoing it and then working backwards so you know know what’s possible. Um, so you’re not afraid of of crashing I thought that was kind of an interesting analogy for things. But yeah, so kind of again that was. 27 like the board was all these you know fancy degree Goldman Sachs ex-people and you know they were all like oh I’ve been doing this since you were in diapers. It’s like oh you’ve been like destroying companies and bankrupting them since I was in diapers like why don’t we try something different here but just sort of having that you know, really adversarial.
Alejandro Cremades: Now.
Ryan Morris: Synch or swim having to stay calm when things were really chaotic I think that’s that’s always been a really big strength of mine. So um, it was. It was really interesting. Period. So I think that’s one of just ah, being able to sort of keep your head well things are super chaotic was was absolutely an important lesson that I got to see over and over again and how things would get political and. Um I wrote a little article on Linkedin. How I said loyalty is the seed of evil and what I would see over and over again. It was a couple things in these really dysfunctional companies. So again I’m kind of like working backwards to now what I’m doing at turntide to you know, make sure Charlie Munger has a funny expression. I was likes Warren Buffett’s partner. He says all I all I want to know in life is just tell me where I’m going to die and then I’ll just never go there so it’s like work backwards from your failure modes and then don’t do them and the outcome should turn out pretty well and so I’d see these super political dysfunctional companies where things were. You know, really based on loyalty to individuals as opposed to like a shared mission you know or shared principles that sat above everybody so it’s kind of the you know rule by law as opposed to that you have an autocratic um and countries versus rule of law that you know applies to everybody in in western democracies. Um. So that that was a really interesting thing to see and nobody ever thought that they did anything wrong. So I definitely came away from that thinking intellectual honesty and people who admit when they’re wrong and make mistakes like that’s that’s a pretty key ingredient because if you’re doing anything interesting or new or innovative. You know you’re.
Ryan Morris: You’re going to be wrong like you’re going to have to make mistakes and learn and iterate and that’s that’s really key and and nobody ever was admitting. They’re ever wrong in these situations so that was really interesting too.
Alejandro Cremades: So continuing continuing there on on lesson learn on Lucas energy as well as surfcon I think that the um obviously obviously now you’re on turntide and and we’ll talk about it in just a little bit but I find that those. 2 companies that you were involved with too I mean both of them were sold the latter serfcon for 200,000,000. So I think that at this point you also gain the exposure as well to the full cycle of a company you know going through the hoops you know, racing money. Um. And then obviously going through the acquisition and reaching the finish line. What kind of businessability did that give you into the full cycle of a business.
Ryan Morris: Ah, yeah I mean there, there’s a lot I mean turnide have been building. You know, built more or less from scratch or from like a seed of intellectual property. Those other companies you know infuse system. The stock was a dollar and I think it’s about $9 or something I haven’t been involved for quite a while. But. Yeah, we we turned it around so it was a little different in those cases because we were going from something that was already working ah in some ways and really not working in others and then transforming it but it wasn’t like started from scratch versus the software company that started from scratch and obviously investing fund which is sort of a business started from scratch. Um. So I you know I think I’ve I’ve got to see you know a lot of different lifecycle stages of a company so you know from the 0 to 1 phase and then also what it’s like kind of when you’re more mature but maybe there’s some product changes that are happening in your in your market or in the technology that’s capabilities that are happening. Um. And so I guess I’ve always been interested in. You know where is there some kind of inflection point happening both maybe at the scale of organization. So you know going into companies that had is like the founder like an infu system. We’d bought a company that it was basically the founder and 50 people. So there weren’t really any processes or systems in place to make that scalable and so seeing what it’s like when a business is like that versus one that kind of already you know really has scale and process and how you can go you know build that up. Um a lot of companies fail once they kind of or they fail.
Ryan Morris: To to grow once you get to that 50 person thing because it’s beyond what 1 individual can really sort of hold in their head and manage and so yeah, we’ve I’ve ah certainly learned a lot from that of you have to really focus on what’s the problem you’re trying to solve. As you scale the business through different stages I mean turntais now over 500 people which is which is bigger. The other public companies I was involved in were only up to about 250 and so there’s really different scaling issues that start raising their head as you you know as you get to those kind of breakpoints.
Alejandro Cremades: So And let’s talk about turnt tight. You know how did the idea you know of turn tight of doing going out it with turnt tight. You know back in 2017 come about because it was not like the traditional. You know you get an idea and then you execute it was more you know doing you know some type of ah. Transaction there you know with research project of some sort and then bringing that to Market. So What was that process like and they what ended up becoming turnt tight.
Ryan Morris: So turntide has a technology It’s a super efficient electric motor switch reluctance motor that doesn’t need wear earth magnets so I was while I was working on sevcon which did powerelectrons electric vehicle drive trains. Ah you know they’ve been doing that for for many decades. It’s a very hard problem. And knew about from my educational background and ah as you’re electrifying electro vehicles is there’s this big problem of rare earth magnets so all the best all the electro vehicle motors use rare earth magnets that are basically all from China and 2011 which was not too. Far before I first got involved in the industry in 2013 China had export restrictions and the price of those minerals went up 2000% so it was really scary supply chain stuff. It’s still a problem still big problem today. They’re very destructive to mind and process and so being able to solve. This was a really interesting idea and. And switch reactants I’d been hearing about from some you know technical people in the space ten years ago as kind of this next generation design that everybody was interested in but nobody had really solved it because it requires really advanced software control to run the motor efficiently and nobody had solved that I’m a software engineer so I’m always. My sort of general philosophy on on building things is to say you know where is there some hard technology that you have these predictable exponential price performance curves especially something you know, compute or software-driven. You know those.
Ryan Morris: Kind of Moore’s law-like curves are a very predictable way to see what technology capabilities are going to be like in the future and so we started looking around at this and I had this thesis that switch reluctance kind of should be the future ah architecture that that can get a lot of um of traction. And so I started looking around. Basically the whole world of like who’s working on this and nobody had really solved the problem like they’d made it work but not efficiently which is really critical and found this group. Ah that is kind of a science group that spun out of university in Chicago in 2007 and they were still working on it trying to get this thing to work. And so by I guess 2016 or early twenty seventeen I was in the process of exiting selling ze k to Bot Warner who was big tier one automotive company that needed to get into electrification is that was obviously where things were going tesla just released the model s and scaring the heck out of the entire auto industry and so I thought okay if we can go make this better motor. You know that’s a. You know, $200,000,000,000 market of electric motors in you know vehicles plus buildings so buildings every fan pump compressor basically everything that moves in in the world is electric motor bind it and obviously electric vehicles is a growing area as well. So we thought hey if we can go solve this motor problem get rid of the right earth that. Makes it a much more stable problem. You made the motors more efficient. That’s a huge target so we kind of created turntide by ah, effectively buying the asset that these science group had been working on and turning it ultimately into a business so there’s some technology that.
Ryan Morris: And some really interesting ip to make it very efficient and the first product that worked was in ah hvac upgrade retrofit so sort of like led lighting upgrades. But for the motors and the h-vac system for commercial buildings so that was the first product that that worked at least for a prototype in 2017 but I demonstrated that ah you know the core tech could be made basically the most efficient production motor in in the world. So that was kind of the key thing and then going and building a business on top of that over the last six years has been what I’ve been focused on so I think there was 7 employees or something that were kind of working on the core tech when i. Ah, kind of got involved to build it as a business so we we had about 100,000,000 revenue last year we we basically sell systems based around the motors and power electronics. So the hard part that we do are really we say we are software wrapped in metal. So.
Alejandro Cremades: And how do you guys make money today.
Ryan Morris: Building software-driven very efficient electric motor systems for buildings and then for electric vehicles as the other half of the company. We actually hired back a lot of the key team that was with me at at sekcon doing electric vehicle power trains after they ah they left Bork cornerner we hired them out of burg orderner.
Ryan Morris: Ah, because they wanted to be back in kind of a smaller startup kind of environment where they could move faster and yeah, so what we sell hardware is like smart devices. So it’s kind of like the you know iphone of of motor. So it’s like really intelligent software software drivenven very very efficient and yeah building. Hvac and agriculture hvac big fans moving air very efficiently and then we’re working on specialty electric vehicles. So not passenger cars. That’s a very high volume market big big players in that space. But there’s a lot of specialty kind of off-hihway for larger sizes. Like construction equipment. We have one big rail customer a attachee and then some smaller things so like kind of 2 3 wheel like in southeast asia there’s you know millions of those and you know if you’ve ever visited Southeast Asia there’s a little noisy scooters and those can’t go electric soon enough for local air quality and noise pollution. But um. Yeah, those are kind of the markets. We’re focused on right now. So we’ve in total raised about four hundred and sixty million dollars over the last six years you know my my partners at at maison my people who’ve kind of backed me overtime in previous companies were.
Alejandro Cremades: And how much capital have you guys raised too late.
Ryan Morris: You know the early early risk takers there back in 172018 um you know people now I would say are funding. Climate tech is seen as a kind of a new asset class over the last couple years but five years ago it was not really something I mean Tesla really stood alone I would say as.
Ryan Morris: As a company that was funded in that space like all the other early ones you know, really in 2008 there was kind of a clean tech. One point one point zero that didn’t really get all traction so it made it very difficult at the time so I had to really bet my whole reputation that we could go you know make this make this thing work which you know were. Clearly working on. We’ve grown grown 100000000 business now and um and really amazing investors that we’ve accumulated along the way I mean I’ve I would say been very strategic about what investors we’ve brought on but you know some some pretty big names like Bill Gatesrick for energy ventures you know Jeff Jeff bezos Amazon the climate pledge fund. The and pension board. So very very proud to be working for all the canadian grandparents work working hard for them. Ah, fifth fifth all now has been a you know, very very rapidly growing venture fund strategic venture fund in the real estate space. So they’ve been. They’ve been super helpful for us as well and jll you know big property.
Alejandro Cremades: It’s amazing.
Alejandro Cremades: And and in this case, how how did how did you go about I mean all obviously all these people you know, incredible profiles that you’re sharing here. How did you go about getting them and and making sure that they were the right investors.
Ryan Morris: Ah, so because of my background you know I’ve been an investor I kind of understand pretty well the different profiles of different different firms and it was really important for me to get. Ah, very kind of mission and values aligned investors and in particular that meant really long-term focus people I mean I I think long-term like I want to go build build things that have endur anduring value and ah and certainly anything when you’re doing hard tech like we’re doing with you know, really. Deep science involved with the technology like those things are very different than like video node or a software company where you can go have a product in you know six or twelve months that works pretty well and sort of iterated from there. You know these things take many years like it took 10 years actually from the university spinout to the first sort of working functional prototype that. Actually demonstrated the efficiency benefits. So so you need people who have staying power and patience. So I was really looking for people who are very missional aligned and the thing that gets you through those longterm is that you have a shared vision of what this looks like in the long run because you’re going to have lots of problems and bumps along the way you know doing you know, just like ah my kind of growing example, you know you got to you know. Training you kind of lose lose a lot of races before you keep getting better and better and better until you you know can really win and so you know being able to share that long-term alignment break the energy ventures for example is um, most venture capital funds have like a seven year seven to 10 year max life
Ryan Morris: Breakthrough is a twenty year life. So You know they’re they’re deliberately set up to not. You know, not come in and pressure you to kind of you know, sell way too early or you know put short-term pressure when you know you really just need long-term you just need more time for things to to play out versus I’ve had lots of friends in in the Bay area who. You know they get a certain amount of time into their company and you know they’re just getting lots of misalignment pressure from you know other other investors that might have different interests from them and and I certainly saw the misalignment of interests in my activist days with public companies where you had some people that were very very short from focused involved in the companies. And so it’s just it’s really important for me to get that long-term alignment. So from the beginning I’ve been trying to build something could really have a big impact and we we found people that are very in aligned with that.
Alejandro Cremades: So let’s talk about having a big impact imagine you were to go to sleep tonight and you wake up in a world where the vision of Turntite is fully realized what does that world look like.
Ryan Morris: Ah, that’s a really good question so ah, half of the electricity in the world goes through electric motors. It’s a bit more than that that’s growing with electric vehicles. So really anything that moves. Um, so the vision of the future is that you have all the electric motors that are moving air fluid. Vehicles materials be the most efficient possible while using the least raw materials or especially scarce raw materials like special like rare earth magnets make those things as efficient as possible and then make the systems that they’re part of. As intelligent as possible so you can have like kind of the most efficient muscles and then the the brain of the system. That’s you know, thoughtful and really ultimately serving people. So that means you know breaking down less so you don’t need to take out people’s time to maintain them and you know replacing repair equipment and then making them run. You know, really. Really efficiently for whatever their goals are so it’s really making these things efficient and intelligent. This kind of the high-leve you know, categorical picture that happens over time and you need that because the world is getting the energy world is getting much more complicated so as you have. As you have more renewables for example, so solar and wind are intermittent and so you need to have we’re we’re not focused on the generation side of the problem we’re focused on the demand side. How do you optimize how humanity uses energy and again motors are like half of the electricity plus that gets used so it’s a big big categorical problem to solve.
Ryan Morris: But need to make that more intelligent so that it can be adaptable as you’re going to have increasing complexity on the demand side as a time of day pricing. For example.
Alejandro Cremades: That’s incredible now. Then? let’s take a look at the past and doing at it with a lens of reflection imagine I was to put you into a time machine and I bring you back in time you know perhaps to that time back in 2008 where you were thinking about doing something of your own. You know a business of your own if you were to go back in time and and have the opportunity of having a chat with that younger Ryan what would that be that piece of advice that you would give to your younger self before starting a business and why given what you know now.
Ryan Morris: Ah there’s a lot of things well as fifteen years of of working on companies that’ve made ah made a lot of mistakes learned a lot of lessons and but you know you try to just get a little bit smarter every every day every year. Um I guess a couple really big ones are. You know, try and it’s funny because I did this actually really well with video note but I I sort of have a technology interest background. Let’s say um so with video note a thing that I did really well was I was my own customer. Ah, and so I would say just really really holding on to that really hard of put put myself. Into the shoes and empathize with the customer the customer problem you know as absolutely deeply as as possible like just keeping myself in that I think you know certainly with I mean for example, turntide like the the seed of it was this hey there’s this better technology better physics. You know how can we go scale that and um, you know if you can marry. That with really deep customer empathy. You can build really great stuff. But I think that’s something you know I’ve I’ve learned now but I probably veered away from a little bit back in the ah the early days while I was focusing on all the other problems that I had to solve. Um, so I would say that’s one. And then um, yeah, just ah I mean so much of it is about the people right? So you know, just again is just an area that I feel like I focused on but it’s like.
Ryan Morris: Even more focusing on making sure you have the right people values aligned and also the right skills for the phase of the business that you’re in like it’s a very different thing building a company when you got 10 people versus one that you got you know one hundred or five hundred and the kind of leaders and and individuals you need around. You know, really it really does. Ah change. So you know keep keep zooming in focusing on that I think those are things that you you can’t focus on enough.
Alejandro Cremades: I love it now for the people that are listening Ryan that would love to reach out and say hi. What is the best way for them to do so.
Ryan Morris: I’m not really big on social media and Twitter or anything but you know feel free to you know, reach out I’m just Ryan that turnide dot com um Linkedin I think is probably the most active social social media. They’ve got pretty good posts and post some articles here sometimes.
Alejandro Cremades: Amazing! Amazing! Well Ryan thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Ryan Morris: Yeah, thanks so much.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Ryan Morris On Raising $485 Million To Optimize How Humanity Uses Energy appeared first on Alejandro Cremades.
Jai Shekhawat has built, funded, and sold companies. Now he’s investing in and advising other entrepreneurs on their own ventures. His startup, Fieldglass, has attracted funding from top-tier investors like Madison Dearborn Partners, SAP, HLM Venture Partners, and Grotech Ventures.
In this episode, you will learn:
- Testing and validating your idea
- Risk of failure versus the rewards of trying something big
- Alignment with your investors and board
Alejandro Cremades · EP 575 Jai Shekhawat On Selling His Business To SAP For $1 BillionSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Jai Shekhawat:Jai Shekhawat serves as Board Member in 1871. He also serves as a Member of the FireStarter Fund. He also served as Chairman at Semantifi.
Jai co-founded Quinnox and serves as its Board Member. He is a Co-Founder and served as Chief Executive Officer at Fieldglass. He served as Board Member at Fleet Complete.
Jai also serves as a Member of the Advisory Board at Method Capital. He also served as Board Member at OfficeLuv and BlueCat Networks. He also serves as Entrepreneur Partner and Advisor at Chicago Ventures.
Jai has more than 20 years of experience with software development, information technology, and management consulting. He is ranked 7th on SI Review’s 2010 “25 Most Powerful People in Staffing.” He is also a two-time Supply & Demand Chain Executive “Pro to Know” and currently serves on the Mayor’s Council of Technology Advisors (MCTA) for the City of Chicago.
Jai is a regular speaker at industry conferences and has been profiled in publications such as Silicon India, Entrepreneur, and Chicago Tribune. Under his leadership, Fieldglass received a Stevie Award for “Most Innovative Company in North America” in 2007.
Prior to starting Fieldglass, He was a Co-Founder of Quinnox, an IT and Business Process Outsourcing firm located in Naperville, with development and sales operations worldwide.
Previously, he was a strategy consultant with McKinsey & Co. in Chicago, where he served clients in various industries in the areas of corporate strategy, sales effectiveness, marketing, and cross-border alliances.
As head of operations at Syntel, a software services firm, he helped build the company to nearly 700 consultants as well as create an international sales and service delivery organization to provide application management services to the Global 2000.
Jai holds a master’s in business administration with specializations in finance and strategy from the J.L. Kellogg School of Management at Northwestern University in Evanston; and a bachelor’s degree in management science from the Birla Institute of Technology and Science, Pilani, India. He serves on the Board of Directors at Signal. He also serves as Advisor at StarVest Partners.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So today. We have a really interesting founder. You know we’re going to be learning about coming to the us about building about scaling about financing about exiting all the good stuff that we like to hear so without. Waiting any longer. Let’s welcome. Our guest today Jay Shekawa welcome to the show. So originally born in India so give us a little a walk through memory lane how us live growing up there and then also being in a family that is involved with the military.
Jai Shekhawat: Thank you, Thank you alandro.
Jai Shekhawat: Yes, I was born in the city of Jeor in Northwest India it’s a desert town. Um and born into ah a military family. So my father was in the navy so we moved around a lot most of the. Most of the time when the coastlines of India but as a child also lived in the former Soviet Union my father was a submarine officer then and I think at the age of about 4 or 5 we lived in Moscow and then vadivostok and then upon coming back to India. When I was 14 my father was posted to the naval war college in the United States and that got me put into boarding school in New Delhi a place called the Delhi public school which is really sort of the last time I lived at home. So so it’s it was good I have only the best memories of growing up in that environment.
Alejandro Cremades: And obviously you know like moving around making new friends. The unknown your certainty. How do you think that they you know made who you are today.
Jai Shekhawat: Well I you know upon reflection I think it probably had quite a big impact because when it’s happening at the moment. It’s quite Disruptive. You know you’re young, you made all these friends and then you have to go to this new place and you’re not easily welcomed et cetera. But I think I learn to become. Quite independent and quite resilient and probably developed a pretty rich inner life with lots of reading and a love for sports actually eventually individual sports which you know we can figure out what that means but I was very much drawn to racket sports in particular squash. Tennis Raquetball. That’s something.
Alejandro Cremades: So in your case, you know you ended up you know going to school and and and that you know 1 thing led to the next and you ended up working at this company called Tata and. As a result of that you land all of a sudden in the us. So how was that transition like and and how shocking you was to all of us sudden and be in the land of opportunity.
Jai Shekhawat: Well, you know at the time it was happening I didn’t know any of these things so when I finished when I finished college at the age of 22. The only job offer that I had was from the phillips radio company and. It was to sell radios in the interiors villages of of India and that’s about all I had and you know my father ever the optimist said something to the effect that while you’ll at least get to know your country. Ah, and so I was within days of accepting that offer. When just by complete chances ran into a friend who was going to do an interview at this new company. Ah called Tata borrowrows. It was a joint venture between the ta company and the burrowers computer corporation I showed up there. 1 thing led to another I got an offer as ah as a computer programmer it was coil back in those days. And we knew very little about computers other than some classes that we took in college that involved working on a mainframe ah where the act of programming was really you know putting holes in punch carts and then stacking them and handing them to a computer operator who sat behind this glass cage. In an air-conditioned room and that was my experience with computers but lo and behold few months after joining I find myself being shipped to Atlanta Georgia where I showed up, you know in the mid 80 s with the 2 or 3 other people so it was a complete adventure.
Jai Shekhawat: I had no idea what to expect? You know my the first time I heard I was going to Georgia I thought it was Soviet Georgia which is the only one I knew back then and I think people corrected me and said no we think you’re going to Atlanta georgia not not not Soviet Georgia
Alejandro Cremades: Now now in this case for you I mean you you enter this really nice path of you know the corporate world in the us you know, having the um, the 9 to 5 um, the land of opportunity as we were saying you know earlier. But. After a few years you know, ah data then you did Intel then you realize that it’s time to shift gears and you do your and Nba program. What why did you decide. It was the right time to do an Mba at that point at Kello.
Jai Shekhawat: You know I stayed um in the it services business withintel ah for 5 years and it was a wonderful experience because the founders husband and wife team that I’m very close to to this day had really pioneered. The business of it services the offshore business e so and built a very substantial firm over the course of you know, a couple of decades I was there relatively early for about 5 years I learned a lot. Um, what it also taught me is what I don’t know. So with the complete support of of my then boss his name was baratteai um I ended up applying to business school and got into a few of them and I chose northwestern here in Chicago which is the kellock school of business so that was really the reason you know to expand on. My then relatively rudimentary experiences. You know most of them involved. You know one sector heavy on sales heavy on learning about entrepreneurship. But in hindsight I can just say unequivocally that it was an excellent move.
Alejandro Cremades: You know, kidding and in your case you know a career shift too because then you went into consulting you know is he solving problems to then solving your own problem with your first company. So how were how was that transition of events you know going from graduating to now you know you are. Mckinsey where you’re learning how to grab 1 big problem divide it up into small little problems and tackling one after the other to then hey I think I I have what it takes you know to to go at it and and start something on my own. Yeah.
Jai Shekhawat: You know the thing about joining Mckinsey which was completely. You know my dream at that stage. Ah and it was it was difficult to get into they were they were quite selective. It was hard to even get an interview. So I think I got lucky on several fronts there. Mckinsey back then was often referred to as getting a ph d in business. You know, metaphorically speaking and I would say for I stayed there for just under 3 years including a job as ah as a summer associate so it was ah it was a marvelous experience. We worked in these intense situations. And really got to take the Mba the you know the learnings from an Mba and put it to some sort of practical use. But you know 3 after 3 years went by the bug of entrepreneurship that I had that had been planted in me when I worked in Michigan with Satel. That had started to surface again because I I really wanted to get my hands dirty once again with operations. Um, and you know consulting at the end of the day if you’ve been in operations it it feels incomplete and there was there were several moments on different studies where I felt I would have liked to. Stay and continue to see this work through and you know build it out and run pnls and build a salesforce and you know bring on a team and that sort of thing and that’s what eventually led me to decide that it was time to leave but I’ll always credit mckinsey with just giving me the frameworks and the.
Jai Shekhawat: And the sense of confidence to go you know break down these big problems that you see if you leap off and try to start a company. It can seem overwhelming but but the stint at Mckinsey gave me the confidence to feel like I could tackle those.
Alejandro Cremades: So Then let’s talk about that the confidence because then you know Quinnox you know is what comes really? you know on the light of the day here. You know obviously the most immediate step to building your biggest success story which we’re going to get just in a little bit but. How do you get into quinnox.
Jai Shekhawat: Well Quinox which was actually originally I t twenty so the term quinox. It’s a merger of IT twenty and another small firm that a friend of mine had started. It was ah you know, frankly it was the only type of business that I really knew which was it t services. And you know it offered an opportunity to do on a small scale. What I had done backets and tell so I I jumped into that but I learned a couple of things very quickly that I had changed. You know myself and and what I really wanted to do is build product and not. Be in the services space and so you know within a year of starting that I handed that off to a couple of friends of mine that continue to run it and then I started field glass which I have to say was um, the. Probably the fifth company in that space to begin and and.
Alejandro Cremades: And but but 1 thing 1 thing really quickly there I mean quinnox is still up and running today and doing pretty well if I understand right? How many employees that that does the company have.
Jai Shekhawat: Yes, that is correct. You know I don’t know anymore because I’m not involved I was on or there for a very long time. But yes, the firm has done well and hopefully.
Alejandro Cremades: Yeah I mean we’re talking about thousands of employees if I understand that right.
Jai Shekhawat: Ah, no I don’t think it’s quite that many, but it’s ah it is It should be fairly substantial. It’s probably you know getting. It’s probably close to a thousand but I’m not like this. Yeah.
Alejandro Cremades: I mean that’s impressive. So I guess saying you know Ac company that would end up being so successful I mean looking back I mean do you think that was premature or or or what? what? What did you learn from you know, turning over a ah company that. Would be so successful.
Jai Shekhawat: Ah, no, it wasn’t premature at all actually because what what I did is the couple of friends that were running that we I gave them some equity in field glasss and in exchange I kept some equity in quinox and so it was all done on the basis that. You know back then these things are very small and the theory was look the chances of you know, even 1 of these succeeding statistically is quite remote and so let’s just set it up. So if even one of them succeeds then you know we’re going to be okay so that was the basis of it. Ah, and like I said. Ah, you know my heart really lay in solving a big new original problem and that’s when I started to write the business plan for field glass.
Alejandro Cremades: You know I mean pretty impressive stuff here Jay so tell us about field glass because for you to be running a business and then you know, really understanding that. There’s something much bigger for you. A bigger calling a bigger problem. You know something that you are that you can’t take over out of your head to the point where you are turning over you know the the operation that you’re in and and really venturing into something new. What was that level of conviction. How did you get that level of conviction that that was the right path. To take on at that given moment.
Jai Shekhawat: You know what I started to think is um rather than think about a company where I’m just you know doing something that thousands of other companies are doing which is what it services is could I tackle a problem. In a space that I understand that is such a large unsolved problem that the that the the dangers ah the risks are substantial to failure. But also ah you know the upside is tremendous and something that honestly offers a more interesting journey to me that’s. Criteria I optimize for is will it be a more interesting journey and ah that was the basis for even sort of starting the process of thinking about it and you know in my mind. The real risk is looking back. You know years later you know ten twenty thirty years later and thinking I could have done this and I didn’t do it that to me is a much greater risk than the risk of a business failure. This is failures come and go you know most of the people who have done well have had plenty of failures along the way and I would say even with field class. Even though we ultimately succeeded there were many moments along the way where we we might not have succeeded so that was really the the basis just trying to tackle a very large ah problem of which I felt I knew something.
Alejandro Cremades: So for the people that are listening to to get it. What ended up being the business model of field glass. How are you guys making money there. So.
Jai Shekhawat: So you know at at a very high level. Ah think of a large corporation as having 2 categories of talent 2 categories of workers. There is a category called the called employees and then there is a category called people who are not your employees. And that second category consists of contract workers people from staffing firms independent contractors consultants ITService providers you know all of that and what was becoming clearer is that large is that second group is getting. Bigger and bigger as companies. You know, talk about core competencies more outsourcing. You know if it’s not something that we have to do then we shouldn’t do it so that second group was just getting larger and there was no way for the corporation to effectively manage that group and. You know you could see the evidence everywhere the the things like the bill rates for the same scale were being. You know, not properly understood. There were compliance issues taking place you know on and on and so at that level all all. I thought off was that that second group is going to need some sort of a procurement slash hr platform to manage it and that really was the starting point.
Alejandro Cremades: So I guess say Also what was that the because building a company is not easy. But I guess saying for you All what was that turning you know moment you know where you realize you’re into something here.
Jai Shekhawat: You know I think it took a little while for that. But there was so much evidence that this was a real problem and one of the things I did is I did a lot of interviews so I laid out my thesis on a single page. You know here’s the problem here’s why there isn’t a. Solution then you know here’s my idea and so on and I did as many interviews as I could with people who who knew the space on the customer side and the thing is you know when you don’t have a product. We don’t have anything to sell people don’t mind talking to you because you’re not. You know you’re not pitching them anything I’m like I don’t have anything to pitch and people will give you the benefit of their thoughts and their ideas in those circumstances and it really helped me sort of refine. What I had and it did it validated 2 things for me 1 is that this conception my conception of the problem is very real. This is an unsolved problem and second that if someone showed up with a platform there was they would be you know, ah substantial revenues to be generated from solving this particular problem so that that was my naught star and it gave me the confidence to then. Raise money and build out a team and I’ll tell you you know, building out a team. It’s an act of risk. It’s an act of you know you have to be responsible before you ask? Ah, someone to quit their job and join you on this crazy journey because.
Jai Shekhawat: You don’t know where it’s headed and the only thing you can offer them is the promise that you’re solving a big enough problem. Ah you know that it’s worth doing and that’s you know that’s what gave me confidence but it still took a number of years before the market really validated these solutions.
Alejandro Cremades: And we’re talking all the late 90 s here. So um, so.
Jai Shekhawat: Well, this would ah this would have been effectively early 2000 so in fact I was sitting with an unsigned term sheet the day. The internet you know the early internet market crashed in 2000 it was March twentieth of 2000
Alejandro Cremades: Yeah.
Jai Shekhawat: Which actually happened to be my birthday and also the birthday of my chief technology officer who was my first hire. So the 2 of us sitting sitting there with an unsigned term sheet with yeah.
Alejandro Cremades: So what? What? what? what was like going through through that downturn in the market. Yeah.
Jai Shekhawat: You know it was ah it was it was difficult but we managed to get that round of funding done now we had to take terms at that stage that weren’t you know the prettiest but we got the funding done and I learned 2 things.
Jai Shekhawat: 1 is how to make money lost as as much as you can because it is scarce. It was hard for us to raise the cash and we found ways to make it last you know we we stretched it quite a bit. The second thing I learned is that the market this. When a downturn happens. It’s only people who are really serious about building something that remain all the dilettanes and the folks who you know just thought it would be a good idea. All of those people leave because it gets really hard so there is some advantage to building a company.
Alejandro Cremades: No kidding now you were talking about it. You know getting the term sheet. How much capital Do you guys? raise prior to the private equity firm. You know coming in. Okay.
Jai Shekhawat: And a downturn.
Jai Shekhawat: We had raised 38,000,000 over the course of 4 rounds and ah yeah, so that was the and that took ah probably 7 years over the course of 7 years to raise that money. And then the private equity firm which was Madison Dearborn Partners came in in October of 2010 and we essentially did a recap off and bought out the existing investors and so on. So yeah, that’s how long it took.
Alejandro Cremades: And why? why did you go from Vc to p you know because that’s ah, interesting transition there and and obviously a different way of um of dealing with an investor and I am sure that you know people that are listening. They’re probably more used to the Vc and. I think that that transition from Bc to b is quite interesting. So can you walk us through that.
Jai Shekhawat: Yes, of course you know in some ways we could have just stayed. We didn’t have sold. The company was profitable at that stage. In fact, the final vc round that we raised I think was ten or eleven million and off that we never spent more than you know 1 or 2 so. Our bank balance at that stage never dropped after that round less than I think 9 if memory serves me right? So we could have continued to build a business but you know at this point there’s the consideration that most of these venture funds have been in the business for a long time and some of them are running. To the end of the fund life and so they were looking for liquidity. So I think in large measure it was driven by their need for liquidity. Ah as opposed to the businesses need for additional funding.
Alejandro Cremades: And I guess you know for you. Also what has been a lesson you know learned because I know that they receiving that pressure of vcs that are. Looking for liquidity you know versus where you’re at to and what are your interests and your passion you know sometimes you know there is some type of misalignment there. So How was that for you.
Jai Shekhawat: You know there’s always I would say in hindsight I was lucky to get a good set of investors that doesn’t mean there wasn’t disagreement and you know the disagreements were often around what are we spending the money on how much we should raise and you’d often get conflicting. You know inputs there were when things were going well people would want you to spend more but you know when times were tight, they’d want to pull back but operationally that becomes very difficult when you made commitments to people etc. So I think one of the lessons for me is is actually just to be more tempered with the spending. So my bias you know back in the early days today I sit on a number of boards and so on and the the behaviors are quite different. There’s a lot more money available today people are you know at least until this relatively recent downturn people are willing to put lots and lots of capital at work. My views were old fashioned. But today’s standards I think you should try to build a profitable business as quickly as you can um and that would remain you know that would remain my position.
Alejandro Cremades: Now in that in that sense when the private equity comes in. You know you guys structure this as a minority investment so there was first the need the first tranch of money you know where where you guys were selling that minority ownership. And then you know as it happens with these types of deals. You know you retain certain amount of equity as well as the team members and so forth and then you know you would do um another transaction where everyone is is really you know, liquidating their position in full. So can you walk us through you know how those ah ah. Structures or transactions you know were actually how how did they happen and and what was the value.
Jai Shekhawat: Well the the deal with Madison Deo Born Partners was again going by memory approximately 220,000,000 and since we had only raised you know 38 and still had a lot left that was a. It was a pretty good return for everyone concerned, especially the early investors you know, given the vintage of the funds which were raised in the year two thousand you know this was a good return so people were people were quite pleased as far as our employees and management team was concerned. We. We took some chips off the table just because it had been a while but everybody at this point really believed in the firm and far exceeded whatever was required by the new private equity firm coming in and so we kept our money in um, and. Then you know things things actually became really good. So we started to ah you know one statistic that will be interesting is it took us approximately seven or eight years to close our close about 40 customers. And these were large firms you know fortune 500 firms. It was pretty global already. But then when the recession hit which I think was in 2008 in that one year we closed 40 new deals and it was the proverbial hockey stick and all because in that recession you know in times.
Alejandro Cremades: Wow.
Jai Shekhawat: Recession companies start looking at cost cutting tools instead of revenue generating tools and we were sitting there as a platform that could help a large company control costs on service spend and so all of a sudden there was just this wave of adoption. And it just accelerated so 40 deals that year that I think we did 60 and then eighty and you know then I think we did over a hundred new customers in a single year and for the private equity firm. This company was making its first bet in the world of software. They. They were more focused on industrials before so it turned out to be very good and then eventually we were acquired by sp just you know little over three years after that transaction and at this point, the firm was extremely profitable it on the on the rule of 50 we were. 70 or 75 so the farm was growing. You know 35% a year had nearly 40% ebata margins. It was just it was just a very good business at that stage and I would just say as an aside though, if there is such a thing as a work of art in the world of business. It would be a great business model that can stand up and essentially become your highly profitable. So yeah.
Alejandro Cremades: So so so what were the what were the terms of this transaction then you know the second time around with this a b.
Jai Shekhawat: It was ah approximately a billion dollars so it was one of the first tech unicorn exits in the midwest of a privately backed firm.
Alejandro Cremades: J a billion is a lot of Zeros you know any? what was you know some? yes bill the bins here. What were some of the things that you did you know? Obviously you know after this transaction that they that you couldn’t do before.
Jai Shekhawat: Ah, to to be to be honest is is going to sound a bit syrupy but 1 of my first acts was to to buy a home from my my parents could live in in bombay at a place that I could visit so that was really sort of the.
Alejandro Cremades: Wow, That’s amazing.
Jai Shekhawat: Only substantial purchase I don’t I don’t really like to own that many things that so I might have bought a New Paris new set of squash rackets and some new squash shoes but really nothing nothing more.
Alejandro Cremades: That’s amazing I’m sure there were there were very good shoes on very good racket now in your case you know, obviously an amazing chapter here that they that you were you know closing in you know after the acquisition with with sap what happened next for you. You know you’ve been now you know for the for the past few years you know, really you know getting involved with boards you know making investments. You know what what What has been this next chapter for you.
Jai Shekhawat: So you know one of the things that I learned is when you’re going to leave a journey that has been that intense and that long you know nearly fifteen years from start to finish. You have to prepare the landing strip so that you don’t end up with you know, nothing to do. So that was good advice and the way I started thinking about it. So I stayed with essay for a year and a half this a marvelous farm just you know great experience. Everybody bleeds blue there you know shows up for conference calls. You know 3 minutes early whereas a field glass. It was always 3 minutes late so that was a reset but I decided to. Think about life as a portfolio as opposed to a job and I didn’t want to go back into you know one more ant hillll where your entire world is consumed by just what happens inside that 1 antil and that’s what a startup is you are. 24 by 7 in 1 little thing so I decided to think of it as a portfolio so rather than you know allocating dollars. It’s a question of allocating your remaining you know hours, you know so to say hours and weeks you know and months of your life. Um, and. So I broke it down into I think what I’m good at is I can I can see how problems so solving problems can be translated into businesses you know which is the core act of entrepreneurship. So I love working with entrepreneurs. So I invest in a lot of them I have dozens of such relationships.
Jai Shekhawat: You know and some will fail and others will hopefully succeed but it allows me to to be involved in the act of business creation without being that person getting on that you know 6 a MSouthwest flight out of midway. Um. So there’s that set of activities I have a great deal of sort of personal learning interests. Ah I’ve been a mentor for duality which is the country’s probably only quantum computing accelerator illinois has become a bit of a hotbed for quantum computing because. 2 of the Nsf grants came to Chicago to Argonne and fermil labs and there’s University Of Chicago so it’s been really a good sort of a learning experience. You know, thinking about that. Um, and then I’m involved in a number of funds I chair one of the industry roundtables for Madison Dearborn partners and that involves sitting on some boards there I’ve been a trustee with the field museum of natural history for probably twelve years now and I like going into the field with the scientists so we’ve made trips into Madagascar I’m going again into Guyana into Peru Africa so that’s.
Alejandro Cremades: So you you experienced now the board from two sides you know that they will you know from the side of being the operator being the founder being the one that is executing now from the side of being someone that coms you know provides a strategic guidance. You know shares your opinion you know on on how to handle.
Jai Shekhawat: But my life is now.
Alejandro Cremades: Certain problems. So what are your thoughts on effective board dynamics What does that look like.
Jai Shekhawat: Um, you know that’s a good that’s a good question ah I would say the boards that I’ve enjoyed the most is where the board remembers that it is not working inside the firm. It’s not working inside the company it’s working on the company and ah great relationship is where the Ceo you know sits on the boundary of those 2 and is spending their whole day working inside. You know, selling talking to customers. You know, handling problems building product that sort of thing and when they bring it to the board they are presenting a picture that is a dashboard of the daily activities that are going on there. And then the board’s job is to help bring what they know of the outside world and different experiences. You know to the table when that happens well in a in a trusting way then you have excellent board dynamics and I felt like I had that in my final stint with Madison Dearborn where I will completely credit them with finding the right time to exit the business in its final sale because they started to pick up signals in the market that I would have never seen you know because we were heads down on building our business. So ah. It is that the my second point would be the board has to be a combination of of sponsors so investors as well as operators and then you can have a healthy discussion that factors in both I think if it’s only so financial sponsors then you’ll get a board that is probably.
Jai Shekhawat: Going to be a little bit difficult for the Ceo. So yeah, so those would be the few.
Alejandro Cremades: Got it now. There’s probably a lot of people that are listening you know J right now and and that are wondering you know hey how can I get in touch with J you know So why will be the best way for them to reach out and say hi.
Jai Shekhawat: Um, they could probably drop me an email and that would be at JRAndEY 1 2 3 at yahoo.com
Alejandro Cremades: Amazing. Well hey Jay thank you so much for being on the deal maker show. It has been an honor to have you with us today.
Jai Shekhawat: Thank you very much alandro. It’s been a pleasure.
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The post Jai Shekhawat On Selling His Business To SAP For $1 Billion And Now Advising Entrepreneurs To Achieve Their Own Success appeared first on Alejandro Cremades.
Sasha Orloff built his first two companies at the same time. Now he’s helping other founders figure out the financial puzzle they face on the startup journey. His latest venture, Puzzle Financial, has raised funding from top-tier investors like Gokul Rajaram, FOG Ventures, General Catalyst, and Ayo Omojola.
In this episode, you will learn:
- Decision-making and failing fast
- Hiring and empowering your team
- Debt versus equity financing
- How Puzzle Financial is empowering entrepreneurs at all levels
Alejandro Cremades · EP 574 Sasha Orloff On Raising $1B For Previous Companies And Creating Smart Accounting SoftwareSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Sasha Orloff:Sasha Orloff is an entrepreneur, advisor, and board member based in San Francisco, CA. He is currently the Founder and CEO of a well-funded stealth startup. Prior to this, He was CEO and Co-founder of LendUp and the co-founder, and an Advisor to Mission Lane, the credit card division that started and spun out of LendUp in 2019.
Orloff focused on expanding financial services to new segments or markets and finding ways to harness new technology to improve lives. Ten years ago, after reading Banker to the Poor by Nobel Peace Prize winner Muhammad Yunus, Sasha was inspired to go move to one of the poorest countries in the world, Honduras, where he worked for The Grameen Foundation.
What started as a six-month internship, turned into years of service in Honduras because he found the work so inspiring. Prior to launching LendUp in San Francisco in October of 2012, Sasha worked at The Grameen Foundation’s technology team, The World Bank’s Consultative Group to Assist the Poor, and most recently, Citigroup.
Sasha has a B.S. in Applied Math and Economics and a minor in Behavioral Psychology from the University of California, San Diego, and an M.B.A. from Georgetown University
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So today we have a very exciting founder. You know I think that we’re gonna be learning quite a bit on building scaling. You know all the above that we like to hear so I guess we thou further do let’s welcome our guest today Sasha Orlo welcome to the show.
Sasha Orlo: Thank you, Let’s go.
Alejandro Cremades: So so give us a little of our walk through memory lane Sasha How was life growing up.
Sasha Orloff: Yeah, yeah, it’s I would say it’s been ah, a fun journey so far and it feels like I’m just getting started in my ability to be a successful founder and and and create value. So. It’s been fun. Um I grew up. Ah. All over the place but mostly here in California I’ve had the fortune of growing up in the bay area when I was younger and so you’re just surrounded by all the new technology waves and everything lived in San Diego for a bit I went to college and and had a couple jobs and here I am.
Alejandro Cremades: So what? what got you into math out of all things Sasha.
Sasha Orloff: And yeah, you know I fought it a lot as a child I thought math was embarrassing I knew I didn’t want to be a teacher or professor but it was one of those things that I aced the math on the sats ah went in and took my general education undergrad and got. A’s on all my math classes. Ah I Just found it kind of boring and ah, not really relevant to the rest of life and then I found applied math where you could actually take math and apply it towards real world business situations and then all of a sudden I fell in love.
Alejandro Cremades: Now in your case I mean you’ve um, you know you traveled the world quite a bit you know and then you know you’ve studied in Cambridge in also in San Savastian I mean you, you’ve been you know quite around you know so I guess having that exposure to the rest of the world. How do you think that opened. The way that you think about things.
Sasha Orloff: Yeah, it’s one of those things where when you I think when you grow up you live your own life and you think that’s the experiences that everybody has ah and when you live in the Bay Area you’re probably insulated in even more of a bubble than the rest of the world. So you start traveling around the world and seeing how different people. Live and operate so studied in cambridge university because I wanted to see the core of where economics was founded and studied in San Cebastian because I wanted to see art and the culture of europe I lived in ah central american Honduras and Mexico for 3 years working on. Rural poverty then lived in Dc and New York and San Diego and ah, ah Oakland and San Francisco you just get a different perspective I think all of that just helps you open your eyes to bigger and bigger opportunities as an entrepreneur.
Alejandro Cremades: Now for you I mean you, you kept coming back I mean you you you went back there to San Francisco so what do you think you know I kept you coming back there and and and why so.
Sasha Orloff: 1 of my favorite things about the bay area is it’s a constant focus on tomorrow. What could be There’s just a sense walking around the streets and talking with venture capitalists going to coffee shops and seeing entrepreneurs pitching vcs all over There’s just an energy and excitement that makes you feel like it’s possible and being a founder as you know and everybody else I think it’s a kind of a mix of confidence and imposter syndromes and so how do you make that balance feel like an enabling factor and I think part of the magic of San Francisco is this feeling of possibility. Ah, and what what can you do tomorrow which which is just energizing.
Alejandro Cremades: So I mean for you, it took um it took a little bit you know to to go at it. You know with a company of your own you know I mean you you were working a little bit for other companies and as you were saying you were trying traveling to anduras and. But it took a little bit to really you know, get into the whole Yc and starting your own thing you know type of stuff. So so what do you think push you over the edge.
Sasha Orloff: I you know I think I if we take ah a bit of a step back I read ah but after 9 11 ah, which and living here in the bay area was devastating everywhere but but it makes you really kind of rethink priorities around the same time I read a book called banker to the poor. By Mohammed Yunus who would later go win the nobel peace prize and he started this idea of microfinance. So. It’s small loans and savings and education as a tool to fight rural poverty and you really get to see the possibility of. Ah, how these overlapping things can help empower somebody to to be even more successful and then I was ah went to the world bank to work for the consative group to assist the poor while I was getting my Nba Georgetown and then went to New York to work in a rotational program at Citigroup that ended up being in the venture capital team. So city started the first. Venture capital group in the first bank sort of strategic investing arm in Palo Alto and so I had an opportunity to come back to the bay area as part of the rotational program and you just see how exciting it is to be an entrepreneur because my job was to find great ideas and fund entrepreneurs. They’re the passion. And the capitals of the fuel and it was just is exciting but at the same time you meet a bunch of people who are just everyday people. There’s always a sort of lore of Ceos and entrepreneurs that there’s something really magical about them and and there is to some degree. Ah, it’s a bit of lunacy and craziness.
Sasha Orloff: But at the same time It’s just exciting and you you see. Ah, it’s possible and then when you see it’s possible. Ah, it can’t get you more excited to kind of look for look for ideas I got really excited by an idea that I couldn’t find the right combination of product and entrepreneur and I ended up. Randomly on a on a just kind of a whim on my way to the airport stopping by my brother’s house opening up a computer and applying to y combinator and we ended up getting in ah and it was a really exciting time to be able to build 1 of the first core underwriting and um. Sort of financial services experiences on the mobile phone when the smartphones first came out and we created a couple companies off of that technology and the hit product market fit. We raised a bunch of capital and it just sort of shows you? What’s possible.
Alejandro Cremades: And what is that process like because I mean typically the people that come on the show. You know they develop like 1 platform or a product and you know developing a technology and applying it to different you know channels or different products is not the typical thing that they. Folks here on the show you know have to share in terms of a journey you know with with a company that that they’ve done in the past. So I guess how is that possible. How do you go about first building a technology and then once you are clear on what that looks like how do you you know come to the decision hey you know maybe we apply this to multiple things at the same time because I mean doing a startup. On its own is already difficult. You know doing doing it twice at the same time is absolutely nuts. So how do you go about doing that.
Sasha Orloff: Yeah I think it’s a combination It’s a good question easier probably to evaluate in hindsight now. Ah in thinking about it than going forward I think it’s it’s there’s 3 things that I think stand out one is. When you start to become so obsessed with an idea you try and battle test it and you try and share it with as many people as possible and you try and poke holes. What is the way that this could work and what what is the way this wouldn’t work and and then the second is you have to have an incredible team that can pull this off. And so hiring is really important. So can you recruit a couple people and get them excited enough that they’re willing to quit their jobs work for no money or very little money for an indefinite period of time in the hope of building something and then the third is can you not every business. Some businesses you you should sell funds some you should bootstrap and some you should raise money from venture capitalists in this case can you reasonably understand a path in which this could generate 100000000 of revenue or a billion of revenue along the way and when you can’t think of a reason why all of those things don’t exist to me that was the reason it should exist. That’s probably again my bath background like thinking about risk is ah if I can’t find a way to say no and I get so excited about the yes I feel like I I don’t have a choice I have to do it. So.
Alejandro Cremades: So then what was the technology and then how do you guys? think about you know, implementing it to 2 the 2 to those 2 those 2 different companies that you guys end up you know, building up. Yeah.
Sasha Orloff: In a last I think there’s a lot of themes actually between what we built with lend up and mission lane and what we’re doing here with puzzle is one of the most amazing things. Well I guess we take a step back I think first there’s kind of 2 mindsets of an entrepreneur. There’s this creative genius entrepreneur that can create something that doesn’t exist. Maybe that’s the Steve Jobs or the Jack Dorsey’s of the world people that can create something that doesn’t exist and then there’s other entrepreneurs who just see this opportunity. Can you apply this technology to this industry. And if you have kind of an understanding of those 2 things together then can you build a big business. Can it be defensible. Can you find a market entry are people willing to pay you for it. I’m the latter I’m definitely not sort of this visionary I can create something that doesn’t exist. So if we think about the place where my skillset relies. Its um. I’ve had ah ah a big diverse set of experience startups multinationals banks government ah nonprofits and so that helped give me a pretty broad perspective as you mentioned across a lot of different countries a lot of different industries and then sitting here in silicon valley is like what are the new technologies that are emerging. But if we take that back to. 2010 what was happening. We had 3 big inflection points that were happening one was we had the subprime mortgage crisis which meant the government was going to completely change the laws to how banks could operate and effectively what’s going to happen is they were going to exclude about half of the country from core financial services for some period of time.
Sasha Orloff: Second which is hard to think about now is we were just kind of commercializing the cloud. The cloud was a big thing. You could actually do massive processing like machine learning like not on a computer and smartphones and I still think that when I look back one of the biggest arguments was is everybody going to have a smartphone or is it just going to be for super wealthy people. Along the way it’s hard to think about the cloud and smartphones being a thing back then but you have all those 3 trends happening the same time and so we thought well god if we had a smartphone we could reach everybody if we could process in the cloud we could do machine learning and we could use more data to help underwrite people and we had half of the country was going to be excluded from financial services. And so we decided could we build like a fraud and underwriting technology on a mobile phone that took advantage of some of the native features of a smartphone and then we just tried to apply that towards a lot of different industries and that ended up working really well I still think it’s a major competitive advantage. Um as banks sort of still are slow to invested in technology.
Alejandro Cremades: So then talk to us about talk to us about then lend up and miche lane I mean we’ll we’ll get into puzzle just in a little bit but I want to talk about you know those 2 companies you know what? what were the business models. How how did the business model you know, ended up shaping up. You know how were you guys you know making money on each.
Sasha Orloff: Um.
Alejandro Cremades: Ah, in day and obviously you know like how did you go about building the teams around them.
Sasha Orloff: Yeah, the first concept was the simplest version. We kind of took what was one of the most hated financial products on the market payday lending and how do we reinvent it and turn it into a force for good and so we thought how do we design a product that can help people have an opportunity to build their credit score. To learn about better financial education and to save money teach them the behaviors that make them have ah a basically a higher credit score or a lower risk and then use that to lower costs and save them money over time and so we did that so we built the Linda ladder and it hit product market fit. really really quickly it was the first place you could ever borrow money on a mobile phone. You could borrow it instantly in just a matter of seconds. It put you on a path to improving your credit score and over time we just empirically demonstrated each of these things was was correct. Um, that’s a small market. You know I think it was thirty five billion at the time. Ah. But then how did we apply that towards an even bigger market. The credit card market ah, which is where I spent some time at citigroup and so we built mission lane and that became and I think still is the fastest growing credit card company. Ah it applies you you do it directly on mobile phone. It was the first place you could ever turn a credit card on and off with your mobile phone. Now. It’s broadly available but we were the first to bring that technology to market and it had education built into it I think it was just again took off It’s so much better on every aspect of the product against anything else in the market because the technology enabled that to happen. Um, and then they tried the the manager team then after I left.
Sasha Orloff: Ah, tried to open up one of the first savings account micro savings accounts on a mobile phone. Um as well called the head financials.
Alejandro Cremades: So let’s talk about optimizing for time because I mean building 2 companies in parallel. How did you go about? you know, really surrounding yourself by the right people and then also enabling you know those teams to make sure that they were successful and and you were not in in in the weeds you know, sort of speak. Yeah.
Sasha Orloff: Yeah, it was one of the mistakes I think I made as a first -time entrepreneur is thinking I had to do everything myself and then you start hiring incredibly smart, talented people and you realize the product gets better faster. The product is able to scale faster. You’re able to scale yourself faster. And then as a founder or ceo. There’s some things that are just unique that only that role can do and so it allows you to have more time to do the things that are unique to a founder or ceo whether it’s continuing to hire or raise money or help manage the board set strategy and alignment communication and so. I learned probably the hard way. Ah but hiring incredible people. There’s nothing better at increasing your chance of success than hiring great people and then getting out of their way and letting them letting them do their thing.
Alejandro Cremades: So Then in this case, you know talking about also getting the right people and um, um, let’s talk about investments because for both companies you raise money and and money is not just about the money. It’s about the value that comes with the money. So How did you think about. Financing both companies. How was that fundraising journey and you had to do it twice. So I mean that’s pretty unbelievable.
Sasha Orloff: Yeah, a lot of capital to sort of take on ambitious ideas and I think part of it is the preparation of it. Um, fundraising is hard. You have to tell the story your finances have to align towards the story. The people in your team have to align to the story. And I view my job as the ceo ultimately as the arbiter of of resources of capital allocation and resource allocation across the company. The 2 biggest resources that we have are our money and our our team our people over time as you grow your customers become a huge asset as well. But ah, how do you sort of manage and of all the time. So like I said when you hire great people. It gives you time to do the things that you’re uniquely suited to do as a founder one of which is fundraising and so the preparation time. Ah, all starts with a vision that is compelling. And so what’s your take on the market that is compelling is defensible and is exciting and can can energize people. So with the last 2 companies. It was how do you turn the concept of a predatory financial product into an opportunity to help people. That’s just something that resonates everybody has had some struggle in their life. Everybody is needed a hand and when our financial system was designed such that they make more money when their customers get further into trouble. It’s easy to see a vision in which if you can demonstrate you can make money and.
Sasha Orloff: Enable and empower people. It’s ah it’s a compelling vision I think that attracts a lot of people with domain expertise and a lot of people from outside the industry to bring fresh perspectives.
Alejandro Cremades: Because how much did you raise in total for lend up and how much did you raise in total for Mission lane.
Sasha Orloff: Um I don’t know the exact number but it was in the hundreds of millions for each each company.
Alejandro Cremades: Got it I mean I think that they you know based on on what we can see online you know Mission lane is around 675,000,000 I’m sure that there was like some depth you know versus equity ratio in there and then lend up about 361,000,000 and probablyly the the same you know with that. They. Debt versus equity a ratio. How do you think about debt versus equity ratio. You know in an operation like that. How does that work.
Sasha Orloff: Yeah I Think if you’re specifically doing a capital markets business like a lending business. Ah the more that you can leverage debt the better and one of the advantages you have is when you can build outsize returns because your fraud and your credit underwriting is better. Then you can attract more capital at a lower cost with a higher advance rate. Um, and so that just makes it much more capital efficient than otherwise if you’re building ah a revenue financing business or you’re taking on debt as another startup I think it’s as with all debt. You want to really have confidence that in good times and bad. You’re going to have a means to pay it back because debt can wipe out all equity investors. It can wipe out all the returns for founders and for employees and so you really want to make sure you have that So I’m a big fan of some of the innovations in revenue financing that we’re seeing these days. Ah. Slightly less so of just raising debt for Debt state just to advance equity just because it can. It can be dangerous, especially when we’re thinking about shareholder returns.
Alejandro Cremades: I mean I’m sure that during this time where you were raising efforts you know, raising money you know with those capital racing efforts for both companies at the same time you know all those millions I mean that’s a lot of money you know to raise I guess what would you say. And I’m sure that there’s a lot of people that are listening. You know to us you know that are wondering hey you know I I wonder if I can you know, get some insights here from Sasha what? What are the top 3 lessons you know around fundraising that you’ve learned.
Sasha Orloff: Um, well I think if we just first address the equity versus debt I think when it’s a very different mindset which I I learned after years and ah, many many pitches other way the equity investors want to capture upside they’re making money. Because you’re turning that equity into a multiple of that equity the mindset of a debt investor is I don’t want to lose a penny. Um, and so those are very different messages and stories that you have to tell I’m never going to lose your money and here’s how we structure a deal so I’m never going to lose your money or I’m going to make you a lot of money. And sometimes those things are aligned and sometimes those things are in conflict and so I think from a debt versus equity that that’s a big lesson I think at the last that the the thing that I still take to heart about fundraising is everything creates a compelling. He has to all anchor towards a compelling vision. Ah, the first sentence that you say is the thing that is going to frame everything else from that point forward. So you really have to get that right? Um, and the the second is you’re the the third I guess on this point is you want everything to align. Part of fundraising isn’t about telling your whole story. It’s about telling the parts that get people the most excited and 1 of the things I am still prone to that I think almost every founder that I’ve talked to is is they overexplain they go into too much detail and so get help early get that first sentence.
Sasha Orloff: Get this story right? and then practice with friends practice in the mirror. Ah to a point where you’re not trying to tell everything you’re trying to tell the exciting part that gets people interested in all of those rich details.
Alejandro Cremades: Now. Ah, and and I love that by the way I think that simplicity is everything less is more as they would say I guess I guess you know one thing that is very interesting here is that for both companies I mean you were for about 6 years what do you think you know after you had built you know those 2 companies you know after all this success. Or the triggering point for you to say hey maybe there’s something else for me to explore and actually you know that perhaps you know that that push you to to to get 1 year off I mean 1 year off I’m sure that was pretty boring for you because I mean after running 2 companies you know I’m sure that you you were like. Used to the constant you know, racing in your own head with the ad as with what to do with the fires to put out I mean what? why? Why did you like you know turn chapter and take 1 year oh what what? what the hell sasha.
Sasha Orloff: Yeah, we were working. We had the fortune of hitting product market fit really fast and so I basically worked seven days a week for 8 years in a row. Ah and that was just exhausting and I needed to take some time off and so. It was a perfect time for the businesses to be split into individual entities to be able to be capitalized separately for us to hire ceos to run both of those businesses and then afterwards it just we needed to take some time to ah decompress and figure out what to do next I had quite a few interesting opportunities. But I also had two little kids and they didn’t know my name and I wanted them to know who their father was and spend time with them and decompress and so I I took some time off I thought it would be a couple months it ended up being almost almost a year.
Alejandro Cremades: So what what? what happened during that year I mean obviously I’m sure that you had the opportunity of spending more time with the family but you know how were you thinking about then entrepreneurship building companies. You know I’m sure that taking 1 year off and. And you know taking a step back and and seeing what mattered you know, obviously the family but what happened there you know what? where are you incubating because obviously you know as a result of that you came back and and now now you’re you’re at it again with puzzle. But. What was that incubation process of thinking you know what was going to be the next thing and and why pasa was the next thing for.
Sasha Orloff: Yeah I feel like building. A company is is also somewhat traumatic. So maybe there was a little post-traumatic stress disorder happening. It took me about three months to just relax have a resting heart rate I spent time ah trying to learn some new skills I read a lot I didn’t. Carry my phone with me anymore for three months which was kind of crazy I just left it at home I spent 1 hour a day on my phone and the rest was just being really present ah exercising a lot meditating just decompressing then I started carrying around a little notebook. Ah the one that I wrote with ah with pencil and paper pen and I just started writing down ideas. Ideas that I thought were good for the world ideas that I just problems that I saw and big ambitious ideas I thought that I was uniquely suited to tackle and I just kept writing them down for a couple months after about the 6 month Mark um I started talking with other founders and venture capitalists about ideas and started narrowing them down from. Ah, hundred and twenty ideas I think to 20 ideas to 10 ideas to 5 ideas to 3 ideas to puzzle.
Alejandro Cremades: So what? But why pass or out of the top 3
Sasha Orloff: I think the story is easier told in hindsight I realized I’d been thinking about these I had 3 ideas one was fairly similar to the idea that I just stepped away from just applying it towards another industry. Um, another one I thought was sort of another missing idea in the market. Ah, that I think would be still. They would be great, but this idea had been thinking about for about a decade since my days at city ventures and and it came back from a lot of my experiences to date which is. When it combine the experience of being able to scale a company to hundreds of employees and millions of customers and raising hundreds of millions and ah, how do you use those tools to enable something to exist that is different and more valuable in the world. The world of accounting just felt like kind of a natural fit. Yeah, we talked about I’m a math major accounting at its core is is numbers if we think about it as the numbers are the core truth of a business and if we can understand the numbers then we understand how our business works and if we understand how our business works we can make better decisions so we combine a bit of math. A bit of my history. It grameen like helping company like ah basic entrepreneurs in the rural parts of developing countries understand how to build a business with loan and education together and then this third step where I had the fortune of scaling a business I had an incredible executive team.
Sasha Orloff: But I would look around my table and I could ask product and Hr and people and ah engineering and um, ah our credit team and finance team everybody could open up their computer and answer any question that we asked them for the most part except the finance team. It took them days to figure out how to calculate errors was all mostly done manually and when you start looking at that and you start investigating like what’s happening here. We were hiring consultants and we were pulling engineers off of things and we were asking how confident people were in the answers. It turns out that that wasn’t a failure of accounting teams. It’s a failure of accounting software and that was the part that sort of really kind of struck it. It was a bit of what am I good at what was kind of a history of a fresh take because of my perspective and what was a big big market problem that needed addressing.
Alejandro Cremades: Got it now. 1 thing that is very interesting here is that to just create the minimum viable product of something like this. It takes a lot of money you know I understand there’s twenty million bucks so how I mean. Obviously you’re a rocktar you know at this point you know when it comes to because I mean any other like average Joe Schmo you know on the street. You know that is like a first time founder Twenty million bucks to just get going with something you know it’s kind of like kind of like crazy so so I mean they I mean the barrier to entry is like absolutely ridiculous. So. So why 20000000? and then how do you convince someone to just say hand you that money to just put together an mpp.
Sasha Orloff: Yeah, ah, that’s the fun. That’s why ah, that’s why these podcasts are so exciting because you get to hear a bit of the story behind the scenes that doesn’t get published in other places usually because people don’t ask this? Um so I I think there’s 3 themes that can lead up to something unique happening in the world. So back I guess in my training as a venture capitalist I was thinking about what are major trends that are happening in the industry right now big trends that we’re going to create big winners and big losers and there’s 4 trends happening right now in I believe in the world of accounting one is gap is no longer sufficient for valuing a company. Ah, you listen to investor calls and they’re not asking about traditional p and l and balance sheet metrics. They’re asking about new customers and existing customers and they’re asking about new product lines they’re asking about growth. All of these things are not in the details of your financial in the financial statement summary. They’re in the details behind it second is. Startups have style aligned towards a modern set of tools that all have apis think the stripe gusto ripplings brex ramp mercuries of the world. These modern toolset that all have data available in real-time and api the profile of a Cfo changed I the majority used to be come from the counting background and now the majority. Ah, of cfos come from strategic finance or investment banking or operational cfos and then fourth the profile of a founder has changed when a founder used to raise money they used to raise a series a and they would put a Ceo in a cfo um on like to run the company. But now there’s capital for founders to go on scale which is great.
Sasha Orloff: But there’s this really important missing knowledge which is accounting and finance as a capacity so we have these big macro trends that are happening at the same time. This is a well understood problem. There’s plenty of vcs have posted around the the the lack of. Ah, modern, accounting software to enable this next generation of companies. Um, why it doesn’t exist was unique to the capital structure. So there’s a lot of smart entrepreneurs who have tried this There’s a lot of um, understanding of different. Go-to markets. There’s a lot of opportunity. But when we look back at the history of What what it took for any meaningful accounting software to be created. It was 3 to 5 years and part of that is accounting is just binary similar to like going to the moon 95% of the way to the moon doesn’t really matter or 95% of the way going to Mars doesn’t matter accounting is the same thing. It’s 100 % or nothing what that translates to is. It takes specialized knowledge from accountants and auditors and tax experts and cfos. It takes years to build for all of these different edge cases and the combination of like very specific expertise and a lot of time means you need a lot of capital to incubate something like this that means it’s not. Part of the normal traditional venture capital rat where you know maybe raise a couple million dollars from some angels or friends family and then you go raise a seed round and then you raise a series a series b I knew that if I was going to do this for real I couldn’t get distracted by building a dashboard or building an insights tool or building a charting tool I needed to have the core.
Sasha Orloff: General Ledger which is the backbone of accounting I needed to be able to focus on that it was going to take a long time and so I spent a couple months studying this and what that meant was I needed $20000000 what I estimated to build it validate it show growth and traction. Ah, in order to set up that next race I actually think it takes about $50000000 to build this for real $20000000 like you said is a big it doesn’t fit into a traditional venture capital structure and um so I I looked for very large funds that do seed to scale I looked for.
Sasha Orloff: Funds that had a history of incubating really big ambitious ideas and I looked for a partner that I thought would get it at the exact same time without my knowing Hammond from general catalyst was creating a creation fund which they now talk about publicly general catalyst big ambitious ideas. That don’t fit in traditional capital capital structure hemont was an early investor in stripe and gusto so he sort of really understood this next generation. He also has 2 main themes of his investing. It’s like physical health like human physical health and financial health and I think this vision. Falls squarely in line with both of those two. So I went in and I ah had ah had a meeting and we sat down in a conference room. We talked about what it sort of could look like we then went and he introduced me to a couple of his cfos portfolio cfos. We went around and talked with ah a bunch of people we validated the id in the market. We talked about what it would take and we both looked at each other and said I think I think this is it I think I think we can do this and so we we shook hands and here we are.
Alejandro Cremades: I Love it and now for the people that are listening to get it. You know what ended up being the business model of puzzle. How do you guys make money. Okay.
Sasha Orloff: And yeah, so I think there’s we think about this in sort of 3 phases ah of um, the lifecycle of a company. There is that entrepreneur who’s just starting off their business. Um, and that has a free tier to it. It’s the things that are the most important when you’re first starting your company you want to have a scalable system for tax compliance for investor and shareholder reporting but accounting in the early days is a little bit more of cash burn runway and financial insights. What am I spending money on what are the new things that I’m spending money on what are the things that are changing so our first tier is completely free for every brand new company. We want them to have a scalable ah formation a scalable system to to grow their company phase 2 is I’ve kind of now built a product and I want to. Be able to do a couple different things now I need to understand the complexities of my business I want to see revenue by customer I want to see revenue by product I want to see expenses by vendor I want to see expenses by new or recurring I want to see my runway I need I need to have full cash and accrual views because I want to save money on taxes. I need to fundraise but I also want to understand my business and budget forecast there. It’s a saas um a monthly fee. It’s completely voluntary the user opts in to a paid tier and then they get unlocked a lot more capabilities and features and then the third tier is I’m growing and scaling my business.
Sasha Orloff: And I want to have a lot of automation and collaboration and learning built into the system because now my accounting is getting complicated I might have fixed assets and I don’t want to spend every single month writing a depreciation entry I just want to like list my assets and have the software take care of it I might have. Bunch of revenue and accrual automation I want to see my cash and my accruals at the same time and so I need to see all of these books but I don’t want to spend more time doing it so we’ve built a system that learns and gets better all the time and automates a lot of the tedious parts of accounting I mean so that’s that’s the third tier.
Alejandro Cremades: Now let me ask you this imagine if I was to um, give it the opportunity of going to sleep tonight and you wake up in a world where the vision of puzzle is fully realized what does that world look like.
Sasha Orloff: Um.
Sasha Orloff: I think that the part that I get the most excited about is when anybody regardless of their background can make confident decisions in their most important financial decisions they have the data they have the understanding. And they have the knowledge to be able to not guess to not have to make a political discussion. They can actually understand them for their most important financial decisions they have confidence making those they confidence making those decisions so that’s that’s a combination of Ux. It’s combination of data. Combination of machine learning ai. It’s a combination of accounting with finance.
Alejandro Cremades: I love that now we’re talking about the past here. So let’s talk about the um sorry we’re talking about the future. Let’s talk about the past with um with a lynch of reflection in there. So imagine you’re able to go back in time and you’re able to go back in time you know perhaps to that moment that the. You had you know, moved back to San Francisco you were in those coffee shops as you were saying and you were able to see the other founders pitching others and you were probably thinking hey I should be also one of them right? and and and imagine you know you were able to ah talk a chat with your younger self and be able to tell that younger Sasha. Or give that younger sasha 1 piece of advice before launching a business. What would that be and why given what you know now.
Sasha Orloff: Um, we touched on this a little bit before but I feel like it makes sense to reiterate is um, there’s there’s nothing in my opinion that will make a company more successful than proper capital allocation. And hiring the best people ever if and so sometimes that’s hard when you’re scaling because you need more capital and you need more people and so it’s tempting to either lower your bar or potentially pick the wrong investors or hire the wrong people or just hire people fast enough. And so the lesson I would learn is or lesson I would give back to my younger self is have a good vision of what success looks like um, empower your hire. The best people if you don’t know that they’re going to be a step function to your success. Just don’t don’t hire them. Don’t take the chance. It’s better just to work harder because the wrong people can make just catastrophic decisions when you hire the right people you have to empower them to be successful and that means that you need to have a common set of values of what does success look like How do we behave as an organization and sometimes you have to just let people make mistakes along the way you have to trust them and that’s the hardest part you got to bite the inside of your cheeks extra hard and my general advice that I give to people is we will try 10 ideas eight of them are going to be terrible.
Sasha Orloff: 1 ne’s going to be okay and 1 is going to be that game changer. So let’s get to that one as fast as possible.
Alejandro Cremades: I love that I love that Sasha so for the people that are listening. What is the best way for them to reach out and say hi.
Sasha Orloff: Well, if you’re starting a brand new company. You should of course use puzzle and then um, there’s a button that can connect with me right inside but it’s Sasha at puzzle io and I’m on Twitter I’m on Linkedin I’m everywhere so would love to hear ideas. Unfiltered feedback and what else we can build for the founder community.
Alejandro Cremades: Amazingson well hey Sasha thank you so much for being on the deal maker show today. It has been an un earth to have you with us.
Sasha Orloff: It’s been an honor to be here. Thank you so much.
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The post Sasha Orloff On Raising $1 Billion For Previous Companies And Now Creating The First Smart Accounting Software appeared first on Alejandro Cremades.
Greg Marsh previously founded and sold for $250 million OneFineStay. He is now the cofounder and CEO of Nous which is a software company that deals with household utilities. The company has raised millions from investors such as Mosaic Ventures.
In this episode, you will learn:
- How Nous is helping homeowners in the UK
- Picking your investors
Alejandro Cremades · EP 573 Greg Marsh On Selling His First Startup For $250 Million And Raising MillionsSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Greg Marsh:Formerly a venture capital investor with Index Ventures in London, in 2009 Greg founded pioneering luxury accommodation marketplace onefinestay, which he led from inception through to acquisition by Accor Hotels in 2016 in a deal worth more than $200m. Greg has since taught at Harvard Business School, and served on the boards of several organisations including Amnesty International. He studied at Cambridge and HBS where he was a Fulbright Scholar and Ford Scholar.
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Read the Full Transcription of the Interview:Alejandro: All righty hello everyone and welcome to the deal maker show. So today. We’re going to have the battle of accents here. You know we got the british accent. We got the spanglish you know the spanish accent. You know that I have but I think that we’re definitely going to enjoy our guest Today. We’re going to be talking about building scaling. Financing exiting I mean you name it. But but again I don’t want to make all of you wait any longer. Let’s welcome our guest to the Greg Marsh welcome to the show. So originally born in London you know the city where it always rains. So how was life growing up there.
Greg Marsh: Um, thanks, so having him had a ham but.
Greg Marsh: There’s a famous infamous medieval french document where ah frenchmen who committed truly heinous acts worse even than than being punished by murder were banished to the land of eternal rain they were sent over the channel. Permanent exiles. So yes, London is a rainy place but what it makes up for with bad weather in in sort of as a technology and entrepreneurship hub. You know we can. We can all attest and for me look it’s my home. So I grew up here and 1 of the few who stayed here thought. And a couple of occasions I thought about going west coast for a period of time I thought about going East Coast us for a period of time. We even flirted with moving to berlin after I sold my last business but I keep coming back here because I think it’s a very rare and unusual combination of things. It’s an entrepreneur right? where you have this one location unipolar. Ah, city you’ve got a political center an economic center a cultural center as well as being a large population and capital center and there’s not that many cities which can claim all of those all of those hats at once.
Alejandro: Now in your case you know, very interesting. You wc
Greg Marsh: I’ve been perennially indecisive I’ve I’ve never figured out what I want to do when I grow up. My sister is a doctor at about the age of 10 She announced I Want to be a doctor and then she goes and becomes a doctor. She did great I’m so pleased for her I’ve always been very envious of people who’ve known what they wanted to do and I felt like for a lot of my early. Career possibly even my later career I made decisions that kept my options open and so part of my career choice. My degree choice was around not really knowing what I wanted to do I Sometimes think I probably would have been happier if I just stayed with my first love which was computers I used to code as a kid and wrote computer against my bedroom and loved it. Um, but I. For whatever reason got Distracted. You know the British education system. Unfortunately one of its problems is it tends to it tends to sing a song sirens song about the humanities and it drags us into abstraction rather than keeping us applied. Um, so yeah I ended up reading Philosophy. It was at least it was more. Ah, more analytical discipline. There was a lot of logic in there and some and some sort of hard semi-math problems. But yeah I felt like most of the rest of my career I’ve been I’ve been so scrapping to get back into the more worldly more prag pragmatic stuff.
Alejandro: And you know it’s interesting. You know how when you think about the philosophy you know angle of things you know which is really discovering the why of things you know how do you tie that to you know to becoming an entrepreneur later on which is discovering you know. Obviously really the the why of problems. But then you know figuring out the solutions I guess your in your case, the first experience into the venture world was when you landed in apax when they had their venture practice. So that’s. That’s an interesting place to land after graduating from philos. So how do you land there and what was that experience with the venture world for the first time.
Greg Marsh: You know, look what what what? the quintessence of the study of philosophy is that it’s a generative discipline you are staying at the at the abstract creative end of thought right your before thoughts become disciplined enough routineized and rigorous enough to become functionally specialized at which point they become. History or they become maths or they become engineering and I think something similar applied about you know why? I’ve been continuously resistant to specializing in my career as well. Right? I mean entrepreneurship is a generative discipline. You are resistant to specializing as the chief exec of a startup you’re kind of a bit of everything and the moment you get. 2 dragged into 1 bit of detail you figure out right? There’s someone who’s way better at this than I am man to hire them to replace myself and in a sense you’re constantly replacing yourself and in in that generative role look venture capital I didn’t know quite that I wanted to run businesses I didn’t have the confidence to be able to start them again. You know. The Uk is getting better at in promoting and encouraging entrepreneurship as a legitimate business career. But I think we we have a long way to go still for that to be a default behavior pattern and certainly as the son of 2 lawyers where the kind of professional discipline was the expectation that. The the norm for me was I would have gone into a professional career investing represented this interesting interstice between that professionalized competence and something that was close to generative work and close to technology which has always been my first love so that was what attracted me to it I was looking for a way to kind of combine those interests in 1 place.
Greg Marsh: And you know it’s fun, right? I mean investing other people’s money is is a kick. It’s really,. It’s really intellectually rich and enjoyable. You get to be very lazy and other people do all the hard work if you’re in a good shop I mean Apax for a period of time later in my career Index ventures are really outstanding People. You get to work with in these in these places. And you get to sit in the middle of the the solar system and these crazy smart entrepreneurs revolve around you and that is an incredible luxury. Um I think it can also breed I don’t want to be disparaging about ah Investors. You know some of my best friends or investors. But I think it can also breed a kind of arrogance and a complacency I’m. You know I think I think the best investors are great investors because they know they’re not operators actually and I think the best operators um at some level know they couldn’t really be investors because they need they need to have their hands there because they need to grab it and play with it and and own it and build it and create and do that in a collaborative Way. So. As time’s gone on I think I’ve become more accepting of the person I actually am but certainly at the outside of my career I was really quite indecisive about whether I wanted to invest or whether I wanted to operate.
Alejandro: And in your case, you also did the reverse commute because you went from investing to becoming an entrepreneur I mean you were at Apax then you did a Harbor business school then you returned to Index So I guess you know while you were on the other side of the table as an investor.
Greg Marsh: At points.
Alejandro: What were th e 3key traits that you saw on founders that deserve the money and that could perhaps you know have the potential of building something great from those that you know still needed a little bit more to learn before you know they were fundable already.
Greg Marsh: Um, it is about teams um about individuals and teams. Usually it’s teams right? The research literature is pretty clear that founding teams are ah have both a low base around a higher overall return. Um. So so what are the qualities that predict success in successful entrepreneurs. Unfortunately like the literature on this one I mean this is my own experience. Yeah I’d love I’d love to have a great searing insight. The data is really bad on this. So if you reviewress back you ask as a bunch of works and former Hbs colleagues in mind did on this. Um. You you look at the scores that venture partners gave founding teams when they made the decision to finance a series a deal and then you you put that on one axis the other axis you put eventual outcome on an ah roi basis or you know cash on cash basis. And you’d expect to see some correlation. You’d expect the teams that were appraised as the best on the way in. But also the ones that delivered the best returns. Ah, it’s a mess. There’s an extremely low correlation between investor assessment of founding team quality and overall investment outcome above a hygiene threshold of founding team quality. But what this tells you at some level is there is an enormous amount of luck an enormous amount of part dependent outcome ah in in invent venture investing so you absolutely you want to make sure you’re backing smart people and people who are likely to be able to course correct on the early stages of their journey.
Greg Marsh: But it is a huge There’s a huge amount of uncertainty and any investor who says that they’re better at picking the smartest people is probably smoking something. Um, what I can say and I say quite confidently is that the thing I got from those interactions with founders ah during my index venture stage. So I was there. 2008 through ah 2005 through 2009 and through that through that 4 year period what what I what I took from it was was 2 things. The first is how widely different founders can be from 1 another and still be it. Successful. There is not 1 dominant behavior pattern or personality type or characteristic. Some are very driven and order driven people. Some are very you know, ah narrow people some are very broad people. Some are you know, very very difficult to work with some are very easy and accommodate. It’s not 1 path. Um, they’re already smart. They work incredibly hard. They’re all obsessed with their business. Um, they’ve all figured out. Thing. They’ve got a thing going on by the time you get through the door at a tier one fund. You’ve got something going on. Um, but the second thing I think he was it was it was about me getting less so at some level I was asking myself again and again one of the recognitions or acceptance I have about my own development as ah as an entrepreneur. Was it was me asking myself when I met these people could I do that and in some cases probably not some of the folks I interacted with I mean we just invested in Skype when I joined the index bench team I can you can pay yourself to Nicholas and and and yanus you’re like well heck no I mean they’re obviously in ah, an extremely high high high altitude. Those guys.
Greg Marsh: Um, but a lot of the founders me back right? Yeah, maybe I could do that. Maybe I don’t know maybe maybe I back myself to take that risk. Maybe I bat myself to give that a go and I think at some level accepting that I was never going to be able to let go of that until I had tried to climb that mountain myself until I had taken the risk and tried to play the game I would never let myself off the hook. When I first took the leap in 2009 to start my own business One fine Stay a lot of what went on in my head was look even if this goes wrong and I kind of expected at some level it would even if this goes wrong. Ah, the very least I will be humbled and I will be a better investor as a result right? I’ll go back tail between my legs to the guys and Index and say please give me my job back and I’m now qualified to invest your money in other people’s businesses because I now know just how hard it is and how how much good luck it requires mom.
Alejandro: But you you were already seeing that I mean you were already seeing it at at index and what you saw you know at apex and perhaps you know other friends that you had at Hbs that went out you know and started their own companies after the the masters program you saw how hard it was so I mean it sounds like. You wanted to to harm yourself I mean? Ah, why did you think you know after seeing all those founders seeing all these struggles that they were going after you know like you had this super comfortable job. You know the typical you know investor in rvc they are able to secure a job because they were successful as a founder in the past I mean it’s not easy to secure a. Vc job. Especially you know in 1 of the best firms in the world like index why why did you decide to make that shift first.
Greg Marsh: Yeah I think I think it’s I think at some level. It’s a bug not a feature I think the entrepreneurial spirit in this regard in a way I often advise people but like you say of acting right? if you could do something else and be happy. Do something else. Um, in my case I may I can only talk about my own experience with this. In my case I think it’s a recognition of my need for that level of kind of extreme stimulation and challenge. It’s ah a pretty pathological aversion to authority I don’t cope well with authority even wellbehaved and self-disciplined and. Good and well and sort of ah well- managed authority. Um I think a third thing is an intense desire to do work that is creative work investing is a tremendously fun job as it’s intellectually varied. You have a tremendous degree of leverage. You get rich slowly all of those good things. It is not terribly creative work and it is not terribly collaborative work. Um, and what I most enjoyed in my pre-index experience at gfx and then my post-ind index experience during the scaling phase of one by stay was I enjoyed building something creating something out of nothing out of hold cloth. And that intense relentless problem solving that you have to do to achieve that on the product side on the organization design side on the commercial problem solving side right? but also doing that with a team of people I mean I’ve I’m sure what talk about this but I’ve gone back in as an entrepreneur now in a new startup eighteen months ago
Greg Marsh: And very explicitly and deliberately chose again to do that with Co-founders. So like I’m not saying that investing is necessarily solitary. But as you become senior as an investor you do an awful lot of your work on your own and. And I don’t want to work on my own I get bored of myself I Want to be stimulated by other people I want that challenge I Want to work I Want to create something that has impact on the world with other people. Um, but unfortunately and as I say it’s above not a feature I don’t think I’m well suited to working for others. And so accepting some of those things about myself kind of you end up, you know I’m going to have to do this if I don’t do this or I don’t try and fail to do this and prove that I can’t do this I’m never going to respect myself and I think it was that as much as anything else in 2009 that got me off my ass to go start. Oneine state.
Alejandro: So then I.
Alejandro: Well how how did 1 find stay come to mind you know because obviously see ah problems you know and ideas they take some time you know to to to incubate but at what point do you realize this is it I got to really go after this one.
Greg Marsh: I nearly left twice before there were 2 other businesses that almost that almost got me there at the end of 2008 just before the collapse of Lehman Brothers I’d got as far as a founding team a business plan like early product staff I was paying a guy to work you know into evenings and weekends and so on and then the lehman collapse happened and that sequoia pitch deck went around saying r I p good times and I realized. That particular business I shan’t bore your listeners with the details all but but that particular business was not viable in a capital scarce environment 2007 was a capital rich environment two thousand and late Thousand Eight was a capital scarce environment and as a first timeout entrepreneur I was not going to be able to raise $10000000 coal to be able to build the business that that business would have required it. So at the start of 2009 I licked my wounds and I made a list and my list was kind of it was an analytic There’s a criteria sheet of like what are the minimum sufficient necessary sufficient conditions of a business model in the design inception phase of a business model. Have to be true in order for me to have conviction about going to start it given I knew on paper the chances of success were low I thought there was a lot of things that could go wrong, etc etc and I had a various head of set of rules. 1 was a counterfactual rule by London if this is a bit must be a business that if you could choose to start it anywhere you would choose to start it in London.
Greg Marsh: 2 a business that was intense that used technology intensively but was not a technology business in the sense that I am not I enjoy technology but I’m not a deep technologist and I knew that about myself 3 a business which did not require capital to get to product market validation again post-lehman there was not likely to be an abundance of capital. Etc. It’s about sort of 5 or 6 of these rules and so I went around essentially I sort of sat at my desk looking at other people’s business plans and media entrepreneurs kind of with these set of thoughts in the back of my head and one morning on the way to work I had I suppose an epiphany. And it was literally looking at these empty buildings in the center of mayfair and thinking how on a set all these places are empty. All of the time this is crazy. This is the most expensive and prime real estate in the world. How come. It’s empty and of course the simple insight is it’s empty because those who can travel travel a lot of this is sort of parked capital. There is a market failure here. And then the thought occurred to me I wonder what service would need to exist in order that folks who have really nice houses like these would make them available for short periods of time to visitors and that thought kind of got stuck in my head and it went round around around my head over the next few days and I had a strip to pisa and as a guest in a terrible airport hotel but I had terrible accommodation experience. Walking through the city one night thinking hang on a safe. This is what I want I want to stay in that apartment there in the center of town I don’t want to be staying at this miserable airport hotel. How can we fix its market failure now I’d read about ah airbnb and went on my own research. In fact I tried to meet the airbnb guys with an index venture hat on though, they’d just raised capital from sequoia at the time.
Greg Marsh: So I was kind of aware that there were pure play market models in in the ether though it was way early in that business’s journey and development I also had a sense that the last thing you wanted to do was compete with a pure play marketplace that was based in San Francisco if you were building that business in London you’re back to if you could start this business anywhere. You would choose to start it in London what must be true of the business model for that to be the case a pure play model is unlikely to succeed in London right? I mean you’re going to be competing with 1 hand tie behind your back against entrepreneurs in in the valley right? where they’ve just got. Ah, much greater density at the time particularly than even more so than today a much greater density of relevant product talent to marketing talent. So what was intriguing about onepoint day was it is a hybrid model. It requires an intense service operation component 1 fine oneen day looks from the outside like a curated airbnb. The inside of the business is’ all about operations and services. When we sold the business seven years later we had 700 people in the company and it’s an intensely complex operating business where you’ manage. Yeah, we raised we a bunch of money and we hired a bunch of people but a lot of those people were not doing product engineering wells a lot of those people we had a product engineering team. It’s the largest team in the business.
Alejandro: And you also had raised quite a big ah bit of money too. I mean you had raised what over eighty million bucks
Greg Marsh: But we also had a team of drivers. We had folks doing linen. We had folks doing warehouse management. We had folks doing hospitality and service management. The only way you can maintain a high level of service quality on the guest facingcing side or a high level of property management quality on the homeowner facingcing side. There were not third -party service providers in the markets where we operated that could deliver that service. We had to build those service functions ourselves right? So one fineins stay was from the very beginning at at inception and conceptualization phase a massively hybrid business. It was an operation. It was a luxury hospitality and operations business. With this curated marketplace over the top and so very first thinking about it’s like this is an unbelievably complex person to engineer and build It’s it’s multifunctional. You have to be good at a lot of different things to do this I knew I couldn’t do that on my own I didn’t want to do it on my own and so a lot of the early journey. What held me up from when I became obsessed with this. What got me what stopped me from jumping immediately was the need to find co-founders who could help me on that journey and it was actually when I found this great technologist. Ah who has postmersed business as a y combinator start up hadn’t worked out and I dragged him back to london but it was actually when my former colleague demetrius opted in. Who’s ah ah, a sort of saner and wiser individual like than me, he’s but sort of 8 years older than me and have a lot more management experience than I did it was when he said I think there’s something here. Let’s let’s build it together that I felt like okay this is crazy. It’s going to be unbelievably difficult but I kill myself I didn’t try and so heck.
Alejandro: Love it. Love it and now you guys raise quite a little bit of money I mean for this I mean over eighty million bucks you also had as investor index ventures so I’m sure it was not that hard to to get them on board now because they already knew you.
Greg Marsh: We tried.
Alejandro: But you really knew you know the investment side of things. So why did you choose the investors that you chose to write you know along you know in this journey with you. So.
Greg Marsh: I was I was actually I mean you say index week get involved. Ah I remember when I when I said I was leaving Danny Rymer sort of pulled me to 1 side. Hey Greg hey listen you know if you want to have someone to sit while they’re working on the business use our offices and I very expressly said. Thanks. But that’s that’s cool. It’s okay. I very deliberately distanced myself from the firm for the first nine months or so of my journey as an entrepreneur I think in part because I didn’t want this to feel like an index venture shot deal if I’d done that a I was anxious I could have got screwed on terms but b I was worried that if this was an index house deal. If index didn’t do it I was screwed. There was always going to be a bit of a risk of that for precisely. The reason you say there’s like an adverse signaling risk if you leave a tier one fund and the fund doesn’t follow but I thought my best chances of having a decent leverage at a series a stage and also my best chance of having a fallback plan if that doesn’t work out. Is going to be to have distance from index so I maintain distance from index for nearly a year and it was after we had sort of early traction and sort of a sharp growth trajectory that and actually after I had term sheets from a couple of the funds that at that stage I sort of opened the conversation again with the index guys and they made a decision within 2 hours and said let’s do this and so it was. And look yes I was happy to take their money clearly, it’s a fund that’s a firm I know and have a lot of respect for and in the end it was um I would also say that I really wanted an entrepreneur on the board and so ah, it was Robin Klein an index who ended up taking the board seat before Robin and Saul split out to build local globe.
Greg Marsh: As an independent fund so Robin was on our board for for for the first several years as as the index benches lead and again as someone who was on this entrepreneurial journey I felt like having a serial entrepreneur was was extremely attractive to me and I still feel you know at early stage where the very operationally complex business.
Alejandro: Got it.
Greg Marsh: You know I would always advise an entrepreneur to be to be very to be very enthusiastic about getting getting serial entrepreneurs or entrepreneurs on your board if you can um so.
Alejandro: Yeah I mean that that background operational expertise is key but I guess in your case you know I’m sure that the listeners are going to love you know, listening about the two hundred and fifty million dollars acquisition I mean first business first exit you know, first success I mean that’s pretty amazing. So. Ah, what point do you guys realize you know it’s time to pursue an acquisition and how did that happen walk us through that.
Greg Marsh: Um, one might say is a fascinating business as I’ve alluded to it is a fun it a deceptively difficult and complex business to operate um and after I guess it must have been five five and a half six years at ah at the pointy end I was. Physically and psychologically quite fatigued by it. Um I was also finding that the we were at an inflection point in the company’s development. We were either going to have to raise a lot of money I mean a couple 100000000 plus and build a large. Kind of make a big commitment to building out a brand so that we could have more control over our demand and engagement with the demand side of the business or we were going to have to partner and the partnership path we we got to know the ibnb guys a bit we got to know a bunch of the big hotel groups. Um. Was on first name terms with a bunch of the big hotel group ceos and what was increasingly clear in conversation with them was that they were extremely interested in what we were doing because they knew that airbnb was eating some of their lunch at least they knew that they couldn’t compete directly with airnb and they didn’t want to because they felt there was too much brand exposure doing this in an uncurated or unservice managed way. And so the attraction for them of the one finds stay partnership opportunity was that what 1 findst day did was service managed. It was curated. They could stick their brand on it and they didn’t worry about the risk of that and so.
Greg Marsh: It was a very natural fit from a marketing and distribution perspective I mean the conversations we had initially with Hayat and then we had them with a bunch of other the hotel majors and latterly acor was that look you’ve got a bunch of folks who stay with you for work purposes in shorts stay city center contexts principally they earn points. They want to spend their points for leisure travel 1 fine state is principally not exclusive, but principally a leisure travel product and so this is a very natural opportunity for points redemption and so there’s a very clear sort of strategic synergy on the um on the demand side. They were very interested in what we were doing. We started talking partnership. Ah, from a distribution perspective and of course big companies say well can we own a bit of it and the answer is well not really you either have to own it. You don’t own it and then Sebastian Bazan was the first to tip over who was the chief executive of that core into. Okay, then let’s own it and then it was ah then it was a discussion I say by that stage we had ah a fork in the road. Um, I look back on it I think yeah could I have taken it could I have done another 5 years Maybe maybe if I had the psychological resilience at that stage but it was a it was a hard business to run at scale and a lot of the thinking that’s animated the design of my current business mouse has been. But make sure you design a business which can be operated at scale and can be scaled fast or don’t play the venture capital game I got to know Nick Jones who’s just come come off. Ah what is it a 20 something year stint as the chief executive of soho house group. It has taken him.
Greg Marsh: Like twenty something years to build that business right? when you have these complex multi-local service operations with luxury hospitality attacks. These are very complex difficult businesses to build it takes time. And look who has financed that it’s not been technology. Venture capital firms who have a return horizon expectation which that isn’t well aligned with that class of business. So I think that some I think it was the right outcome um is a respectable outcome for the folks involved everyone made some money and um.
Greg Marsh: You know it’s good to see. It’s good to see you know some of the early team get well rewarded for their hard work and it’s good to see it continue as a brand under Acos ownership.
Alejandro: So I mean obviously that’s say when you finish the ah when you reach the finish line and and everyone you know he’s able to do so you know with with high flying colors. You know it’s a an absolutely very fulfilling. Um, you know I would say. Feeling for the founder now for everyone that really took the bet on you I guess in your case you know after you know they this tent you know this this this first rodeo you you know basically took some time you know to do advisory stuff. Government stuff. You know you? even you know were you? You were even teaching at day Harvard. Ah why why Nos I mean what why I mean at what point do you say hey you know I think I I’m ready I want I want to go out it again and I want to go with this.
Greg Marsh: Yeah, and I’m clearly too young to retire. Um and I wasn’t enjoy. Plural is fun but I wasn’t enjoying it enough I was finding it quite unfulfilling I found I was finding that um the ah that where things succeeded. It was usually because someone else was doing a great job in my heart of hearts I felt I mean you can always claim credit for someone else’s hard work but in my heart of hearts says like if if I invest in a company or I’m on a board and they’re doing well. It’s probably because you know the team is doing the right stuff where things are failing. There’s almost nothing you can do as a board director actually. But you can wring your hands and you could fire the chief executive in theory but in practice we know how that ends usually in earlystage companies. Um, so I mean I just wasn’t enjoying that that sort of ah actually Robin Klinein once said to me my my sometime monfe state board member who said you know being a board member’s like being a grandparent. And that was very insightful. You have to be able to let go of it. You have to be able to leave it alone at weekends and and leave it to the parents to make the hard parenting decisions. Um, and I guess I’m I’m I’m not ready for that at this stage of my career yet I mean I think I have some value as a board member but I I still need to build stuff. There’s still that that and that desire in me. The challenge then is like this is ah this is ah this is not a 3 year journey it’s a 10 year journey if things go well, it’s longer and sos you got to build something you deeply believe in if I reflect on my one fines day experience what I love was I love the creativity I love the brand building I love the teamwork I love the problem solving and the product work.
Greg Marsh: Um I liked the product but I didn’t ever fundamentally feel that the product was making the world a better place and I you know I was finding myself doing government advisory work I was doing charity work in a variety of different contexts. I was looking for ah a way of expressing my interests that included a powerful sense of social mission and social purpose and social impact and I wasn’t finding that in my day job. So I was having to do a portfolio of things to get that and a lot of the design thinking that went into the nous model was. Okay, how can I how can I live in 1 place. How can I do 1 thing that fulfills me both in terms of social impact but also ah building a business that I’m intensely proud of and so a lot of the early work was not trying to build the double bottom line business or start a charity but trying to design a business model. Which if it were to succeed on its own terms as a profit-seeking enterprise which it is I mean we’re a Bcorp but it’s still a profit-eeking enterprise if it succeeds on its own terms now so we’ll have I strongly believe a potent positive social externality. The nature of the problem we’re trying to solve and how we’re trying to solve it. Will lead to very significant real social benefit and I think that means that radically simplifies my life I don’t have to be on the board of a charity I don’t have to worry about you know, ah having other sort of meaning and purpose this is my meaning and my purpose I do this I have a family. Um.
Greg Marsh: I do a little bit of teaching because it’s nice to give back that way but actually this is something I want to build and I’m proud to build for the next decade in terms of the.
Alejandro: So then let’s talk about that real real quick then you know just show that the people that are listening get it. Why ended up being the business model of now. How do you might? How do you guys make money there. Okay.
Greg Marsh: Um, yeah, so now so very simply put now. So for your house. It is it will be an intelligent agent that makes all of the boring routine decisions about the stuff related to supplying services to your house. Who supplies your energy who supplies your broadband your mobile phone telephony your car insurance your home insurance your mortgage all of these decisions which added together but present probably 40% of the stuff that we spend money on as a household this class of. Non-discretionary recurring expenditure 40% of what we spend money on as a household. It’s 40% of gdp I mean as a spend category this is quite literally the larger spend category that there is and what characterizes as category of spending is that we underinvest as householders time and effort in it because. Who supplies your energy has no effect at all on how you consume the experience of using energy if you turn the light switch on the same electrons flow down the same cable and the same light bulb lights up irrespective of whether the energy is supplied by 1 company or another company. It is a commodity. And because it’s perceived as a commodity and substantively. It is 1 people underinvest in the procurement process and because people under avest in the procurement process vendors take advantage of households and the the kicker is when you dig into how much vendors take advantage cumulatively across energy mortgage insurance products and so on.
Greg Marsh: For a typical yeah uk household and the median household income. It’s about £1000 a year of overspent now £1000 a year for each of 30000000 uk households is just an enormous amount of money and that amount of money should be consumer surplus currently it is produce a surplus so we look at that and say well. How do we fix that. And clearly the current market structure militates against a solution because the current market structure is I as a householder want to get cheaper energy I go to a site I search for cheaper energy and I get cheaper energy but the supplier of the intermediary who who intermediates between me and the energy companies. Isn’t working for me as a household is working with energy companies the deal they are promoting is the one that they get paid the highest level of commission on and moreover it naturally equilibriates with a high low pricing model in the market where I am lured into switching my supply to a low price deal. And the supplier will walk me to high pricing over the next 2 to 3 years and so as a result unless I am hypervigilant as a consumer I’m going to end up getting screwed and that’s what happens consumers get screwed and the consumer groups that get most screwed are the ones who have the least money and often the ones who are least financially literate or sophisticated. They’re the ones who are the busiest so often parents with two young kids and a car and a dog. They don’t have time to deal with this stuff and so they get screwed and that’s not fair and it’s not right? and it’s silverable.
Alejandro: Well, ah, that’s the way that’s the way that it always happens and they always say you know like you were saying you know, definitely doing something that has an impact you know you were alluding to that you know earlier you know I think that you know I’m sure that now you know obviously the the second time around you know you guys have also you know, raised some money. Ah, from from outside investors I guess that you know imagine if I was to put you into a time machine and you were able to go back in time Greg you go back in time to that moment where you’re perhaps still at index and you’re wondering what to do? you know you’re wondering you know that you want to start a company by. You know you’re wondering you know what What’s that going to be if you had the opportunity of going back in time and giving that younger Greg one piece of advice before launching a business but would that be and why given what you know now.
Greg Marsh: Um, well am I advising myself as an early investor I was advising myself as a student I mean I go even further back in a sense. It was my anxiety and my lack of self-confidence that inhibited my doing this when I was in my early twenty s I mean the key thing is life gets really expensive, really fast and if you don’t. Jump and take those risks early. You know it doesn’t get easier now. The nature of the kind of business challenge. You might seek to solve as you become more senior changes I couldn’t have started 1 fine stay in my early twenty s I wouldn’t have tried to it was a stretch even in my as I turned 30 I wouldn’t have been able to conceive of how to start a business like now. Until I had a bunch more experience right? It’s a very very complex ambitious business which is a multi-care managed service with a ton of kind of regulatory and and technological and product complexity. Even now it’s a scratch but I feel like now I’m ready for this class of challenge. But the the problem you will try to solve. You know you will find you the important thing is the temperament and the attitude. So if I could advise myself it would be just get off your arms and take a risk back yourself. Trust us. Ah.
Alejandro: I love that I love that the problem will find you I love that Greg now for the people that are listening. You know that will love to reach out and say hi. What is the best way for them to do so okay.
Greg Marsh: I’m Greg at now Dotco N o us dot co I am always interested to chat, especially to folks who are thinking about building their own businesses I’d love to say I do a lot of investing I have done at the moment I just don’t have capacity because I am spending 80 hours a week on the main thing. But um, yeah look I mean 23 3 is going to be a huge year for us as a business we’re going to be doubling in size. We’ve got kind of great early product market traction and some tremendous early signal from market. So it’s exciting, but it’s a lot of work.
Alejandro: I love it. Well Greg thank you so much for being on the deal maker show today. It has been an on earth to have you with us.
Greg Marsh: Thank you Aandra for the good questions.
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The post Greg Marsh On Selling His First Startup For $250 Million And Raising Millions To Manage Your Household Bills appeared first on Alejandro Cremades.
Bruce Smith has gone from competitive rowing and coaching to leading a connected fitness startup that has raised $288M and is better for you than a Peloton bike. His venture, Hydrow, has attracted funding from top-tier investors like Constitution Capital Partners, Sandbridge Capital, Activant Capital, and Rx3 Growth Partners.
In this episode, you will learn:
- The benefits of rowing
- Right-sizing your team
- The need to go fast
Alejandro Cremades · EP 572 Bruce Smith On Raising $288 Million To Create The Ultimate Home Gym Must-HaveSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Bruce Smith:With a lifetime of experience as a championship-winning rower, the former president of Chicago Union Rowing and Paddling, and the coach of the U.S. National Team, Bruce has always been passionate about moving the sport of rowing forward due to its positive impacts on the body and the mind.
However, you might say his life’s work was predestined. Long after he fell in love with rowing, Bruce discovered, quite by accident, that his ancestors were, in fact, a legendary rowing family. In addition, his great-grandfather was a master boat builder in Cambridge who made the first sliding seats in racing shells.
Throughout his career, Bruce has remained steadfastly committed to improving communities by making rowing accessible to all, including his work previously as the executive director of Community Rowing in Boston. He also founded Lincoln Park Juniors, a rowing program in Chicago for underserved youth.
Today, Bruce continues to thoughtfully innovate new ways to make the water and the rowing world more accessible, while also improving the communities in which we live.
Bruce will tell you it was the “swing” of the rhythm of rowing in perfect harmony with his teammates that bonded him to the boathouse and the lifestyle. And he says that the same “swing” is what continues to move the entire rowing community into the future.
Under his guidance, the Hydrow team has been able to create a world-class way to do that: our rowers. Together, we continue the movement, with a state-of-the-art home fitness offering that grants you access to world-class waterways, the sport’s most elite Athletes, whole-body health, and a community that spans centuries, and the globe.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show. So today. We have a really exciting founder. We’re gonna be talking about fundraising you know, ah what differentiates good investors from body investors. Ah. Scaling you know all of the good stuff that we like to talk about so I guess without further do let’s welcome our guests today Bruce Smith welcome to the show. So originally boarding canada so how was life growing up, give us a little far walk through memory lane.
Bruce Smith: It is great to be here. Thank you very much for having me.
Bruce Smith: Everybody was just so polite. It was really great. You know you just walked down the street. Everybody’s like lots of room and so you know I grew up in New Brunswick which is really far away small town. My town was actually a sign on the side of a. Ah, two lae highway called Prince William and it took about 40 minutes to drive into school every day so it was it was super rural like super super rural and honestly I could not wait to get away. So I I got myself to school in Montreal as fast as I could.
Alejandro Cremades: Why Why couldn’t you wait to get away.
Bruce Smith: You know I really thought that like life was happening somewhere else and it seemed to me like our little town was provincial looking back. It was a great place to grow up honestly like super safe. Super amazing I actually I moved out of my parents’ house in high school I lived by myself. And had an apartment and and I had a business I painted houses ah to support myself and worked at a pizza join and um, in retrospect, it was pretty carefree. But at the time all I wanted to do was get to the big city and Montreal a 10 hour drive away was was the big city.
Alejandro Cremades: And from being able to ah get out of your house. You know at such a young age and getting other jobs and how do you think that out that that all shaped your ambition and who you are today.
Bruce Smith: I just I I really love. Um I love starting things I love making things and I have a really good relationship with money. Um I I you know i. I don’t like money’s not an end for me like I I don’t really care about being rich but I I just it’s fun to make money and be able to do stuff so from a very young age you know I I started mowing lawns when I was 10 I graduated painting to painting houses when I was 14 and then I you know I I paid my way through college I had a company. Um, both in frederickton and then when I moved to Montreal I you know started up painting houses in Montreal too. So like I’ve been paying my my own way for a long time and um, it’s just really fun I get a huge kick out of it I think it’s the funnest.
Alejandro Cremades: You know that’s interesting that you mentioned that your relationship with money you know we all have a relationship with money because I think that live is the intersection between capital and people right? So I think that there’s a lot of people that are listening now I’m probably wondering hey you know. What is my relationship with money you know now that I’m learning this from Bruce Smith: what is your own relationship with money Bruce and what do you think people that are listening. You know could learn you know from from what so what? you’ve gotten from you and your relationship with money.
Bruce Smith: Um, when I was younger and I didn’t have any money I had this experience where I thought like oh if you have money everything will be better. It’s not It’s just it’s exactly the same if you can afford my threshold is if you can afford a cup of coffee and a roof over your head. You’re. You’re doing all right? Um, the fun part about money is that it’s this amazing tool that allows you to create things in the world. You know with resources you can bring something to life that just wasn’t there before and so it’s not that um, money’s an end in itself. It’s that it’s this tool that allows you to be creative. And it gives you ah the ability to bring a team together. It gives you ah ability to to make things in the world. You know like my old job at community Rowing. We wanted to make our own coaching launches like the the boats that coaches use to follow rowers out on the river so like we got some money we got a grant together and we actually like. Built our own way close launches which was it’s just so much fun and that kind of freedom to create in the world comes from that um relationship with money and if you don’t understand money has its own rules and its own kind of um necessities around the relationship and to me money is really like. Access to money is evidence of trust between human beings and took me a long time to get there. You know I’m fifty three years old and it definitely did not have that perspective and and you know I love a first -class plain seat as much as the next guy. But.
Bruce Smith: That’s really not what it’s about. It’s really, it’s It’s really about that freedom to create.
Alejandro Cremades: I hear you now in your case I mean you you did move quite a bit. Obviously you went to o migule university then you graduated from that then you moved into other cities other places. What do you think you know trigger that move or those different moves that you’ve done. Um, you know because you were also doing real estate. You know you build you know also a marketplace in the late 90 s I guess from all these times that you’ve moved I mean I find that it’s like starting over to certain degree new friends new things. The unknown uncertainty. But do you think you’ve gotten you know out of every single time that you moved and and also why did you move for so so long I’m for so so much
Bruce Smith: No yeah I keep ah I view it as like concentric circles getting closer and closer to New York city which is kind of like the center of the world in some ways you know and. So I went from New Brunswick to Montreal to Chicago to Vermont and now I’m in Boston and I’m I’m just a few short hours to New York I spend a lot of time there and honestly like growing up in Canada you don’t really understand how the United States works and just how um. How many resources there are here. It’s just it. It boggles the mind you know it’s ah the opportunity to go to different places and live in them for several years ah each place is really different. You know Chicago is like a wildly different from Vermont and Boston is different again, but the opportunity to just. Absorb what the United States is really about and there I think I said about I almost said it like an american but not quite and ah understanding the depth of relationship that people have here and and how they make decisions and ultimately you know access to that pool of capital that is uniquely american. There’s nothing like it nothing like it in the whole world The mobility here is radically different from the mobility in Canada.
Alejandro Cremades: Now your case rowing you know, played a critical piece in your life and career. So how did you get into the whole rowing thing.
Bruce Smith: It’s kind of I I wish I could do a better alpatino imitation I keep getting sucked back in I tried I tried to quit rowing like a bunch of times so I started rowing at Mcgill I got recruited to be on the you know the team at Mcgill. Got really involved in it. It was really fun for a couple of years and then I tried to make the canadian national team I didn’t make the team. Um I thought when I moved to Chicago it was you know the late 90 s and I would go train in Chicago on my own and like sneak my way back onto the canadian national team when everybody retired. Ah, from my little group of you know rowers and that generation and instead I got sucked into this coaching thing and coaching is really fun like you know like you get um, depending on what kind of level you’re at so I’ve coached at all different levels I coached at the high school level. Coached at a catholic school in Chicago started a public school program in Chicago built a couple boathouses there and on the Chicago river which is like kind of an exciting experience and when you get to the highest level the national team level. Ah you get this main line and the people’s.
Bruce Smith: Like into their soul like you know like there’s no other way to say it. There is nothing. You won’t do to win like follow the rules follow all the rules really carefully, but there are basically other than like don’t use drugs like there are no rules and it’s a group of people trying to do something. Is effectively like completely useless in the world. So again, it goes back to that freedom like there’s no reason to row around in boats. It’s just this thing you’re trying to do and you try and make it perfect and you put every ounce of what you’ve got into it and. So I got I got sucked into this roing thing and that became very addictive to me. It was you know it’s really It’s really really fun to try and do that so I went I’ve been to the world championships 10 times for the United States I’d love to coach at the olympic level at some point that’s like a you know a dream. Maybe maybe a pipe dream. We’ll see how that goes.
Alejandro Cremades: Mom.
Alejandro Cremades: And what what kind of fail leadership lessons you know, can you take out of rowing because that’s how a lot of people you know that are pushing you know towards one direction and to certain degree steering. You know a company is very similar. So what have you taken? you know from a leadership perspective out of the rowing world.
Bruce Smith: Um, yeah, yeah, the coaching thing is ah coaching at the elite level is very similar to being a Ceo at a company and ah I would say like. So rowing is kind of a tired old trope. You know like oh we’re all pulling in the same direction and everybody in the same boat and um, definitely you know like um I don’t think people put posters on walls anymore. But they used to put posters of rowing and um, it’s out. It’s actually true like those those are. Um, they’re not bad metaphors ah people working together. The interesting thing about coaching though, especially so when you’re coaching a big group of people you have 50 or sixty boys or girls in high school like they all do the same thing but when you get to the elite level when you’ve got. 8 people who have dedicated 6 years of their life for 10 years of their life to go to the world championships and represent their country each person needs very specific stuff and because we’re all so different and and you’re doing exactly the same motion but different like. 2 or 3 people in the boat will need a ton of information to be able to perform some people need the bad news. They need to be told all the things are doing wrong because they they want to improve and that’s the only thing that they believe and other people really need positive motivation and being able to discern those different motivations I think has been.
Bruce Smith: Um, really really valuable as I as I built a team here at hydro.
Alejandro Cremades: Nice now. Let’s talk about hydro at what point because obviously you were in community rowing for about almost fourteen years at what point you know that’s the idea of hydro come knocking because I mean you were already for a while you know doing the coaching thing and.
Bruce Smith: In.
Alejandro Cremades: So at what point do you? you know, realize hey I think I I kind of go for this idea right.
Bruce Smith: So peloton started in 2012 and that was cool. Huge respect for peloton around 2013 2014 so I was always looking for ways to scale rowing if you could do 1 thing in the world to make people feel better. Like if you knew what that was you would do it right? So I know that wrongwing makes people feel better. It really does. It’s super efficient. Use your time but it just makes you feel good. You know like turning on all your muscles in that way moving in synchronicity with another human. So I I knew this thing that if we could deliver it to millions of people. The world would be at least like. Maybe not measurably better but slightly better and with that I was watching peloton and I knew at some point like there’s this inevitable shift. Um, biking is really fun and I love cycling. But it is not great exercise and I knew from coaching you know like it. It only engages 2 out of 7 major muscle groups. So it’s just it’s not a super effective exercise and there is this inevitable growth. You see it from crossfit to orange theory. The world is eventually all going to use roing machines for exercise in their homes because it’s the best exercise. So I knew I knew the shift was inevitable. And I saw what was happening with peloton where they were making a really cool experience but it had nothing to do with cycling outside and I was really worried that they would start to divorce rowing machines from this incredibly beautiful immersive experience that happens out in the water. So.
Bruce Smith: Honestly, we started hydro to to bring that experience of being out in the water into people’s homes and make it accessible in a way that it wasn’t before and it was it was entirely the product of technology because it was really only 1516 that you could start to broadcast live from the water. And ah use cell phone signals so you could take like 5 or 6 cell phones. Um, you know film an Hd break the signal apart send it up to the cloud and into somebody’s home for a reasonable price and we looked at different solutions earlier but that was the tipping point when the technology. Made it possible for us to create this system that we did at hydro.
Alejandro Cremades: That’s incredible Now you know in this case for you guys. How do you guys make money for the people that are listening to really fully get the business model. Yes.
Bruce Smith: Oh yeah, we are a connected home fitness device and we sell you a rowing machine which is very beautiful. It’s won all kinds of awards and then once you start using the roing machine you subscribe to hydro it’s $44 a month. And we have an amazing user base super committed people and and rabid users and I think we’re one of the top 5 connected fitness companies in the world. At this point.
Alejandro Cremades: I Mean the design is absolutely beautiful. How did you? How do you go come up with with the design.
Bruce Smith: Ah, it is crazy beautiful. Um, we put a picture of a 1971 maserati ah on the wall and that car is just you know it’s got these curves and shapes that are just to die. And we put a picture of a rowing single up on the wall umtemflley built to one seventy three in Switzerland out of wood and that also is incredibly beautiful. It’s that rowing singles are they’re thirty feet long they weigh £30 even the wood ones weigh £30 and they’re. Ah, their widest point they’re about 16 or seventeen inches wide so they’re really these like little toothpicks that go along the water and then we put a picture of a wave and we had an incredibly talented design team a woman named Julie Miller was the lead designer. She came up with four designs. 3 of them looked like kind of old school gym machines. You know like that like that you would recognize and the night before we had the big confab with like 12 engineers and myself and Julie and everybody sitting around ready to be like okay it’s March we’re gonna pick our design today. She came brainwave complete brain wave and.
Alejandro Cremades: Um.
Bruce Smith: Designed the whole thing in 1 sitting and brought it in exhausted the next morning I went to the meeting I was like this is too radical I can’t this doesn’t look like a rowing machine and so I I chose a different design and fortunately the lead engineer for this company gerhart palacca. Was like he waited. He didn’t say anything at the time he waited the next day he was like hey we got to get a beer and ah so he went and got a beer and he was like you’re choosing the wrong thing that thing that was so beautiful. We all thought it was so beautiful. That’s the one and so that’s that’s what we chose and heaven looked back.
Alejandro Cremades: Wow now. Pearlly I mean rowing I mean I’m I’m like a big fan of what you guys are doing. You know, big fan of rowing you know people that go to the gym. You know have their personal trainer Now you know they they they they get them into into into the rowing but it’s not. As popular, right? as maybe getting on a tremall or or or maybe like a bike I think eventually hopefully you know I’ll I’ll pick up. You know some good momentum and it’ll be right up there. But I guess for the people that are listening What are some of the health benefits of rowing.
Bruce Smith: So Let’s start with the bike so you sit on the bike. It’s got kind of an uncomfortable saddle and you have to adjust it in at least 4 dimensions to make it comfortable and then you curl over the handlebars and you take off and you’re really, you’re using your legs. But you’re really not using any other part of your body and your muscular skeletal system is being loaded only through the muscles. The bones are not being loaded at all and so what that means over a long period of time is that you’re not building any bone density you’re just you’re just building the muscles in your legs and some cardiovascular. Capacity. But you’re building it very slowly because it’s only turning on a small part of your body with rowing when you sit down in in the boat or on a rowing Machine. You are turning on literally actively turning on every single muscle in your body except the muscles above your neck. So your whole body your posterior chain. And nobody knows that they have a Posteri ear chain. You know I say it in every every chance I get but that’s the series of muscles that keep you upright that uncurl you after curling over your screen for the whole day that keep your ah inner cavity of your your body. It opens up the cavity so that all the organs in your body can do their work. That gets turned on and there just are not very many activities that do that and the cool thing about the way that it gets turned on is that it it applies pressure across your whole Skeleton at the same time. So it introduces these little micro bends to your bones and it’s those little bends to the bones like you can’t feel them but they.
Bruce Smith: Happen when you when you’re running or when you’re rowing and that improves bone density. So you’re loading your cardiovascular system in the most effective way you can do it. There’s really nothing else like it other than maybe cross- country skiing. You’re doing ah because it’s an on off motion. You’re also creating strength. And you’re improving your bone density and there’s just there’s nothing else like it in terms of efficiency. So when when I was coaching a lot somebody would come down to the boathouse if they had an injury and they said hey coach I can’t go out on the water today I would put them on the bike for twice as long as we would be out on the water because that’s what it took to catch up.
Alejandro Cremades: Wow now for a company like this. How did you think about the first hires and you know building that team.
Bruce Smith: And terms of impact.
Bruce Smith: You know I got incredibly lucky. My first hire was a genius named Chris Paul he was our chief technology officer. Um, it’s kind of like fundraising you know like when you when you need money ask for advice and so I needed a cto and so. Ah, somebody connected some some kind person I didn’t know very well at all connected me to cp and um, weirdly, we ended up talking a lot to Chris Paul the you know the basketball player so cp was going to help me find my first cto. And we talked once on the phone and then he was like hey let’s get dinner and then we got lunch and then we got another dinner and then we had 2 more lunches we ate 7 meals together and at the end of the seventh meal he was like actually I think I want to be your cto and that set us on this track where it was It was really extraordinary. He’s a lean and agile ah religious fanatic you know and and he taught me really how to live lean and agile and he’s also just a brilliant engineer and and by hiring him like the next 5 people we hired were also just amazing. Amazing people and he he’s. You know veteran been through 7 other startups and was just invaluable to get both our culture and our product right at the same time.
Alejandro Cremades: I mean that’s incredible because typically the Cto is the toughest role to fill, especially if you’re like the business founder. So that’s absolutely remarkable. How ah what about what about fundraising because fundraising you know this? This is this sounds like a capital intensive.
Bruce Smith: Friend.
Alejandro Cremades: Type of business. So how much capital have you guys raised today.
Bruce Smith: Ah, we have raised just about $200000000 in equity and some additional debt. So um I think all in we’re you know we’re approaching about $300,000,000 ah in terms of capital and. Yeah, building hardware is not for the faint of heart. It’s really like the cycles are just so much longer. So saas is 1 thing like you can you can build a saas product. Get it out find out if it works or not with hardware. You’re really committing to product market fit before you can really know and we were lucky.
Alejandro Cremades: Yeah, yeah.
Bruce Smith: Ah, we went so priority number one was going incredibly fast so we had a prototype in six months psychophysical works works like looks like prototype on June fourteenth first meeting was January Fourth so that was ah I think he’ll lay in speed record and also I I know so much about the sport. And what I wanted to do. There wasn’t we didn’t have to do a lot of discovery. So like I and I knew what we had to do right away. So that part of it helped a lot and then on the fundraising side. Um, again, you know, maybe better lucky than good but I had through the course of working at community rowing I gotten to know. Dick Cashin at 1 equity partners and his nephew worked to community rowing and kind of unbeknownst to me like he he was he you know he’s close with his family and he was following along with what was happening here in Boston even though he lives in New York and he’d hear you know like over Thanksgiving dinner and stuff what what was happening and so we got to know each other better and and when I told him about my idea to get this thing done he he was the first investor and and invested $3000000 upfront. So there was a huge huge leg up and he’s. You know oep is he invested personally but oap is one of those very you know pretty well respected shops and got us off on the right, right? Foot. So really, that was key and we had another great advisor Howard Anderson who’s a founder and also a venture capitalist so between Howard and dick and.
Bruce Smith: Ah, we we were able to assemble a small group people who are pretty exceptional.
Alejandro Cremades: That’s fantastic now. Good investors and bad investors. What sets the good investors apart from the bad ones.
Bruce Smith: I can set people told me this before but I’ve lived it now. It’s really and I can vouch for this. Um I made a list of the best people in hardware and connected fitness and the very top of that list was el catterton they’d invested in peloton. Um, and they were you know they’re just so well respectted. They have this incredible team and I tried and tried and tried to get an introduction and finally somebody ah, you know made a really good introduction. Um I was over the moon because they they led our series a. And we were the first investment I think that they had ever made pre-revenue in a company. Um and just as ah as a firm um people congratulated me at the time and I did not grasp the magnitude of what had just happened because as the pandemic has you know, come and gone the the business is. Has really grown explosively and we have a really great 10 year trajectory 100 year trajectory. But the past year has been has been really challenging and and we were able to continue to finance and capitalize the business in a way that is setting us up for success and really great outcome for everybody but I I know a lot of my peers in this industry have had to. Accept terms that are really really punitive and um, having a great long-term partner like lcat is just it’s really exceptional. It’s that it’s a difference maker in every dimension.
Alejandro Cremades: And what in terms of you know, fundraising as a founder. Do you ever stop fundraising.
Bruce Smith: My if I had any advice that was worth anything. It would be um if you want to start I think everybody wants to start a business like like everybody I talked to is like oh that’d be so fun to start a business that you must be prepared to tell the same story 3 or 4 times a day. If not more with equal conviction and sincerity. Um, so you’re talking like thousands and thousands and thousands of repetitions and if you can’t do that if you’re not prepared to do that. Don’t do the business because. Every person you meet needs to understand what you’re about and if you can’t share that and spread it 1 by 1 from the from the founder to investors and you’re going to talk to 400 investors before you find the one who actually believes and is willing to you know, willing to write the check. If you can’t do that if you’re not prepared for that work. Um, you really shouldn’t do it. It’s kind of I won’t say it’s like being a politician but you have to have some of the same skills. You know like you have to be willing to get up there and give that stump speech and it has to be fun. You have to like investors on some level like it’s got to be like a good give and take otherwise it’s just not going to work. You’re going to deplete your energy stores and and you will not be able to bring the heat when it matters.
Alejandro Cremades: Yeah, now for Hydro you know for the people that are listening. You know that would love to get a better understanding on the scope and size of the business anything that you feel comfortable sharing like number of employees or anything else. Okay.
Bruce Smith: Yeah, so we’re privately held. Ah and we don’t share all of the information but we have just about 95 employees we did a riff left last July and we did another smaller riff in january.
Bruce Smith: Unk Re always super painful to do but it is this extraordinary opportunity to rightize the business and we have a ah set you know a recurring revenue Stream. That’s very substantial and it was crucial to get we. We were building for growth Mode. You know like we had scientists back Deal. We were ready to do this Back. We were so fortunate we we pulled up before we did this back and so it was right sizing our team so that we were prepared to operate with the goal of profitability rather than hypergrowth and that’s just it’s a very different skill set a very different team and we’ve made that Pivot. Um. I Think in in my opinion and in the board’s opinion really really successfully.
Alejandro Cremades: Now imagine if you were to go to sleep tonight Bruce and you wake up in a world where the vision of hydro is fully realized what does that world look like.
Bruce Smith: We have ah millions and millions of people who can’t wait to use their hydro rowing device or their strength device every day it gives them not just like that. Physical bump that you get from exercise but it gives them you know human connection and experience of nature and they get the hydro high every day and as a result when they go spend time with their family or they go to work. They’re a little bit Kinder. They’re a little bit more generous with their time and and they trust people more. And that to me would be just fabulous and um, serving exactly the right workout to the right person at the right time and that kind of personalization. So that people get what they need no matter where they’re from no matter their walk of life. No matter if they live in a. Tiny apartment in downtown Manhattan or you know, ah a suburban house in Kansas City really bringing people together like that would be so exciting. It is so exciting.
Alejandro Cremades: That’s incredible i. Love it now. Imagine if I put you into a time machine and I bring you back in time you know back in time you know for you to be able to have a chat with that younger Bruce. Maybe that younger Bruce that they you know were starting to be independent and you know you were now dreaming about doing things of your own and and you could see the impact now of money and how you’re able to to get money and your relationship with money if you were able to give that younger Bruce one piece of advice before launching a business. But would that be and why given what you know now first.
Bruce Smith: Ah, buy bitcoin. Ah yeah, so yeah, get about you know 4 or 500000 bitcoin for a pizza. So um, the vikelvas fins actually are investors in the company by the buy. Ah so I would say.
Alejandro Cremades: Ah, ah.
Alejandro Cremades: Okay, okay.
Bruce Smith: You know I wish I could have got here with less struggle and pain but not that you know like pain is relative like you know I’ve had a ah really really really I’ve I have loved all of the things that I’ve done with my life and I think that. The thing that I would say is um, you can always go faster like just go faster. Um, there’s a lot of waffling and a lot of people who try and keep things the same and our job as entrepreneurs is to change things and there is a basic conflict there and it’s amazing like the. The more I have learned about the force of will to accelerate and that idea of velocity like don’t dilly-dally like if you’re going to do it. Do it. Do it faster anything you can do take two days off the timeline take a week off take a year off make a radical decision. And jump in with both feet and find out that it fails faster. Um I I see that ah that impact you know the the older I get the more precious time is and I really try and accelerate in every dimension and honestly if we hadn’t accelerated in that ah in that way with this company. We wouldn’t be here. You know we just wouldn’t have made it.
Alejandro Cremades: Now for the people that are listening Bruce that will love to reach out and say hi. What is the best way for them to do so.
Bruce Smith: Ah, find me on Linkedin or send me an email at Bruceithydro.com I have an incredibly easy email and I actually I I try and answer everybody people have been so kind to me. Fundraising and introductions and giving me advice that has literally changed my life. Um I try and do the same and I have a heavy debt to fill there. So really happy to respond to people.
Alejandro Cremades: Amazing! Well Bruce thank you so much for being on the deal maker show. It has been an on earth to have you with us today.
Bruce Smith: Thanks, Very much. Really great.
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Caesar Sengupta left working at Google with seven other cofounders to create a digital family office and democratize financial services. His venture, Arta Finance, has attracted funding from top-tier investors like Coatue, Betsy Cohen, Sequoia Capital India, and Ribbit Capital.
In this episode, you will learn:
- How Arta Finance works
- Managing large teams of cofounders and investors
- Lots more
Alejandro Cremades · EP 571 Caesar Sengupta On Leaving Google To Raise $90 Million To Give You Financial SuperpowersSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Caesar Sengupta:Caesar Sengupta started Arbo Works with a set of amazing people. Previously, as Vice President and General Manager of Payments & the Next Billion Users initiative at Google, he led Google’s efforts in building innovative, helpful products for new internet users around the world.
Caesar is passionate about applying technology to solve today’s most challenging problems. His team launched Google Pay in 2015 to help make payments faster, easier, and more secure. Today, Google Pay has over 150M monthly active users across 30 countries.
Caesar also led the Next Billion Users Initiative at Google, where his team was responsible for the creation of products and tools that drive more inclusive access to the internet, like Files, Camera Go, Kormo Jobs, etc. They also work with teams across Google to make their core products like Search, YouTube, and Android work better for the Next Billion Users.
Throughout his career at Google, Caesar led multiple acquisitions and strategic investments for Google. Among the recent strategic investments were Indonesia-based GoJek and Indian-based startups Glance, Dunzo, and Reliance.
Caesar also helped start and lead the ChromeOS team that built ChromeOS (#2 OS globally), which powers Chromebooks.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So very excited. We we have today a founder. Actually we’re going to be learning quite a bit you know from going to one of the biggest companies that we can think of Google to now really doing something super remarkable. I think we’re gonna be learning. You know what? we like to hear about which is building scaling financing and all the above. So I guess without furtherdo I’ll like to welcome our guest today says her said gupta welcome to the show.
Caesar Sengupta: Thank you Aleandra. It’s really exciting to be with you and with the great dealmakers audience looking forward to this conversation. Thank much.
Alejandro Cremades: So so likewise likewise so give us a little of our walk through memory lane. How was life growing up in India in Delhi hey.
Caesar Sengupta: And ah life was fun. It was Hectic. It was a fairly traditional middle class Indian Upbringing. You know, very focused on education very focused on sort of either trying to become an engineer or a doctor as you know, many of us growing up in emerging markets. Probably ah. Are familiar and associated with and.
Alejandro Cremades: Now in your case I mean very interesting because not only you I mean you, you definitely did with flying colors I mean you attended some of the best schools in the world. Ah, but obviously you know also worked for 1 of the best companies in the world. So I’m sure that. You made your your parents very proud really accomplishing. You know all the because I know that in India you know there is this pressure to become you know like an engineer or a doctor or you know it’s incredible know it’s it’s in the culture which I think it’s great. And and by the way there’s so many incredible entrepreneurs coming from India because they have the technical side and the business side all combined which is obviously your case too. But but in this case, you know at what point do you realize that you wanted to come to the Us.
Caesar Sengupta: I think for me, it wasn’t just about the us. It was really about getting deep into computer science and so once I was when I was in my engineering school I actually started off majoring in electrical engineering but then somewhere through came across computer science programming. And just absolutely fell in love with that. So I thought I wanted to do a ph d wanted to go to grad school and basically be doing research all my life. So. That’s what basically made me look for universities in the us and land up at in California.
Alejandro Cremades: So you went to Stanford is the land of innovation. You know it’s literally everywhere I mean some of the best entrepreneur entrepreneurs. They’ve come out of there so you see it. You know as people in the coffee shops you know pitching other Bcs. Ah their idea sharing collaborating.
Alejandro Cremades: Why didn’t you really take the chance because I mean it has taken you quite a little bit. You know like you’ve done. You know the and Nba you went to Google what do you think? took you so long. Yeah.
Caesar Sengupta: That’s a great question I mean I did take a chance during Stanford I dropped out for a semester I mean it’s fashionable to drop out for a semester from Stanford you know, yeah and start try doing a company. It didn’t work out I came back to grad school.
Alejandro Cremades: Oh yeah.
Caesar Sengupta: But then right after I came back. My life took a very different turn I ended up meeting this wonderful woman who I’ve now been married to for 20 years and she was bonded to the Singapore government and wanted to move back. So you know I finally managed to um I followed her through her career got a chance to get back onto. My career and now um this was the best time to get going with artar so you know it took some time but you know in in in India there’s a saying which is it’s good to finally happen. Even if it happens late. You know it’s it’s it’s longs like oh exactly better laid than never perfect.
Alejandro Cremades: Oh yeah, better better better late than never as as they say here I’d say that’s it now now now now in your case, you know when you moved to Singapore basically there is when you you know, got into the whole startup world. So what was that like yeah.
Caesar Sengupta: It was exciting. Um, you know I worked for I was a very early employee in one of the startups Colin sentuate that eventually got acquired by Ibm and I was very fortunate that my boss at that time the founder actually allowed me to do a ton of stuff across the company. I was I was technically an engineer building server-side stuff but I couldn’t do marketing sales and that kind of really got me exposed to ah you know the whole wild world of everything you need to do to really create a company. You know you can’t go creating a company and just saying I’m going to be an engineer some days you’ve got to like. Ah, basically take all the trash subdays you have to like sell your product. You basically have to do everything as an entrepreneur so it was great trading for me at that point in time.
Alejandro Cremades: So obviously you know with this, you moved to London you know you you were doing. You know a little bit of of of the startup world but then eventually you ended up designing that is time for an Mba. So what do you think trigger that.
Caesar Sengupta: Um, ah, part of it was you know as I got in that startup as I really got into doing marketing and sales. Um I kind of felt I needed a little bit more of ah, a theoretical as well as a sort of background as well as some training and um.
Caesar Sengupta: Yeah, it was a good time. It felt like a good step to do and I actually really enjoyed my and mbn it got to it got me exposed to a side of the world around finance around marketing that was very different from my traditional engineering and technical training.
Alejandro Cremades: And they obviously in warharton you know I mean funny enough I didn’t mention this to you but I’ve been guest lecturing there for over ten years you know professor tylerright he teaches entrepreneurship and I’ve been going there to do it and and and and and he’s just remarkable the community there. Ah now.
Caesar Sengupta: Yeah, yeah.
Alejandro Cremades: You know it’s interesting because most of the people I mean so many of them you know, go into investment banking consulting in your case, you go to Google and you know you peen at Google I mean before you started the company. It was like a 14 year run what do you think.
Caesar Sengupta: 15 years yeah
Alejandro Cremades: Yeah, yeah, what? What do you think? kept you for so long. What was that future that you were living into that made it exciting every single year when you know you decided you know I want to keep going. Yeah.
Caesar Sengupta: I think a couple of things I mean Google look is a very special company. It’s one of those unique ecosystems and environments that gets created only once in a generation so when I joined yeah it was ah it was a place where you could just create and you had the resources and the tools to be able to. Create incredible products. So a lot of what kept me going at Google was this opportunity to build new products work with phenomenal people um one of the people I got to work very closely with is currently Alphabet Ceo or Sundar Pichai he was my manager at that time and the group he had built around him was just you know. Full of people who are waste smaller than me and so for me, it was like wow I get to hang out these people and build new products and they even pay me for it. So it was you know all winwins I stayed um you know every few years every few years I would look up and say should I do a startup in a way like you know like every other person. In tech I keep thinking like at some point should we do a startup and somehow Google would create an opportunity to build a new product to learn something new and to just expand Mar Horizons and that kept me going for for pretty long time. Yeah.
Alejandro Cremades: And what did you learn I mean you were alluding to it I mean Sundar Picha I mean the Ceo of of alphabet I mean unbelievable leader. So what do you think you learned from him when he came to leadership.
Caesar Sengupta: Ah.
Caesar Sengupta: Um, I think one of the biggest things I learned from him um, was how much he cared about individuals and specific people and how sort of he would sponsor and find people and there are a number of examples like this across Google. Very early in their careers. Give them incredible opportunities. You almost let them screw up at times and even when they screwed up he would sort of support them and help them along and that in fact, in many ways created this massively loyal following around him right? and these people then went on to like do everything they could. To you know, fulfill sunar’s vision I mean he’s a fantastic product visionary. But as you know like being a product visionary is not enough if you don’t have a great team and a great culture and a great organization that can fulfill that for you? yeah.
Alejandro Cremades: So what made for example for you 2021 different you know that was the time where you decided to take action on our time and and what made it different. You know for you to say you know what? I think right now is the time for me to take on this problem and to bring this company to life.
Caesar Sengupta: That’s a great question I think there are a few different factors first on a personal basis. Um, you know I’d been leading fintech at Google for a while and I started coming to the conclusion that the governments of the world. The regulators of the world just were not ready for. Big tech companies to go deeper into finance. Um, you know they they were starting to basically put boundaries around what big tech what they were comfortable with big tech doing and so from a professional perspective I could see that on ah another personal side like I could kind of see that you know if I didn’t do it now like. It would it might just get too late and the last thing which is really interesting was there was a particular idea. We’ve been playing with which is this whole How do we unlock these financial superpowers for the the ultrawell we have for everyone and we’d been thinking about this for a while but you know Ai and machine learning got to the point. Where we felt like it was kind of possible within a few years you know I didn’t feel completely out of realm of um, what could not be done. So I think these three factors there was 1 from like okay you know a push from Google there’s an internal desire to get going across our team. We have 8 cofounders. We have 30 Thirty thirty five people who founded artar together and then really the technology and the timing seemed really right for going and trying to build a digital family office in the world right.
Alejandro Cremades: So now in in this case I mean super interesting. Um, you know what? you guys are doing I think that for the people that are that are listening to really get it. What ended up being the business model of Artha. How do you guys make money. Yeah.
Caesar Sengupta: So I mean it’s very standard. You know in this model where you’re managing other people’s assets you’re helping other people build a financial future. Um, you can charge as a percentage of a um and as you create value for them. You know people are happy to share fees with you or a percentage of the value you create. And so depending on whether you invest in Ai managed portfolios. You know we’ll take an aum or you can give us a performance fee. Um in certain other cases where we unlock private investments for example, private equity private capital or venture capital investments for you know, regular people. Um, we’ll take a fee on that. And similarly for different different services that we offer as additional family office.
Alejandro Cremades: Now 1 thing that is very interesting here is the way that you activated your network because how how how much capital have you guys raised to date for the company.
Caesar Sengupta: So we raised turn a slightly over 90 right.
Alejandro Cremades: Over 90,000,001 thing that is true is I mean this is this is something that everyone knows I mean so many super successful founders that are right now making a killing they came out of Google they were employees in Google and. 1 thing that I find really interesting is that in your case, you’ve raised money from like over 80 people. You know, many individuals that you know are part of the Google ecosystem. So how do you go about kind of like activating that network you know, super powerful network. To bring them on board and to get them excited about the future that you were living into with Arta.
Caesar Sengupta: I think a couple of things. First of all I mean ah you know we have 140 angel investors and all of them were people we had worked with everyone we either had worked with inside Google or there were partners that we were working with outside and. When the set of us that are 8 cofounders of Atta when we decided to leave and we started talking to people about it. 1 of the interesting things that 2 things we found was first the vision that we had for art art really resonated with most of these people because they’ve all lived that life. They all wish that they could have. Got some of these financial superpowers when they were in their thirty s rather than having to wait till you know later in their career when they had yeah hundreds of millions of dollars to to be able to avail of these ah these financial superpowers. The second thing was for many of them. They they just wanted to support us and help us. And be part of this long journey. So for what was really, you know humbling for me and heartening for me was for many of them. It wasn’t purely an investment. It was more like we want this vision to come to life and we want to see you guys and help you guys make this vision come to life because it’s going to have an impact on so many people. And so that sort of brought the group together and that community has actually been incredibly helpful like over the last year and a half as we’ve gotten going giving us advice connecting us to the right people. Um, you know at times giving us hard feedback on things we were doing wrong and.
Caesar Sengupta: Finally, at this point now like you know, many of them are starting to use the product and give us feedback on how to make it better. So it’s been really incredible to have this amazing community of people. Um, who you know we in many ways helped us found auto.
Alejandro Cremades: And I mean incredible individuals I mean we’re talking about Eric Schmidt you know who was the Ceo of Google I mean you got Jeff Dean you know one of the biggest rock stars when it comes to engineering in Google ah on bolievable people. How do you go about. Using them in the most effective way to get their help as investors into the business. So.
Caesar Sengupta: Yeah I think that’s a great question and to be to be absolutely honest I I don’t think we’re doing a very good job of it yet. Um, but what we’ve done is for example for different people. We would often go to them for specific types of advice. So Eric yeah, you know he’s. Known as ah as a business leader but Eric is also a computer science professor and very very like 1 of the best computer science thinkers so we went and reviewed our Ai managed portfolios and the ai behind and machine learning with them in a way as if I would have done it when I was at Google you know I would. Take products for Eric to review and he would review both the business side as well as the technical side of it and we’ve done reviews like that with Eric with people like Jeff with a number of other people. Um on different parts of the idea different business businesses. We’ve reached out to. Um, our investors for connections into ah into partners. Um, or to how to structure business deals and you know we sort of have a internal um I almost keep an internal sheet of all of our angels with their skillsets and anyone on the team when they need a particular set of help or advice. Can tap into that and then I’ll pull in the right invest right? Angels and get a group going together to think about how we can apply that experience. Yeah.
Alejandro Cremades: That’s incredible that’s incredible now you know I guess say 1 thing that broadly people that are listening that are wondering is how do you manage igos when you have 8 cofounders. How do you do that.
Caesar Sengupta: Um, so you know a big part of um, why we ended up starting the company together is because we’ve all worked together for over 10 to 15 years and you can’t work with people who have big egos if you’re you know for ten to fifteen years and if things. Um, work out I mean we’re a team. We’re a team that have played together for a very long time and in many ways. Um not only are we colleagues we are friends and so being able to work with each other was a very big value proposition around art.
Alejandro Cremades: Now 1 thing that then that I like to ask you here is how are you guys thinking about you know if if you were to go to sleep tonight and you wake up in a world where the vision of the company is fully realized what does that world look like.
Caesar Sengupta: Um, that’s a great question. Um, you know, somebody told me ah, interest 1 of our one of our very early users. We actually have some of our early users come in and talk to the whole team. Um about their experience and they said and we asked them like why are you excited about? ata. And he said 1 of the reasons he’s most excited is because money is one of these things that is always around us but we don’t know how to talk about it and we don’t know how to use it and often by the time we learn about all the powerful aspects in which we can apply it. It’s kind of a bit late in our lives I mean I can tell you from my chapter like I could go back and teach all the things I know now to my 35 year old self. You know it would be ah it would be ah ah ah, a much more amazing um amazing future we could create. And so the future that I envision like with otta is a future where many of the modern advances of financial services or financial technology can truly be available to everyone if you think about it today. The world feels very unfair because as you become richer and richer. More things become available to you. It becomes easier for you to put your money to work. It becomes easier for you to available all these financial superpowers and why should that be the case I mean a large part of it is because these are very services-based industries. You know it’s not knowledge-driven so it can’t truly be democratized.
Caesar Sengupta: When you when when ah when an 18 year old kid in Nigeria uses Google they get the same service as you know some billionai using it in the valley. So why shouldn’t that be the same for all all of financial services. So that’s ultimately what we’re trying to do is create a world where these financial superpowers are truly available to everyone. So you may be graduating out of college and you know you have maybe saved up a thousand dollars and you want to put it to work. Maybe you really believe in particular ah in a private company and you should be able to invest in it. Maybe you would just want to deploy it into the market and now you should be able to use the best of Ai the best of quantum mathematics. Be able to invest it. Why should you not be able to do that. So that’s ultimately what what we’re trying to do is bring these financial superpowers to everyone in the world.
Alejandro Cremades: And I mean you were calling this you know, basically a detailed family office type of experience now for the people that are listening. You know like having you know and and to what you were saying of of the barrier to entry for having a family office I mean it’s pretty high I mean we’re talking about people that have made at least fifty million bucks
Caesar Sengupta: Yeah, and.
Alejandro Cremades: That have the capability of paying the salaries over like crazy you know investment managers that they it’s just going to cost them millions just in salaries alone every year. Ah, and here. Basically what you guys are doing is not only disrupting it. But and and giving access to having you know your own digital family office to everyone just like you were saying like even to someone in Nigeria but now you know you’re able to to also bring it online. You know which is a pretty remarkable transition here. So what does the experience look like so imagine I am someone. In Nigeria like you were saying like how can I use Arta and make the best out of it. What does that experience look like.
Caesar Sengupta: Yeah, ah so the the commentv was someone in niger was a very was a long-term vision. We want to get it global right? now we’re like still the us. So let’s say somebody in the us and you know somebody who’s been working in ah in a tech company for a few years has saved up.
Alejandro Cremades: Yeah, yeah, yeah, yeah.
Caesar Sengupta: Maybe a couple of $100000 and they’re putting it to work in in a market. What? what what? we would do for them is they would come log into the app or the website and essentially now they can deploy that money either into stocks bonds and assets and instead of. Them having to manage it or you know pay somebody a very high fee to create a portfolio for them. They can available of our Ai managed portfolios which will use the latest quantum of quantum mathematics. Ah as well as a lot of machine learning to create the right optimized portfolio for them. And manage it for them automatically at a very low price so you kind of get like the pricing of a robot advisor of an etf but the sophistication of having your own investment manager at the same time if this person is an accredited investor or a qualified client or a qualified purchaser. These are all like conditions said by the scc. You know they can invest in private equity or in private credit or in venture capital or at some point later in the year into private companies. Um, or for example, at some point we will bring them and connect them with the right kind of tax advisors so that they can set up their finances in a way that is most tax optimized for them. Can create get these insurance plans that the ultra welly use not only to create better futures for their families but also to create wealth in their current life and so we can set them up in an automated way and the the online part of it is very important because the reality is without this being a digital experience.
Caesar Sengupta: It is not possible. It is not possible to bring it to millions of people so that’s actually the critical piece that technology can actually help us take these exclusive services and truly democratize it for many many many people. And machine learning’s finally got to the point where it’s applicable at scale across across the space.
Alejandro Cremades: I Love that now for you guys I mean the growth has been pretty impressive I mean you guys seen the last year you know you’ve read you’ve grown by over 80% The employee count I mean tremendous growth. How do you go about making sure that. Things don’t break when it comes to culture.
Caesar Sengupta: Um, that’s a great question. Um, so first of all look the core team. Um, ah a large part of the team that started this I think about thirty thirty five people in the founding team. Um, they were all we all came from a very similar sort of so upbringing. We all build Google pay together. Ah, many of them will chromos before that together. So there was a certain culture that we brought with us so that makes for the core culture and then very ah early on in our life. We actually wrote up a culture doctrine. We wrote up a culture doc and said these are the virtues and the principles that we are going to abide by. And we actually published it very openly. In fact, for a year we were in stealth mode till November and the only document you could find about us that was not a company you know, high-level company website was our culture doc and we use this as a way to like signal to candidates that this is the culture that we want to create. So if this is not the type of place you’re looking for. You shouldn’t be here and at the same time. It also acted as a great um attraction for people who look we’re looking for that culture so that was the first part. The second thing is we’ve had a very transparent and open culture internally. We want to discuss not just about how we’re doing things. But about the culture itself and how we evolve it so on a regular basis on our internal slack. You will see these discussions happen. You know we have our company all hands. We actually talk about culture. We talk about what is the kind of company. We want to build like today. We are 75 people but at some point in the future if there are like 700 people or 7000 people.
Caesar Sengupta: We are the ones who are setting the culture for them and so what is the kind of world that we want to create for them. What is the kind of organization. We want to create for them is a topic that’s actually pretty top of mind for most of us.
Alejandro Cremades: Now 1 thing that that I like to ask you here. Is you know as as as you’re talking about it too. You know the the amount of cofounders that you guys were also the backgrounds you know coming from Google I guess you know the technical side of things you know you guys were mastering that. So how as part of this culture too that we’re talking about how do you make sure that there is a nice balance between the technical and the business side so that you know it’s equal.
Caesar Sengupta: Um, ah, that’s a great question. So a few of our founders actually are very deep in the business side. Um, one of 1 of my cofounders Felix Lin this is his fourth startup. He took his first startup public in 2001 it was a company called la month ago at that point was a major major ipo.
Alejandro Cremades: Wow.
Caesar Sengupta: And then his second startup he sold to another company and then he joined Google and you know we worked together for the last fourteen years another startup actually ran a bunch of algorithmthic hedge funds and he comes from deep within the finance quant world like the really really high end of finance really sophisticated. Investors and so these guys tend to bring in that that aspect and then within the company. We’ve actually hired people from Goldman Sachs from Black Rock from you know blackstone from a lot of the finance and the the business sites as well as we’ve. We’ve sort of explicitly gone and looked for people who can round out the experience that um, we hired? um our legal counsel very early somebody who had worked at Schwab and Robin hood and really understood investing understood the the markets incredibly well. So we’ve been very mindful and deliberate about trying to create a culture that is strong on the technology side but strong on the finance on the business side too.
Alejandro Cremades: And for the people that are listening to get an idea on the scope and size of the operation of our top today anything that you can share that you feel comfortable sharing like maybe number of employees or anything else.
Caesar Sengupta: So I mean we aren’t here ready to share the specifics I think we just got going in November we opened up to to people on the waitlist. Um, there’s a fairly long waitlist. We are starting to bring people off the waitlist and now it’s just a question of like how well do we serve them.
Alejandro Cremades: Yep.
Caesar Sengupta: And how do we sort of make the products better a couple of things that we did publish was ah around the performance. The 15 year back test of our Ai managed portfolios because in the world of financing too. Many people do handwaving stuff and we wanted to basically put the data out there and let individuals make make up their mind. About what the performance is how it’s going. You know, um, all the places that we’ve done things well are not done well.
Alejandro Cremades: Now Imagine if I was to put you into a time machine and I bring you back in time to that moment where maybe maybe you were you were wondering you know like if it made sense to start a company or not and I’m sure that you’ve had that that thinking you know. Multiple multiple times. Not just when you decided to take action on Artha But imagine you know if you were able to go back in time and about chat with that younger self and being able having that opportunity of being able to give that younger self one piece of advice before launching a business. But will that be and why given what you know now.
Caesar Sengupta: Um, that’s a great question a hundred your questions are fantastic. Um I think the I think the biggest advice I probably give myself is to get started earlier I think I um I the amount I’ve learned in the last year and a half not just about.
Alejandro Cremades: Thank you? okay.
Caesar Sengupta: Business and building products but about myself like the personal journey as an entrepreneur and and you’re an entrepreneur So you you understand this, There’s an incredible journey of to walk on the personal side and internally and um, you know it’s It’s been a very enriching time there’ve been times where. Liked what I’ve found on the journey there’ve been times that I’ve not liked what I found and I wish I could have set out on the journey earlier. Ah and so that’s the only thing I would tell that tell that younger self like just do it get going. It’ll be fine.
Alejandro Cremades: I Love it that said it would always work out. It would always work out I Love it I Love it it. So so for the people that are listening. What is the best way for them to reach out and say hi.
Caesar Sengupta: I think they can reach out on Twitter at CesarS on Linkedin um, you know and would love love to hear from them.
Alejandro Cremades: Amazing. Well it are thank you so much for being on the deal maker show today. It has been an honor to have you with us. So.
Caesar Sengupta: So thank you so much Aandra It’s been really fun talking to you. You’ve you’ve made me think a lot.
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Dr. Eric Whitaker has gone from physician to private equity and is now a three-time startup founder. His latest venture, Zing Health, has attracted funding from top-tier investors like Town Hall Ventures, Leavitt Equity Partners, Newlight Partners, and Health2047.
In this episode, you will learn:
- The advantages of gaining better talent by using remote workers
- M&A deals
- How to handle running out of financial runway
- Eric’s top advice before starting a business
Alejandro Cremades · EP 570 Dr. Eric Whitaker On Raising $190 Million To Bring Healthcare To Underserved PopulationsSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Dr. Eric Whitaker:Dr. Eric E. Whitaker is trained in Primary Care Internal Medicine and Preventive Medicine. He is a health policy expert and a licensed investment professional.
Dr. Whitaker has served for more than 30 years in public and private roles to develop innovative healthcare solutions for medically underserved populations, with a focus on startups and technologies to improve operational efficiency and clinical outcomes.
In 2021 he was named by Modern Healthcare as one of its Top 25 Innovators (population health).
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Read the Full Transcription of the Interview:Alejandro Cremades: Already hello everyone and welcome to the deal maker show. So today we have a really incredible founder I mean someone that has done it so many times that I kind of like lost track. You know how many businesses you know he has been involved with but nonetheless you know super inspiring I think that we’re gonna be learning a lot.
Alejandro Cremades: You know from all the good stuff that we like to hear which is around the deal making side of things around making a difference. Ah, but but again I don’t want to make anyone wait any longer. So let’s welcome our guest today Dr Eric Withtaker welcome to the show.
Dr. Eric Whitaker: Now. Thanks a lot I like Andro it’s It’s great to be here with you.
Alejandro Cremades: So born and raised in the south side of Chicago you know that’s a challenging place. You know to to grow up in you know so I love to hear you know and and I’m sure that the listeners do give us a walk through memory lane. How was life growing up.
Dr. Eric Whitaker: What? Well you know sasad I often say is a beautiful place to grow. But but as you you your words challenging you know so when you hear stories about violence and Chicago the south side is a large part of what that takes place now. But. The the folks who emerged from there I would say who are successful are scrappy and and they know how to make something out of nothing.
Alejandro Cremades: Now in your case, you know it sounds like you went to University you know you went to University which which was you know, quite incredible, but but more than that you know you decided that the medicine you know side of things becoming a doctor was the calling. So How did that. You know, come Knocking. You know to you at what point do you really realize hey I think that this is my path to follow.
Dr. Eric Whitaker: Well, you know I and not unlike a lot of people from the South Side. You know I played basketball in high school and college and I was fortunate to have a ah a great school basketball coach. Who said that you’re not going to be successful in Basketball. That’s what he told our whole tape. But you can use a basketball as a pathway to education and that can transform your life and so I knew that from the time I was a junior in high school that I wanted to become a physician the thing I also learned at that time was about Public Health and I knew I I didn’t want to be a doctor for 1 on 1 patient.
Alejandro Cremades: And obviously you know working you know as obviously the specialty here internal medicine. Um, but you worked in different hospitals. So what? what? What would you say? you know what? what did you learn and what did you saw you know during this experience of going from one hospital to the next
Dr. Eric Whitaker: For all of my career but rather to be a doctor for populations and and so a lot of the work that I’ve done since I I started practicing medicine you know I did some practice 1 on 1 but but most of it was focused on caring for populations.
Dr. Eric Whitaker: In yeah.
Dr. Eric Whitaker: Yeah, 1 1 thing that that I think is is been instructive for me is that I’ve I’ve worked only in public hospital settings. So San Francisco general hospital out. Ah and the bay area which was ground zero for h I v when I went there to to go train. So learned a lot about you know, caring for vulnerable hyv patients positive patients and then came back to Chicago and and worked for about a decade at cook county hospital which is one of the largest public hospitals I saw ah you know in San Francisco that’s a public hospital that works. Like it’s supposed to does a great job at Cook County Hospital not so much and and learned some of the the things that can be a challenge to to practice in that setting but also um, you know learned a lot about the patients that are there and and the needs that they have. Oftentimes go beyond just medical care that can deal with food security or transportation or other things that that are now called social determinists of health.
Alejandro Cremades: Now 1 thing that is very interesting here is the shifting years in your career because here you are you know a doctor doing stuff you know around internal medicine and as as you were saying like being involved in different hospitals seeing different things.
Dr. Eric Whitaker: Home.
Alejandro Cremades: First time right there in the battlefield you know dealing with people. Why did you decide to transition over to private equity because it’s just so different.
Dr. Eric Whitaker: Yeah, well well yeah, you know the thing that ive found is people with the sort of knowledge that I’ve garnered hard on experience that I’ve gared with these populations working in these places were absent and and in the for profit sector and so. I I was lucky that I was I I started the first black men’s clinic in the country that ended up getting a lot of national attention at the time in the late 90 s and became the state health commissioner of Illinois and and got to see health care from a systems perspective. And you know the policies that are made that impact people so bringing all of those experience to the for profit sector I think has been quite helpful as as we established the the company I’m now the the founder and executive chairman of zinc health.
Alejandro Cremades: And we’ll talk about this company in just a little bit but you know obviously you have different you know, big success stories. You know that and that I like to touch on you know, real quick here. So when you transition over to the private equity side. You were able to see also the investment side of things and you know.
Dr. Eric Whitaker: Yes.
Alejandro Cremades: What was but you know some of the those patterns on what’s Good. What’s not so good when he came to an investment or anything that that really armed you with with a worldview that then allowed you to really go at it as an operator and to perhaps you know like apply those listeners that you saw from the investment side. Into now being a founder yourself and the first company that you did that was Symphonic Health. So How did Symphonic Health I Guess I Guess what was that experience that you were able to get you know on the private equity side and then at what point do you realize? hey you know now it’s probably the time for me.
Dr. Eric Whitaker: And.
Alejandro Cremades: To make this shift and and it’s my time to shine as an entrepreneur.
Dr. Eric Whitaker: well well the symphonics health was the first for profit venture that a partner and I started and so you know anybody who knows me before 2012 would say Eric Whitaker started a company and and and what I’d realized like looking back over my life. I’d been entrepreneurial and and government when I started project brotherhood. The black man’s clinic I’d been entrepreneurial and and then the not-for-prot sector and then the question was could I bring the values that I I’ve I’ve ah had all along to the port for profit sector and so. I think that you know I came with a perspective again and work in all these places and and and automatically by by coming from where I come from I’m one of the experts if not the only expert in the room about the life and experience of the populations that that I care to reach. You know those who are most vulnerable and underserved in medicine. So so the you know at some point um you know and and probably in 2012 I I decided that I could raise money and and really put in the place. The ideas I had on the forprofit sector. And and try to make an impact on on people’s lives that way. Well symphonics health was a company that we started it in 13 and we sold it in January of 2016. Um, and it focused on.
Alejandro Cremades: So what was that impact that you guys made with symphonic helps.
Dr. Eric Whitaker: Medicare part d which is federal health insurance for pharmaceutical products for drugs and we started from scratch and and grew that over a 3 year period to 48 States 420,000 clients and and 2,000,000,000 in drugs spend. And we so we sold that to United Health group and and we impacted low income populations across the country. You know in terms of how to get high quality drugs to people who who really needed it.
Alejandro Cremades: And also a 50 next return for investors. So not bad. You know for being the first for profit the company that you were doing.
Alejandro Cremades: Oh yeah, one ah hundred percent now now I guess saying in this case, you know for you, you know one thing that is very interesting is is your first company is your first baby I find that typically founders that go at it for the first time.
Dr. Eric Whitaker: Ah, that that that that that’s so you know I think people in an investment world would call that a home run. Yeah.
Alejandro Cremades: They become very much attached to the business. They think that they are the business. Ah and it takes a little bit longer to perhaps you know, go after the exit in your case, it took no time I mean it was 3 years I mean would you say that maybe this was because you already had a good understanding of what the full cycle of a company would would look like.
Dr. Eric Whitaker: And.
Alejandro Cremades: Ah, so result of your experience being a private equity investor before.
Dr. Eric Whitaker: Yeah, you, you know the you know I’m I’m one of those who would like to be financially Successful. So I can write checks to things I care about and and really as you mentioned there’s a full cycle in venture Capital or private equity that. Part of that cycle is exiting and so I never had any illusions that I would own this business forever. Um, you know the the you know being able to exit allowed me to to write checks to institutions in the African American Community I care About. Um, to be able to support the the academic institutions that made me who I am and also hopefully as I continue to move forward. Be able to see new businesses and be an investor in other enterprises.
Alejandro Cremades: And I guess one one of the things I mean when when when you take a look at yourself right? and and and you’re able to look back and and the days you know, growing up in the south side of Chicago and now how far you’ve come you know and you were you were talking earlier about checks that you’ve written.
Dr. Eric Whitaker: And.
Alejandro Cremades: You know that they that 2 2 things that you care about what would you say you know has been a check that you’ve written and and and as an example and perhaps the one that has moved you the most.
Dr. Eric Whitaker: Probably probably you know I talked about playing basketball and I went to a catholic school on the southwest side of Chicago called St Rita and they gave me a scholarship to come there and you know I was in the top honors class there. They also my younger brothers 3 years behind me. Went to the same school and so being able to write a check that supported 14 students in my mother’s name. Ah you know I would say is 1 example of of a check that it was phenomenal to give back to an institution that made me who I am so. So you know my wife and I and donate a lot of money to scholarships and to to African American Museums and and other institutions we think are important you know throughout the country.
Alejandro Cremades: That’s amazing now talking about your wife talking about your wife because the next day business that you actually started. It was with your wife and that business. You know it was next level health you know another another you know, big success there and so what.
Dr. Eric Whitaker: That’s right.
Dr. Eric Whitaker: That that.
Alejandro Cremades: So tell us about how obviously you know at this point you were coming out of Symphonic Health You know you did that exit. So how did the idea of starting this next company come about and and with your wife I mean that’s that’s risky.
Dr. Eric Whitaker: What? Well you know in that business we know who’s boss ah that you know my wife was that she was the Ceo of the company I was a founding chairperson and you know, but what we saw a void here in Illinois. Um, for a firm that was founded by african americans to really address medicaid and again on the south and side of Chicago and also on the west side of Chicago that that company was ah um, only based in cook county. But for the time that we we owned it.
Dr. Eric Whitaker: Um, you know we we were able to get it to about 300,000,000 in revenue and and had 65,000 clients. Um, yeah, we decided to exit it. Um, you know, mainly because some and and this is one of the lessons you learned along the way one one of the. The the the we got a lender who had rights over what money we could bring into the business and and they wouldn’t let us bring in money from outside parties. So we had an investor that wanted to put $100000000 in the business so we could take it beyond illinois to other states. And and this lender which was a large incuent insurer didn’t want us to do that. So so they said no and so we you know we we exited that business because it wasn’t in a situation where we could grow it the way we wanted to. And as my wife would tell you she would say if you can’t grow. You’re dying and so so we we learned a lot of great lessons that have been applicable to being successful in zing health and and a lot of the the team we built in next level. Now is with me in our third company zing health.
Alejandro Cremades: And 1 thing that is very interesting here that I’d like to double click on is you know there’s a book is called a founder’s dilemma and it’s a wonderful book and on that book it talks about building a company with a family member now I find that when you build a company or when you start a company like in this case with your wife.
Dr. Eric Whitaker: A.
Dr. Eric Whitaker: Yes, yeah.
Alejandro Cremades: You know it’s It’s you know, having that tough love and and and being able to share things the way that they are right? so that the business is effective and the business is successful. Sometimes it’s not easy because you don’t want to hurt you know each other feeling. So. How did you guys go about establishing that level of communication within the business outside of the house.
Dr. Eric Whitaker: Well I think what I said earlier I wasn’t joking that business. My wife was in charge of I was available to offer advice and counsel and and and I really didn’t offer advice unless ask. You know? so so ah, you know you know you can you can have 1 leader at at a time and and ah but you know she needed help in terms of fundraising which you know I’m a peculiar person I love fundraising I love the the chase of money I love trying to figure out who has it and how I can get it.
Alejandro Cremades: That’s my yeah.
Alejandro Cremades: Ah, alright.
Dr. Eric Whitaker: To help support my efforts My my wife doesn’t like that as much and so so you know one one of the other things is that you know I leaned into where my passions are and and I mean she used me in that way and and but but make no mistake about it. It was my wife’s leadership in that that Endeavor. And I was a part of helping to be successful, but but you know I was on her team that not this wasn’t a a co C L situation.
Alejandro Cremades: Not saying Cro I mean she definitely led the ship you know in the best way you know that one could think you know leading that to over 300,000,000 in top line revenue and then you know to a beautiful exit so in your case, you know an entrepreneur always an entrepreneur Eric.
Dr. Eric Whitaker: Oh yeah.
Alejandro Cremades: You know? So obviously you know the next company came knocking and that’s what you’re up to today which is your latest company sing health so walk us through the sequence of events that needed to happen for you to bring this company to life.
Dr. Eric Whitaker: Well, well we talked about symphonics which was so-called medicare part d pharmaceutical insurance I had a 2 year noncompete for that company and so as I started looking at at spaces that were adjacent. To medicare part d I started looking at what’s so-called medicare advantage to health insurance and that’s of a federal government program that you know ah people pay into medicare their working lives and then when they get to 65 they’re eligible to have health insurance traditional medicare just as a pair they bills come from doctors and health system the federal government pays the bills medicare advantage is a subset of Medicare which I think is a superior product. And offers not only paying bills but you get hearing dental vision and a whole lot of other services like transportation or or ah have a food card or over to counter benefits that I think is superior to traditional medicare and when I looked at ah. Program only 19% of African American Medicare beneficiaries were opting to go into medicare advantage. So I saw ah the potential of really trying to improve access to that program through education for the african american and hispanic populations.
Dr. Eric Whitaker: Um, but but also for those who that 19% who had elected to go on medicare advantage they were having poorer health outcomes than other populations even when they selected it and given my my ah experience and my team’s experience in Medicaid and in and medicare part d I thought I could build a company that could do a better job in getting health health outcomes for diverse populations and so in 2019 we started seeing health focusing on black and brown seniors focusing on the the things that are important to maintain. 1 ne’s health like transportation or food and and we started only in cook county at that time and we we started offering insurance in 2020 only in Cook County today we we’re in Illinois Indiana and Michigan and in 21 counties and we ended up acquiring another company called lasso health that’s in 34 states and in the district of Columbia. So so we’ve expanded our footprint across the country but and the core products focus on black and brown folks in lasso healthcare. Um, most of the members in that that business are rural health individuals. So we’re we’re focused on the urban and rural challenges that that our members have in those those 2 areas.
Alejandro Cremades: So for the people that are listening to really get it. What ended up being the business model of seeing health. How do you guys make money.
Dr. Eric Whitaker: Well, you know the federal government gives us a certain amount of money per month per every individual that’s that’s enrolled in our plan that my mom could become more if you have a chronic disease like heart disease or diabetes. Ah, and so we get like so let’s just say if we get $1000 a month for a given individual that means we get 1200 to $12000 a year for that individual and we have to manage all a health care cost within that $12000 if we. Are able to do that on average we we make money if we can keep the cost of care less than $12000 a year if we if the costs are more than $12000 a year. We lose money and so we’re at risk and so so the the incentive for us is to. Do all of the things that are helpful for keeping people healthy out of the emergency room and out of the hospital because that minimizes the cost that that are are are born every month for that individual and and if we do a good job of that we we make money.
Alejandro Cremades: And how much have you guys raised to date for the company.
Dr. Eric Whitaker: Weve rerised a $90,000,000 again. We started in 2019? Um, and it’s a mix of of you know we had a seed round of $3000000 we have had what I call a. And I so so should say for the $3000000 you know we had 3 3 silicon valley venture capital firms that were part of that raise we then had ah another um of $5000000 we raised what I which I call a seed plus round. And then we had a private equity round so we didn’t follow the seed series a series b series c sort of you know trajectory we we raised the 150 man dollar private equity round and then in November of of 2021.
Alejandro Cremades: So I mean I’m hearing a lot of transitioning here from Vc to private equity from private equity to Vc what why going from one to another and then also what has what what is different when you go out and raise money from let’s say ah Vc or racing from a p.
Dr. Eric Whitaker: When we acquire Lasso Health care we raise another 25 ish um you know from a couple of venture capital firms and and and that total to one hundred and ninety million dollars
Dr. Eric Whitaker: A.
Dr. Eric Whitaker: Yeah, what? what? I would say venture capitalists like to break new ground and try new business models. Yeah, you know, really push the limits and and they get rewarded more you know with ah greater returns by taking that risk. On breaking new Ground private equity firms and my my experience um, are used to having a businesses with proven business models and and and there’s been some tension with our company in that regard because there’s you know we’re trying to develop. New marketing for the African American and Hispanic populations that haven’t been done in this product before ever and and so for venture venture capitalists are more tolerant of risk and knowing that some stuff is going to work. Some stuff is not going to work. Um the the private equity folks are more like. Well you said it was going to work and and they have a higher expectation that when something happens that they’ll get a certain result because they’re used to dealing with more mature companies with more matureture business models and and and so so I found that in our and our experience.. There’s been some tensions particularly when we’re trying to do groundbreaking things that have never been done before and and like I said and some of it doesn’t work the venture capitalistic. They they have very expectation that some things aren’t going to work. Not so much for my my private equity backers.
Alejandro Cremades: And then growing via M and a you know as you were saying you guys raised the last tranch to um to acquire this company. So how do you? How do you think about M and a on the buy side to grow faster.
Dr. Eric Whitaker: Well well you know one one way that we have sales is through third party brokers and and they’re attracted by you being a bigger entity that has ah a national footprint as opposed to. When we started. We were only in three states. So if you’re a ah ah big broker and you have salespeople across the the country you want to utilize those salespeople you don’t want to only have have folks be targeted to 3 States when you could have ah you know sales and and. 40 states and so by by going through mergers a merger and an acquisition that ah that allowed us to get to scale and and get the attention of those brokers much sooner than we would have if we were just grown in ah in a ah in a smaller footprint. The other byproduct of that business was that it actually was profitable when we acquired it. So that means that we had to raise less money because that business that we bought actually was profitable from the time we bought it whereas our core business was not and it’s still not. So so it it it gives it. It allows us to raise less capital and have more runway to grow the company.
Alejandro Cremades: And it sounds like you guys are growing this nicely too. You know you are at a hundred and thirty five employees which is great I guess a hundred and eighty five wow so so
Dr. Eric Whitaker: Ah, 8085 employees yeah we’re were in and in the thing that’s interesting, interesting since covid you know we we were requiring everyone to live in Chicago since covid we now have 185 employees in 32 states so we’ve been able to.
Alejandro Cremades: Wow.
Dr. Eric Whitaker: To attract talent from the best talent for for from all over the country and we have a season team that we we have no right to have but for the fact that we’re able to attract talent wherever it it happens to be located.
Alejandro Cremades: So imagine you were to go to sleep tonight and you wake up in a world where the vision of seeing Health is fully realized what does that world look like.
Dr. Eric Whitaker: E.
Dr. Eric Whitaker: You know? Well right? right? now we have roughly about 10000 customers. Um, and you know I would love to see us at 250000 customers across the country and and you know and that’s these things tend to grow slower. But but you know I could see us having the scale. Um and also be a ah ah model of what can be done for diverse populations so that other health insurers have to pay attention and and still what we’re doing to to you know, keep pace with us. And so we would have a ah multiplier effect throughout the industry because we’re doing novel things that impact diverse populations that others aren’t doing.
Alejandro Cremades: And you know what 1 1 thing that I keep hearing you know here as as as you’re speaking Eric is saying how fast you adjust you know to whatever you know is in front of you and they obviously you know that’s something that that you talked about you know when when how you adjusted to the remote. You know work environment and and to now having people in different states and then also to the way that you dealt you know with raising capital also in covid because I mean the remote stuff is coming out of covid so how was that experience of of raising money. You know.
Dr. Eric Whitaker: Yes.
Alejandro Cremades: In Covid where you really need it because you guys were like really running short on runaway and most importantly, who do you think that you needed to be in the moment of. In a moment of uncertainty like that to be effective and not get too much in your own head.
Dr. Eric Whitaker: Well as as a ah leader I had to have every conviction that we could get the money raised you know and and I often tell about how we almost went out of business 4 or 5 times during covid. Ah, and you know you know and and before covid started. We were due to to get a $40000000 check in in January of of Twenty Twenty covid hit actually we were supposed that we we made the deal in January Twenty Twenty we were supposed to get a $40000000 check in and March of 2020 which is exactly when covid hit and so we were expecting that check and and then we were told by the the check writer. You know we want to take a pause but while we see whether or not the world is falling apart or not and and that check didn’t come until um. May so we went from March to may without the the check and and when it came it wasn’t $40000000 it was $18000000 and we were down to $300 in our bank account when it finally came 3 $ 300 and I you know I would go in my office.
Alejandro Cremades: Wow.
Dr. Eric Whitaker: And and we had 30 employees at the time payroll was $100000 every 2 weeks and I would call for dollars to get us to the next payroll and and Alejandra I walked out of my office one day and there were 6 of my my staff in a circle praying. Because I I hadn’t told anyone that we had financial difficulties and I went over and it’s like what’s going on. They said we’re praying that you make payroll and and I said I said you all know and they said of course we though because I would go by office I didn’t share the burden of not having the money. Ah, but.
Alejandro Cremades: Ha Ha wow.
Dr. Eric Whitaker: Our team believed in us so much that that you know people were working with you know and and doing doing things for our members our our patients despite the fact that we didn’t have money but I would raise money. Every every payroll to get to the next payroll until we we got the $18000000 in in May of 2020 and you know those employees will walk through a wall for this company. You know? So so we you know we’ve we’ve been through some hardship.
Alejandro Cremades: That’s how amazing.
Dr. Eric Whitaker: And and we know there’s gonna be additional hardship and and we also know we’re gonna get through it So we we have a profound belief in the destiny of this company and and everyone here is run in the same direction to get to that destiny.
Alejandro Cremades: That’s incredible now imagine if I was to put you into a time machine Eric and I bring you back in time to that moment where you’re maybe like now a private equity investor and and wondering you know what you could do of your own and maybe start your own company. If you could have a sit down with that younger self and give that younger self one piece of advice before launching a company. What would that be and why given what you know now. So.
Dr. Eric Whitaker: Well, you know, um the the lessons that I learned from next level. Um, you know that that I brought over into zing was the importance of having enough capital at the beginning of the journey because you know what. Yeah I ended up. Ah you know and my wife and I signed a deal. Um, you know that ended up being a challenge for the company but it was one of those situations where we signed a deal on December Twenty seventh that had the the language that allowed someone to determine and what capital we could bring in. But if we hadn’t signed that deal January First we would have laid off 250 people and and so to my younger self I would always urge you know, get enough capital at the beginning so you’re not making decisions under duress that could. Yeah, alter the the trajectory of your business and and so so you know and that’s why I think fundraising is so critically important and also making sure you have the right partners who are who are willing to go to and go to go to the the mat with you and and help you build this sort of company that you want to build. Be you know, having the right partners and financial partner is critical to success and and that that’s one of the things that you know I have great partners now that when when I have a problem. It’s their problem too and they want to help solve it in in the best ways for all of ah, all of all concerned.
Alejandro Cremades: So let’s say throw a bonus a bonus you know thing in there imagine if you could go even earlier in time you know perhaps to that moment where Eric was a young kid you know, growing up in the.
Dr. Eric Whitaker: And.
Alejandro Cremades: In the streets there of the south side of Chicago and you know seeing all the challenging you know things around you if you could have the ear of that younger you know self of that of that Eric of that kid and and give that younger you know person you know that younger self. 1 piece of advice about life because you’ve come a long way. What would you tell that that kid in the south side of of Chicago.
Dr. Eric Whitaker: A.
Dr. Eric Whitaker: Well this is advice I give to my kids and to other kids is develop strong networks nurture them. You know be be someone who’s ah who helps networks thrive you know help other people. Because what I found is you know it circles backs around back around and when you need help you can get it like ah Zinc would not exist. But for the networks that I’ve been building for last 30 years the the initial team I told you earlier I have a team that I don’t deserve. For this company at its sides and because of the the people I was able to tap to come with me on this journey are my co-founder and chief operating officer is a guy named Garfield Collins who is a phenomenal operator. And he fills in. He’s smarter than me in every way I would ever want in operations every person on our team is smarter than me at what they do, but they wouldn’t be here if I didn’t have the vision and and I could raise the money to put the vision in place but but the network. Makes all the difference in the world being able to to call people for advice and say hey this is the problem that I’m seeing how did you deal with this or hey I need to raise money. Do you know this person because other thing that invent your capital particularly in raising money.
Dr. Eric Whitaker: People want to have a warm introduction to the venture capitalist. They don’t want someone who just shows up. They want to be vouched for they want you to be vouched for by someone that they know and trust and so I you know I you know we have 7 venture capital firms on my cap table and that’s really because of. Relationships that I’ve nurtured over three decades.
Alejandro Cremades: That’s incredible. So for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Dr. Eric Whitaker: Yeah, you know I’m on Linkedin um, and and you can certainly find ericke whitaker on Linkedin with zing health and you know that that’s probably the best way that I actually meet people is through Linkedin.
Alejandro Cremades: Amazing. Well hey it has been an honor to have you with us. Thank you? So so much for being on the deal maker show today.
Dr. Eric Whitaker: Well the thanks! Thanks! A great bunch and thank you for helping deal makers become better. So thanks a lot for your work I Lara.
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Keith Teare has been one of the most influential founders behind today’s technology and startup ecosystem. Now he’s changing things again with his new AI-powered fintech that is changing the DNA of the venture capital space. The company, SignalRank, has acquired funding from top-tier investors like Candou Ventures, AltaIR Capital, Blake Grossman, and Charlie Jadallah.
In this episode, you will learn:
- Doing deals with the Chinese government
- Today’s VC ecosystem
- How SignalRank works
- Keith’s top advice for founders
Alejandro Cremades · EP 569 Keith Teare On Building Two Billion Dollar Companies And Using AI To Change Venture InvestingSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Keith Teare:Mr. Keith Teare is a Co-Founder and serves as Chief Executive Officer & Board Member at SignalRank. He is the Founder and serves as Chief Executive Officer at ContextPlane.
Keith served as U.S Partner, Executive Chairman, and Chair of the Investment Committee at Accelerated Digital Ventures. He is also an Advisor at Silica Nexus, DriverMiles, and Hub Token.
Keith co-founded and served as the Chief Product Officer at Archimedes Labs. He founded and served as Chief Executive Officer, President, and Chairman at RealNames. He also served as Advisor at Pulsar Venture Capital.
Keith has started or co-started many successful companies, including cScape, EasyNet, RealNames, TechCrunch, and now just.me. He was a winner of the British Telecom Award for Internet Innovation, London 1995, on behalf of CYBERIA Café.
Keith is a Computerworld-Smithsonian Laureate. He co-founded and served as Product Advisor at ContextGrid.
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Read the Full Transcription of the Interview:Alejandro Cremades: Already hello everyone and welcome to the deal maker show. So today again, we’re gonna have the battle of accents here. You know they spanish you know Spanglist you know some of you you know, tell me and then also we’re gonna have the british as well. But with without a doubt you guys are gonna be learning a lot. Getting inspired because our founder you know that we have joining us Today. He’s done it so many times that I was like losing already the amount you know they count on the times that he has built scaled sold you know done all types of stuff with hyperg growthth companies so without further ado. Let’s welcome our guest today Keith Tarra welcome to the show.
Keith Teare: Whereas Dias Alejaro come his staff.
Alejandro Cremades: Moving in and moving me in doing very well. so so I want to do a little of a walk through memory lane here Keith why don’t you give us a little file of ah of an insider view at how was live growing up there in the u k because I know that. You know it’s not not that easy. You know I know that you were also the first one that attended college out of the family you were the older of ah of of 6 siblings so give yourself walk through memory lane. How was life growing up.
Keith Teare: Well, ah you know like life was I don’t want to overdratize it I lived on a on a councilless state is what we call it in England in in America they call it projects. Um, which is basically municipal housing. It was quite nice. Four bedrooms front and backyard. In a country far area. So I don’t want to say it was terrible. It was fine. Um, alcoholic father. Um, lovely mother who had to deal with that and um, grew up with a sense of injustice. Ah, you know when you’re poor in England and you see the queen with a crown and her jewels. Doesn’t feel good to you. You think there’s something wrong with that and so I grew up a bit of a rebel at a bit of a chip on my shoulder and my way of dealing with that was reading and understanding. Um, ah you know in England at the age of 11 they test you back in the day when I was going to school. And they put you in the b stream if you fail the test and I failed the test I went to the bstream I was only 10 because my birthday is August Twenty Seventh and the cut off dates September first so I took the test a year early I was borderline interviewed by the headmaster who asked what does your dad do. My dad worked for the secret service. So I actually didn’t know what he did so I so I I failed and they put me in the b stream age of 11 12 30 and 1415 I’m in the b stream ah and going to school every day looking at factories that the teachers tell you that’s where you’re going to work when you finish school.
Keith Teare: And he finished school at the age of 15 in the b stream so I hated that idea so luckily a second exam was invented during my years and at the age of 15 you could try again and I tried again and passed and got straight a’s and went. Back to the a stream and showed up at the high school what is called a high school is basically a grammar school in english and was told ah Keith don’t bother applying for university you you know you’re probably not goingnna get in which may be super angry. Um, and and. Honestly up up until that moment I didn’t plan to apply for university but as soon as that was said I knew I was going to go to university so I changed my whole outlook ah started a social economic history economics british constitution. Why because I thought politics was the way to change the world. And history knowing history was a good way to change things. You know my heroes were people like Shei Guvara um Karl Marx you know? Ah, ah people like that and um I succeeded I got to university um. In canterbury university of Kent I’m now a doctor at that university and did super well I got the best degree in my year ah was a very strong political activist leading I led marchism protest and wrote a lot.
Keith Teare: But I also was the guy who booked the bands so I remember I booked 10 c and ah the manager was Ray Davis from the kinks and I hung out with Ray Davis so I I kind of bridged entertainment and politics and but I studied hard as well. So I did pretty well. Ah, and learned to code I learned to code with the earliest it was called a sinclair spectrum and then a commodore 64 um, ah why because it was kind of interesting I didn’t have a purpose really it just thought wow that’s super cool. Let me try that. And I was a statistics as part of my university degree I did statistics so I was quite numerate and computers helped there I I used that today at signal rank everything I learned then I’m using now in in the ai and machine learning. So so that kind of changed me from a angry to. I think more optimistic and focused on doing stuff.
Alejandro Cremades: Like the problem solving because obviously you know at that point you got started with building companies so you never stopped I mean the the first day Rodeo. You know that you did you know it was in the publishing side of things and and you handed over that business to your brother. So. So obviously you know that led to. Ultimately, what has been you know a really big Success. You know eas it but then but on that business that you handed over to your brother. You know that that kind of like first Rodeos in the in the venture space or in the entrepreneurial space I mean what was that lesson that you had to learn from that journey.
Keith Teare: Well I mean the first thing is um I work with my brother which by the way is never easy I don’t know if anyone’s ever worked with their sibling but ah, siblings fight. Ah, ah so I worked with my brother I love my brother dearly and ah.
Alejandro Cremades: Oh yeah.
Keith Teare: My brother was ah somebody who stayed in the b stream at school by the way I bought him ah a computer whilst he was a taxi driver when he was eighteen years old and he learned to code he eventually became a cto of a public company. Um, so so so the first thing is um. Never underestimate. Someone’s potential is a really huge lesson that he was written off really and and he became a fantastic ctr. Um, the second is you’ve got to do the work yourself to understand how to work with other people on the work. So i. I coded systems for people like Warner Brothers music and mobile oil in that business. Um, ah before my brother came in and started coding and he was a way better coder than me. Ah, but I you know I needed to understand how to do the job how to what customers needed I did a lot of. Ah, grunt work I was traveling a lot to customers doing support and so on um, and and then to be honest, it almost got too successful. Ah, but by 9093, we were doing. You know there was only 2 of us in the business we were doing millions of dollar pounds a year in revenue. And didn’t have to do much work because it was mainly support work for software that we deployed so it was boring and I got lazy and so I gave him the stock as a way to force me to do something new I basically said look.
Alejandro Cremades: M.
Keith Teare: If you if you’ll keep paying me a salary for six months I’ll give you all the stock and after six months you stop paying me and it created this kind of requirement of me to to make easy net successful in six months and we started using that in in ah the idea was June 94 and we opened for business in August Ninety four so I had two months to learn Unix how to make an isp network how to validate logins. Ah everything mail servers news servers web servers. The whole thing. In 94 that that was like a month sitting in a room with books and a computer by the way paying ah using a credit card for all the systems and.
Alejandro Cremades: Wow! So taking you taking the risk too. But hey that was that was quite a fulfilling journey too because you took that company public so and it and he was saying value that at one point at a billion. So What was like. Take a company public I mean obviously you were now you know, ah an entrepreneur you know you had done you know stuff in the past but taking a company public that’s quite a milestone. What was the experience like.
Keith Teare: So.
Keith Teare: Well, you would you would think the answer should be that it was awesome, but actually it completely sucked. It was it was really it was terrible. Um, well first it was a Uk ipo on the market called aim a I am it stands for the alternative investment market.
Alejandro Cremades: Why.
Keith Teare: And the amount of money we raised was $2000000 at a $20,000,000 valuation. Ah sorry pounds all pounds. Um, and ah so it was a small amount of money. Ah changing for us but a small amount of money. It was not a us ipo within 3 years easy net was worth hundreds of millions hundreds of millions. Ah, ah, but at the beginning it was $20000000 and 2000000 secondly the border directors changed to become financial people. Not not part of the company at all just external control agents if you will. And I would at that time easynet was the center of London life Maurice Sochi shinao’connor Johnny Rotten would all come to our office. Um Mick Jagger helped us launch a website we we were like the center of attention. And I was the ideas guy so I would go to the board and say we should do this or we should do that or we should do something else and the board always said no we got to focus on you know the core business so they destroyed the opportunity for easynet to become the vehicle for internet growth in in Europe. They they kept it very narrow even though it was successful and I I they told me to stop bringing ideas. So I resigned and I moved to the us and yeah.
Alejandro Cremades: Move to Palo Alto and we say you know here you you continue you know doing good stuff. You know. In fact, the next company that you did that was a real ah real names and essentially real names. you know what you what you 1 thing that I thought was pretty incredible I mean pretty impressive is that literally the company became a unicorn in just 2 years So what do you think you know now that you’re looking back. What do you think allowed for that to happen.
Keith Teare: Yeah, yeah.
Keith Teare: Well partly it was the the environment. Um, it was ninety ninety seven ninety eight and that was the up curve of the internet bubble that we all have heard about and so value I raised one hundred and thirty million dollars in twelve months through 3 rounds of financing. Um, so you know things were moving fast generally but that couldn’t happen unless you had got something that was growing and what real names did is it. It. It started with the recognition that most people in the world couldn’t use the internet because they don’t speak english.
Alejandro Cremades: Um.
Keith Teare: Um, and so if you tried to type in arabic on the internet in Ninety ninety seven you couldn’t um the web browser only let you type httpwwwwsomethingdot something using latin characters. It didn’t even allows you to use accents. For example, you couldn’t use accents or om outs. Um, so real names actually created the addressing system that enabled every language in the world to become a web address. That’s why it’s called real names you could use your own language and you could type in arabic for example, wall street journal. And we would send you to the wall street journal website even though you so typed in arabic and Larry and Sergey built that into Google we partnered with them before they had any revenue. Actually we were their first revenue so you would go. You would go to Google and type in ah in arabic wall street journal.
Alejandro Cremades: Wow.
Keith Teare: If we had that it would come right at the top and it would say real name and it looked looked like official and if you clicked on it. You’d go to the wall street journal website even though you typed in Arabic and Google called that I’m feeling lucky. Um and today when you use Chrome and you type in Chrome. That’s our technology idea. It’s still there and it’s in Microsoft partnered with us and put it into internet explorer which by the way internet Explorer was 98% of browsers back in those days so we had worldwide reach.
Alejandro Cremades: Wow.
Keith Teare: And between 97 and 2002 we grew to about 2,000,000,000 consumers delivered to websites using keywords all over the world. The chinese government became our partner in Japan in Korea in in South Africa in France. Ah, it was a real global phenomenon.
Alejandro Cremades: And how how is it like to negotiate with the Chinese government that must be quite a unique.
Keith Teare: The the most interesting thing is they don’t tell you what they want? Um I it took 2 years and I thought the price we were asking was the the problem. The reason why it was going so slow and it turned out. The only thing they really wanted was that the servers were in China.
Keith Teare: Ah, because the chinese are super convinced that the world doesn’t like them and might cut them off so they want to have assets that they control so that if they get cut off it keeps working and so chinese nationalism is very defensive. It’s not an aggressive nationalism like Us nationalism or british nationalism which I think of as aggressive nationalism. It’s like we rule the world. You do what we say the chinese it’s you’re going to kill us so we need to do something to protect ourselves. Um, and and it’s very different nationalism. So as soon as I realize that. Deal got done and they paid us $10 per year per chinese keyword but there was a soldier with a gun at the desk when I signed the documents.
Alejandro Cremades: Unbelievable And why didn’ that up being the oh my God so you want to make sure that you’re not pulling any any any weird move there otherwise and you you’ll be in trouble now now for you guys you know after this, you know you you. You ended up being involved with Tech Crunch. You know a company that I’m sure that many of the listeners you know are going to recognize I’m sure that many many have read multiple multiple articles on this say on this website I mean what? what an impact that that had now in this case, you were.
Keith Teare: Yet.
Alejandro Cremades: Founding shareholder I mean you were basically pretty much incubated this thing out of the studio that you had and you had Mike Carrington that you partner up with who who essentially is the founder and you own 75% of the company. And he owned the rest. So how what happened there I mean it’s pretty impressive I mean I understand that literally you know you ended up doing a swap and and and and and giving away you know most of that equity away I mean most people wouldn’t do that but walk us through how that happened and. How do you really deal with this type of tension you know in ah in a founding you know team or perhaps you know environment on an early stage.
Keith Teare: Well look it. It starts by you have to be humble and honest, um, if you’re if you’re if if you’re not humble and honest, you do all the wrong things and in the case of tech crunch um to be specific I own 75% of archimedes. Ventures which was the incubator for techrunch and me and Mike were partners in archimedes ventures and we kind of owned everything that came out of archimess adventures in that 75 25 way but we but but so um, yet implicitly I I own 75% on day one. However, there’s some facts that that one needs to know the first is Techcrunch was Mike’s idea and only his idea we we had a separate idea called eio that we worked on that we were also seventy five Twenty five um and um I was against the idea. I said to my you know my ah blog is really too small. An idea to spend the next ten years your life on. You should think of something bigger and he said no I really he he was determined to do it and Mike’s both tenacious is ah is a very good researcher. He works super hard I don’t know anyone that works harder than him. And he built techcrunch by interviewing startup founders of web two web two was just beginning in 2005 and he made the whole thing happen the whole thing so pretty soon I don’t know how long it might have been a year might came to me and said you know it really isn’t fair.
Keith Teare: I’m I’m doing all the work in this thing and you own all this stock. Um, and I said you know you’re right? It isn’t fair. Um, it’s a historical artifact of what we agreed in back then why don’t we flip it around. You have 75 and I have 25 the same as in edgio now Mike Mike’s the negotiator is one of his best characteristics and he said how about 10% for me 10% and I shook his hand immediately said deal. Let’s do it because because I didn’t have any sense of ownership or proprietary ship over tech crunch.
Alejandro Cremades: Yeah.
Keith Teare: Didn’t believe it was my idea and I thought he was right that it wasn’t fair. So so we so we did that deal on a handshake by the way we never papered the deal for a long time and Mike was always honorable to it. Always.
Alejandro Cremades: Wow, that’s incredible now the company I understand you know it was rumored that it was acquired for forty million bucks so you know great great outcome now I guess you know like in this case for you. You know one thing led to the next you know you you took some some roles advisory you know like helped other companies. But very recently you thought it was time to go at it again with signal rank. So so why signal rank you know out of all things out of all the companies that you’ve been involved with all these know how these lessons learned why did you think that the problem that signal rank is right now addressing it was. Good enough for you to take another stop out on entrepreneurship.
Keith Teare: Yeah, great question. Um, it took me quite a long time to decide to do single rank. Um I wrote an essay back in 2013 the title of the essay was this is not Silicon Valley and I had that. A picture of that famous painting with a pipe that says this is not a pipe I can’t remember the the artist now. Um and and um, what that 2013 essay documented was the change in venture capital from a single asset class that lived on sandhill road. Into what today is 3 asset classes seed investors venture investors and growth investors more or less seed investing didn’t exist before Techcrunch. There was no such thing and seed investing started to exist around 2007 and today there are you know so more than a thousand seed funds around the world 700 here in Silicon Valley that dominate early stage investing and what that early essay said was that the rise of seed investing is creating a brand new set of opportunities. Um, and um, ah and different different dynamics for founders and it was important to start learning it. Ah what that led to is this recognition a hundred percent of all unicorns come out of seed investment stage these days.
Keith Teare: By the time a company does a b round those seed investors are getting diluted because they don’t have the capital to keep going so the people who help the companies come to life get punished for not having enough capital. Ah, the venture investors come in and dilute them but worse still the growth investors. People people who write huge checks dilute them even more so. what what I realized is if you could provide capital to the seed and a round investors to to keep going to maintain their shares at the b and the c and the d the that more money would be made. Then they make from their original investments. So single rank basically started um and I’m a data guy going way back to when I did the Warner Brothers music stuff and I live in data in my head and stats and patterns. So I I’ve built single rank is ah is an Ai platform.
Keith Teare: Answers the question if you’re going to give money to the a round investors to keep going which of their companies should you give it to because you obviously you shouldn’t do it for all of their companies because not all of their companies are equally good. So we we built a prediction engine that predicts the best b rounds. Typically it’s less than 10 percent of b rounds. It’s around 6% of b rounds that the engine selects and ah that engine when it selects a b round 30% of those companies end up being unicorns which is incredible, right? Every one out of 3 investments becomes a unicorn.
Alejandro Cremades: Wow.
Keith Teare: And the normal the normal venture rules are 1 in 10 ah might return your fund this is one in 3 and so we back tested it like you do with? Ai we back tested it in two thousand and twelve thirteen 1415 16 seventeen. We stop in 2017 because we want to see what the wool looks like five years later to see if it worked and it works so single rank basically is is it combines ai with fintech the ah the ai bid is about which companies. Do you select. Through which partnerships with which which seed and a around investors and then the um, the other bit is um, how do you How do you access putting money into these b rounds because these are the most competitive b rounds on the planet.
Keith Teare: Well, we access them by partnering with the aran investors for their follow on rights. So we have a predetermined right to invest. Um, and the returns are fantastic when you model out the returns most venture funds return less than 2 times the money in actual cash. Um, the good ones. That’s the good ones. Um, it’s called Dpi. Um, our average performance at the 5 year Mark is 6 times the money. Ah so one in 3 uniconns and 6 times the money now. Obviously that’s based on back testing and as they always say on wall street you. Ah, future may not be like the past, but it’s it’s it’s a very de risked capital allocation platform. So that’s the fintech bid It’s it’s Ai meets fintech and ah for that reason we’re structured as a company although we’re investing in in ah b rams we’re not a fund. Ah, we sell shares to our shareholders. In fact, we have our first preferred share sale this month in March ah closing on the thirty first ah every penny that comes in that buys our shares gets invested in b rams 100% and ah our shareholders a little bit like Berkshire Hathaway They ‘re sitting with our shares on top of all these assets and.
Alejandro Cremades: Yeah that’s what I was thinking too. That’s what I was thinking to a similar model but more like the 3.0 of um, Berkshire Hathaway so I guess if you were to go to sleep tonight and you wake up in a world where the vision of signal rank is fully realized. What does that world look like Keith.
Keith Teare: The main thing about that world is we’d be publicly listed on the Nasdaq and I think we will be probably late 2026 early twenty twenty seven ish. Um, that means that my brothers and sisters. Can buy our shares as a way of owning the best private companies. Ah my brothers and sisters are ah not qualified investors so they they’re not allowed to invest in highgrowth private companies. But if a public company has assets those companies. They can buy the shares of that public company. So basically by being listed and having access to these best rounds we you know and we we allocate capital by the way automatically through an algorithm. It’s not a subjective decision. It’s the the ai says yes, so we do it? Um, and um, it means that normal people. Can benefit from the highest growth companies in a publicly traded stock that’s liquid. Venture capital isn’t liquid. The nice thing about signal rank is you’ll be liquid in assets that are not and that’s a huge change. Um.
Alejandro Cremades: You know, kidding now we were talking about the future here I want to talk about the past but doing it with a lens of reflection I mean obviously all those different companies that you’ve done you know multiple that have become billion dollar a companies you know exits I mean all of the above. If I was to give you the opportunity of going into a time machine Keith and you go back in time to that moment that you’re coming out of school. You know you were wandering what was going to be that thing for you maybe start a business if you could go back to that moment. And give that younger Keith 1 piece of advice before launching a business. What would that be and why given what you know now.
Keith Teare: Um, well there’s a so there’s a couple of selfish answers and then there’s some more what I think are probably more valid answers. The selfish answers are um, ah, don’t sell too early easy net when I resigned. I was told I had to sell all my shares ah because I was resigning that probably wasn’t true but I didn’t know better. So I sold all my shares and a year later the shares would have been worth 20 times more. Ah, having said that I had credit card debt right up until that moment and the amount. I.
Alejandro Cremades: Wa umbolio.
Keith Teare: Made from selling the shares changed my life. So. So ah so I don’t want to be too bitter about that the second piece of advice is ah sell when you have the chance which is the opposite advice real names. We could have sold real names for more than $1000000000 to network solutions which which became very sign and um, we said no because we were filed for an ipo at 500000000 more than that and within three months the bubble had burst and we were no longer worth that. But we didn’t sell so ah real lens I never made a penny. Not a penny so one is don’t sell too early. The other is sell when you can and they’re opposite advice and it depends on the circumstance. So probably the right answer is sell something early.
Alejandro Cremades: Yeah, no kidding no kidding. So for the people that are listening Keith that will love to reach out and say hi. What is the best way for them to do so.
Keith Teare: But not everything.
Keith Teare: A couple of ways I’m I’m at ktierkteare on Twitter and I publish that was the week on substack. So if you go to that was the week dot subs stack dot com you can subscribe for free to my weekly newsletter. Um, those are probably the 2 best ways or go on the single rank website and you’ll find various ways to connect to me there as well. singlerank.co.
Alejandro Cremades: Amazing. Well Keith thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Keith Teare: Ah, pleasure to be here.
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The post Keith Teare On Building Two Billion Dollar Companies And Now Using AI To Change Venture Investing appeared first on Alejandro Cremades.
Jim McKelvey has now started close to a dozen different for-profit and nonprofit ventures, including Square. Now he’s tackling the problems we face on the internet every day, with the backing of Peter Theil as an investor. His venture has also attracted funding from other financiers like GGV Capital, Morgan Stanley, Vanguard Group, and Omega Venture Partners.
In this episode, you will learn:
- When the first version of your product is too good
- Solving perfect problems
- How Invisibly works
- Landing investors like Peter Theil
Alejandro Cremades · EP 568 Jim McKelvey On Co-Founding A $40B Business And Now Raising $20 Million To Erase PaywallsSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Jim McKelvey:Mr. James McKelvey is a Co-Founder and serves as Chief Executive Officer at Invisibly. He serves as an Executive at Jam Fintop Capital. He also serves as Advisor, SparkLabs FinTech at SparkLabs Group.
James was a Co-Founder and served as General Partner at Cultivation Capital. He served as a Board Member at Kabbage. He also serves as General Partner at FINTOP Capital.
James served as General Partner at SixThirty. He is also a Co-Founder of Square, the mobile payment system. He now sits on the board of directors of Square.
James’ first venture was co-founding Mira Digital Publishing in 1990, which is a leader in electronic publishing for scientific conferences. He is an advisor to several startups, including Kabbage and LockerDome.
In addition to his business ventures, he is a published author and glassblowing artist and has published several books. He is a graduate of Washington University in St. Louis in Economics. He also served as Director at LockerDome.
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Read the Full Transcription of the Interview:Alejandro: Alright, hello everyone and welcome to the deal maker show. So today I’m I’m thrilled with our with our guest today you know someone that has been building scaling you know financing I mean all the above that you can think of about entrepreneurship and we’re also gonna talk about the book. That he has as well that they recently came out so I guess without further ado. Let’s welcome our guests today. Jim Mcybe welcome to the show.
Jim McKelvey: Thank you Alejandro and man I like I always cringe when an author ah is trying to pump a book. So hopefully we can talk about some other stuff too. But I’m not just here to sell books I want to assure your listeners of that. So.
Alejandro: Well what your story is very inspiring Jim so obviously the book you know it’s just it’s just part of this story. So so Jim give us a little of a walk through memory lane. How was life growing up. You know you were born there in San Louis so how was you know life there.
Jim McKelvey: I had a pretty blissful childhood I had nothing really go wrong? Um, and grew up in the suburbs family was stable and everything was great for me ah up until um, very suddenly in. Ah, right after I graduated from college my mom committed suicide. Um, and that just knocked me over because we’d had no problems up until that point I mean nothing serious. Um and I got um, really for the first time in my life I sort of. Was aware of the fact that the world was full of problems that there were this I so I had like I had this sort of sheltered existence. Um, and then this sort of shocking introduction to reality and from that moment on I’ve been sort of focused on problems of myself and others. Um. And that’s sort of what my life’s mission is now.
Alejandro: I mean to certain degree. They talk about you know how entrepreneurship do is being able to manage adversity or to deal with it. You know and to also they risk whatever path is in front of you So I’m. You know, Obviously this was a very you know tragic you know event you know in your life. You know that they shook a you know, probably the family to the court. You know I’m sure so I guess how do you think that shaped who you are you know and then also the way that you look at problems as well.
Jim McKelvey: Well, um it I guess I’ve never talked about this so this it’s gonna be a dark podcast guys. Um, ah it it changed my perspective because before that. I had always thought things would be fine I had always you know like mom mom got depressed and and I knew she were just depressed and she was in therapy and stuff but I didn’t think she’d kill herself. Um, and then when she did there was this moment that I kept coming back to. Ah, thinking that I should do something I should go spend more time with my mother I should go do something like I should take I should have taken action and that is the regret that I think powers all of my life now because it’s it’s this moment where you have a choice to act or not act and I didn’t act and this was. I think partially because I grew up with you know, like no problem ever really hit the mckelvey family like we just didn’t have any sort of serious issues and so I thought oh everything will be fine because everything always was fine. It was like you know like some 1950 s sitcom where you know everything resolves in Twenty two and a half minutes um and it wasn’t fine. And then I kept saying why didn’t I do something why didn’t I do something I had this moment where I could have done something and I didn’t and I’ve always sort of you know, sort of taken responsibility partially for my mother’s death. Um, since that time when I see a problem at least a problem that I care about I’m like if you don’t do this who’s going to.
Jim McKelvey: Like if you don’t get up and try to fix this thing who is going to do it and so that has been that like that’s where that power came from and it’s it’s from a dark place. Um god this is weird because I’ve done I’ve probably done 20 interviews about this book. This is the first time I’ve ever sort of mentioned that you’re a very good interviewer.
Alejandro: Thank you? Well look I think that at the end of the day Jim I got to tell you know all the events you know I think that we go through different cycles. You know as human beings and every single one of those cycles they shape who we are as humans right? You know all the events you know the good the bad the ugly. You know, whatever that is they shape us who we are and then also the lens in which we look at problems to us entrepreneurs. No. So obviously in your case we’re talking about taking action here. So let’s talk about let’s talk about that because when you were in college. You also took action and you took the action to rewrite the textbook. So so tell us about. What was this about I mean why what happened.
Jim McKelvey: Ah, that was that was crazy so I was a freshman at Washington University in St Louis and I was in this computer science class and the textbook was lousy and I thought man I could write a better textbook business but I was such a you know such a loud mouth that I actually. Said to my roommate I was like you know I could write a better but textbook than this thing and and he he said? Well why don’t you you know? and so I was like okay I will and so I rewrote the textbook that we were using in class and it actually turned out to be successful I I got I you know I displaced the professor’s book. Um, got the thing published by a national publishing house the publishing house asked for a second book. So by the time I was a sophomore I was you know a published author twice over and this was you know the days before self-publishing. So I I had I had major street cred in the computer science department which. Led to this cascading series of events. Basically people thought I was better than I was you know, ah turns out writing a textbook is not hard. Um, it’s just a lot of work and um as a result of this book I got invited to be always on the best teams. And that was transformative because I wasn’t I wasn’t good I wasn’t as good as the other teammates but I was always able to make them better. So the thing about me is like I won’t be the highest producer in any activity. But if you put me with people who are super high producers I will help them get more out of themselves.
Jim McKelvey: So I’m like this catalyst I I join the group and the group becomes more effective. Um, but I I can’t do what the group does I can’t even do what individuals in the group do and that’s a skill that I learned basically because I rewrote the textbook in my freshman year.
Alejandro: Now your case I mean you feel you literally you know went from school and and and you never stopped when it came to to building and scaling companies and obviously you know we don’t have enough time on the podcast to just talk about all of these different projects that you have been involved in. But I guess just for the listeners. How many companies you know, have you built right.
Jim McKelvey: Oh Maybe a dozen or so I mean they’re not all companies I mean some of them are nonprofits I mean a lot of them are just you know sort of helping other people build their companies. Um I was just asked to join the board of a major I can’t actually reveal the name of it. But there’s a major industrial conglomerate that’s bringing me In. And I love it because they build things you know and they’re they’re they’ve asked me to join and I’m I’m thrilled um but look I I don’t think this should be about me because I think they would bore your listeners to death I Think what we should talk about is sort of the the patterns that I’ve seen. Because that might be something that would be useful like it like if I was listening to this and I was like oh God This guy’s promoting his book and he’s just talking about himself like God put me to sleep. Um, but the interesting thing that I hope your listeners will be. You know, open to is that.
Jim McKelvey: I’ve done this so many times and I just recently noticed there was this pattern to what I was doing and before that I didn’t and I made all these mistakes and now that I’ve seen the pattern I’m like oh my God I could avoid all those mistakes So that’s kind of what I want to share with your listeners And yeah.
Alejandro: So then let’s let’s double click on that you know what? what have been? What have been those patterns that you have recognized over the course of um of building you know and scaling companies whether it was for profit or non for profit.
Jim McKelvey: Yeah, so it is that there is this line between what we know how to do and what we don’t know how to do and we spend almost our entire lives on one side of that line. We will spend most of our existence perhaps all of our existing. Doing stuff. That’s already been done and what I mean by this is it’s not judgmental. It’s it’s just the fact that humans are best at copying success. So that’s how we get our Dna That’s how you know all the stuff in the room that I’m sitting is a copy of other stuff. You know like this chair is an original. Whoever. Built the chair I’m sitting in didn’t invent the chair they didn’t even invent the material in the chair like nothing here is original including me. Um and we spend our whole lives copying um and that’s usually smart because if a problem’s been solved then you find the guy had solved it and do what he did, but.
Jim McKelvey: Occasionally, you’ll find yourself in a situation where there is nothing to copy and that’s when this whole different skill set has to come into play and that was what I was missing through most of my career which was the recognition that there’s this line where. You need one set of skills on one side of the line and that’s a set of skills that’s taught everywhere and that you probably know instinctively and then on the other side of the line. There’s this set of skills that nobody even talks about because we don’t even have words in the English language to describe the stuff that that I.
Alejandro: Got it and you know it’s it’s funny because I remember Steve Jobs you know mentioned this quote that good artists copy great art artists steal. So I think that to certain degree. You know.
Jim McKelvey: Discuss in the book.
Alejandro: That’s what you’re alluding to is that you know everything you know that needed to be invented is out there and it’s just all about you know making things better and more Efficient. You know than whatever you know we have out there. But I guess for the people that are listening now you know and that you know perhaps you know want to take a look at at the Book. You know that that you feel. You fame published recently the book just so that for the listeners. You know that want to take a look at it. It’s called the Innovation stack. How do you think that they could ah they could read that book you know, especially for all the entrepreneurs that are tuning in now and really.
Alejandro: Get the most out of it meaning reading it and being able to apply some of those effective lessons. How do you think they should go about that.
Jim McKelvey: So um, let’s talk about this I do the innovation stack. So um, what happened was square got attacked by Amazon and when we were a startup this is the most terrifying thing that a startup can have like. When Amazon decides they want your market. They always win um and in 2014 when square got attacked by Amazon ah, there was no solution to that problem like well. Okay, so here’s what happens.
Alejandro: What do you mean attack because probably a lot of people listening are not probably so familiar.
Jim McKelvey: Amazon decides they want to take over your market so they copy your product. They undercut your price by 30% and then they um then they add the Amazon brand name which you know is this universal. You know it. It is a strategy that always works so 100% of the time if Amazon. Does those 3 things Amazon wins and so what happened in squares case was they did that and we looked at what we could do to fight Amazon and we looked for other examples of companies that had survived Amazon and first of all nobody had ever survived. So there was nothing to copy. And secondly we couldn’t think of anything to do so we didn’t do anything um and then amazingly a year later Amazon quit they just got out of our market. Um and actually gave us all their competitor all all their customers. They they turned around and mailed one of the little square readers that I designed to all of their soon soon to be former customers which was amazing. And that you know was it was a it was a giant relief and the relief lasted about one day and after that day I was like how did this happen. Why did this happen like this wasn’t just luck like what happened here. How come. We’re the only company that said this has ever happened to. And so I spent 2 years literally asking myself this question and trying to look for other examples and I spent ah a lot of time looking for other contemporary examples and then looking in history and I found that the pattern wasn’t unique. It’s rare. But it’s not unique which is to say it’s happened hundreds and hundreds of times throughout history.
Jim McKelvey: Where these tiny little things that you would think would die um end up not only surviving but ultimately dominating their market so that like the biggest bank in the world. Um began this way. Ah the biggest furniture company in the world. The biggest almost everything in the world had this similar beginning to Square. And it was his pattern and when I saw the pattern all of a sudden I had this clarity about all these mistakes I’d been making because what these companies doing was fundamentally different from everything I’d been taught. So um, that’s why I wrote that’s why I wrote the book. Um, and that’s why. Now go around trying to encourage people to basically not make the same mistake I made with my mother which was to sit there when I saw a problem and not act like I want people to be able to when they see a problem. Especially a problem that nobody has solved before I want them to be able to say okay I can do this now. I’m not saying you have to I’m not saying you know, go go do only unique things. No. No no I Just don’t want you to be completely constrained your entire life. To only implementing other people’s solutions. Why now because I just figured it out now I mean I yeah mean I was up I was 50 when I figured this out, you know it was I wish I’d learned it in my twenty s I’d lift. Wish I’d learned it as a teenager I’d certainly wished I’d learned it when you know when Mom was alive or when.
Alejandro: And why now Jim
Jim McKelvey: You know my other businesses were struggling or like I just got this knowledge and and when I got it. Um, like then I had to I had to get it out like this is this is too powerful an idea to just sit on So I mean here I am doing another podcast talking about. Innovation stacks and and how people should behave differently when they have to invent something as opposed to copy something.
Alejandro: And obviously we’re talking about people here I think that’s something that will be very interesting. You know for the listeners to hear is that moment when you hired Jack Dorsey you know, arguably you know one of the best entrepreneurs you know of our generation. You know that you hired him to be your summer intern I mean. Come on, you got to tell us about this. How did that happen.
Jim McKelvey: Yeah, so Jack um, lived in St Louis his mother ran a coffee shop where we would buy. Ah you know coffee beans to keep us awake. Basically this is you know before Ridlin was you know, commercially available so we kept the staff awake with chocolatec covered espresso beans. Purchased by Mar purchase from Marcia Dorsey um marshha’s kid liked computers. We worked with computers and he came down one night um and actually pulled an all nighter with us his first day on the job. Jack was you know smart teenager and ah. He worked great on the team and he and I became friends and then um, you know years later when he had been kicked out of Twitter for the first time. Um, he asked me if I wanted to start a company with him and I said yes sure what do you want to do and he’s like I don’t know what you want to do and and we we didn’t actually have an idea. We just knew that we liked working together. So that’s what um. Started square and then the idea for square came from me losing a sale in my glass studio I was trying to sell a piece of art and lost a sale because I couldn’t take a credit card and I called Jack on my phone and I said hey can we turn my phone into something that allows me to take a credit card payment and that’s that’s how square started so um. You know Jack went from being a summer intern to being my boss. Um, but you know Jack is yeah he’s he’s fantastic and has been you know, very very successful. Um, but even as a teenager he showed a lot of the same qualities.
Alejandro: So obviously and the rest is history right? I mean the company now is valued at close to forty eight billion so um believable now we’re talking about patterns here. What would you say are the patterns. You know, let’s say like the key traits you know I’m sure that you’ve invested it in a bunch of entrepreneurs too. Especially you know after working with someone like Jack you know and and and seeing other entrepreneurs What do you think? are they keep you know, probably the 3 biggest things that you look at when you think that someone has it or maybe that someone doesn’t have it.
Jim McKelvey: Well I try to figure out why they’re doing it. Um, if they are in business for something that is personally motivating or if they just want to get rich or famous rich and famous doesn’t work too well because it turns out that usually the path of. Creation is is so difficult if you’re doing something significant that if you’re if it if you’re just looking for money. You’ll quit you know or you’ll switch to something else that makes more money. Um, what I’m keenly interested in are people who are trying to solve problems that they deeply care about personally. Um, and I look for that personal motivation. Um, interestingly I think the thing that I don’t look for is experience like I don’t value experience in novel problem solving because frankly, if you’re doing something for the first time.
Jim McKelvey: There is no such thing as having experience. So the the analogy I’d use is you know, think about the right brothers. So um, like if you if you fly planes today you get trained as a pilot and you get certified by the Faa and you got to take all these tests and stuff and you know pretty soon they let you fly um and you’re a qualified pilot. But you know Wilbur and Arville Wright were not qualified pilots like they flipped a coin to see who would go first and then they had to get into this thing that they just built and see if it would fly and see if they could control it in the air and see if they could land it you know and and they flew. But they were not qualified to fly like they didn’t they had no certification. They had no training they were by any standard were not as qualified as you know the most junior pilot today although they were the people who did it first and so one of the things that I don’t look for when I’m judging you know a potential entrepreneur. Is whether or not he or she has the experience necessary to do it I’m just looking for drive.
Alejandro: So then let’s talk about as well adapt it to change because you know I’m sure that for you being able to see a company. Let’s say like a square now called block going from nothing. You know when Jack asked you to join to where it is now I mean how do you think a entrepreneur should think about. Adapting to change adapting to the news cycles. The lifecycles that the company is going through because I mean we see that a lot too. You know when when let’s say an entrepreneur raises a bunch of money from vcs and then all of a sudden The company is outpacing them and then they end up. You know, invited to leave the business. So what have you learned about adapting to change as an entrepreneur.
Jim McKelvey: So I mean there are 2 types of change. There is refinement that is incremental change. That’s the stuff that we’re all used to things get slowly better over time. You know the iphone 10 okay now we have the iphone 11 now we have the iphone 12 now we have the iphone 3 you know like that’s. Incremental improvement. Um, but the iphone one that was creation. So think of change as either refinement or creation and if you you will spend most of your life in refinement. You will spend most of your life taking things at work and making them work better.
Jim McKelvey: Um, and as a matter of fact, a lot of people who start companies are doing nothing but refining somebody else’s idea so I could open a new coffee shop and I could say okay well I’m going to open a coffee shop. That’s a little bit better than the other coffee shops around and here’s how I’m going to you know do that. But you’re not really inventing anything new. You’re not creating. Um, we still call you an entrepreneur but in my world you are just a business person. You’re just somebody who’s copying and I’m I’m not denigrating that I’m just saying that. That’s not something that I need to talk about because that’s all we ever talk about is refinement. Um the process of creation which is building something that has not been built before you know what? Ah. Peter Thiel talks about in 0 to 1 um and actually Peter’s funding my new company so I got you know like I I got a lot of respect for Peter’s thinking in this area but this idea of a new thing being created that is. Also part of change. So when you talk about adapting to change what happens with most companies and why they stagnate is they they get stuck in the cycle of refinement. They keep doing the things that they’re doing a little bit better but they never come up with a new product or the new idea so where I spend. Almost all of my time is on new products and new ideas.
Alejandro: So I guess say in your book too. You talk solving a perfect but a perfect problem. What does the perfect problem look like.
Jim McKelvey: So a perfect problem is yeah, it’s this thought construct that I created in order to define the area of focus. So imagine all the problems in the world and let’s divide them into two groups ones are. Solvable problems and the other ones are unsolvable problems. So an unsolvable problem might be teleportation like no matter what we do, it might not be possible to do teleportation or maybe time travels an insolvable problem. It’d be cool to go back or forward in time. But you know who knows if that if that can even be done. Okay, so there are unsolvable problems. But then. Let’s talk about the solvable problems. The ones that can actually be solved and divide that group into 2 subsets 1 is the ones that we’ve already solved. Okay, so we know how to um, you know for instance, ah, you know, ah put fluoride in the water and make our teeth healthier. Okay, that’s a solved problem. Um, but then there’s this other group that I call the perfect problems which are solvable but yet unsolved problems these are the ones that if we apply ourselves and do the right things we can solve them but they have not been solved yet. So that’s. Focus of my book and my career and and and basically all my work right now is I’m I’m trying to get more people to focus on that subset of problems and I call these perfect problems because if you’re the first to solve a perfect problem. You end up with this thing called an innovation stack which is.
Jim McKelvey: Monstrously powerful I mean it will make you rich. It will make you very successful. It will it will it will have all these sort of nice side effects of you know what? you know business starting tends to do. But it’s also you know an order of magnitude or 2 beyond that. Ah, because what will happen is in solving a perfect Problem. You end up creating a whole new thing that the world has never seen before and that’s really powerful.
Alejandro: So as we’re thinking then about perfect problems. Why did you think that saying goodbye to paywalls was a perfect problem and how did invisibly come to life.
Jim McKelvey: So ah, invisibly which is a project I’m working on right now. Um is a way of me taking back control of my attention so I got really upset because I would try to read an article and I hit a paywall. And you know, maybe it was an article at The Atlantic and I love the Atlantic but I don’t subscribe to it or maybe I did in the subscription labs or maybe I forgot my password or maybe I’m on my wife’s computer and you know her browser doesn’t work I you know like I I can’t read what I want to read I was I I kept hitting these paywalls and I thought you know damn it I I’d happily pay to get past this thing. But it’s too cumbersome for me to do that. Um, and then at the same time I thought about how most content is sold which is through advertising you know, most of the stuff you read is not you know like Netflix where you have a subscription. It’s where you know you’re going to see it and you’re going to watch ads and. Problem with the ad ecosystem is again I’m not in control like my eyeballs are being bought and sold but not for my benefit. They’re being bought and sold for Facebook’s benefit well actually I don’t use any Facebook products. So um, but Google’s benefit I mean Google makes a bunch of money off me. Um, and I I didn’t want that I wanted to take control. So what invisibly does. Ah, is it kind of lets you as an individual take control. First of all, you’re allowed to monetize your attention. However, you want so you can you can give us information and we’ll sell it and instead of us keeping the money we’ll give it to you now we’ll take a 15% commission on that. But it’s less than the.
Jim McKelvey: 90% commission that the platforms take so you and actually end up with a balance in our system. Um, and then this balance gets sort of automatically spent because you know we’re talking pennies here. We’re talking pennies at a time but um, those pennies add up and then you can have access to all the content you want so you want to read barons you want to read the wall street journal you want to read. You know the atlantic or harvard like all these great publications. All these things that everybody wants. That’s you know, usually festooned with ads or stuck behind paywalls that’s now accessible to you and it all happens invisibly which is to say that look I mean we’re talking quarter of a cent here half a cent there ten cents here like these are tiny tiny amounts which. You know if you care about we’ll show you but generally you probably shouldn’t care about it. You should just let the system work but it’s it’s like magic because you can get access to all this content and ah, you don’t feel like you’re being exploited because if you decide you don’t want to sell your information. Well we let you stop doing that and if you. Want to sell more well we’ll tell you what it’s worth and so it puts you in control. We take a 15% cut.
Alejandro: And how are you guys making money. Okay, got it now for this company for invisibly after building companies for so long you know and you’ve seen it all. How did you go about building the team and then also the investment side of things because I mean you’ve raised a. I think like over twenty million bucks for this already from from I guess you know outsiders as well. I mean you were mentioning Peter Thiel he’s a venture a fund founders fund which is a very repeatable firm I mean at this point you did not need. To take on external funding. But maybe because I mean you’ve done pretty well for yourself. Why did you take external funding.
Jim McKelvey: I needed Peter’s name there were only 2 people who I considered as potential investors for invisibly, um, one was Elon Musk and the other was Peter Thiel and Elon was too busy. Um, ah. So I approached Peter and I I showed him the project. You know the project and his response was Jim people have been trying this for 20 years everybody’s had the idea nobody’s made it work. Why do you think you can do it. And by the way founders fund never invest in media companies like this is basically a media play and we absolutely do not invest in media plays and um I got silent for a couple of seconds and I said Peter ask yourself why founders never invests in media and he sat there and he thought for a minute. And he said we’re in we’ll do it is like this is what.
Alejandro: So I mean that that that’s interesting there. What you just said you know earlier I needed Peter’s name I think that? yeah.
Jim McKelvey: Right? I didn’t need his money but here’s the thing Peter with possibly this second only to Elon has made contrarian calls correctly. Okay I’m doing some invisibly is doing something that has that has never worked in the history of the internet a lot of people have had the same idea that I had nobody’s ever made it work. So why? do you think it’s going to work this time what is special about invisibly and the answer is well. It’s enough to make Peter Thiel put his personal money in it and that was what I need I did I didn’t I don’t care how much you put in he put in millions but like it was not I don’t care about the money so much as the fact that this guy who called. The Trump Election who called Facebook who called again and again and again contrarian bets that the rest of the world said oh Peter you’re nuts and he’s like yeah well, we’ll just see turns out Peter’s right more than you are you know Peter is just that good and when Peter puts his personal money into something it says something so what I was doing was. Essentially validating the concept by taking Peter’s money
Alejandro: So as you’re thinking about ballyating the concept you know taking Peter’s Peter’s money or using his name as well. How do you think? and I guess you know how should perhaps you know some of the founders that are listening to. Think about leveraging networks and social proof to the risk your entrepreneurial path.
Jim McKelvey: Well I think I think you really have to ask yourself what you’re doing most people that you referring to as entrepreneurs I think of just as people starting businesses which is not it like you don’t need a Peter Thiel to back that you just need any any old money. Um.
Alejandro: Yeah, right.
Jim McKelvey: If you’re doing something that’s never been done before if you’re doing something truly novel then you better, get some validation because what will happen is the rest of the world will show up look at what you’re doing and say oh forget it. That’ll never work. It. It’ll be hard to hire people. It’ll be hard to get attention everything you’re doing is. Much much more difficult if you’re doing it for the first time so then and only then do the ah networks and connections and social proof really really matter the rest of the stuff is just you know, sort of rinse and repeat.
Alejandro: Now imagine you were to go to sleep tonight Jim and you wake up in a world where the vision of invisibly is fully realized what does that world look like.
Jim McKelvey: Well it. It’s a world where I’m in control. So instead of having my ah news fed to me by platforms where their their goal is to keep me engaged right when Facebook shows me something there. They’re sending me a newsfeed that’s for their benefit not for mine. Okay, so for their benefit. Ah, they’ve turned they’ve they’ve determined that you know after 5 minutes I normally stop reading. But if they piss me off at 4 minutes and 30 seconds that I’ll keep reading for another 10 minutes so what do they try to do well they try to piss me off and their computers are actually really good at pissing me off you know? So I don’t want to be pissed off. Um and so I don’t want Facebook or Google or Apple or some platform that has interests that are not aligned with mine ah serving the content that. Becomes part of my brains and my thought patterns. So. The first thing that invisibly does is it allows me to be in control. Ah the second thing it does is it saves a whopping amount of time. So I’m no longer hitting ads I’m no longer hitting paywalls. It’s just it’s just less hassle. Um. As a matter of fact, one of the things that we did like ah 1 of our early product releases was so seamless that people didn’t even realize what was happening and so we had to actually like we actually had to go back and like put some like fake barriers in just so people would realize that oh wait a second normally I hit a paywall here but I’m not or oh.
Jim McKelvey: Normally this would be festooned with ads but it’s not you know like we we actually made the the one of the first generations of the product too. Good. Um, so now what we’re doing is we’re making it a little bit a little bit worse and then we’ll let let it become good over time. You know as people start to realize what they’re actually getting we’ll then remove the the fictitious barriers. But. In a world where invisibly works you just you just feel more in control you have access to everything you want? Um, but you’re not being exploited to get there.
Alejandro: Now We’re talking about the um, the future here and I want to talk about the past but doing it with a high ah degree or perhaps you know with a lens of reflection. So if you were to have the opportunity gym to get into a time machine and go back in time. And perhaps have a chat with that younger gym that is coming out of college and being able to give that younger gym a piece of advice before launching a company. What would that be and why given what you know now.
Jim McKelvey: It would be the book. The innovation stack like I kind of wrote it to my younger self. Um I didn’t actually do that I actually wrote it for a friend of mine who is phenomenally talented and brilliant and should be doing great things in the world. But every time she comes. Up against a problem where she doesn’t have a solution that’s already been validated by the world she quits and she says well I can’t proceed because I’m not qualified and my answer to her which you know took 300 pages was yes, it’s okay to feel that way. The first person who does anything in human history is always unqualified. You know the wright brothers were not qualified. You know Jack and I we weren’t qualified to start a payments company I mean I was a glassblower. He was a massage therapist. You know I mean who cares? Um, there were no qualified people at the beginning of most of the major inventions in the world and to hesitate. Which I’ve done many many times in my life many times to my regret um is the thing that I’d like to change most about me. Um, since I don’t have a time machine I just have this book. Um I just want people to read and understand that you don’t have to spend your entire life.
Jim McKelvey: Copying from other people you should spend most of it doing that like I’m going to have dinner tonight and I don’t want to have an original dinner like I don’t want I don’t want have my you know why my wife come home and say hey Jim I found this odd Bush growing in the park and I decided to like chop it down and cook it and serve it to you and the kids right? like. I don’t want originality in my food you know I don’t want originality in my medicine or anything like I’m I’m a I’m a very conformist person but but I don’t want to I don’t want the world to spend our whole life constrained there and so that’s that’s the thing that was missing for me. Um, you know it started off with a tragedy. Um.
Alejandro: Ah, right? yeah.
Jim McKelvey: That tragedy in some ways has been actually good for me because it it over the years it’s been the thing that’s made me go well, you got to just try because like we know what happens if I don’t try which is nothing happens and I don’t want to live in a world that’s got all these problems without people trying to fix them so I’m hoping. That we can reach people who are listening right now and and basically tell them what it’s like to you know, go try something for the first time because it’s different.
Alejandro: I love it so Jim for the people that are listening. What is the best way for them to reach out and say hi.
Jim McKelvey: Um, ha. It’s very tough I don’t do social media at all. Um I turned I mean I had a couple of accounts that were run by people who weren’t me it was bullshit. It was. Basically a lie that I mean my publisher said Jim you need social media I was like okay I don’t do social media who’s like Jim you need social media and it’s like okay I’ll hire a bunch of Twenty year olds to tweet for me. Um, well that’s not me, um, you want to reach me come to an open house at one of my glass studios. You know. Come to come to third degree on a third friday I’ll be there blowing glass I’ll be at the bar. You can you know have a beer and we’ll talk um it gets kind of crowded sometimes we have typically 1000 people show up on a Friday night um but you can reach me there. Ah you can reach me through you know some of the companies that I run but.
Alejandro: Wow.
Jim McKelvey: Generally I don’t I don’t try to make myself available I don’t try to get out there. Um, ah simply because yeah yeah, yeah I mean I’ve had people drive to town and you know I’m usually there but ah, but you know I don’t want to sit down and have a coffeeka.
Alejandro: Well at least we know you know where people can go and have a beer with you. You know? that’s the that’s the most important.
Jim McKelvey: Cup of coffee like if you if you have a serious problem that you’re working on. Um I will probably find you so.
Alejandro: I love it there you go there, you go? Well Jim thank you? So so much for being on the deal maker show today. It has been an honor to have you with us.
Jim McKelvey: what a pleasure man.
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at alejandro@pantheraadvisors.com
The post Jim McKelvey On Co-Founding A $40 Billion Business And Now Raising $20 Million To Erase Paywalls appeared first on Alejandro Cremades.
Ty Harris and Matt Wielbut came together around a shared problem to launch their own insurtech startup that has already raised $200M. The venture, Openly, has attracted funding from top-tier investors like MTech Capital, Gradient Ventures, Obvious Ventures, and Clocktower Technology Ventures.
In this episode, you will learn:
- Why not to keep your startup idea a secret
- Going through startup accelerator programs
- The importance of defining your cofounder roles early
- Celebrating all of your successes
Alejandro Cremades · EP 567 Ty Harris And Matt Wielbut On Raising $200 Million To Save Homeowners $100 Billion A YearSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Ty Harris:Ty founded Openly in 2017, alongside CTO Mateusz Wielbut. He received his undergraduate degree in economics at Duke University, then continued studying economics at MIT.
After that, he spent 13 years at Liberty Mutual, eventually becoming Chief Product and Underwriting Officer for Personal Lines.
At Liberty Mutual, Ty built pricing and underwriting models for homeowner’s insurance and noticed a pain point in the homeowner’s insurance market. He and Mateusz decided to tackle this problem through Openly.
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Connect with Ty Harris:* Crunchbase * LinkedIn * RocketReach * SignalHire
About Matt Wielbut:Prior to founding Openly, Matt spent 4 years as a Partner at Elements Insurance, one of the fastest-growing property & casualty insurance agencies in Massachusetts, which he co-founded in 2013.
Matt began his early professional career on Wall Street, where he spent 8 years at Goldman Sachs as a Vice President in Engineering with projects spanning operations, sales, and marketing.
Matt is a serial entrepreneur; investing time in projects ranging from graph-based concept search to improve the way consumers find local businesses to a platform to deliver hyper-specific educational videos to students to bridge the gap between school and home.
Outside of his entrepreneurial endeavors, Matt works on personal programming and robotics projects and is an avid skier and sailor.
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Connect with Matt Weilbut:* Crunchbase * LinkedIn * F65 * Topio Networks
Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the dealmakerr show. So today. We have a really exciting episode. We’re gonna have you know two cofounders here you know jumping in sharing their story sharing the journey of this rocket ship that they’re in. And I think that you’re all going to enjoy very much. You know what they have to say because you know again, it’s all about the building scaling all of that good stuff that we like to hear so without further ado I like to welcome our guest today and that is ty har and also matt willbot welcome to the show.
Ty Harris: Thank you, Glad to be here. Thanks for having us.
Matt Wielbut: Thank you.
Alejandro Cremades: So let’s do a little of a walk through memory lane with both of you guys. You know so let’s start with thai so tai you were born. You know in Atlanta Georgia so how was life growing up. Yeah.
Ty Harris: Yeah, no look I was really fortunate I wish I had a more interesting childhood but I had 2 loving parents who you know my dad was a air force pilot and then ah and then worked for an airline so who got to travel a fair bit and they really prioritize education for me and and engendered. Ah, curiosity and and and just really sacrifice a lot for my for my education so it was it was great.
Alejandro Cremades: Now I think that when you have a parents like that you know that that that give you that insight into the world. You know I’m sure that that gives you you know a different worldview you know on everything and also the way that you would do your analysis and you think about stuff is that right.
Ty Harris: Yeah, absolutely I think there was a real curiosity. 1 of the things that I I think is is ah is a pro and a con about me is I’m very you know I got to derive everything for myself and so I’m not going to believe something unless I write it down and okay, yeah, that’s true. And I think there’s a certain aspect of that that you can certainly see that in my parents they they they brought that level of kind of first principles which I and drives my wife crazy I’m sure sometimes but where it works in business sometimes.
Alejandro Cremades: So let’s talk about numbers. You know out of all things economics. You know you’ve done the undergrad the graduate you know degree you know whether it’s in Duke or also you know at mit why economics.
Ty Harris: Yes, um, you know I I find Economics great. It’s ah it’s a really neat I’m a pretty quanny person and but I also used to be I was like on the debate team in high school. So I was very into kind of you know, social and political issues and making arguments and for me economics at the time was a really neat. Mishmash between the two you could use a lot of math to prove things you could use data and write code. But at the same time you’re arguing about kind of big weighty Issues. You know so that was that was the early days of it I do a little less formal economics these days. But um, it was. It’s a great. Start Also for for any kind of quantitative career. It’s I think it’s just a great back Background. So.
Alejandro Cremades: And you know what one one of the things that I typically see on entrepreneurs is that competitive nature in them and I think that that competitive nature came out of you when it came to ballroom dancing. You know that’s quite unique.
Ty Harris: I was I was scared. You were gonna bring that up. You must have found some old photos. But yeah, you know I I like I said I was at I was at mit a little bit kind of wandering in grad school supposed to be writing my dissertation. One of the things I wandered into was you know mit doesn’t have like a great basketball team. But my god they’re the best. Ballroom dance team in the country and I found my way there and I was very serious for about 10 years I was very serious I practiced ten fifteen hours a week at ballroom dancing. It’s actually how I met my my wife. But yeah, it was ah it’s ah it’s a weird niche hobby that I really enjoyed.
Alejandro Cremades: And thanks to me and your wife you got into the whole insurance world. So how did that happen and.
Ty Harris: Yeah, she she was so she was my bar dance partner at the time. Um, since has since now become my wife but she grew up in a family of actuaries which is this very strange thing. Most people have never heard of I was thinking like mortuary when she told me I I didn’t. But I discovered this and she said yeah you can take these tests and then just make money because you take these standardized tests and become an actuary It’s pretty good money and I you know that’s one of my I love um, centerized tests and so I that’s that was very appealing to me at the time. and and I kind of so went off and secretly started doing this without even telling her I went off and started secretly taking these actualctuial exams got through a few of them and then that got me into insurance that kind of pulled me into ah I went to work at liberty mutual up in Boston um, and that that dragged me into the insurance world.
Alejandro Cremades: But that that’s something interesting there because you were working at libertyfor13years you know one of the things that you see in the us I mean obviously I’m originally from Spain so there you know you’ll see people sticking at a job for quite. You know some time. So what do you think? kept you for so long. What was that future that you were living into that they made you you know want to stay around and.
Ty Harris: Yeah I mean look it’s a great company I I um I had some great early bosses and and mentors. Ah, it’s just a really friendly engaging environment and there’s a lot to learn boy insurance is complicated. And there’s so many problems to solve and you know for a big giant company I think they probably have I don’t know 40 rty fifty thousand employees I was able to keep getting you know promoted and recognized for for work. Um I eventually became the you know I went from being a starting analyst to the ultimately the chief product and underwriting officer there. Which was a pretty senior role so I just kept kept being engaged by it. Um, it was it was it was a great job.
Alejandro Cremades: And you know in your case you know Matt you know, obviously you know a super interesting story. It was a shout out to the wives because that’s how you know you guys come into the picture together and we’re going to talk about that in just a little bit but to allow you know the audience to really get to know Matt a little bit I mean 1 thing that is. Really remarkable is you know how you are originally from Poland Matt and and and and the also the uncertainty that the family had to endure you know during the early days I’m wondering you know if you could walk us you know through what was you know childhood like for you and. And how do you think that uncertainty you know, growing up, you know that perhaps they family experience how that has shaped who you are today.
Matt Wielbut: Yeah, of course and and I think you’re right I probably have a bit of a different take on on risk than many other people just because of that uncertainty of my childhood. So I I was born at Poland I don’t remember much of the early days. But um. From what I’m told we we fled Poland when I was very young when I was five years old um we were political refugees. We left a pretty oppressive government and we we fled to Germany we lived there for 2 years and we saw a asylum in the United States where we. Um, they were granted a asylum that’s kind of where I grew up.
Alejandro Cremades: So I know as well that they getting a computer in your bedroom. You know I say quite a breakthrough you know thanks to your dad. So so tell us what kind of computer and what were you doing there and why did your father think it was so important to have that computer in your room.
Matt Wielbut: Um, yeah I think I think I can credit a lot of my ability to to program and kind of the career that I have with my dad’s forward thinking and knowing that computers are going to be the future at such an early age so he spent probably are. Most of our family’s life savings at that point on this beautiful Mac Performa and he instead of putting it in the living room like most people I guess he he put it in my bedroom and he just wanted me to see this thing and to to me this was this very intimidating expensive box. But then you know my dad. Loved languages he was ah actually a language teacher and he he spent time with me learning how to program and he didn’t have a background and programming either. He ah, he and I were both learning together I think that was actually quite an amazing bonding experience for us to both learn how to use this tool. Um, and then. From there I kind of just fell in love with it and the the rest of my life. My career has been engineering and being obsessed with programming.
Alejandro Cremades: Now you know after after school you know, basically 1 thing that that happened for you is that you went to the investment banking world. You know with Goldman Sachs where you were scaling through the ranks then you know at 1 point you decide. That’s not for you and you went at it as an entrepreneur. And 1 thing that is very interesting here from your journey as ah as a founder is that you’ve been able to experience everything you know you’ve been able to experience you know when things work out. You’ve been able to experience when things don’t work so well. Ah, but as they say you know either succeed or you learn. So obviously the most immediate. Um, you know journey you know or or event that happened in your entrepreneurial journey was a success right? Elements insurance. But before that you went at it. You know for a few times and unfortunately things didn’t work out the way that you had hoped for so it sounds like the third time was a charm for you. And I’m wondering what kept you going because obviously you know the first try you know it didn’t you know, but get the outcome that you hope for same thing on the second one. What let you to keep going. Until you actually stumbled you know with elements insurance you know and and and thank god that was a success.
Matt Wielbut: Yeah, no, that’s such a ah great point you know I I think I have maybe the typicals or the stereotypical I should say immigrant story where you know education was really important to my parents grades were really important to my parents and and. You know if school wasn’t tough enough if I was getting too many a’s I would get a tutor right to to make it even more difficult they they knew that educational is the future and and so throughout kind of my entire upbringing I was always put into situations where there was. A lot of of challenges. There was always a next rung higher and so when when I when I was at Goldman Sachs and I was succeeding I think I still yearn for those like additional challenges like what else is out there that I can push myself into a place where i’m. A little uncomfortable and and trying and do things it may be fairing a little bit and and that’s okay, um, and so when I left Goldman and I I founded a startup called peakful I founded a startup called recitatee Neith of those worked out but I think it was probably a lot of the upbringing that. Should push yourself beyond your comfort zone and it’s okay to fail that let me to just like no but this is okay I can continue and I will continue and eventually it will work out.
Alejandro Cremades: And with elements insurance. Actually it ended up a working out. Ah you build it into a multimillion dollar agency you know which eventually you sold it to titan you know one thing that is really cool here is that when you go through the and and here obviously you know like you you didn’t raise any money. But. But when you go through the um I say the full cycle with a business. You know, ah building scaling and exiting it gives you full disibility into how you know really the game works what kind of disability. Do you think that gave you.
Matt Wielbut: Yeah I think you know you read in in Techcrunch and all these other publications. You just read the highlight reel of the success stories and and just the tail end of these big exits but seeing the business. Through when it’s just you and your cofounder when you’re hiring your first employees and you’re convincing them that this pine and this sky dream is going to work out through to you know, just sitting there building it for years to the exit and then those negotiations when you’re talking to your buyer and and they’re. You know, picking apart every little bit of your business. You don’t experience that when you’re reading those those articles. So yeah, that was that was really an amazing experience. So.
Alejandro Cremades: Um, and it sounds like 2017 was the year when magic was going to happen and that magic came because you know your wives you know went to mit together. You know they knew each other as a result you know you guys became friends too. But I wouldn’t know ty. You know what was that day they were you and Matt you know were having a chat and and the idea of perhaps doing something of your own you know came up how did that come about.
Ty Harris: Yeah, you know we knew each other for I don’t know maybe twelve ten or twelve years even before we started and the company together and we had always. You know, kick things around I I think I didn’t have a lot of role models in my life. They were entrepreneurs so that you know I saw lots of lawyers and doctors and finance people. But that was kind of success that I that I had access to and it always seemed magic to me that people could just start companies. Um, but I think my outlet was I would ah had a bunch of. Hobbies these really deep hobbies some of which were somewhat lucrative and whatnot but Matt and I we both you know I’m an amateur program. He’s a professional programmer and we would always talk about interesting technology things and you know we talk about companies and I think um from my perspective I so you know I was at a giant insurance company and I just saw so many opportunities. Like 10 different companies I think there’s ah, a theme around you know what they were going after but there were a bunch of different companies. One could start um to to go after opportunities there. Ah, but yeah, we I think it was we probably had. The hardest thing for me was well I also was having 2 kids at about that time in my life and so I knew I wanted to do it but I was a little bit of the straggler because jumping out of ah a very cushy corporate job into.
Ty Harris: You know my first startup it wasn’t Matt’s first my first startup that was that was a big big leap that I think probably I was a little slower too than Matt was.
Alejandro Cremades: So I guess say Matt what was that moment where you know you guys really get a line and he’s like a screw. Let’s do it. Let’s go for this one.
Matt Wielbut: Um, yeah, think the stars really aligned in a number of different ways you know ty and I are the right pair of of of technical ability and you know we we obviously friend our friends kind of our are comfortable being around each other but our. Backgrounds right? this this 20 or 30 years of of work that we have done really lined us up for success tie had spent his life. You know in this insurance career and and seeing the world of insurance through the eyes of an insurance company and the problems that they were facing. And I had spent my life as a programmer as aor and had recently got into insurance but I was looking at it through the prism of an agent as a broker who is selling the insurance on behalf of these insurance companies and we both saw the same problems from different perspectives and so I think that. Genesis moment is like when we’re sitting at the dinner table and then I’m ranting and raving about these problems and asking. Why aren’t the insurance companies making it easier for us time ranting about problems and asking. Why aren’t brokers making it easier for us and so I think to come together and and create an insurance company that solves both of those problems was.
Alejandro Cremades: So ty for the people that are listening. You know to really get it. Why didn’t ended up being the business model of openly how do you guys make money today i.
Matt Wielbut: So perfect for us.
Ty Harris: Yeah, so we are a heavily tech-enabled provider of what I’ll call premium homeowner’s insurance. Um, you know so you know most people know what homeowner’s insurance is but you know why? Why are we different. Why is it better. We use technology to make it extremely fast and easy. So for example. You could get your home insured by answering just your name and date and birth birth and address to an agent they they could have you quote in like 8 seconds as opposed to with many carriers. It might take you know days or or weeks to to get that we also use technology to you know, drive automation and low expense the industry as a whole about people don’t know this but about 40% all the money people paid to home insurance goes toward like administrative expense not profit not claims but admin expense we dig at that as well. We also have very sophisticated underwriting but you know Matt was alluding to a final aspect of our company which is we we had this great all these algorithms and you know low cost model of of premium insurance. But who really is going to care about that. It’s really tough to get in consumers to care about that because they don’t shop that often for home insurance. It’s not like top of mind thing you want to think about. But I think some of the magic we found is we said you know who does care about that these independent agents who do this all day every day and sell like half the homeowners insurance in the us and we brought them. Very technology forward product and and they had that in their hands from us and then like a you know, hundred year old system available from from one of our competitors. It’s much slower and Clunkiky and awful to work with and it’s really that advantage that is made openly go viral. Um, you know so that’s that’s sort of the the.
Ty Harris: Secret sauce that we built and credit to Matt and his team for for building that technology that enabled that of course.
Alejandro Cremades: And building. You know, have some being easy. He a Matt you know how was that time where you guys launched you know this thing and there there was like nothing happening for weeks.
Matt Wielbut: Yeah, no, that was that was scary days. Luckily it was only a few weeks but rather than buying an off-the-shelf you know policy management system and rating engine. All the other things that the incumbents are are buying. We built everything ourselves so we spent 2 years building our own software stack. The entire stack of running an insurance company on this bet that it’s all going to work out and so you know then the the day comes that we go live and you know we had lots of promises from agents that they were going to sell policies and. We’re waiting and waiting and a week ticks by another week tick by and we’re facing this existential crisis. Did we just waste the 2 years of our lives. But then sure enough the the dam broke and a couple sales started to trickle in and um, you know just took agents a little bit of time. It took them time to get to. No us to trust us, you know it’s a big deal for for there to be a new insurance company. You don’t hear about new insurance companies launching every year um but but eventually we built enough trust with agents that like ty said earlier it became viral.
Alejandro Cremades: And I know as well to follow up on that you know tie that you guys went through tech stars through the accelerator program. Um, you know you thought that you know things were going to be you know blue skies. You know, right? after that, but all of a sudden you realize that they. Hey maybe you know it’s not such a blue skies. Maybe it’s a little cloudy because you literally had to go to square 1 given you know a series of events that unfolded what happened there because I know that some some of those days were some of the darkest that you guys encountered.
Ty Harris: Yeah, yeah, you know we we went through tech stars in Boston very early and it was a great program. We were there with 9 other companies. You know in the kind of basement of this building but you’re really building camaraderie we were next to ah a pipe that we’re pretty sure was like the sewage that’s okay, but the you know bless. Their hearts but our our all our the 9 other companies. There were like um in industries that’s it’s easier to to get to your Mvp right? So they were selling something which required kind of a. Ah, small build and then you had to find traction and so we’d have these weekly kpi meetings and we go in and everybody else would say yeah we got like 3 sales this week we got 5 sales. Okay, it’s going up here’s the metrics and every single time but Matt and I what we had to build. It’s like starting an airline you have to have like. Reinsurance and you know yeah you have to build an amazing amount of stuff acclaims organization all this crap to actually run an insurance company even for your first policy so we had nothing and so we would show up at every single kpi meeting. So our kpi is we still don’t have this this critical thing we needed a carrier partner was like the number 1 thing we needed and we just invariably show up. You know we still don’t have it. Ah, kpi is still zero as it remained for about 2 years but so we came out and it took us about 2 years to get to market finally and that was that was why it was so troubling when we still no policies having launched two years later but but eventually it all worked out. So.
Alejandro Cremades: So at what point Matt to to follow up on that. Do you guys realize that you’re turning you know a corner here.
Matt Wielbut: Um, yeah I think I think when we started so we had this thing where we would celebrate every sale right? at the beginning. It was a big deal. We would.
Matt Wielbut: We would highlight the first five sales the first 10 sales people would have a big gone celebration. We would look at every house and examine it. We make sure the algorithms were all correct I think I think the turning point was probably would we stop doing that for every single house and every property where. We we stopped Pigeon ourselves and we believed. Okay, this is now happening. Let’s figure out how we’re going to actually get the system to scale to a thousand policies a day that are just 5 policies a day.
Alejandro Cremades: Wow now obviously the way that you guys are diversifying or dividing and conquering. You know, ah Matt he is the ceo really you know making sure that engineering and everything you know with his team you know is under control and then you know thai. The Ceo and I guess as the Ceo you know someone that is leading the fundraising efforts you know I would assume obviously with the rest of the team but but taking on that responsibility I guess to that day point. How much capital have you guys raised to date a time.
Ty Harris: Yeah, we’ve raised. We’ve been you know venture Funded. We’ve raised just under $200,000,000 of Capital life to date. Ah we have about half of that left right? So we we were not We very much pride ourselves on being an efficient company and ah. But for for what we do. We have to actually raise Capital not only to fuel the initial burn of you know so of most startups. But also we have to have capital that we put on ah on a balance sheet because part of what we do is actually take some insurance risk via some some regulated entities and so you know it’s kind of.. It’s a complex.. It’s a more complex story than your average kind of software company in terms of capital.
Alejandro Cremades: And now you know for for math too. You know when it comes to the to the to the team. You know I Guess how big is the team today.
Ty Harris: Yeah, we’re we’re just under Oh sorry.
Matt Wielbut: It’s about sorry yeah, my my my team in engineering is about 55 people the the company is just up 300
Alejandro Cremades: Just under 300 okay, got it and and in that regard you know I guess say a question you know that I that I like to ask thai and and and Matt you know I’d like for you to really expand on is if you guys were to go to sleep tonight. And you wake up in a world where the vision of openly is fully realized what does that world look like Tyler start with you.
Ty Harris: Ah, well my whole theory about insurance is that um, it’s today. It’s very opaque. It’s very hard for consumers to actually understand what pricing is out there and therefore to save money to get the best coverage for them. It’s a complex. Web they have to to dance through I think 100 years from now. It’s hard to imagine that the market won’t have changed I think you’ll see so I referenced earlier that like 40% of the money goes toward administrative expense that number has got to come way down. It’s like if imagine 40% of your 4 one and k contributions went toward the you know the management fee or something. It’s almost like that. So that’s got to happen and I think what will fuel that is consumer consumers driving that through their demand and through increasingly transparent digital choice for consumers and so what we would like openly to be we. We kind of foresee that world coming and what we’d like to be is the fastest best risk selecting lowest expense. Ah, you know insurance company and ultimately platform that is able to meet the needs of people who want to buy insurance. Um in ah in a more transparent way like that. So for example, imagine that Amazon is selling insurance down the line through a digital agency or imagine that you know. Ah, gm is is selling insurance through their on-star in the in the front of the car. These things are all retail outlets for insurance in the future and we openly want to be there to sell insurance through all of these emerging retail outlets and we want to do at low expense without wasting people’s time and with really advanced underwriting models.
Ty Harris: So I want to be part of the what saves people about a $100,000,000,000 per year in insurance. But.
Alejandro Cremades: Well that sounds like a lot to save so Matthew feel free to expand on that.
Matt Wielbut: Yeah I think I have conversations with with my friends all the time about insurance and they still they just don’t get it and these are intelligent people. They they care about their finances. They care about their their family security and their and their risk but to them. It’s just such a complicated product and so on 1 hand you know the dream is to to to revolutionize I guess not even an evolution to revolutionize insurance so that it’s simpler I don’t know how how possible that is right? It’s a highly regulated very old industry. So short of that what I would like to do is just to create an environment where it’s easier for people to get help navigating the complexity of insurance that means that making it easier for people to go to an insurance agent whether that’s a digital agent or or a human agent that they meet. Um. And get answers to their to their questions and really feel like their entire life is protected and and they have the right coverage. Um I I don’t think we’re there. Yeah I I think that there’s still a lot of work to be done to make insurance. Easier for even agents to navigate. Let alone let agents make it easier for consumers to navigate.
Alejandro Cremades: Now 1 thing that I like to ask you guys you know here that day I’m sure people are you know, probably even wondered is 1 thing that is that is amazing is that you guys started this as as already being good friends and then you know I find that. In terms of cofounder dynamics you know communication is absolutely everything you know and I and I can see that you know on the way that you know we’re having this discussion. How you both very well know you know who is accountable for what and who is responsible for what so how? how was that you know. Journey of or or in terms of dynamics with you guys to also because I’m sure that you you were very careful about the friendship too like having those discussions where you were able to divide and conquer and and and how you guys you know, agreed on why that should be the case meaning why you know ti take in on the Ceo. Why might taking the cto and obviously each responsibility that comes with each one of those so tai feel free to jump in. Okay.
Ty Harris: Yeah, and it’s it’s a great question because I think in our cases we overlap maybe more than most cofounders do in our capabilities I like I said I’m like an amateur coder. So I I kind of want to stick my nose in that stuff sometimes in Matt is you know way broader than you know, just like a technology person. He has amazing insight and. Thoughts about business and everything you know he could. He could be his Ceo easily. So I think um, it was not an obvious thing for us I think um in the we we did. We did talk about it in the early days there were some clearly some fits and starts I mean you had 2 people and you’re kind of grabbing everything as it comes like kids chasing the soccer ball. We had some times like that I think. Um, when we really first had to do it was when we hired our first employees besides us we so we can’t use like parents when they have a kid you got to like rationalize things you can’t you know, present some um, chaotic world and I think we both came from a corporate tradition that was clear about you know. Ah, roles and responsibilities. We said look we got to get this straight and so we did that we also talked very methodically and and intentionally about culture of the company and we wrote down all right? These are the values we want and let’s make sure we’re hiring for these things etc. I really am glad we did that I think I see a lot of companies where the responsibilities aren’t clear. And where the culture is not clear and I think that’s a catastrophic error early that can you know? maybe you can fix it when you have 10 people. But if you get to that point you have 50 people a hundred people. You have a big problem.
Alejandro Cremades: So my what would you? What would you add to that.
Matt Wielbut: Yeah, yeah, definite not it definitely didn’t come kind of naturally to us. In fact, I remember this ah this this time when we were we were going to techstars and our mentor pulled us into the office to kind of have his his weekly 2 on 1 with us and we thought we were in trouble because the the tone was a little off and he said you know everything is going great all the investors love meeting both of you. They clearly understand your idea all the messaging is coming across but we knew there was something that he was holding back and and he said but. The 1 thing that they keep telling us is they don’t know which one of yous the Ceo and that’s just you know because we were both so passionate about it and we’re answering each other’s questions and overlapping. We thought that translated to a great dynamic right? that we were both so energetic and and and involved but instead what that translated into was a confusion and so I can. From that moment on. We’re very clear about like this is technology and this is kind of the executive management side.
Alejandro Cremades: I Love it. So So I guess you know obviously we’ve been talking about to the um, the the future you know division I like to to really talk about the past and being able to to reflect on it. So if I had the opportunity of putting you guys into a time machine. And I’m able to bring you back in time you know in time to maybe that moment where you know you guys you know had the the idea of maybe starting a company if you could have a chat with your younger self and be able to give that younger self one piece of advice before launching a business. Why would that be and why given what you know now let’s start with Thai. Okay.
Ty Harris: Ah, one piece of advice I think um, don’t be intimidated by or or get too caught up in the hype of it right? There’s a whole like culture that is. Entrepreneurship and the Vc -funded startup world and you can be very intimidated by it. Um, at first first you walk in and you know while you’ve had success somewhere else. You walk in you say oh my gosh I don’t I don’t know how to behave according to these rules and you know I think you know, but but when you. And I think on the the flip side is you can get into it and say well my gosh these people want to give me money I don’t even have to create a great company I just got to take money and they love me. But I think both of those are wrong and you need to go into it and just remain grounded and say look if I build a great company. It’s not going to matter I will you know I will succeed if and only if that happens and I think just. Make sure you stay grounded and for me that would have translated into probably a little bit more early confidence in those meetings where I brought more I said you know what you you know? insurance way better than these people. You don’t need to be intimidated by this kind of vc sitting there but it was a new world for me so it was it was ah it wasn’t easy at first.
Alejandro Cremades: What about for you Matt.
Matt Wielbut: And yeah, for me I would say there’s this fallacy that that first time entrepreneurs have I have this amazing idea and it’s the idea that is the the unique thing and and that. s just wrong, right? It’s your execution of the idea. That’s the unique thing and and so what they do is because they think that the idea is the special thing they keep it secret and they say I’m not going to tell the world until it’s ready and what they need to be doing what I wish I was doing more of is telling everyone that will listen until they’re bored out of their. Like what my idea is because worst case, you’ll just get better at pitching. Best case you will find that random stranger. That’s either going to be a partner or an investor or a future employee. Um, so don’t keep it a secret.
Alejandro Cremades: I Love it now for the people that are listening that would like to reach out and say hi. What is the best way for do for doing so time.
Ty Harris: Yeah, look our our website openly dot com we have our you know, kind of contact stuff there. That’s we’re kind of old school. So that’s probably the best way to get in touch with the the openly crew obviously on Linkedin as well. But.
Alejandro Cremades: Amazing and the same thing for you Matt are you also active on Linkedin Amazing well guys thank you so so much for being on the deal maker show today. It has been an honor to have you with us. Thanks.
Matt Wielbut: Yep! Lincoln is great.
Ty Harris: Thank you! It’s a pleasure speaking with you Really appreciate it.
Matt Wielbut: So yeah, thank you for the opportunity.
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Christer Holloman has raised tens of millions of dollars for his fintech startup, including achieving 100% oversubscribed funding rounds. The venture, Divido, has attracted funding from top-tier investors like Silicon Valley Bank UK, Dawn Capital, SBI Investment, and ING Ventures.
In this episode, you will learn:
- The notable investors Christer’s strategy has enabled them to land
- How to manage your investors once you bring the capital in
- When to transition out of being CEO, and what to do next
- Christer Holloman’s top advice for starting a business
Alejandro Cremades · EP 566 Christer Holloman On Raising $50 Million To Give You More Choices When Managing Your FinancesSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Christer Holloman:Christer Holloman is the CEO and co-founder of the award-winning consumer finance platform, Divido. Prior to starting Divido, Holloman launched Glassdoor.com in EMEA, which subsequently got acquired for $1.2BN.
Before this, he helped traditional media companies like The Times, the Daily Mail in the UK, and Gannett, the largest newspaper publisher in the US, to transition old business models to monetize new digital channels for recruitment, property, and content.
Hollman is the author of the Amazon bestseller “The Social Media MBA” series, published by Wiley in multiple languages, and more recently, “How to Sell Online,” published by Pearson, the world’s largest publisher of academic literature.
Holloman holds an MBA from the University of Oxford.
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Read the Full Transcription of the Interview:Alejandro Cremades: Already hello everyone and welcome to the deal maker show. So today. We’re gonna be talking with this incredible founder. Also an author of several books and we’re gonna be talking about building and scaling in Europe and then also moving to the us so without further ado. Let’s welcome. Our guests today. Christer Holoman welcome to the show. So originally born in Sweden give us a little of how walk through memory lane. How was life growing up there.
Christer Holloman: Thank you very much. Thank you for having me.
Christer Holloman: So I was born very close to the Arctic Circle. So for I’m not sure if you had that opportunity to be up there but the summers are pretty remarkable that the sun never sets So as you see the sun hitting the Horizon. It goes up again. But then on their flip side in the winter. You barely see the sun so you can be in complete darkness for weeks on end more or less so pretty epic and in that sense. But yeah, very idyllic. It’s very green, Very clean, very safe. So Yeah, I’m super grateful for for the opportunity to to grow up there.
Alejandro Cremades: And then you also did your military service there. So I mean how how was because you know typically in the us you don’t do that I mean you you see that more like in Israel and other places I mean what kind of ethics. Do you think or or or perspective did doing the military.
Christer Holloman: So that was one of the last generations that mandatory had to do the military service since I did it now is very much on an optin basis. So Sweden has famously been neutral for for centuries.
Alejandro Cremades: But you.
Christer Holloman: Um, and part of being able to be neutral is to have a credible defense. So it’s It’s kind of just something we had to do it. It’s part of almost like ah a rite of passage for for a generation of of swedes that had to to do it. Yeah I thought it was a unique experience I’m very grateful for it. It’s clearly not something hopefully that I’ll ever be able to you’ll need to use skills or or experiences I need to use again. So yeah, but I thought it was ah it was fun to do it and I feel that I’m more well-rounded because of having had that experience.
Alejandro Cremades: And then in that case I mean obviously you were in Sweden you did the military there you did your undergrad there as well. I mean at what point do you realize that maybe it makes sense to make a move and land in London.
Christer Holloman: So as I mentioned I’m I’m from the very far north. There’s a very small place and and I realized pretty quickly that if I wanted to become successful if I wanted to make something on myself I can’t stay in that small city. So I had my heart and my head set on Stockholm the capital of Sweden when I was a teenager. Try to go there as often as I could to see friends or as live in the big city when I went to university I had the opportunity to apply for a scholarship to come work in London for a year at the swedish shanero commerce so I applied and I was very fortunate to to get that opportunity. So after I finished my undergrad I moved to London and the idea was to spend a year there but having been there for a few weeks for a few months I realized what was I thinking about trying to go to Stockholm clearly London is the place to be way bigger, more fun, more exciting. So. Yeah, and then I’m skipping stokcomm all together and going straight to London.
Alejandro Cremades: So in Lano tell us how landing in London what happened next.
Christer Holloman: So in the beginning I worked for a series of newspapers I worked for a us newspaper group called Gnett helping them launch a new for europe at the time a new job board called http://careerbuilder.com and then I worked for the times and the Sunday times again helping them to deliver and new product innovations put new products and service out in the market learning them or helping them figure out how to make money online because obviously up until that point they’d been making all the money on ads in physical paper people weren’t buying them. Um, so they had to transition their business online as we all know as as consumers of the news. So yes I spent the none chunk of my career doing that.
Alejandro Cremades: And that was quite a rocket ship be so in this case for you. You know you were also one of the None team employees you know for for glass door. So tell us all glass door to.
Christer Holloman: Yeah, so when I was working for the newspapers that one of the most significant revenue opportunities that we had was classified so jobs automotive and so on. So. Glass store is a review website where you as an employee can review your employer and this is the poiglos store that most people are familiar about but where they make a lot of money is to classify it so I had the opportunity to join glass store as the none employee outside the us to help them launch and build out the european operations. Um, so yeah, at the time that we were a none people my bolshes in San Francisco and today they’re over a thousand people they got acquired a few years ago for over a billion dollars so tremendously. Successful business.
Alejandro Cremades: And what were some of the things that you were able to have exposure to by working with a company that was a rocket ship like that.
Christer Holloman: Well I think it’s certainly elevated my gaze having worked with newspapers which is obviously very stable, very traditional, very conservative things doesn’t happen very quickly easily in that world. So it really transformed my perspective and and how to get things done what we are aiming to do how quickly we want to get there I remember pitching a few business ideas to my line managers and he he said Chris this can only make us ten more million dollars I don’t think is worth our time. And just that mindset if if something isn’t going to bring in 50 or one hundred or a billion dollars why we even bothering. So I think that helped me to think bigger and to expand my own horizon and all the art of the possible.
Alejandro Cremades: Now in this case for you, you know? eventually you ah realize that it’s time for you to start your own thing. You know at what point you know did the I idea or the concept come to mind and and how did you go about you know launching it because I mean becoming. Ah, None time entrepreneur is a big deal is a big leap of faith and I’m wondering what was that incubation process for you.
Christer Holloman: Well, there was a number of sort of data points that I kind of came across in this period ah in my life. 1 of them was having a friend that was trying to launch a cloac clone in Poland and I saw him struggling to raise money. Ah, to get the capital to lend to consumers and get the capital to build the business and get the capital to get the banking licenses and so on was so mini hurdles and and I really thought that was ah None big challenge. Similarly um I came across a company in the Uk called pay for later. And their business model is very similar to Klana with the one significant difference is that they don’t do any of the lending instead they partner with banks and then they offer the combination of their software and the banking so provider to the retailers and I even pitched this to my friend saying hey this could totally solve your problems. Ah, instead of having you to become the bank instead of you becoming regulated. You can just focus on building the business and partner with the banks and he said Christer you know this is my idea I think this is the way it needs to go and I said well if you’re not going to do it I’m going to do it. It was a combination of things that I saw in my surroundings effectively that led me to create Div divideo together with my two cofounders so divideo’s business idea is very similar to Klana in the in the sense that we’re offering buy now pay later but the significant way we’re different is that we only build a software. And we license it to companies that want to compete with Klarna other the banks or or to big retailers that want to work with multiple providers for credit and therefore needs to manage to interface themselves in-house. So that was our kind of ah unique take on by now pay later.
Alejandro Cremades: And how were you guys making money there I mean how what was the pricing and and and anything else that you can share around the business model right.
Christer Holloman: Yeah, so in the beginning we were approaching ss so we would charge a setup fee usually 49 to £99 a month then we charge um a monthly fee which again and that could be another forty nine to £99 a month and then we charge a transaction fee. So whatever. Ah, they were processing. We would take None to 2% and and those so were the three ways that we were extracting value from from the by now perator space.
Alejandro Cremades: So what time do you realize? hey you know it’s probably better if we just focus. You know most of our efforts into Enterprise type of sales.
Christer Holloman: Yeah, so we had over a thousand se retailers after a few years using our solution. Um, and we had a few bigger clients approaching us the first one they actually came through our website they clicked on the chat button and and we responded and it was Lenovo. So one of the world’s biggest computer manufacturers and we thought it was someone that was joking with us. We couldn’t believe our luck. You know we’ve been dealing with Mrs Jones ‘ art gallery in Bristol and and. And Sarah’s dj equipment store in Edinburgh. Nothing bad against those guys at all but they’re obviously significantly smaller players than the likes of of global consumer electronics manufacturers so we we ended up speaking to them qualifying them. And they and ended up signing up with us as the none enterprise client what they liked about the technology is that it allows you to use different lenders in different countries because as you may be aware a very few lenders can lend money to consumers all over the world. It’s usually very. Regionate restrictive for example, only in the Uk or only in the us. So that’s what Lenovo really liked but the problem with Lenova is that they have and other enterprise clients is that they have incredibly high standards and so we really needed to to up our game. Um. So after a few months we recognized we were making a lot of money on the bigger clients but taking a lot of energy and we had to really challenge ourselves to figure out how to prioritize s and mes versus enterprise and and after a series a the board took a decision. To exit the s and me space entirely. So we can double down and focus our headspace our money on those enterprise clients.
Alejandro Cremades: And what is it like dealing with enterprise clients and and more specifically dealing with banks. You know that’s not easy.
Christer Holloman: Yeah, so I mean the good thing with the s and me is which is why it makes perfect sense for a lot of startups to start with those if you’re targeting business clients is that you could get hold of the ownery with one call and you could potentially get ah a signed deal literally on the back of None phone call. We had None sales guy. He did a five day close he called them on the Monday on by Friday they were transacting on our platform. So that’s obviously great when you want to show investors numbers show a growth and so on but the numbers are very small as we touched on earlier. The big difference and perhaps obvious difference is with enterprise is that they are There’s not necessarily None decision makers. There’s usually none people involved in signing off any any sort of big significant investment or change and that takes time so ah, a identifying those right peoples. Convincing all those people going through all the due diligence steps and all the hoops even to be a prudence supplier or vendor. You know that alone takes six nine months and that’s even before you started actually finalizing the contract perhaps or even starting the the build which again can take another six nine months so yeah tremendously long sales cycles from five days to None ars end to end.
Alejandro Cremades: So now in this case I mean same it’s It’s really interesting to like the way that you would go about financing a company like this one you know in in this case, How much capital have you guys raised to date.
Christer Holloman: Yeah, so dividers raised over $50,000,000 the none fundraise was roughly $1000000 um, and interestingly we me and my co-unders we were working on this business for a year and the last sort of three four months is when we were in a position to start fundraising. And we had meanings with None investors and everyone said no everyone said well Paypal can just copy this? Um, and in April Two Thousand and fifteen ah we were running out of ah personal money to sustain ourselves. I was he even starting to look for for jobs. But but we had a breakthrough one investor said well we won’t give you the full amount but we’ll give you half and at that point we were only asking for none. That’s what we were starting with and the investor was a company called initial capital. Um, and that was like a turning point for us I actually even just weeks before I had to sell my so my I had an old Bmw I got £10000 which will give me a few more months to to live off so I sold the literally the only ass that I had at that point. To to brace myself for a few more months of fundraising so it it was on the on the brink of of not happening. But interestingly when that none investor said yes for half of the amount almost every subsequent conversation we had from that point onwards turned into yeses. Because I guess investors they have a fear of missing out. That’s a totally real thing. Um and we get the kind of almost social validity or validation by getting that none invested to to say yes to us. And in the end we did not only filled around. We didn’t just reach the 500 as um as I alluded to we actually oversubscribed by a hundred percent we raised just over a million pounds in that first fundraise so from being a from almost walking away from creating this business altogether to selling the only asset I had left. At the brink of personal you know, ruin um it everything turned and literally four six weeks later everything were completely different. So yeah, that’s ah the starting point of our fundraising journey.
Alejandro Cremades: I mean obviously you you’ve raised quite a bit of money and those are pretty interesting. Lesson they’re like the importance of and engineering fear of missing out. So how I mean obviously there’s a lot of people that are probably tuning in now and and listening and and wondering. Hey you know like how should I go creating that fear of missing out so that you know maybe I’m able to put myself in a position like Christ where all of a sudden you get None and then everything else is is much easier after.
Christer Holloman: Yeah, so I think the key is that ah you don’t want to drip feed ah investor engagements you want to kind of go all in in one massive hit so spend a lot of time doing upfront research that at divided we call it blueprinting. So you map out all of the players in our space who their investors are most of those will not be interested so we put them on the on the red list or blocklist and then we focus on who else is ah similar in this space who’s like who’s investing in fintech who’s investing in Uk in our case uk-based companies. Um. We had a really clear idea by the way we didn’t really do this for the none round but we got better as we as we went along so we had a critical mass like None plus investors for each subsequent round that we did and we would we would approach all of them at the same time within the within the same few weeks we would email them all Linkedin them all. And and that’s that’s the other thing you you also don’t want to rely on just having None email to or phone number but maybe email probably the most likely um you want to map out None or 3 people at each of those firms that potentially could be a ah way in for you because yeah as we know people can be on holiday. People’s emails can go to spam um and that’s probably the other thing that you don’t just want to email them and sit back and wait and hope that’s going to work. You also want to find them on Linkedin and and message them there as well and if there’s another way like if you can meet them in person if you’re attending an event like. We went to money none quite a lot and a lot of investors would would go there in our space. So I think that’s the key thing you have to identify all of the right people or their contact details and hit them as hard as you can as fast as you can in a short period of time as you can and that obviously assumes that you have a very compelling. Compelling ah business case that illustrates that this is a huge opportunity and this is why you need a position to capture this opportunity in ah in a way that kind of resonates and is understandable and relatable I mean divider is a relatively easy product to pitch everyone understands why consumers use credit. Um, it’s almost like a no-brainer and and our approach coupled with that made it a very easy decision for investors to make.
Alejandro Cremades: Now in this case I mean you guys have raised money from all types of profiles. I mean you’ve raised from angels even series a you already got people like American Express I mean which is a you know quite early now but they still It’s great. An amazing company. And then you know like also going more into like the Vc traditional type of route. So what is the difference from each one of those profiles I mean what’s the way of engaging with them and then also to continue to manage that relationship.
Christer Holloman: Yeah, so the beginning whilst our largest investor was an institutional early stage investor. We had a long tail of smaller. Ah high net worth individuals. They putting in anything from none pounds each and you’re actually right? It’s about managing that could. Managing them and managing their expectations. Some of them would email me every other week asking for updates which is obviously not really practical so we had to sort of so tell everyone that no we don’t do ad hoc None on one updates. We do a courtly or bimonthly update and we give the same to the angels as we did to the. Institutional investors I think that’s like the None thing to manage expectations upfront and to not bend backwards and do anything and everything an angel might ask from from time to time I think that’s one key difference another key difference and and going back to the point around fear of missing out. I would argue that one of the main reasons we were able to convince amys to invest to your point they wouldn’t typically do deals of that size that early on but we were fortunate enough to have been selected by Mastercard to join something called startpath which is their global platform to engage with fintech effectively. And on the back of that partnership. They had the right to invest should they choose to do so in our subsequent funding round and they took the decision to invest in dividers. So it made it very easy for me then to call American Express and say hey mastercar is investing would you be interested. And and clearly I did the same thing with visa and now visa at this time they were in the process of I’m not sure if you remember this but visa used to be europe and the us and they merged and there was for a few years visa wasn’t really doing much in fintech which is why Mastercard signed all of the. Early stage fintech to to use their cards in the cardrails. So visa didn’t really have a good point of contact. But anyways fairom missing out definitely worked in the case of Amex and Mastercard and again the difference between our institution investors and angels is that. Unlike them we can actually work with these vcs these corporate Vcs to gain to get business. So the the key thing there is not so much what we can do for them. But what they can do for us who do they know that we want to speak to who do they have relationships that we want to work with. Um, and so on so Mastercard on amexs has been was a tremendous catalyst for divider not just from the money perspective but also from a credibility perspective to be able to say to prospect employees can’t work with us. We’re backed by Amex and Mastercard to prospect clients. Hey.
Christer Holloman: You should trust us look these guys trust us and and on top of that to get an introduction from mastercard ah is is incredible. Like for example, they introduced us to http://lastminute.com which is one of the biggest online travel agents in in Europe and on the back of that we did a tremendously successful deal with with them. So. Um, yeah, very different dynamics and benefits and and I really see value in in having all of them at different stages so of your journey.
Alejandro Cremades: Now in this case I mean you guys raised quite a bit of money during the Covid time. So how was like raisingcing money you know, but that point.
Christer Holloman: Yeah, so in total I raise $50,000,000 for for divider and again just to be super clear. Divider does not lend any money so we are just a software company. So this money goes straight to hiring engineers product development marketing sales and so on. This is not money that we lend to consumers in any shape or form That’s what our clients do with their money. Our bank clients effectively. So we had raised in the last round we did $30000000 so it was the our series b was a biggest round the plan was to do about half of that. Um, and we started approaching strategic investors because we knew they would take the the longest but the fundraise started maybe April may so that just as covid has the lockdown had sort of come into force almost globally. We started fundraising. And yeah, for the first few months investors were a little bit kind of on edge to try to figure out what’s going on and a lot of investors day during a time of crisis like the one we’re seeing now they become a little bit like a hedgeho they kind of turn inwards to trying to understand what’s going on with their existing investments. What can they do to help them effectively which means that if you’re a new company trying to pitch for their attention or raise money from them. You will be kind of none tier in their mind in terms of priorities. So yeah, so it did take us a few months to to get going with the fundraise we were planning on closing by the end of of 20 20 um but ah yeah, it took longer than that. Fortunately, we had some very good strategic corporate clients that also did investments so we were able to have conversations with them and in the end in the spring of 2021 we got a firm term sheet from hspc and I and g to lead our series b and and that was the again fear of missing out they became those anchor investors the anchor names they gave confidence to ah, a long list of other investors that joined at the same time. Which is why we were so oversubscribed again, you’re almost doubling what we were looking to initially raise.
Alejandro Cremades: So very recently you decided to step down from from the company I mean as the Ceo so so walk through that you know thought process.
Christer Holloman: Sure. Yeah, so I’ve been working with Div divider all day every day from at that point for the last sort of None ars is a very all consuming as as you’ll know and I’m sure other entrepreneurs you’ve spoken to will will testify to um. And as you know the business had changed a lot. We went from s and mes to large enterprise deals and I very much felt that there will never be a good time for me to exit. So it’s kind of about finding what’s the least bad time to to leave the business and I felt that the business was in ah, an incredibly stable position. We had signed some landmark deals with global players. We had a clear path to break. Even we were. We had just signed a tremendous chairman the former Ceo paypal emme I hired a fantastic cfo and the team was very stable. Um, we had the clients we had the team and we had the money. Most importantly, we had the money in the bank and that was the the final kind of deciding point for me to say this is the point when I’m comfortable to step down I still have a significant shareholding in divider. So I very much wanted to continue to prosper and be successful and I’m there. The biggest fan. Um, but it gave me the opportunity to pursue other interests and other opportunities and one of them was to.
Alejandro Cremades: And what is that what is that transition. What is that transition process like you know where you know here you are the founder of the business. The Ceo of the business and you want to make sure that you’re able to preserve you know what? you’ve built and what you’ve created and that. You know people are not going to destroy it right? overnight. So what is that transition process to make sure that you’re able to show up yourself with someone else that is going to be able to carry that flak in the same way or perhaps in a better way so that you know the legacy you know is there? yeah.
Christer Holloman: Yeah, no absolutely and for me, it comes back to the team. So the people that that was left when I stepped down with people I’ve been working with all day every day for the last one 2 3 4 even None ars so I feel that they knew me they knew what I wanted to do I think I had. Ah, shared with them the vision of where this company could go and I felt that they felt that you know in their hearts as well. So I felt very comfortable with them staying. Also you know we were 3 co-founders. So one of the co-founders. He left three years ago and the none cofounder he is still in the business. So. We also have some longevity through through that relationship and we still you know, very good friends so’re very close in that sense. But in terms of the process itself. It’s something that I’ve been discussing with my chairman for over None ars or almost two years so it wasn’t something that ah you know? ah. Ah, quick decision on my part or a quick sort of exit in terms of the planning for this bringing on board. A professional cfo was ah one of the key milestones because she would be the interim Ceo Ceo when I stepped down so that was another key influencer. Knowing that the people were in place and that we were doing this in an organized fashion. We wouldn’t we didn’t want to spook the employees. We didn’t want to spook our investors. We didn’t want to spook our clients. So yeah I think it was kind of like a textbook example of how I would wish for anyone to be able to exit their their business.
Alejandro Cremades: And and what’s next for you. Chris.
Christer Holloman: Well, ah, knowing that I was so moving on I started working on a book last year called how banks innovate because as I mentioned whilst we started working with Smes and then eventually focused on enterprise retailers. Around the same time. We also started licensing the platform to banks directly for them to brand it as if is their own and give it to their own retail clients so over the over the last so five six years I’ve met with over a none banks literally all over the world from. From Africa to South America to Australia to Asia North America and obviously all over europe and divider is fortunate enough to work with None of some of the most significant players in the space that was the inspiration for me to but but basic I was running workshops for these banks around how how. By now potato’s evolving how banks need to compete with this how this is eating up their credit card of revenue so consumer lending revenues and working with them how to come up with a plan to transition from the old way of thinking to the new way of thinking and effectively managing their innovation process because. They hadn’t done this before some of the banks we worked with said this is the None new product they’ve launched in ten or fifteen years so banks like most big traditional organizations are very slow moving. They’re very risk averse for very good reasons. Ah, and there’s ah there is a perception that banks do not innovate. Um. And I wanted to dispel that myth by sharing what I’ve already seen in my job by publishing this book about how different banks are approaching. Innovation. So there are 16 different banks around the world and I’m covering topics like buying building partnering and acquire or changing ways of working. So what I’ve been doing since I stepped down is spending a lot of time with banks on a consulting basis to advise them on specific projects I’ve also started investing myself in early stage tech companies I’ve done about 2024 investments in the last ten months in fintech and but also beyond that. Um, and I’ve also taken some time out to decide what I want to do next and one of those things was to to move to the us which is where I’m now based.
Alejandro Cremades: Now you’ve you’ve done other books too them. So tell us about those other books and perhaps like like maybe like 1 nugget you know of ah or maybe like something that people you know can really take you know for themselves from from this time with you from each one of those books.
Christer Holloman: Yeah I mean I think there’s 2 ways sounds to the question when I was working for the daily mail group I was asked to because I was active on social media. They thought I was a knowledgeable person to help them on social media. Um, and and I at the time didn’t really know much I started doing research. How can corporates already on social media. Take it to the next level and this was ten twelve years ago so this is very much the beginning of Twitter becoming mainstream and Facebook becoming like staple so I was intrigued how you elevate your social media presence when you’re already doing social media. Um, and I realized there was no books There were no guides written addressing businesses and their needs. So as I was speaking to people I offered them to con chapters and eventually that became a whole book that got published by by Wyley the book was became an Amazon bestsellers. It’s called the social media Mba. Translated into multiple languages and on the back of that they asked me to do a none none book also on social media but different aspects. Best practices case studies as well as how to measure the success. There are a why as I as a business leveraging social media. So what I would say. It’s not so much a nugget from the books but I would say anyone listening if you’re ah if you’re a person or professional that wants to further your personal brand. It’s great that you’re posting stuff on on Linkedin It’s great that you’re engaging in local communities and and contributing as a speaker or guest blogger. Whatever it might be. But I would challenge everyone to contemplate the opportunity of writing a book I think honestly that everyone carries at least None book within them and I think it’s very daunting and challenging to write like a novel like a story. Ah, but if we talk about what we do all day every day our day jobs I think we have a ton of experience. That is definitely worth worthy of sharing. So think that will be my None recommendation. Why have you not written a book and what steps can you take to to write a book and how can you do that in part-time alongside your day job. Um. And ultimately not only does it benefit you and your personal brand and your expanding your network is also hopefully benefiting your employer or the business you’re working for whether it’s your own business or someone else’s if you’re able to link what you’re talking about to what the business is working on and. And therefore create an opportunity for marketing material for white papers or whatever else like you can extract on the back who created this book.
Alejandro Cremades: Now for the you know one thing that I’d like to ask you here is imagine if I was to put you into a time machine and I put you back in time to that moment that you were perhaps you know working at Glass door and thinking about like Wow was going to be the future and maybe like something that you could do on your own. If. You could go back in time and give that younger self you know one piece of advice before launching a business.. What would you say you know and why give me what you know now. Yeah.
Christer Holloman: I think that um I think everyone should have a go at starting a business at some point in their career I think it’s a unique learning opportunity learning experience. I think it’s tremendously it develops you as a professional develops develops you as a person it gives you opportunity to learn new skills whether it’s managing people or managing investors managing a board. Maybe things that you wouldn’t necessarily have had the opportunity to do at this point in your career so by starting a business you kind of leapfrog maybe traditional. Career paths and and hierarchies and and put yourself in the driving seat. So I think ah don’t be so hesitant. So so what? what happened was that I I was fortunate enough to have roughly a one year worth of savings that I didn’t need to to earn a living as I mentioned I had to sell my car at the end. So I think it’s you know you need to recognize you need to save up to be able to take a step back from earning the traditional salary. So I think that would be the key thing start saving to put yourself in a position to not have to take a salary for at least you know, depending on. But industry. You’re in you know up to twelve months maybe
Alejandro Cremades: Now for the people that are listening a Krista what is the best way for them to reach out and say hi wonderful well Christ. Thank you so much for being on the deal maker show today. It has been an honor to have you.
Christer Holloman: Linkedin is probably the the easiest.
Christer Holloman: Thanks for having me appreciate the opportunity.
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The post Christer Holloman On Raising $50 Million To Give You More Choices When Managing Your Finances appeared first on Alejandro Cremades.
Ethan Agarwal sold his first company after raising $70M for it. He’s now championing the area of financial health for entrepreneurs and others who need a modern approach to investing that understands their needs and aspirations. His venture, Aaptiv, has raised funding from top-tier investors like Insight Partners, Warner Music Group, Bose Ventures, and Amazon Alexa Fund.
In this episode, you will learn:
- Successfully pitching your startup to investors
- The three things to focus on as a founder
- LTV versus CAC
- The Coterie and your financial success
- Ethan’s top advice when starting a business of your own
Alejandro Cremades · EP 565 Ethan Agarwal: From 120 Investor Rejections To Raising $100 MillionSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Ethan Agarwal:Ethan Agarwal is the founder and CEO of Aaptiv, a leading provider of premium digital health and wellness content with the #1 audio fitness app. Launched in 2016, Aaptiv has raised over $50m in venture funding and counts nearly 200,000 paying subscribers.
Prior to launching Aaptiv, Ethan spent three years at McKinsey & Co, advising clients in the technology, media, and financial industries. Previously, Ethan was an investor at LionEye Capital, a $2.5bn AUM hedge fund, focused on a merger arb strategy across energy, tech, and healthcare.
Ethan began his career as an investment banker at Lehman Brothers, focused on healthcare M&A. He holds a Bachelor’s in economics, a second Bachelor’s in political science, and a minor in entrepreneurship, all from Johns Hopkins University.
Ethan earned his MBA from the Wharton School at the University of Pennsylvania.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show. So today. We have a very exciting founder. We have a serial entrepreneur you know building scaling financing exiting all the above I think that we’re gonna be learning quite a bit here all the good stuff but without farther do let’s welcome our guest Today. Ethan Garwal welcome to the show. So Ethan give us a little of a walk through memory lane. How was life growing up in Montreal.
Ethan Agarwal: Hey how how are you thanks for having me.
Ethan Agarwal: Yeah, ah, ah, actually great. My dad was a professor at Mcgill and ah learned a lot from him about software and engineering and and building in general and then he started a company in the semiconductor software space. In 94 called logic vision and moved our whole family out to the bay area and so I’ve been in the barrier since 94 and got to you know, watch this industry grow here.
Alejandro Cremades: So I guess two things that come to mind there is what was that the process because at 9 years old I mean you really realized what’s happening around you. So how was that process you know for you of going to a new place completely unknown new friendships I guess how would you say that that uncertainty has. Made who you are today.
Ethan Agarwal: Yeah, it’s a really good question and I think the ability to adapt to new situations. There’s ah, there’s some research that’s been done around how frequently successful founders moved when they were growing up. And there’s some really high correlation in the success that founders have had and the number of times they moved as kids I don’t know exactly why but it’s probably something around your ability to adapt to different situations and people and so as a nine year Old. You know you have friendships and you have opinions and you’re familiar with stuff and. It was a whole new reset for me. But obviously I had my family there and you know we spoke the language and everything and so um, watching my dad do something that he was really passionate about was very inspiring to me.
Alejandro Cremades: Yeah, because that was quite a big switch. You know for him and and also for the family you know something completely unknown to I mean going from professor to entrepreneur. That’s quite a. Quite a stretch. So I guess saying how was that you know for him and also how was for you, You know to be able to experience to the ups and downs of seeing your father going through that right.
Ethan Agarwal: Yeah I mean it’s it’s it’s hard to start a company under the best of conditions I think it’s ah it’s even harder when it’s you know a new country a different industry entirely if you’ve ever seen. There’s a great documentary on Mitt Romney when he was running for president against Obama it’s on Netflix I think and there’s an episode on election night where his parents or his family is sort of consoling him because it looks like he’s going to lose and they’re talking about. You know how great he is and he says listen my dad took me from you know home base to third base. And then I’m starting on third base and you know his dad I don’t know if you know this history but you know you grew up in Mexico you came to America he was the Ceo of gm I think he was the governor of Michigan so you know Mitt got to start on third base went to hps and this and that and so I feel like I got a lot of that accelerant. By watching my dad start his company from nothing. He ultimately took it public and then sold it and so I was fortunate enough to not only have sort of resources. But more importantly have the education and the access to the information that I needed to become an entrepreneur myself.
Alejandro Cremades: The fact that you able to that you were able to see that and that you were also showing in the Bay area I Mean do you think that that made you think hey you know I think that one day I’m gonna do this too.
Ethan Agarwal: Yeah I mean look I I came here in 94 which arguably was the best time to be here I wish I was 10 years older than I am because maybe I could have taken a hinge of it. But you know we we came here and netscap was starting I went to a school called Harker which is in San Jose which is where a lot of. Um, kids of tech people ah went and so a lot of my friends parents were starting companies or working at Cisco or working elsewhere and so that you know it’s not just about the money but sort of the innovation and the culture was all around us and so I grew up in that and then. Um, you know technology has always been really interesting to me I’m not a technical person I’m not an engineer I don’t write software but I’ve been very interested in how technology can change access and how technology can ah make people achieve things that they would not be able to achieve otherwise and so. That part of innovation has always been really exciting to me I’m the kind of person that likes to break things open and see how they work inside.
Alejandro Cremades: and and and 1 question that comes to mind here is obviously being surrounded by all this technology and innovation. What got you into economics and and politics.
Ethan Agarwal: yeah so yeah I went to Johns Hopkins for undergrad and I was an economics major There was a brief period there where I wanted to um, ah work in politics and and particularly as a lawyer and I was interested in that because of sort of the impact that you can have ah. Well what I thought would be the ability to drive impact by being part of the public sector and and potentially being an elected official. Um I think I look at that today and I say the ability to drive impact at scale is arguably greater through software than it is through policy at least the way that things are. You know today and so as I got older and I started thinking more and more about how can I drive impact I realized that there’s actually a lot of ah work and ah reach that you can have by building really really great software and software is far more scalable than hardware or any other. Um, sort of technological innovation that has occurred in the last you know 200 years and so as software and the internet really started to scale. You know early two thousand s mid 2000 s I started thinking about where do I want to spend my time and that became pretty natural for me.
Alejandro Cremades: And then you went to lehmon you know you did your and Mba now 1 thing that that is interesting here is that typically you know people would do an and Mba and then you know that is what pushes them to to start a company because they meet their cofounders at the at the Nba program. And your case I mean you had it in the family. The entrepreneurship you were also you know, raised raised in an area full of innovation. What do you think? took you so long to get going. You know we’re starting your own company stuff.
Ethan Agarwal: Yeah, so this was a very conscious decision which is that I saw a lot of entrepreneurs start companies. You know, 21 22 out of school and look I admire people who have the ambition and tenacity to do that. But I was very concerned about starting a company before I was ready so to speak so I decided to spend the first ten years of my career learning how companies are built and learning how companies are run so I spent 2 years at investment banking I spent 2 years getting my Mba at Wharton. I spent 3 years at Mckinsey understanding sort of the operational side of it strategic side of it team building side of it and then I also worked at a hedge fund so I had about 5 years of finance experience and 3 to 4 years of sort of operational experience and I combined all that when I started my first company and I think you know could I have done it without all that. Maybe but I’m I’m confident that I am a better ceo I’m a better founder even today I still use the skills that I gained when I was 21 22 and how to build a financial model or how to think about valuation and you know all those little things that you learn when you’re coming out of an investment banking program or a lot of the things I learned at Mckinsey I still use today. So I feel confident that that time was well spent and it makes me a better entrepreneur.
Alejandro Cremades: So when you were you know Akiney That’s when the idea of optave you know, keep him knocking so walk us through the sequence of events that happened for you to bring activeiveve to life. Okay.
Ethan Agarwal: Yeah, so I was um, you know, just like any other consultant traveling four days a week and you know you gain a lot of weight because you’re ah ah, very very busy, but also you know a lot of the places you go don’t have great food or don’t have great. Training or gyms or whatever and so I gained a lot of weight and this was around 20142015 when soulcycle was really popular and the studio class was really popular and I remember thinking 2 things 1 is I was like it’s kind of ridiculous that to get access to these high quality trainers and high quality classes. You have to spend $35 per class. Now. Fortunately I was in a place where I could afford that but most of the world is not like that and then the second thing was even at that price point you had to deal with the hassle of signing up on time before it sells out and you had to go to a specific place a specific time and if you were traveling you can take it with you and so. Was all this stuff that just didn’t make sense to me in an era of the internet you know and everything else being on our phones and so I said what if I could take studio quality classes with me that was the premises. And so we then said okay, what is ah what is a great studio quality class. It has 3 things. It has a trainer who provides motivation music and guidance those are the 3 things that create a great workout and so we just started creating audio based classes and.
Ethan Agarwal: Ah, we realized that audio was actually a much better delivery medium than video because when you think about working out almost never is your head anchored to a specific you know three inch ah range for 45 minutes right? like if you’re running down the street or if you’re doing yoga. You want flexibility of movement and so if you have really compelling audio you will actually be more engaged and a great example of that by the way is when you’re listening to a podcast as as here audiences right? now you tend to do single activity when you’re listening to a podcast. Versus when you’re watching Tv for example, which has both video and audio you tend to be doing something else and so there’s something about the singular nature of audio that actually makes it more engaging than dual medium of video and audio and so we came up with this idea of audio-based fitness. And no one else was doing it the other popular fitness products at the time were things like daily burn and a couple others but they were all video focused and so we realized that audio based fitness was going to be really powerful.
Alejandro Cremades: So then in this case, what ended up being the business model and how are you guys making money for the people that are listening to get it. So.
Ethan Agarwal: Yeah, so activeive appive was a subscription business. It still is we charged somewhere between 10 to $15 a month for unlimited on-demand access to a really large content library ah up to you know 4000 classes across 13 categories. We created 40 new classes a week because as you know in your profession creating fresh content is really important and you know most digital content has a very low um ah tail I mean there’s certain obvious silly exceptions to that Michael Jackson’s catalog etc. But by and large freshness of content is really critical so we were always creating new classes. So the subscription always became more valuable and you know we grew to have over a million paying subscribers in 20 different countries and the ah company did you know just about 100,000,000 of revenue. So. And we all ultimately ended up selling the company. So I would say you know there were certain areas that I wish we had done better but from a you know it was my first at bat and ah given that I’m I’m proud of you know what? the team built.
Alejandro Cremades: Absolutely now for you guys you know here you raised about seventy million bucks but I know that the first round of financing that you did you know you had a hundred and over one hundred and twenty notes to get to a yes, how do you? How do you keep going when you get so many notes.
Ethan Agarwal: Yeah I think you have to be a little delusional and like a little silly to start a company in the first place. Um, ah you know the question you have to ask yourself is um, are people giving you a no because there’s like a fundamental. Problem with what you’re building or are they giving you a no because you just haven’t gone far enough for them to give you a yes. So I’ve raised I’ve raised over $100,000,000 of capital in probably 7 or 8 different rounds of financing and what I’ve learned is investors need. Something to hang their hat on and what I mean by that is there’s there’s generally 5 buckets of things that an investor is going to look at one is the team. Ah, you know is is it a bunch of ph ds from whatever school working on a scientific problem if so great. Nothing else matters. They’ll they’ll take a bit on that two is. The product and the technology itself you know is it something like openai you know where it doesn’t matter who the team is it doesn’t matter about anything else. But if the software and the technology is so revolutionary they’ll take a bet on that number 3 is the growth. So if you have. Unbelievable growth. It doesn’t matter what the product or the team or anything else is they’ll invest in that number 4 is ah the market. So is it. You know enterprise software ten years ago is it Ai today.
Ethan Agarwal: Ah, if you’re reasonably good in that market then they won’t care about anything else and then the last thing is who else is investing and so when I was my first time founder nontechnical. Ah you know out of an Mba raising in the fitness space I had none of the 5 things for them to hang their hat on. But. Eventually active. You know, grew quite significantly and our growth became so significant that they couldn’t deny it and they hung their hat on the growth metric because I still didn’t have a you know massive team I still didn’t have incredible product and software. I still didn’t have ah the fitness was a terrible industry at the time and so I had sort of fought through and made the found The 1 thing that I was confident. They could hang their hat on and I still remember like in ah November of 2015 Activeve did 5000 of errorr in December it did 20000 in January of 2016. We went from 20000 to 50000 then 75 then one 21 then 89 so we were growing incredibly quickly on an um mrr basis and. You know that’s how we were able to finally convince pair ah pair Vc to do our first seed round.
Alejandro Cremades: So So let’s talk about you were talking also about then you know on others investing who else is investing. How do you go about controlling or perhaps managing as much as possible that signaling. You know that is sent to the market with what others are doing towards your business when you’re fundraising.
Ethan Agarwal: Yeah, it’s a good question I mean you know, look this my my my most recent round came from andreessen Horowitz right? And um, ah, there’s a lot of signaling that comes with that. So as soon as people find out that you’re raising money from. Ah, you know, even when I got my first round from pair by the way pair did the first round for both my companies. But when pair did the first round for apptave suddenly a lot of other people wanted to jump in and then eventually we did another seed round from a fund called. Ah, Rina Vc which is still around a little bit but at that time they were incredibly popular and you know suddenly someone who three months ago told me absolutely not was suddenly knocking on my door to try to put money in and you know I think look I think for and for the founder it’s easy to say like oh screw you you weren’t there when I needed you and now you’re sort of following the sheep and it’s it is nice to have that like hanging over them a little bit but at the same time I think a lot of investors. Um, ah, do have ah the benefit of. Working with other investors and once someone really credible comes along. They’re willing to follow along with them for worse economics or something and so you know you could argue that there’s ah, there’s ah, a component of the founder doing this as well where industries do well or you know employees want to go work for a hot company and so.
Ethan Agarwal: I Think it’s it’s It’s nice to see people come after you but I think it’s ah it’s all a cycle right? At some point you’re going to need someone that didn’t need you and eventually they’ll need you again and so I think you know you can feel good for a little bit but Ultimately. We’re all here trying to build something and we all know that this is a hard industry to work in.
Alejandro Cremades: So let’s talk about the um, the acquisition here because obviously you guys grew this to a nice size you know over one ah hundred and twenty people you had like twenty Thousand Square feet in in the war in in the in the one in the one world trade and then also you guys had. You know as well’ll build the business to over one ah 100000000 in revenue. So obviously really impressive numbers. So how did the um, the acquisition come about.
Ethan Agarwal: Yeah, so okay, so I think one of the mistakes that I made um in running the company was ah we were growing so quickly that I focused almost I focused too much of my attention on growth. And not enough of it on product and so we were a subscription business so our whole life was Ltv Cac and in order to increase my ah so cacs were naturally going up and you know cac is always concentric circle based and so as you spend more your cacs will naturally go up but also cpms are rising which are not really in our control. You try different. Um ah distribution channels and you know some of them will start better and then get more expensive over time. But the point is if you don’t have this really strong ltv and you don’t have avenues to grow your Ltv. Your ratio is always going to get worse because your cacs are undoubtedly, always going to get worse over time. And so I was focusing too much of my time on the cac side of the business and not enough time on the ltv side of the business and so when it came time where optimizing cacs was becoming really really challenging or each incremental thing was like a 1% here or 2% there. It was almost too late for me to do anything meaningful on the ltv side and on the Ltv side. You use a contribution Ltv which is your gross March in Ltv not to get into the you know weeds with your listeners. But ah, you end up using you should be using your contribution Ltv. So really, the only.
Ethan Agarwal: Change you can have is in your gross margins and ah we did a couple things to make our gross margins better. But really the hard part of improving Ltv is actually making people stick around and that’s product work and I didn’t spend enough time on our product work I was spending more of my time on our growth work and so what ended up happening was. We can no longer scale. The business at the clip that I wanted to and we also realized that the tam was not as big as we had originally hoped like we were trying to build a you know Spotify netflix 100000000 subscribers ten bucks a month kind of thing we got to a million paying subscribers which is pretty good. But I’m learning that the tam for paid content within digital fitness just isn’t that big and I think a lot of the other companies. You know that have started since then or that are still around now are all running into this tam problem within digital fitness which is. You have the early enthusiasts and the company rides a nice little wave but then ultimately you spend a bunch of money you try to acquire that next concentric circle and it turns out that it doesn’t really exist like there aren’t 100000000 people that are going to pay for fitness whether it’s hardware or software. Um, and so once we realized that we said okay, ah you know let’s let’s agree to sell this one and you know try and go solve another problem.
Alejandro Cremades: So then so then obviously you know like here you guys you know did the acquisition and then you know it took a you know probably you guys you you did the integration for about a year or so and then you know you got started with the next company which is the one that you’re running now we’re gonna talk about it. But 1 thing that I wanted to ask you is. What were some of the things that you learn around mental health because I think that that’s something that entrepreneur entrepreneurs really leave us sight and I unfortunately do believe that entrepreneurship does involve depression. It’s just the the nature of it. You know the ups and downs. It’s really hard to. To to embrace them. You know as well. You know, not everyone can do it. You know in in a powerful way. I mean you get to learn you know as you go but but it’s a tough a roller course to to go through but mental health. What can you tell us about that Ethan.
Ethan Agarwal: Yeah I I don’t think you can put too much weight on it I don’t think it’s possible. It’s it’s It’s eternally critical for founders to focus on their mental health I I made the mistake of not doing that. Um, in my first company and so let me let me be clear so there’s 3 things that every founder has to focus on. They’re mental. They’re physical and their financial health and only by taking care of all 3 of those can you bring your most productive self to work every day. And I think the um ah battle that we all experience is you know you feel guilty are am I working hard enough Am I Ah you know being responsive to my team am I being responsive to my investors and all the investment that folks have put into me and into this company. If I’m spending time taking care of myself and I learned after my first company that if you are not doing those things and you are actually doing a disservice to your team and your company and your customers and your investors and I think the um ah the way that I think about it is like adaptive I remember I I. Collapsed at work once I ended up having ulcers twice. Um, you know it was It was to the point where I was unproductive for days or weeks on end because I was working so hard and that was not good for anybody and so with my new company I.
Ethan Agarwal: You know we’ll talk about it. But this company is actually designed to help founders with their financial health so that and you know apptive was really good for ah physical health and we ended up launching some stuff around mental health as well. Um, but products like Com and others. do do that really well I think if you don’t. Know why? you’re building the business and if you don’t have good outlets to spend your time outside of work that make you feel better. You will not be able to run this job for 5 or 10 or 15 years or however, you’re gonna like how however long it’s gonna last. So. It’s critical that anytime someone thinks about starting a company. They think about what are the avenues to focus on my mental health when things get really tough. So as an example I have an executive coach this time I didn’t have one before because I thought it was a sign of weakness but I got one this time and she’s incredible and she makes. A lot of things you know more clear for me and she helps me ah, sees problems and solutions in different ways and she asks questions that I haven’t entertained and so it’s it’s an eternally necessary product and I think it’s not only on the founder investors. Need to be thinking about their founders needs every every investor likes to say oh we focus on founders and we are founder friendly. What does that actually mean is it a term and term sheet or is it that you care about this person’s well-being and their health.
Ethan Agarwal: And what are you doing differently than the 50 other investors out there that also provide Capital and also say that they’re founder friendly. It’s the ones that are actually putting their money where their mouth is and actually so allowing the investor the the founder to spend the time. On their own health and then on their own. Well-being that are truly founder. Friendly.
Alejandro Cremades: So So it sounds like you know, Obviously what you endured ah with apptiveve you know it really you know, kind of like triggered and incubated you know far the idea of what you’re doing now the cut thereso. So Can you tell us you know how you thought about you know this idea and. And why you thought it made absolute change to go after it.
Ethan Agarwal: Yeah, so active was doing pretty well and I I turned off my salary at some point and I went to apply for a mortgage because it was time to buy a house and the guy says we can’t give you a mortgage. You don’t have a salary and I said well if you look at my. Cash and my equity and all my assets like clearly I’m not at a risk of defaulting but he couldn’t conceptualize that someone without a salary could afford a mortgage and I remember thinking you know everybody that I know makes a lot more money from their assets than they do from their salary and then eventually you know my wife and I went to talk to a wealth advisor. And you know the guy does his whole song and dance and ultimately he basically presents presents us with like a binder that has a fancier version of a sixty forty strategy right? and I was at this time I think I was 32 or 33 and I was like this is ridiculous like I’m not at all interested in. Ah, sixty forty strategy at my age and and sort of where I am in life I’m interested in. You know at the time like crypto when I’m interested in investing in companies and I want lp into funds and what kind of access can you get me and like I was super curious and passionate and interested about all this stuff and it was like this old guy and just like. You know, gives you this strategy in the same pitch that he’s done 50 times probably 500 times before and there’s just such a disconnect between what he was selling and what I was trying to buy and you know it wasn’t just the product Alejandra it was the fact that.
Ethan Agarwal: The way that he delivered it showed to me that there was a massive disconnect in the way that I thought about my future and what I wanted to do and what he thought about my future and what he was recommending to me and so um I couldn’t do anything about it at the time because ah, you know. Working on appive full-time and then um after we sold the company I started looking around and realizing that no one has really solved this problem and so what the codery does is we build financial products for people who make more money from assets than from salary. And that ends up being a lot of founders. A lot of finance people a lot of startup people. But if you go even deeper. You know, even you know lawyers or even um, you know, ah partners at ah, consulting firms. A lot of people are compensated through ownership which is actually risk um as opposed to through salary and. The legacy financial institutions have not done a good job of adapting to that shift in the economy and you know I understand that twenty years ago because almost everyone was still making a lot of their money through salary or inheritance. But now there’s a whole new generation of wealth that’s ah emerging literally a whole new generation. It’s most of our customers are first generation. It’s not inherited wealth. They’ve created the wealth themselves a lot of them are actually wealthier than their parents and are seeing money for the first time and don’t feel.
Ethan Agarwal: At home going to you know a fancy office with wooden panels where some like old white guy is sitting behind a fancy big desk and talking to them about all the fees that they charge like that’s not the way that we think about money and so. Um, I realized that there’s just this huge disconnect and so we wanted to build a product build a company build a culture that understands how money is created today and how it’s earned and what people want to achieve with their money and so that’s what the codery is is. We’re helping. This generation of entrepreneurs of builders. Um, invest borrow set up their estate planning ah understand about their investments better than any other financial institution does.
Alejandro Cremades: So second time around here Ethan you know building a company and obviously you know in the first one you I’m sure you really understood the importance of people now when it comes to people. Um, you know whether it’s on the team or whether it is on the investment side.
Ethan Agarwal: This.
Alejandro Cremades: I’m sure that you learned quite a bit you know on the first time. So what did you do differently this time around.
Ethan Agarwal: Yeah, when I was starting my first company one of the pieces of advice. My dad gave me was focus on your team and everything else will sort sort itself out and um I really take that to heart I think the second time around you know there’s that there’s so there’s a couple of. Inherent advantages you have your second time around which is you know you know more people you have built a little bit of credibility. Ah so it’s easier to identify and recruit the highest caliber of people. Um, also I was in less of a rush the second time because. I knew that I wanted to start the company with cofounders versus active I did it by myself and it started scaling really quickly and then I had to build a team really quickly. Um, the second time around I was really focused on hiring the right people but the right people defined a little bit differently the resumes matter they always matter. But it was important to find people that understood what this journey is like and understood. You know, going back to your earlier question. The mental part of it and the tenacity part of it and so when I interviewed people for jobs at the coderie now or or my two cofounders. The conversations were much more around. Alignment of why are we building this who are we building it for what is the outcome that we want from this company not just financially but otherwise and once we aligned on all of those things then we started talking about the specifics around you know product and resume and comp and all that kind of stuff. But yeah, um.
Ethan Agarwal: I can say now I mean my two co-founders Jason and Chris are outstanding and I I feel a very different level of camaraderie and a very different level of satisfaction and you know there’s there’s that saying where um, ah victories are sweeter and. Ah, defeats are are easier something more eloquent than that when they’re shared and that’s exactly how I feel and I think because both these guys have been through the ringer before Jason has started and sold 2 companies before one to Google went to credit karma Chris has started and sold many businesses before. Um, they know what this journey is like and and my investors are incredible. I took some of the investors from my first company along with me and I hired some you know I brought some new ones on board this time around. So I feel really fortunate about the the team around me.
Alejandro Cremades: I mean you’ve raised this time around already fifty million bucks so when it comes to um to fundraising you know as well I mean was it a little bit easier. You know this time around or no okay.
Ethan Agarwal: Yeah I think anyone anyone saying that a second time fundraise isn’t easier is lying to you and also if I’m honest like we raise money in twenty twenty one q 4 21 which anyone that raised money in that time has got to acknowledge that.
Alejandro Cremades: Yeah, yeah.
Ethan Agarwal: You know it was probably easier than it should have been I mean I think we probably would have raised capital anyway. Um, but yeah, it was easier but you look we we raise money from Andreessen Horowitz which is the best investor in the world and so um, ah, they. Where they have been just phenomenal partners I cannot say enough good things about them and as you know I’ve spoken to over 120 investors ah of all different stages and I can tell you um Andreessen you know did a you do sort of like a mutual reverse pitch idea and then. You know they they made a bunch of promises and stuff and like not only a bit have they been true to their word. They’ve actually surpassed it so I couldn’t I couldn’t be more grateful to them.
Alejandro Cremades: Now in this case, you know for the coterie you know, obviously incredible. You know now you guys are doing you know team Everything How are I mean if I had to give you the opportunity of perhaps you know going to sleep tonight and waking up in a world where the vision is fully realized.
Ethan Agarwal: I Don’t know this this the potential for this business is just too big. There’s there’s so many problems that we need to solve that I keep running into different types of people or different types of problems.
Alejandro Cremades: What does that world look like okay.
Ethan Agarwal: That resonate with what we are trying to build because it’s not a product. It’s a vision for the future of the world where anybody can have access to the right set of financial products relevant to them at that particular time. Which is such a crucial aspect because a lot of the products that we offer some of them at least already exist in the market but they’re only available if you’re a billionaire or if you know the right person or whatever and so what we decided to do is we said let’s bring that access to the right set of people at the right time in their lives. So that they can accelerate what it is that? Ah, whatever it is that they want to do. We’re trying to provide freedom a lot when I was when I was starting the company. We interviewed a lot of people and we asked a series of questions and 1 of the questions was how do you define success and the most common answer that we got was freedom to do whatever I want it wasn’t like. I want to model less or I want this fancy house or I want this or I want that it was like I just want the ability to do whatever I want to do and maybe some of those things are go buy fancy stuff but a lot of them are I want to start a company or invest in a nonprofit or whatever and so we want to provide that freedom and so the long-term vision of this is that people have the freedom to do what they want to do. And we have built the tooling and the products and also the language and the communication and the capabilities with this and the distribution to actually help achieve those things and I don’t know in 5 years or 10 years What those problems are going to be.
Ethan Agarwal: Um, but I feel confident that we are one of the few companies in the world. That’s even trying to solve them and because we have this team. You know I feel pretty confident that we’re going to be the ones to do it.
Alejandro Cremades: So as we’re thinking all the future here. Let’s think about the past 2 but with a lens of reflection if I was to put you into a time machine and bring you back in time maybe to that time that they you know you were. Perhaps you know like in in in the Nba you know like you were seeing like a bunch of friends. You know, starting companies. All of that stuff imagine if you were able to have a chat with that younger self and being able to give that younger self one piece of advice before launching a business. What would that be and why given what you know now.
Ethan Agarwal: Um, that one’s easy I would just say to calm down I think I ah you get enamored by the um potential and you feel like if you don’t capture the full potential immediately that you’re not. Ah, doing the right thing and so you know when I was starting a company or even before it every up and down was like the best moment ever or the worst moment ever and ah, that’s not a sustainable way to live and it’s not a sustainable way to run a company and so. I’ve started you know thinking about this more and even you know reading like stoicism and other ah ah philosophies and started thinking a little bit more about what is a more steady state. Um, ah, leadership style look like what is a more steady state life look like and I. You know you still want to enjoy your successes and you still want to you know, learn from your failures but there’s so many of them in this job and they’re so unpredictable and they’re so close together that extreme emotional volatility on a daily basis is not a. Reliable or productive way to live your life and so I now try to keep calm in events of joy and in events of sadness and I think that’s going to be a better long term strategy for me and then ultimately a better long term strategy for the company.
Alejandro Cremades: I Love that now for the people that are listening you thin. What is the best way for them to reach out and say hi.
Ethan Agarwal: Um, easiest is just find me on Twitter I’m just at Ethan Agarwal ah e t h a n a g a RWAL and the company’s website is the coderie dot co.
Alejandro Cremades: Amazing! Well hey Ethan thank you so much for being on the deal maker show today. It has been an honor to have you with us. So.
Ethan Agarwal: Thank you so much for having me I really enjoyed the conversation.
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The post Ethan Agarwal: From 120 Investor Rejections To Raising $100 Million, Starting Two Companies, And Selling One Of Them appeared first on Alejandro Cremades.
Howard Lerman has been building and selling companies since he was in college. After taking his last venture through an IPO, he has launched a new startup helping to solve the future of work dilemma that many are debating right now. His startup, Yext, has attracted funding from top-tier investors like Insight Venture Partners, WGI Group, CrunchFund, and Grape Arbo VC.
In this episode, you will learn:
- How the fundraising ecosystem has changed
- When to bring in an outside CEO
- The process of going public
- Why not to self-fund your company alone
Alejandro Cremades · EP 564 Howard Lerman On His Last Company Being Valued At $1BSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Howard Lerman:Howard Lerman is Yext’s Founder. He founded Yext in 2006 on the principle that the ultimate authority on a business should be the business itself.
From 2006 until 2022, Howard developed Yext into an innovative, global brand that can live up to that principle.
With a mission to help businesses and organizations around the world deliver official answers everywhere people search, Yext is delivering the future of search to thousands of brands, businesses, governments, and organizations worldwide.
Howard stepped down as CEO in March 2022, passing the torch to Michael Walrath, Chairman of the Board.
In addition to Yext, Howard co-founded Confide, a leading off-the-record messaging service, and served as its chairman from 2014 to 2020. He is a proud graduate of TJHSST and Duke University.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the dealmaker show I’m super excited about the guest that we have today you know he’s a serial entrepreneur. He’s built several companies and I think we’re gonna be very inspired with his story so without farther ado let’s welcome our guest today. Hallward Lerman welcome to the show. So originally you were from Virginia so one give us a little if I walk through memory lane. How was life growing up.
Howard Lerman: Thanks for having me.
Howard Lerman: Well, you know I sort of grew up I would suggest a little bit like a stranger things child in the Hawkins Indiana type suburb of Virginia I rode my bike around in the 80 s a lot and um, you know as a kid I think I was ah a. Ah, very mediocre baseball player. But I love to do it. But more importantly I was ah an opera singer as a kid grown up and so you can imagine. How cool it looked when your mom would come to pick you up to take you from baseball practice to opera practice I got really used to being punched around a lot.
Alejandro Cremades: I Hear you I hear you and now I know that you know when you were in school. You know you got into computers like very early on. So um, so how was that you know first encounter you know and and and where you were like my God This is so cool.
Howard Lerman: Yeah.
Howard Lerman: You know I I grew up at the perfect time because I had a childhood in the 80 s where there were no phones and no ipads and no internet and no computer and around 1994 ninety three. That’s when things really started to kind of become real and. You know that was right when I was becoming a teenager you know I was 1314 years old during those years and I just remember the excitement of when I was 13 figuring out how to run what’s was called a bulletin board system and this was predated the internet you would use a phone to call into somebody else’s kind of computer and. You could talk to people and post games and sort of do other things there so I got really kind of acquainted and comfortable with connectivity and doing all that kind of stuff at a really early age that that and then the luckiest thing in my life was getting into ah a. Ah, math and science high school called Thomas Jefferson high school for science and technology. It’s a stem school science technology engineering math where I met other people that were like me.
Alejandro Cremades: So what did you do there when he came to ah grabbing the phone line and and creating the chatting system. What what was that.
Howard Lerman: Yeah, you know they used to have this software called wildcat bbs this was before the internet existed what you would do is you would use the phones to dial your computer and have a phone line dial somebody else’s computer so it was like peer-to-peer. And you could host a few people at the same time if you had multiple phone lines. So yeah, we’re all used to today just connecting a gajillion people to a call. This was one person could call in they needed a dedicated phone line to do it but I would host people I’d host games from my computer. This was all when I was. 1314.
Alejandro Cremades: And that’s you know the type of stuff that other people were were experimenting with like Sean Parker you know as well. That’s amazing.
Howard Lerman: That’s right? Yeah Sean Parker we used to do stuff with Sean Parker you know the Facebook ah former Facebook president and I I got to know Sean when I was I grew up with you know in the same neighborhood as him. Um, so there was a lot of kind of fun stuff that would that would happen when we were kids. Um, and but you know but the cool thing was it wasn’t mainstream yet and it was ah it was a strange dynamic because we knew something that our parents didn’t it’s an interesting dynamic when you’re an expert at any programming or any sort of technical skill. And really nobody else knows how to do it yet and it was a time in which yeah ninety three 94 95 the internet was growing very fast and was there but it was the kind of thing that people would write about on time magazine. But the mass was not mainstream at all people didn’t know how to use it and and I think. You know when you’re whenever you’re involved in a formulat of your formulat of ages with something. It makes you just kind of gets it to your brain and and and it’s there with your your whole life. It becomes a part of who you are as much as I hate to admit it I think it’s part of who I am the internet.
Alejandro Cremades: Now Obviously as you were saying the internet you know became part of who you are so you had it clear So why did you go to duke to study history out of all things.
Howard Lerman: Well I you know history was a great major and don’t tell the duke professors this but it was the easiest by far I was a terrible student I I pretty much never went to class and I found now you know with chat gp history’s done forever. It’s hard to imagine how people are going to. Not write history papers using Ai um, but at the time I was able to cobble together enough papers to just pass barely while I could pursue other interests.
Alejandro Cremades: So there was say definitely 1 thing there talking about other interests that they involve sending people tips anonymously what was that.
Howard Lerman: You know I started my first company at Duke and it was I was 20 when we started it. This was back in you know, 99 or 2000 it was called just a tip.com it let you send your friends anonymous tips telling them about their annoying problems. It was really funny. It was tongue in Cheek. It was a joke. But you would get an email saying hey you knowlary you have someone is asked just to anonymously inform you that you have bad body odor or someone has asked this to anonymously inform you that your 2 pay is obvious we had all these precanned kind of tips this was ah at a time when you could sort of have a site like that go viral via email. And it did go viral and it ended up reaching millions and millions of people Jon Stewart sent 1 on the daily show which caused it to just absolutely explode and this again was in you know, twenty three years ago but it was for for us. We ended up selling the company. You know in in a matter of a year. It was really a good first taste into the world of business because we had a quick win. Ah.
Alejandro Cremades: and and I guess also a good first day taste that what it looks like you know at um, you know at building scaling and and exiting I mean the full cycle of a business I guess what kind of disability did that gave you.
Howard Lerman: Breath. Well at the time you don’t know you just think you know when you’re 1920 and you sell your company for a few hundred thousand dollars you think you know that’s just how it always is it wasn’t like I was looking at myself from the outside in thinking that wow. You know how lucky am I to be going through this experience right now to have had such a positive experience with selling to a great company meeting some great people that ended up being mentors later on frankly was very lucky and maybe luck is the theme that you’re going to hear from me over and over and over again because I do I do think that. You know I’ve just I’ve had certain lucky things happen which is which has made which has made us go. But you know at the time you didn’t realize how lucky that was and how unusual it was but it did happen and um, the other thing you learn is how little a couple hundred thousand few hundred thousand dollars is after you pay taxes and you’re. You know twenty you feel like you’re rich for a second and then it’s time to do something else.
Alejandro Cremades: And as they say lucky is preparation meets opportunity. So good stuff Now you know your case you know you saw the um, the full cycle of a business but rather than and obviously with that crazy traffic that you guys you know were able to experience with this company. But. You know what you did after this is is Interesting. You know which is you know the next business was really a consulting firm. So a consulting firm. You know is not that repeatable and scalable right? As you know what? you maybe had experience before. So Why? the consulting side of things.
Howard Lerman: Um, yeah.
Howard Lerman: You know what happened and we think about this a lot why we went down this route Nine Eleven happened you you have to think back to that time in the United States and yeah, we just sold. Our first company and when I say we I mean my cofounders Tom Dixon and Sean Mckaiseac who I still work with every day to this very day including through xtin at romem and then you know the twin towers went down and we were on the East Coast we were in you know the Dc area and it just. I don’t know why we did this but we just felt like it was the patriotic thing to do to you know use our consulting our technical abilities to sell consulting services and many of the people that we served were government agencies or you know contractors of government agencies serving ultimately serving. Government is the end and that you know is a twist of fate that I I think about a lot and we ended up having a good outcome there I wonder what would happen if we didn’t do that.
Alejandro Cremades: I mean selling you know a company for 7,000,000 boxes say not battle and outcome. How old were you my god I mean do you remember? what was the first thing that you did with all that money so young.
Howard Lerman: 24
Howard Lerman: I think I bought a security called auction rate securities which ended up being a illiquid cash substitute that thank goodness Citibank made us whole on. Ah.
Alejandro Cremades: Wow, that’s amazing. So so here you go now you know from ah the consulting side of things to you know now getting back on track with it building something that is repeatable and scalable now in this case, you know 1 thing led to the next you know you got started with.
Howard Lerman: You know I was pretty determined to keep going pretty much.
Howard Lerman: Yeah.
Alejandro Cremades: Gym ticket and ultimately gym ticket you know was like the immediate you know, ah kind of like a sequence of a venture or perhaps what led to creating what ended up being yes with a massive success. So Why so walk us Through. What was that journey like from starting with this company and and how do you all of a sudden you know like see yourself you know with? ye.
Howard Lerman: I think it’s important to think of yex kind of in two phases. The first phase was our media model phase the second phase was our saas model phase in the first phase which started with gymticket.com I had this idea to make a hotels dot com for health clubs. Yeah, and didn’t exist. This was 2006 so you know and what would be the business model for that. Well you know hotel sells the booking. Maybe we can sell leads to the gyms that was the idea I called the head of the the trade organization for gyms. This guy Rick Carro this place was called ursa. He partnered up with us. He was probably in his early sixty s I was you know 25 26 we just got going and he would help us find get access to the gyms and we would essentially find leads on the internet and then send them to the gyms and. Got to about 2000 gyms and we realized that you know when we got to a couple million of revenue that it didn’t scale. It didn’t scale to like you know much more and so we were faced with the choice. Do you go vertically or horizontally could you go deeper selling more to gyms or do you try to do the same thing you know more peanut butter to different. Verticals and it turned out that we we chose the the horizontal approach so we started doing the same thing we built a site called local vets.com and repeated that playbook and then did the same thing for chiropractors and then we did this over and over and over again and got to about 20 different verticals.
Howard Lerman: And about $20,000,000 of recurring not sorry, non-recurring media revenue because we were paid for performance by small businesses and we had a whole team of you know college kids right out of college cold calling small businesses selling leads. This was you know right? when the internet was. Really becoming mainstream and s and bs were stopped stopping. You know getting leads from the yellow pages because nobody was looking at print yellow pages. They were all looking on Google and Google Maps and so on and so we were able to offer really compelling value prop. But then that business hit a wall and so then what we did. Was we this is the crazy thing we did we sold that business the original business to iac interactivecorp and we incubated an entirely new company in the same cap table and a little complicated but we we actually did it in reverse order we we started this new company and then spun the old company out original company out sold it to iac. Use that capital to incubate power listings and here’s how power listings worked. You know it. It became obvious that the unit of local advertising and location-based stuff was going to be listings. Ah, you know that is a listing and it used to be in the yellow pages and now your digital listing is in Google it’s in. Apple it’s in Siri. It’s all these different places and so we built this cloud listing idea where you could upload. You know a company could upload its information into yext and we’d sync it across 100 different places that people looked to find a small business and that works so well.
Howard Lerman: It turned out that big companies started signing up for it and companies like you know all the way up to fortune 50 banks and fortune ah, you know fortune wall street banks and fortune 50 companies. Morgan Stanley Farmer’s insurance and they all wanted the same service that yaxt offered but for their. Many thousands of branch locations where Mcdonald’s has 12000 store locations and you can imagine the utility for them at scale of being able to upload all their location data and have it sync across every mapping service on the planet from one spot and that ended up just being a smash an absolute smash hit. And that and that business is what yex does today and is the leading provider of location data and listings to the biggest and most important mapping services in the world. So that you find the right mcdonald’s address or hours of operation when you go to look it up online.
Alejandro Cremades: And I mean obviously incredible success. But I guess say you know for for yet. What were the early days like you know what was that process of really putting that the team of of a players.
Howard Lerman: Very early days of Yaxt were characterized by just bloop Force I would suggest I mean literally we would you know I would bowl over marketing managers at Health clubs around the country. And get them to sign up for gym ticket. Ah you know I would we were just like heat seeking missiles that were hustling like crazy. Um, we had way more of a sales approach than we had a good product I will say that we had a great value prop pay only per leads. But we didn’t really make we didn’t invest in R and D to make something super defensible and super Awesome. We just were essentially arbitraging media and then building this network of Gems. Um.
Alejandro Cremades: So in that in that case too I mean you know for for this company. It was like your real experience at the super hyper growth like really raisingcing money to how did you guys go about raising money. How much capital did you raise prior to the ipo.
Howard Lerman: Yeah. Well look I mean I like to joke now I’ve been on all sides of this coin here and I’ve gone back to the first stage of the journey but look I’ve raised seed I’ve raised an a a b a c a d a growth an ipo a secondary a follow on. Ventured I mean you name it I’ve been there and at yext I think we if you were to total it up. We probably did 3 in the a and then this was back before you know an a round was now now an a round is 20000000 but back then an a round was 3000000 so we did you know 3000000 between a and b and then we did a. A $25000000 c a $50000000 d and then another 25 before we went public and then when you go public you put about 125000000 on the balance sheet we did. We did a follow on offering to add another 125 or so so yeah, we raised probably 20250 Somewhere in that range to 25.
Alejandro Cremades: 250,000,000 and when it came to really picking the right investors you know for the right reasons you know how was that process like I mean obviously at this point you know you were quite a seasun guy you know, even though very young. You know you had ah a few exits already you know under your belt.
Howard Lerman: Yeah, yeah.
Alejandro Cremades: So what was that process of making sure that you had the right people for the right reasons. So.
Howard Lerman: You know I think first off I mean everything has changed so much like if you look at the ecosystem today and 2023 versus what it was yeah the venture ecosystem was like back when I first got to know it in 2007 2008 2009. It’s totally different now you have all these. Solo capitalists that are out there that can throw half million million Two million dollar checks back you know and again I sound like I’m like a really old person here but back when I was doing this the for the first time twenty years ago it would there were really like I don’t know. 20 firms kind of that would do these and they were all they all kind of knew each other and they were all part of the same thing on sandhillroad in Silicon Valley 3000 sandho road specifically is where Sequoia is and ivp is Sutter Hill is on page mail road. Great I mean you have these. Benchmark and excel I mean there just wasn’t too many of them and you would hit them all and ah and you know for us the process. The process was actually and maybe we’re just again lucky here to use that word but we never really had to chase the money the money kind of always we did pretty. We would prefer to put up the results. Ajandro and and then have people come to us as opposed to like talk a big game and then you know, raise the money and then have to deliver I’ve I’ve always which by the way I think a lot of companies today are in trouble for having done that um you know for having raised money at super sky high valuations that are.
Howard Lerman: Fundamentally unsustainable and by the way the vcs are equally as guilty in making that happen because if you’re a first -time entrepreneur and someone shows up and you have 3000000 of Arr and they’re willing to invest in your company at 300000000 and put in 50000000 with no terms. You’d be an idiot to say no so ah, ah, there’s there are 2 parts of that problem that have happened there. Um, but the the game is completely different today than it was back back in 2000 and you know 2007 2008 just a completely different ballgame. You have all these different capital ah sources different types of funds classes of funds. And just an entire. They all have a totally different strategy than they did before too.
Alejandro Cremades: And I guess say for you guys, you know what? Ah what? an absolutely amazing experience with yxt I mean at what point do you realize that you know it’s time to to go public because I mean it’s a whole different ballgame where you are operating privately and you can move much faster. You don’t have the disclosure the reporting.
Howard Lerman: Yeah, yeah, yeah, well you know what we did was we brought in our cfo Steve Cakebred who is the cfo of Salesforce and was.
Alejandro Cremades: You know type of stuff you know at what point do you realize? hey maybe maybe we gotta we gotta go public here.
Howard Lerman: Cfo Pandora so he had taken 2 companies before yaxs public super experienced new wall street knew how to handle the banks knew how to handle investor relations do all the forecasting put in you know, real processes to become a real company I mean going public forces you to grow up. You. You have to have you know super. Concentrated ah you know, ah financials you you really good at forecasting. Um, you know it it forces you to behave in ah in a much more disciplined way than when you’re private now that comes with bad and good sides right? and the good side you become more predictable and you’re better and the bad side. You. You might be more focused on quarterly earnings instead of long-term success. Ah, if you’re not if you’re not careful that bad and people can get mad at r and d which doesn’t have a very you know short-term payoff. So um. Yeah, I’d say in 2014 when we hired Steve that was kind of the catalyst for getting getting out and going public which we did in 2017 it takes takes a couple years to get ready. You have to yeah yeah.
Alejandro Cremades: How Nerf How how nerve rocking was saying you know going on the Jet you know with the investment bankers. You know pitching people doing the whole pony show I mean how how was that experience too.
Howard Lerman: Well, you know the ipo roadshow is really ah, a unique thing. The banks. Their product is they put you on a private jet for two weeks and in return you get the privilege of flying around from city to city in the United States where each. Each day you do and I kid you not It’s starting at 8 am there’s a breakfast and there’s you know there’s a meeting every hour until lunch and then you do a lunch meeting and then there’s a meeting every hour until dinner and you do a dinner meeting and then you get in the plane and fly to the next city and so you end up doing probably ten pitches a day. Ah, with the bank that accompanies you over a two-week period. So you meet I’m guessing maybe between ninety you know, 80 to 100 investors over that time period and you just say the same thing over and over again you you have your your sort of dog and pony show in your pitch and by the end of the show you sort of get good at it. And you’ve been I guess rehearsing with your comrades in my case I had Steve with me and Jim Steele who was our president and head of sales and we were completing each other sentences. It was a trip to say the least and it culminates in a. And a crazy special day when you when you when you wake up and it’s time to ipo that day.
Alejandro Cremades: And now that you’re public you know is ah different ballgame I guess say for you as the experience. What was what what? what difference you know, did you encounter from you know, operating yta privately to then all of a sudden you know you’re the Ceo of a public company.
Howard Lerman: Yeah, well there, there’s a lot of differences but the first difference and I think this is the most important one is that when you meet with investor you have a new set of investors when you’re private your investors are all on your team. They are venture investors that. They’re going for depending on when they came in and valuation between a 3 and hundred x outcome and when you’re public the people that are buying that you’re meeting with. They may not be on your team because they’re allowed to short you so you don’t know if you’re. Talking to someone who is betting for you or betting against you and that is a really fundamental shift. That’s the first thing second thing is when you have venture investors they’re in it for at least 3 4 10 years in years when you’re public people can be in and out within a day. So you could be talking to traders not investors and you just have to learn to pretty much cut through the the noise to provide a signal that that these folks can use to do it. The other thing is that everything you do is is scrutinized. You know you’re talking to analysts that. Are modeling your business and have to give them clues and you have to be very accurate and very careful with what you say you can’t say anything that’s not correct.
Alejandro Cremades: So in your case I mean you’ve also had the opportunity of um of investing in other in other companies too As an investor you know, especially after you know yet, you know obviously you had daily liquidity. So I guess say in terms of investing in other companies.
Howard Lerman: Yeah, yeah.
Howard Lerman: Oh yeah, yeah.
Alejandro Cremades: What do you typically have experience as patterns between the people that succeed from the people that fail.
Howard Lerman: Well first off I need to just start this off by saying I am a terrible investor I am you know you you are much better in your audience. So don’t take anything I say as investing advice not for a legal reason. But for actual practical reason which is that I’m just not very good at it because I am a operator Alejandro I love to just get my hands on things and design things and go from 0 to 1 as opposed to you know, helping someone you know letting someone else do it so I actually have.
Alejandro Cremades: Right? right.
Howard Lerman: Learned this about myself so much so that I try to not invest in a lot of things because I just would be annoying to the founder and I don’t I don’t want to be too annoying because I you know I see things that they can do um and I and I don’t like it if investors that are in. You know my companies are telling me what to do? Yeah that’s just annoying so I’m not I’m not very good at this but it really I think comes down to the intersection of two things which would be the how good the founder is and how good the product or market fit is that’s it’s really that simple and I guess the third. Thing is ah is it is a lens on that which is the valuation. Are you gonna make money or not um and you know in the first thing I’m pretty good at judging the first thing and the second thing the third thing there’s professionals that are way smarter at me that that can judge that.
Alejandro Cremades: So in your case I mean what a run 15 years you know really pushing yet. You know that’s I mean 15 years in the startup world I mean in dark years I mean that’s like crazy crazy amount of time crazy amount of battles you know ups and downs. You know after you know like.
Howard Lerman: Yeah.
Alejandro Cremades: Bring the company to such heights. What really you know, brought you to the decision of you know, Maybe there’s something else that I should be doing here.
Howard Lerman: Ed yext over my time as as our founder or Ceo I always had to figure out how to grow and the way that you run a. 5 person company is totally different than a 20 person company and that’s totally different than a 50 person company and so on and so forth and you have to keep making adjustments to play a different game at each stage and do a different job and yes. Got under my leadership to about 15 about 1500 people somewhere in that range I at some point stopped being the best person to figure out how to lead a global company at scale and over by the way as. We grew in our first stages I was not shy or hesitant to replace people that were not growing correctly, you have to do it. It’s part of the journey when someone hits a wall or you know, kind of gets to their point of competence but the company needs more. You have no choice. But to replace them. It is the moral thing to do for both the company and for them and that person at some point about two years ago became me and so it became time to replace myself and so we did.
Alejandro Cremades: So. So What happened next.
Howard Lerman: Well I you know it was a discussion with the board and you know I think we were struggling in certain ways and I was trying and you know I was swinging everything I could possibly swing in every possible direction and it just became. Time for there to be a new person for me to pass the torch to and fortunately on our board. We had someone that was awesome and willing I don’t think we would have you know I think we sort of again luck is a recurring theme here and ah I think we kind of lucked out with with having Michael both. Present up to date and available so that you know when we started to make this discussion. We we decided that he would be the right guy and and we did it and I don’t look back at all and think that it was a mistake or. I don’t miss it at all I I feel like I fully gave and lived every possible moment that I could have and did everything I could to make the company great and part of that final thing was finding my successor every company has to outgrow its founder.
Alejandro Cremades: Yeah, now now in your case you know I mean 15 years is a long time. So what was that discovery process for you to really understand what will be the next chapter in your journey.
Howard Lerman: Well, you know I was like everybody else we went to zoom in slack during the pandemic and I was setting up a Zoom call one day and you know when you’re running a big company I was doing it with about 100 people and I forgot to add someone to the calendar invite and so at that moment. Was like shit if you forget to add someone to a counter invite a distributed company. They don’t exist. They’re a non personson so I had this flash ofs insight let’s make a bird’s eye view of all the people in the company you know meeting you can see everyone. It’s kind of like if you know Harry Potter like a marauders map for the company and that. Spark of insight gave me the idea for Rome which I am now leading today.
Alejandro Cremades: So at what point do you? Obviously you got the idea there. But at what point obviously you know I’m sure that you looked into this and you had that process for really figuring out whether is it was gonna be worthwhile or not so at all point there you like okay I’m gonna go for this one.
Howard Lerman: You know everyone’s advice after a fifteen and a half year journey where you know we we’ve achieved immodest financial success ah was don’t jump into anything take your time. Take some time off take it six months off a year off go on a journey of self-discovery enjoy this break and like a total knucklehead I completely ignored that advice and literally started Rome the next day.
Alejandro Cremades: Wow! So I guess say for the people that are listening. You know to really get it. What ended up being Rome and how do you guys make money.
Howard Lerman: Rome is a cloud headquarters for distributed teams and just to take a step back. You know I was telling you about the Zoom call where you know the person got lost in the ether we made this sort of bird’s eye view or had this idea for a bird’s eye view and. You know, right now in the world. There’s all this debate about the future of work and whether the future of work is going to be in the office or hybrid or remote or something else or some combination and frankly we at rome think it’s entirely the wrong question. Um, because. Ah, hundred percent of companies that are successful become distributed I’ll give you an example yes had offices from Berlin to Beijing. The best salespeople are always with customers. The best product managers are always with customers and engineers and the best engineers get to work and can work productively from wherever they want. And so you know during the pandemic companies really adopted Zoom to help them stay connected and Zoom in teams Microsoft teams and Zoom did a great job. They were the first company to really solve the video conferencing technology problem remember video conferencing before Zoom was off. And Zoom really helped us stay connected but it didn’t bring people together in the same way as if they were in the same real office and furthermore we’ve all kind of adapted our workflow around so now and so if you look at you know a calendar. It’s all full of meetings people have.
Howard Lerman: You know these long big boring meetings all day with too many people back-to- back. The meetings are too long things that used to take 2 people 5 minutes are being scheduled for Zoom calls next week with 8 people. There’s people that go to an office that drive to an office every day and they they sit on back-to- back-to-back Zoom calls. After they’ve driven to the office and so you know what separates I think what’s clear is that video conferencing technology is not a replacement for an office and bureaucracy has ah you know grown to the point where productivity is stalling in these distributed teams and so you know what makes. Video conferencing different than ah you know in this new distributed work world from a real office is a concept I call synchronous presence in real office. You can walk in and you get a feeling for who’s there and you can see who’s present and you can. Ah. You know taps them on the shoulder of inspiration strikes to have a quick conversation and and that in a in a remote or distributed world is all lost it’s lost in a world it’s all missing in a world from videoconferencing. Um, and so what we need to get back to is a world in which. The workflow is one where distributed companies can be distributed but still work together as if they were in 1 headquarters and that’s our mission at Rome to bring a whole company together in the cloud headquarters from anywhere as if people were working together.
Howard Lerman: In real life and we just started it like I said we started building it a little while ago and we only made it in our private beta two months ago and it has exploded um and we’re just really trying to hang on to support the customers we have while we implement the features that they demand. Um.
Alejandro Cremades: That’s amazing I mean absolutely you know very much needed and it sounds like you guys have hit a nerve there now in your case you know Obviously you know this point you had done very well for yourself, you know, especially you know, given the prior ventures. Why did you take money from outside investors here.
Howard Lerman: Well, you know I thought a lot about that I talked to Mark Benioff’s people about that for a while I I did by the way this wasn’t publicly reported. But I also did put in 12,000,000 of my own money into the company and I thought about. Funding the whole thing and the reason I didn’t was because there’s a chinese proverb old chinese proverb if you want to go fast. Go alone if you want to go fargo together and one of the things that was fortunate is that given that I’ve been on the other side here and I’m coming back around. I kind of got to pick the people I wanted to go on with and so in our cap table. We’ve got juules from ivp who you know I worked with a y for 12 years and fifty five Five Five incredible entrepreneurs that have been my friends for. Ah, decade and so to be able to call on guys like that when you need them and be able to get introductions or help or product feedback. You know when you need it, you know as opposed to just keeping it all for myself. I’m not trying to make something that I just you know that’s like Howard’s fun house that I own. You know, just for the sake of having a fun house I’m trying to make we’re trying to make it. You know a company and a company has multiple stakeholders and multiple people and lots of people involved and so it just you you want to go you want to go far here and you want to do it with other people.
Alejandro Cremades: I love that now as you’re thinking about going far and also what the future holds here for Roman and for the team you know if you could go to sleep tonight and you wake up in a world where the vision of rome is fully realized what does that world look like.
Howard Lerman: Yeah.
Howard Lerman: Um, we want to build the default h queue for every company on the planet big and small and we want everyone to log everyone when they when they’re ready to go to work whether they’re in the office or they’re remote or they’re somewhere else they log on and they’re in Rome. And they see a visual representation of a company’s headquarters and they can see from a glance who’s there they can ad hoc tap people if they want to talk to them when inspiration strikes and if they want to. Leave their company building. They can jump and visit another company and see that company’s Hq we have this big vision for building a way for every company to have an Hq and today we have. You know, certain types of rooms but we we intend to add you know all kinds of new rooms to to Rome.
Alejandro Cremades: That’s incredible now we’re talking here about the future. So let’s take a look at the past and be able to reflect on it. You know, let’s say I was to put you into a time machine and I’m able to bring you back in time back in time to that moment that you know you were still you know at Duke you know.
Howard Lerman: Yeah.
Alejandro Cremades: Doing your first gig you know, figuring things out you know building your first business imagine if you had the opportunity of having a chat with that younger Howard and being able to give that younger Howard 1 piece of advice before launching that first business. What would that be on why giving what you know now. Yeah.
Howard Lerman: I would say focus make sure you focus on your existing customers more than new customer acquisition I know that’s I know that’s um that’s not like insightful and Buddha and you know Mr Miyagi or whatever.
Alejandro Cremades: Can you expand a little bit on that.
Howard Lerman: Yoda I I really just was always in such a rush to grow the top line as fast as possible when I was you know, starting early days of x and everything else and you want to make sure you have the product right before you sell something people don’t need. And net retention is the most important metric in any business.
Alejandro Cremades: Yeah, 1000% well Whoward this was this has been I mean imagine imagine that’ll be absolutely unbelievable now for the people that are listening homeward that will love to reach out and say hi. What is the best way for them to do so.
Howard Lerman: I hope I hope I can get a thousand percent never retention.
Howard Lerman: Well, you can do you can find me on Twitter at Howard I’m on og Twitter handle. Ah you can find me by the way. Rome is at Rome if you want to check out Rome and you can always email me H At R O Dot a m.
Alejandro Cremades: Amazing. Well hey Howard thank you so much for being on the deal maker show. It has been an honor to have you with us today.
Howard Lerman: Um, thank you.
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The post Howard Lerman On His Last Company Being Valued At $1 Billion And Raising $50 Million To Design The Future Of Work appeared first on Alejandro Cremades.
Sacha Michaud has not only been involved in the birth of several startups but has ended up seeing them go public as well. His latest venture, Glovo, has attracted funding from top-tier investors like GR Capital, Lugard Road Capital, Drake Enterprises, and Delivery Hero.
In this episode, you will learn:
- Leading a public versus private company
- Scalability
- Successfully integrating companies in M&A
Alejandro Cremades · EP 563 Sacha Michaud On Cofounding A Business Of 4K Employees That Just Sold For $2.6BSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Sacha Michaud:Sacha Michaud is an English entrepreneur with more than 15 years of experience in the online sector in Spain and extensive experience in creating successful companies.
In 1997, Michaud founded the company LatinRed, one of the largest providers of internet services in Spanish, and then sold it to StarMedia two years later.
During his career, he has founded several companies, including Inlander, which was sold in 2000; Binaria, a successful digital communication agency; and Transword, an online translation company.
Toward the end of 2014, after nine years leading the Betfair Iberia team, he joined up with Oscar Pierre to create Glovo.
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Read the Full Transcription of the Interview:Alejandro Cremades: Hello everyone and welcome to the deal maker show I’m super excited about the guests that we have today I mean he’s absolutely incredible. You know the amount of companies that he’s built. You know what he’s doing right now. I think that we’re gonna be learning quite a bit you know on what he is up to and then also I think that you’re all going to find it super inspiring so without further ado. Let’s welcome our guest today Sasha Misot welcome to the show how you doing so originally born in London.
Sacha Michaud: Um, a thanks Aleandra for the invite. Great.
Alejandro Cremades: But you know obviously your your parents you know, different nationalities and you know you also traveled quite a bit growing up. So how was life you know, growing up, give us a little of a walk through memory lane.
Sacha Michaud: Yeah I mean I’ve got you know, very fond memories of my childhood I’ve been very very lucky. Um as you said, um I was born in London um canadian father english mother. Um I lived there until I was about 6 um. My parents actually split up and my mother who’s the english one actually decided to to take my sister and me over to Canada and lived in Vancouver for about a year my mom was a bit a very young but lot of get up and go um and we ended up moving down to Mexico lived in Mexico lived in Guatemala. Great experience. Got amazing memories I learned learned spanish obviously um although I forgot it all when I went back to the Uk until I came back to Spain but that’s another story. So yeah, a lot of freedom I also spend a little bit of time in Greece switzerland so traveled quite a lot as ah as ah as a child which is a great experience. not that structured um not that um you know I was never pushed on school results and things that I always did enough. Um, but I had just you know doing a lot of things never at home doing a lot of sports getting up to mischief so I had a great great childhood, very free.
Alejandro Cremades: Now now in your case too. I mean when you travel so much and being so young I mean is every time you you jump to a new place. It’s like new friends I mean obviously back then we didn’t leave in the connected world that we’re living in today. So I’m sure that moving so much also created quite a bit of uncertainty. So What do you think you know you really learned you know from that experience of um of having to start over you know over and over and over again.
Sacha Michaud: Yeah, i’t thought about it a little bit like that. But yeah, um, to be um I mean for example, you know, um, fast forward when I moved to bar suon I actually met my wife who’s still my wife today a long time ago but and her her you know she’s been a bar on all her life and actually the rel relation she has to long term friends is um believe she’s got friends that she’s had. You know for forty years and and um and it done I and probably haven’t had a lot of that because I been was moving around a bit so I suppose it goes and certainly I’ve never felt that I felt the positive side of adventure. But um, but it does make you all sufficient right? Um because you can’t really rely on stability and things like that. Um I suppose um I am.
Alejandro Cremades: I mean I’m sure that that help you you know to deal with uncertainty later on you know in life you know, look at you. You’re an entrepreneur entrepreneur. So I guess the um you know one thing that comes to mind here is when you turn 16 you know, obviously 1 thing let to the next and and you leave home.
Sacha Michaud: Thought about it that deeply.
Alejandro Cremades: You know, quite early quite young. So what trigger that.
Sacha Michaud: Yeah, as I said earlier I mean I was doing a lot of sports. Um I was probably one of the smallest kids in the class and everyone kept telling me. You should be a jockey um, and so I started you know to learn to ride a little bit at 14 to be honest horse riding and. You know race horse jockey are very different The only thing similar is there’s a horse underneath but actually so I just started getting familiar with horses and luckily my grandfather um knew a race horse trainer and he just said you know when when he’s 16 give me a call and he’d come so I went there when I was 16 and and started you know. And the beginning you know, cleaning cleaning horse boxes groom then you start you know training the horses and then you start racing. Um, it happens all very quickly. Um I was the right size and and I started racing I raced for about four four and a half years three years in the Uk and then I and then I was lucky. It did the opportunity to go and race in the us. ah for a year I was in East Coast um New Jersey meadowlands um ah and then I went down to um Arkansas and Oakland Park um and then ah then I went back to Monmouth Park and I also spent a little bit of time in Belmont very cold 2 Christmas.
Alejandro Cremades: So I guess e.
Sacha Michaud: And minus five galloping horses round bellbone park I can tell you that was.
Alejandro Cremades: My god I know the feeling I know the feeling of dealing with without weather. So um, you know what 1 1 thing that I wanted to ask you here. Is you know here you are a jocky you got that competitiveness. Um. I’m sure you love that you know the the adrenaline of of 1 those doors would open and you would just go like super fast but the um you know one thing that happened for you is that you transitioned you transitioned into programming I mean it’s such um, you know quite ah quite a big difference now from one to the other. So. How do you You know, really encounter the world of computers and what caught your attention and why do you think What did you think at that point it made sense to to switch careers. 5.
Sacha Michaud: Yes, I mean it sort of happened organically I don’t you know the bright right? place at the right time sort of thing. Um, my mother was living in Barcelona um I was in in East Coast of the us and I flew over to spend a few weeks in Boston and I fell in love with the city. Um, it was around when the olympics were happening then there’s a real buzz. Um I hadn’t really been to school I hadn’t really you know and I was sort of doubting. You know she’ go back to the us and continue riding she’ go back to the sort of and I decided to you know take a year off to spend there and I said what am I going to do because there’s no horse racing here and you know I have to go to trade so I thought well I’ll learn you know I think. Computer program. He’s got a great future I’m sure I’ll always be able to find work if I do and um so you know went enrolled in a course learn to computer program. Got a job fairly quickly and um, yeah and I was working for a company then I joined another company actually ended up working for a bank. Um, this computer programmer. Ah, brazilian bank. Actually you can no longer hear banggaoo. But as very big, still still huge um and running their computer systems and then and then this thing will be no, the internet came along around mid 90 s um and I said wow this is incredible. You mean you can send files across the world and you can answer emails and you know and um. And I so you know so I just set up a little company that was um, you know, building websites and and then and then that right into a hosting company where we’re doing you know managing a lot of servers and lot of domains for for companies and corporations’s got a great name called seviatorris.com in spanish and.
Alejandro Cremades: Know that in in in that case too is something interesting because you go from the web development you know agency consulting you know, which is you know building something that is not repeatable and scalable to now you know you’re you’re building this thing you know like you were saying the web hosting company that.
Sacha Michaud: And.
Alejandro Cremades: Ended up getting acquired. Um you know for for an ice price tack. You know for eighteen million bucks and I guess you know the the question here that comes to mind is this is the first time that you gained access to to the full cycle of a business. You know from building it to scaling it to you know selling it. So what kind of clarity did that give you on the cycles of a business.
Sacha Michaud: Yeah I mean that’s that’s exactly the good point I mean you know we’re building websites and and basic the scalability of my first company depend on how many people I had in the company which is not very scalable right? But at the same time these companies were asking us to host their websites and that is super scale it because you end up putting in a so server and when you. Instant when you go to sleep at night. You’re still billing um and and then what derived from that and actually the company we sold for $18000000 at the time was was actually um, a services portal company which had you know we started off with ah pretty much a copy of Hotmail in spanish called latin mail we built a chat service. Build a search engine and our reference at the time and many of the younger viewers probably won’t know this but Yahoo at the time was the star. It was you know the Google of its day and and it was it was a spanish version of of Yahoo to say it’s a very community building and we end up growing. We were the largest spanish- speaking portal in the world. The time we had I think close to 18000000 active customers in the late 90 s is quite a lot. It doesn’t seem very much today. Um, and we we end up being acquired by a competitor which is a New York based company called star media in the same business as us. The main difference. They had a lot of money and we had all the traffic.
Sacha Michaud: And we were quite just before we went public and we actually went public with star media and the Nasdaq um, and people don’t know this but in those days this is may 1999 star media was actually the company pre ipo who’d received the most amount of capital at the time full stop and in those days it was $90000000 that seems like nothing but um, interesting story star media end up being acquired by by France Telecom and their internet unit in those days which was called oneanado um, and I end up joining them after that, but it was a good ride and it was um, you know it was an amazing growth. Period. Um, and and as you said.
Alejandro Cremades: Now.
Sacha Michaud: It was scaling very quickly and we were actually doing fundraising the us we weren’t intending to be sold and and star media gave us a call and and offered toquire the business. It was very important for them to qui pre Ipo Um, and it sort of worked out very quickly.
Alejandro Cremades: Very nice now you know as that you say once an entrepreneur entrepreneur always an entrepreneur entrepreneur but in your case you know once this company got acquired. It took you 15 years to go out it again. You know like because you worked that they want I do you were that the bitd fair I mean obviously I’m sure that you gain you know several skills. But. Why did it take you so long to start your next company.
Sacha Michaud: Um, well I was ah we were when when when France telecom now orange acquired the business. Um I think I stayed there a couple of years or year eighteen months I had a big team I wasgrading I was doing a few interesting things within the group and I was generally enjoying myself. Um, but at the end I really wanted to do something else and funnily enough bet fair which in its day was fairly revolutionizing in in sports betting they they invented what was the betting exchange which is actually instead of betting against the house. You’d bet against other other users which was quite unique and amazing. And I was a big fan in the distance and obviously with my horse race and background and technology I understood the betting industry really well and I understood um obviously tech and and um, somebody reached out to me obviously somebody spoke about me that I um and we just started talking. They were just expanding internationally with ah in the Uk and. And I and I remember saying to Vicki I said you know I think this is going to be a great fun thing for me to do for a couple of years until I know what I want to do and I ended up staying there 9 years and and met some really really talented people. I had a great time. I was also very much product tech person until then now suddenly I was building a commercial business much on the other side of things. Managing marketing spend managing. Um so I learned quite a lot there. Um, and you know the guy who hired me a guy called Neil Walt Amazing 1 of the best guys I ever worked with ended up leaving a little bit earlier and he ended up running uber’s international business. So basically when the uber decided to move out of the us he was the guy.
Sacha Michaud: Launched I don’t know hundreds of countries or thousands of cities and he ended up leaving and then in the end he became when I when I could he became law chairman and he really was institutionalized in in building the the playbooks to help us grow so quickly certainly the last five years um so you know cause effect I mean. Um, you know I’m sure if Neil hadn’t joined us. We would have been different place and I was lucky in Depthford that he actually hired me. But yeah.
Alejandro Cremades: So then how how how they then because obviously after like 15 years like working you know you’re 9 to 5 You know you turn the light off you go back home. You know you get you get comfortable. You know so so at what point does the idea of global you know, come knocking and and why did you decided.
Sacha Michaud: Um, yeah I think you do get comfortable. That’s fair I’m definitely a knife 9 to five I mean I’m really passionate about what I do I don’t I don’t think it’s actually about starting a young company I’m you know I’m passionate about doing things for other people as well. So I think it’s um.
Alejandro Cremades: To go for it.
Sacha Michaud: I think it just came to time you know I mean where I could have stayed in the gaming industry. Um Beford offered your role in in Dublin I said you know I’m not interested in a moon to Dublin and probably being in this big corporation that we’d we’d become huge right? We’d gone public as well. Um, and I thought I was at the age where really you know I should be. Starting to do something else of my own otherwise I think you you do get too comfortable. Um, and I thought you should you know why stay in the gaming and is that so easy. Um, why don’t you do something different and I think you know there was also this. Theme then in those days as we talk about it less but it was this sharing economy things in these companies like airbnb’s the ubers. You know all this thing about using resources and and turning into normal. You know, sharing your your flat putting a renting a room out um, sharing your car. There’s this whole movement around sharing economy and I started getting really involved with that getting excited and I think I think uber was was my reference of what they were doing with ridehailing how they disrupted it with technology and and you know they’d be amazing to do an uber of things was the thing I started talking a little bit about. So I left betfare sort of the summer of 14 and 2014 ands found a couple of investors told them my idea look and started pushing it. Um, this idea very quickly I ran in to Oscar who’s who’s.
Sacha Michaud: Came who was coming back from the Us. He’d been studying there in Georgia Tech and he had pretty much a very similar idea he was a bit more Advanced. He was actually you know he’d already had a had a sort of name and he he was actually closing ah his his precede. And we met and I said hey why don’t Why don’t we join force and I’ll join your project and let’s do this together and and luckily you know he was all for that And so yeah.
Alejandro Cremades: And the rest was history. There is was history now what were the early days of global like because at the beginning you guys didn’t have a lot of money.
Sacha Michaud: No I think the the the preced was around 100 k I think we end up doing 140 k um euros and we launched we hired you know a very small team barr junior and for me, it was tough because I’d been in senior roles. So generally my my reports were quite. Senior so I was a good learning curve for me as well. Um, and we we grew Organically we launched in Barcelona then very quickly. We decided to launch Madrid but we didn’t have money to spend on marketing so it was pretty much you know some very clever Pr and getting noise out there but just organically we so we were growing. Um. You know, obviously not the speed you do with a fullyfledged company but we we were growing around and then and that gives you the feeling you’re onto something you know when something just grows and people you know I I received so many emails um with with hardy any orders from people saying what a great idea. The service actually works. It’s amazing then I probably received with millions and millions of transactions in betfare. 9 years are progressive more than six months in global um and just we knew we’re on something and there was ah and there was a attract and and quickly we became a buzz um company within the tech ecosystem in Spain which is quite relatively bigger now but was very small people were talking about us. This hot startup in barsonon and that really helped and we quickly did um, pretty much by the end of the summer um 2015 um, we closed what was the seed round for quite a ah lot more like around 2,000,000.
Sacha Michaud: Um, a big jump and that really allowed us to scale. We quickly went to more cities in Spain italy Southern Europe
Alejandro Cremades: And we’ll talk about the financing in just a little bit I guess for the people that are listening to really get it. What ended up being the business model of global. How did you guys make money there.
Sacha Michaud: Well, the first year and a half we had global 1.0 which was pretty much there wasn’t a solid business model behind it. It was much more um, granite was basic. You could order whatever you want, you’d have a but 2 buttons in the app basically would we’d go to any any store or restaurant in your city. Tell us what you wanted. We’d go there. The courier had ah had a credit card who’d pay very manual pick up the goods and take it um or you could actually send or or deliver anything in the city. Maybe keys any you know document from your and not very scalable very manual. But very wow. No very imagine you can send somebody to that your your favorite shop mar and pick something up for you that was like wow moment. But um, also you know we’d pay the couriers fixed fee sort of um ah per delivery. Um, we charge the customer as well. A very high delivery fee of five Euros so not very scalable mass wise is a big um and we weren’t working with any of the stores or restaurants. We’d have a commission model move ahead pretty much a year and a half later global 2.0 which is probably the business model the base of it today which is a lot more scalable a lot more automatic is that’s close agreements with. With stores and restaurants they pay commission. We can use that commission to lower the delivery fee for the customer becomes a lot more widespread that more people can afford the service because if you you know cost you one euro 1 eu ninety um and and then there’s a scalable business model. Um.
Sacha Michaud: There were with economics begin to work and then you offset the courier costs and the objective obviously is to make you know a little bit on every order covering the courier’s costs and using the commission and the delivery fee to offset that and that’s probably the the business model per se and since then um. You know we’ve done over 500,000,000 orders in the last eight years
Alejandro Cremades: That’s pretty nice. That’s a lot of others that’s a lot of other sasha. So I guess the um you know question here is obviously you know to to scale something like this I mean it requires a lot of money now I Guess the question here is how much capital have you guys raised to date prior to the acquisition.
Sacha Michaud: Yeah, we I think we raised close to you know 900,000,000? Um euros all in all I mean it’s very you know capital intensive business we’re in it seems like a lot of money. But if you look at every single one of our competitors. They had a lot more money. In fact, was you know. David versus Goliath and you know we had big companies coming to Spain and spending a lot of money to try and take leadership and it was It’s been tough. So um, so from a fundraising perspective as as far as seems a lot and and there’s a lot of money but in our industry it’s actually not that much. Um, compared to another uber eats I mean even deliveroo. Um, you know on companies like doordash where you can. You can look at the histories of their their finances. It’s been um, a lot of I think cabin intensive growth but but fighting off some gigantic companies.
Alejandro Cremades: Now.
Sacha Michaud: And I think we’ve done you know we’re in 25 markets today and um, we’re pretty much leader in in most of those so it shows that we’ve managed to fight them off.
Alejandro Cremades: And how was the journey of of racing you know the 900000000 because you know being in Spain the market is perhaps not as developed as’s the us and maybe the funds they’re not as big so this is a lot of money. So how was the journey. You know of raising this money and going from one cycle to the next.
Sacha Michaud: Um, I think that there’s a few things that were a little bit stacked against us. Um I think we’re a little bit later in fundraising than than most our competitors. So it meant that they were already pushing hard in markets where we were competing with with more capital than us and investors. So that’s high risk as in can this you know smaller startup from Barcelona um, could they compete will they have enough capital to compete are they going to be 1 of the winners. There was a feeling is a bit of a winner’s take old market or certainly winners take all market and if you left and third we just. In my opinion very correct I think there’s a lot of advantage in our his network effects that leadership or co-leadership or being one of the the major players doesn’t leave much room for um so there was a doubt and fundraising was really difficult for us which which you know I mean I remember 1 round I think was the series c I mean we had you know 110? No’s until 1 vc said yes and decided to lead the round. Um, and we’ve and we’ve had rounds where actually we’ve had to put money ourselves into that was that we’re very late and we’ve had to actually finance to make sure you know they.
Alejandro Cremades: E.
Sacha Michaud: People’s pay tips could have been paid so it was tough. It doesn’t seem like it from the outside is and also I think it’s less so today but in then there would be no major startup scale up, you know, unicorns out of Spain at the time so it was there was a certain thing. Was a bit of that we got that from a couple of investors and you know there hasn’t been anything major out of Spain. You think you can really compete on the world scale and we were because we were trying to compete the european level. Um Eastern Europe Latin America so we had a very wide geographical span. Um.
Alejandro Cremades: And for.
Sacha Michaud: And it made a positive side of that we had to do more with less right? We had less access to capital. So we really had to do more with less resources. So I think it made us internally a better company.
Alejandro Cremades: And definitely more effective. So I Guess the um, the question here is for the people that are listening to really get an idea on the scope and size I mean you are alluding to it with a 500000000 orders Anything else that you can share in terms of scope and size perhaps like number of employees or anything else that you feel comfortable sharing.
Sacha Michaud: Yeah I think we’re close to 4000 employees a little bit over worldwide when again I said when 25 countries when very different geographical when we was where he started which is Southern Europe we’re in eastern europe that’s Poland or the baltic region. Um, we also covered a lot of the ex so in countries Georgia Kazakhstan kyrykistan Ukraine ukrainein’s an interesting story how we had to close down the business when the war started and actually the local authorities reached out for us to reopen. Um, and now it’s pretty much 80% um, close to where we were pre and the team there’s amazing. Just an example to everyone. Um, and and we’re in Africa when 7 countries in Africa meanwhile we’ve we’ve actually sold our business in Latin America we wanted to really focus this side of the atlantic and double down There’s a strong competition there. A lot of players. We had the opportunity to leave and it was a very good very good agreement so so we’re very very very different parts of the world. Very different economics culturally language. Um, so yeah, we’ve we’ve grown and um. You know, really happy on the team. We. We give a lot of local um leadership to the teams we’re we’re a global business but very locally run. Um, you know the strategy in in sub-saharan Africa is not going to be the same in in the Mediterranean region or obviously Eastern Europe the the goto markete often changes.
Sacha Michaud: Media we use. What’s effective how operations work. Um.
Alejandro Cremades: So it sounds like things say you know we’re heading in the right direction. So at what point does the acquisition of the liberal. You know come to mind and and why did you guys decide that was the best route to follow.
Sacha Michaud: Um, but deliver hero. Um, it was was an investor us for a number of years. Um, important investor we. We knew that you know they were on a board. We we have we knew who them they know the business. Um and it just seemed the right right thing to do. We were covering. Geographies and that they weren’t covering. Um I think we feel and and felt that you know they’re going to be 1 of the winners in this in this space. Um, they give a lot of our autonomy to the to local brands deliver here at the end of today’s an umbrella brand for a number of different brands worldwide. Um. They they let you know the teams run the business. Um and it just seemed um you know it seemed the right thing to do. Um I’ve been a couple of publicly traded companies. It’s it’s quite romantic but at the end of the day you know it’s a lot of reporting a lot of change of focus. Ah, your number is not going a quarter. It’s going to be public. It changes the dynamics of company. Um, you know I think it’s a bit of an ego trip taking public but actually once you’re there. Um, so you know just seemed to work and um and we decided to kick on with that I’m very glad.
Alejandro Cremades: Nice and they were the terms of the transaction disclosed. So what were what were those terms two point three billion good stuff now the integration of something like this is not easy.
Sacha Michaud: Very happy.
Sacha Michaud: Um, yes, they were turn. Yeah, two point three million yeah yeah
Alejandro Cremades: Right? Because there’s different cultures. You know, different things that need to blend together and and as they say most acquisitions fail. So what you know are some of the things that you’ve learned about effective integration.
Sacha Michaud: Well, when our case it was quite easy. We already knew the Ceo the Ceo had a lot of admiration from them. They were not board. So so that part of it. Also again I mentioned there’s not necessarily integration. They leave the companies quite independent. So actually. Pretty much from the operational perspective. Not that much has changed um except we don’t have to do fundraising anymore which is great one and and there’s a guarantee in the project now. So I think that sense I think now if you look from from from our acquisition or mightus.
Alejandro Cremades: That’s nice.
Sacha Michaud: Or acquisition perspective. Yes, that generates. It’s difficult it’s difficult to keep um, founders um, interested align culturally, it’s it’s one of the big big things. Some companies I don’t think there’s a magic wand here I’ve seen companies who don’t really care that they’re going to acquire the business and have a plan. Make sure that business works well within their organization and there’s others who actually try and keep the the founders and the management team super so we don’t lose that and and they can have their independence I think to achieve the second you really have to allow um, acquired companies to to remain. Independent and make their decisions. Um, you know I sense and I’m not don’t know much about the insides running but I get the sense that you know what’s up to a certain extent. Um, you know within Facebook or Meta Now has been pretty much left independent and um and there’s a massive company and and I wonder if they ever. You know, try to integrate that with Facebook messaging at the time and try to integrate it within their core things probably would have killed it and I don’t know I mean I don’t know how that the history around there. But that’s a good example of of ah of a company using a massive asset and leaving it independent and you could probably say the same about.
Alejandro Cremades: Now.
Sacha Michaud: Um, Google’s acquisition of Youtube and how they just kept. It has um I believe a lot in that um of of you know, allowing if if you know if a team’s doing a great job or keep them motivated and and let them continue building something you can bring value. Back to your business at some point later on.
Alejandro Cremades: So such how you’re a pro and when it comes to entrepreneurship I mean you being you’ve been at it for a while right? I mean you’ve been at it since since 95 I mean incredible. The amount of battles that you’ve had you know the amount of successes the amount. Ah the amount of.
Sacha Michaud: Well I’m getting older. So.
Alejandro Cremades: You know failures which I guess you know I don’t call them failures I call them. You know lessons learned and then if I was to give you the opportunity of getting into a time machine and going back in time and going back in time Maybe to 95 you know where you were like you know what? I’m going to start something on my own and. Being able to have a chat with your younger self and being able to give that younger satcha one piece of advice before launching a business. What would that be and why given what you know now.
Sacha Michaud: Um, I think 1 thing that has always served me very very well and I’ve been very lucky and I don’t know how but it’s not science behind this but I’m pretty good at choosing. Um you know, partners and and and you know. And people to do that and I think you know a you know I wouldn’t do things alone. You need compensation. You need diversity I mean you know it’s a roller coast. They’re building ah a company. It’s difficult enough to make it successful but but also the longer it is you have ups and downs and it’s great to do this with with super talented people and I’ve been lucky from. From the beginnings from latin red um you know and then obviously with Oscar now. Amazing guy superstar. Um I think you know surround yourself with super taanted people who are better than you who compensate your your strengths. Um, you know don’t have too many people the same you know. Tip of 1 you know extrovert or get an introvert or if you’re super detailed. We’ll get somebody who thinks hired Devil um, people compensate to each other’s quite well. Um, surround yourself with good partners. Um, and you know people that you that you admire and you want to have ah you know they don’t know you work with. But. Enjoy having a drink with you enjoy passing time together and inspire you um, that’s probably been my trade and and again I don’t know why but I think that’s probably my my biggest asset that I I can identify really trying to people and and work with them and you know, ah, they’ll definitely advise that.
Sacha Michaud: That’s my I think do things with a good team and and you know.
Alejandro Cremades: I Love it So sasha for the people that are listening that I would love to you know, reach out and say hello. What is the best way for them to do so.
Sacha Michaud: Yeah I mean I’m on Twitter and that’s probably the best way. Really easy to find me I’m super accessible. Love love talking to people. Um, you know there’s so many things happening in the tech space. It’s just amazing. Um, how would you know with technology. We’re really making people’s lives um, better people have more time to do you know people? sometimes forget. We have this conversation other day you know, but there there’s a bit of bit this text consuming us and we’re connected to me times. But but we all forget that you couldn’t used to be able to you know, get a flight on our Thursday night and then work. Remotely from your house or or answer emails at the airport and and you know people have a lot more free time thanks to technology or they can work from different places thanks to technology that sometimes we want I cake and eat it and technology has given so many people so much flexibility of movement and um.
Alejandro Cremades: Absolutely.
Sacha Michaud: You know my grandparents go to one country a year um you know my parents go to a few more but now I mean you know our team you know thirty year olds are going to 10 countries and working from there and then coming back to the office like you know we should um, embrace technology and for the good things it does.
Alejandro Cremades: The digital nomads. No kidding no kidding satsha. So I just have to say thank you? So so much for being on the show here with us today. It has been a a real honor such a tool to have you with us today. Thank you? so so much
Sacha Michaud: It’s not all good. Most of it is.
Sacha Michaud: Thank you Alejandro good speaking to you.
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Nikita Shamgunov built a $100M revenue company, before joining Khosla Ventures to invest in other startups. Now he is going at it again, with a new tech startup that has raised $54M in just 16 months. The company, SingleStore, has attracted funding from top-tier investors like Prosperity7, Hewlett Packard Enterprise (HPE), Dell Technologies Capital, and Insight Partners.
In this episode, you will learn:
- Launching versus incubating startups
- Creating category winners
- His top advice when launching a business
Alejandro Cremades · EP 562 Nikita Shamgunov On Building A $1B Business And Now Raising $54 MillionSUBSCRIBE ON:
iTunesGoogle PlayStitcherTuneInRSSSoundCloudSpotify For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
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Your email address is 100% safe from spam!About Nikita Shamgunov:Nikita is passionate about deep tech, data infrastructure, and system software.
Prior to Khosla Ventures, Nikita co-founded MemSQL and served as CTO and then CEO, successfully scaling the company to over 40M in ARR and near profitability. He also worked on data infrastructure at Facebook and before that, was a systems software engineer at Microsoft SQL Server for six years. The company is called now SingleSotre.
His latest venture is Neon. Neon is building open-source cloud-native PostgreSQL. In essence, Neon is a serverless Postgres database that enables developers to move fast without managing and scaling infrastructure.
It automatically scales up or down based on demand and gives users bottomless storage out of the box. Neon also enables developers to instantly branch your data the same way you branch your code, making it a perfect fit for CI/CD and Preview Deployments.
Nikita graduated from St. Petersburg ITMO University in Russia with a PhD.
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Read the Full Transcription of the Interview:Alejandro Cremades: Right? Hello everyone and welcome to the dealmakerr show. So we have a very exciting founder today. You know we’re going to be talking about both sides of the table. You know on the operator side on the investor side. You know we’re going to be talking about building scaling. You know, financing all the above all the good stuff that we like to hear. And think that you’re all going to find you know this story of this founder very inspiring so without further ado. Let’s welcome. Our guests today Nikita Shamgunov welcome to the show.
Nikita Shamgunov: Excited to be here. Thanks for having me.
Alejandro Cremades: So Nikita so let’s do a little of a walk through memory lane. How was life growing up in Russia and.
Nikita Shamgunov: Ah, that’s was that was a lot of fun. Um actually and um, if I look back the events of of my childhood. Um, it was the memorable ones where kind of the Berlin wall came down. Um. And that was in the news right? I was not in berlin obviously I was in Russia and in a relatively small city called yukaturinburg um, but that was was was definitely hit the news. Um, and then um, that kind of so not that event but timewise. Um, after that a lot of things started happening. You know the fall of Soviet Union ah the hyperinflation um in the ah early 90 s um and then um ah just kind of a very very quick transformation from what used to be soviets union and planned economy and iron curtain. Um, to opening up of the country to the world. Ah, and that was um, felt both scary. Um, ah and exciting. You know I was very young at the time and so my parents um, kind of I would say sheltered me from the. From the harsher realities of things. Um, you know of ah the economy and hyper inflation and whatnot. Um, but it was certainly a ah brand new world. Um, that we we were experiencing in. Um and I’d say my generation took the full advantage of it. Um, one thing. Um.
Nikita Shamgunov: Ah, is ah that was there and it’s a similar phenomenon for that of of what I read in in this book. Freakonomics um, was um at my high school and and I and I went to um, an elite math high school that’s called soons. Um, whatever that means. Ah, which I think stands for special scientific and research center something like that in that high school. Our teachers were university professors and looking back. Um I realized that um the reason we had those those folks. And they were relatively young. They would be like ah assistant professors. Um, ah you know today they were all in their like mid late 20 s or maybe early 30 s ah, the reason we had them is because they they needed to moonlight they they needed to to have their ends meet um and they would go into a good high school with. A lot of talented kids. Um and teach them more math teach them computer science teach them science. Ah, and um that that set the foundation of ah of my early education and interest and there was a lot of passion towards towards towards math during those days. Um. Both my dad and I granddad are mathematicians um, and at that time I thought I’d I’d be a mathematician too. Um that the the brand new and exciting world of computer science started to kind of pull me into that universe and eventually eventually that became my life.
Alejandro Cremades: I mean obviously you know computer science. You know why say what ended up taking its scores. Ah but in your case you know like when you moved to St Petersburg for the ph d you know there was like a very interesting shift. You know there that happened and and that that got you to land into Microsoft. So so what happened there.
Nikita Shamgunov: Yeah, for sure. Um, so ah, my my interest in computer science kind of manifested in in the desire to participate in programming competitions. Um, and and I started that in high school. Um I was mildly successful I you know never made it into the country level or or international level. But I continued at it. Um, at at the university um, and there was a programming competition which still exists. It’s called Acm icpc. Ah which I started to participate in um and eventually made it into the world stage. Ah, we we went to? um I think it was Netherlands and then another time we went to to Vancouver canada and and got to to a bronze medal. Um, so so that interest in programming competitions eventually what pulled me into the computer science. Ah program so I did my bachelor’s in math and masters in in computer science. Um, and the best school in computer science was in St Petersburg that is a university in five mechanics computer science find mechanics and optics and is still one of the top schools. Um, ah in Russia. Ah so.
Nikita Shamgunov: Just kind of staying on that programming competition train and refusing to grow up I guess I I went ahead and joined that school for the ph d program and moved from yukiurenburg to St Petersburg um I was doing ph d and working full time to again to to support myself. Ah. And some of the folks at that company joined Microsoft I was referred there and post graduation I packed my bags which I had won so ah and and moved to to Redmond to work for Microsoft.
Alejandro Cremades: So when you were working at Microsoft you know, obviously the idea of going back to school came about you know business school. Ah, but when you actually executed on that you know you land on business school and you quit the same day I mean that’s kind of like ah a little bit of aggressive. Hey there any keta what happened.
Nikita Shamgunov: Yeah, that was ah that was a funny story. Ah so I was um at the time I think it was like about 4 years I worked for a very very capable team inside Microsoft called Microsoft Sql server ah that’s where I truly understood how to build systems. Um. And complex systems and databases I started to get a little bit restless and and and trying to figure out what is what is what is next um, for me. Um, and then I was like oh business school that sounds interesting. Um, ah, potentially you know, ah people who are good at computer science but have no idea about business. That’s what they do? Ah so so I applied and and and passed all this like exams which I think was sat and whatnot and then I joined the business school I was super excited I walked in in the first day and my thesis was that I’m going to meet. Some very very capable people who are business leaders. Ah, and then will learn a bunch from them in addition to you know ah from the program. But as we were going around the table and and sharing our experiences I realized that the folks were kind of lost. Ah, and then I realized that about myself as well. So I was probably lost as well in that moment. So so I quit the first day and um at the time I already had a Facebook offer so I took that offer and flew down to California um I basically changed my thesis my thesis became
Nikita Shamgunov: Um, I’m going to move to to the Silicon Valley where the mindset and um and the entrepreneurial spirit is high um and then I’ll meet people ah that I’ll be more inspired about ah and then eventually maybe we’ll start a company. Um. So what happened is um as as I joined Facebook I met my cofounder.
Alejandro Cremades: And actually you know like that’s what what ended up happening. Ah you know one thing that you found there was that the culture of Facebook was saying completely different to the culture of Microsoft so why was that the case and and what would you say you know were the sequences of events that really led you to. Ended up. You know, starting your first business because I mean there were like certain things there that got you to start reading essays from Paul Graham and y combinator and things like that. So what were the sequence of events there that needed to happen.
Nikita Shamgunov: Yeah, Paul Graham was already famous I started reading his essays at at um, at Microsoft but the gravity of of that personality and and the gravity ofycombinator wasn’t really fully understood while I was in Seattle as I moved down. Um. I realized that Facebook was wildly different from Microsoft just the pace of everything that that was happening like the clock speed was of the company itself was a lot higher. Ah Facebook was in the hypergrowth mode. Um I believe I was either engineering employee 800 or there was a total employee hundred of of 800 and the the company was was growing rapidly right? Um, um it it felt like stuff’s just flying around people picking it up getting it done. Um, and then that was definitely the move fast break things era um. The mindset of the people that that walked in and through the door and ah Facebook was onboarding everybody in batches that was called bootcamp um was also very very different from what I see at Microsoft um, and especially in such an established team asql server where the pace is slow. The group is definitely is is okay because the you know the team’s bigger, but the the product is established and whatnot here. You know lots of new things. Lots lost focus on building rather than maintaining and whatnot. Um and that’s where I met my cofounder um with whom we applied to ycombinator.
Nikita Shamgunov: Um, through that we I understood a little better ah ah what what kind ofycombinator really was we met Paul Graham and ah, um, and then we had a tough choice. You know, do we want to leave Facebook and all this early stock which was already apparent how valuable that was um. Ah, ah or we should you know stay at Facebook and and realize that stock or should we you know leave Facebook and and start a company and we already inside. Ah the y combinator we got accepted. We walk in with Facebook badges and and Paul Graham is looking at us and saying well you know. You got to get rid of that and so and so we did um and so that was that was a tough. Ah what are the that was a tough call. But I think it was the right call.
Alejandro Cremades: So what happened next.
Nikita Shamgunov: So so then it was a lot of grind I lived in the office. Um, ah Eric lived across from the office that was just ah, an apartment ah in San Francisco right across Costco Tenth and Harrison um, we stayed there a while until we started building. Our. Testing infrastructure bought a bunch of servers. They were loud. They were hot so it was impossible to live in the office anymore. Um, it was a lot of you know like we we have all this like glamorous um views sometimes of what startup building is like and and potentially Facebook. Ah, the social network movie ah may give you your own idea to own idea. But what it looked like is a bunch of folks um would would sit down in front of a computer and headphones and write code. Um you know day in and day out. ah hours hours and hours through the day. um I I think we did a lot of things right um and um and I think we got a few things wrong. Um I think long story short ah memsql that was the company and that became single store is now unicorn company. Um, it makes close to 100,000,000 in revenue. Um I believe ah and ah growing really fast. Um, it’s on the trajectory to go public. Ah there’s all these billboards and 1 on 1 um the timing of that is is uncertain because that that you know nobody’s going public right now.
Nikita Shamgunov: But um, it certainly is getting to a position to to do so.
Alejandro Cremades: Yeah, and what ended up being the business model of men sql. How does the company make money.
Nikita Shamgunov: Yeah, so and and and that’s ah, that’s really what? Um What’s so interesting. Ah, and now that I’m on venture. Um I’m thinking about those things um a lot. Um, because. Whatever model you choose and I’ll explain what the model of memsql kind of is and was um it you know comes with with with a particular um with a particular territory and and particular a way of of generating business. Ah single store. Um. You know we rename msql to single star because over time it wasn’t it was not longer in memory and it was not longer just sql so we were just basically our our name was misrepresenting what what we were and so we changed it to single star. Um, the the. Business model is ah and it’s an enterprise focused company um with with ever sales price um in the high tens ah low hundreds of thousands of dollars a year and um it it finds. Um. Ah, it finds as customers. Um, ah by by establishing what is called an enterprise ah marketing which is a combination of you know ads sp and account account-based marketing and attending enterprise events ah collecting small number of high- quality leads.
Nikita Shamgunov: Pushing those leads through the process through the funnel. Um, and that revenue comes on the other end of it and so you end up um, depending of the efficiency of this of this Enterprise Account acquisition. Um that the revenue Scales Um, with. Big step increments right? because every deal is like I don’t know a $100000 to $100000 and especially the expands could be could be very material. Um, but it also comes with the with the high customer acquisition cost and relatively long sale cycles. So You don’t need a lot of those deals to build a significant business but those deals are hard to get um um and ah it it takes a lot of energy and and then push up the company to ah to keep growing in the high pace.
Alejandro Cremades: Got it now now in this case, you know for the company. How much capital that you guys raise in total.
Nikita Shamgunov: Ah I need to check. But it’s in the in the three hundred s three hundred millions range um so um, over over multiple funding rounds and especially the later. Ah, the later rounds are all $100000000 plus um
Alejandro Cremades: 300 and
Nikita Shamgunov: They are what is called like mezanine rounds. It’s the round that you you get mostly to fund your sales and marketing um to keep the growth. Um, ah to keep the growth and and the bigger your bases right? they. Ah, the the harder is to grow because now if you want to grow 200% now you need to add you know it took all that time for you to get to 100000000 and now if you want to keep growing very high high pace like you now only have a year to add another $100000000 so it’s um. Ah, it’s it’s an expensive proposition. Um, but that’s what the name of the game is ah to to building a um, a high quality enterprise business.
Alejandro Cremades: Now for you. You know as part of this journey. You know you started as the Ceo and then you eventually transition to the Ceo role I mean that’s not ah, that’s not an easy an easy thing and in fact, you know many you know great c to ah ctos.
Alejandro Cremades: They’re not good. You know when it comes to the business side of things. So how was that you know, um transition period for you on and and how hard it was.
Nikita Shamgunov: Right? Um, so um, so now that I’m I’m kind of see having a ah broader visibility of of of other companies I I tend to agree the Cto to Ceo transition is rare. Um, and in fact, product to Ceo or marketing to Ceo or sales to Ceo I kind of see more of that. Um sometimes general manager to Ceo and general manager trained by a bigger company. Obviously um, ah I see those transitions. Um. Much more frequently than the cto to Ceo transition. Um, you know, um, depending on the circumstances of why? Um, you might want to? um, ah have this decision. So um, that could be different for for a particular cto that that. Sees it as ah as the next step. Um, the mechanics were the following. Um I had to make sure that my product and engineering team were are absolutely intact and humming and that required me to have leaders. That run product and engineering um and then um I forced myself to to shift my focus completely to go to market. So basically trust that the product and engineering are are working very well and trust the leaders and of course.
Nikita Shamgunov: You interact with them. Ah very very frequently. But despite the fact that the course skill set is in the product and engineering ah basically shift the focus and to go to market and go to market completely at that time they were you know Obviously there were 2 major. Problems in in front of of Men’sql one was well we didn’t have that much cash in the bank. So We needed to raise ah cash and you raise cash because you grow. Um, and if your growth slows down then raising becomes really really hard So we’re we’re in that situation. Where you know we had time to demonstrate that growth but it wasn’t a lot of time. Um and the specific thing that I did is um and and that’s like a hack um is to go to your existing customers and ask for more money. Ah and and obviously for those that. That you have relationships with um, you might feel a little scared but at the time that was the right answer. Um, and so I did and they and they gave us and they gave me the money and they didn’t even think that that hard and so that was kind of a revelation. So We we were either potentially undercharging Or. Um, or the other revelation is that if if you have a good relationship with your customer. Um, then? um, they they will give you money. Ah, if if you ask So So that was that was cool that was that was Learning. Ah.
Nikita Shamgunov: Um, and that allowed us to demonstrate almost 100% growth ah in a year and we raised ah around from Google so so that was one um and that’s how we solved the the ah the money problem. Um. And the second ah business ah problem that was in front of me was that the um that the whole business was transitioning into Sas and cloud and and memsql at the time was a hybrid offering. You know it had a on-prem offering and had a cloud offering and the checks for the on-prem offerings were higher. Then the checks for the cloud offering but it was clear. Ah it was very clear at the time that that’s where it’s heading it’s heading to the cloud ah to to all managed offerings and so now looking back. It’s like okay of course like who who cares about on-prem nobody cares about on-prem everybody cares about cloud. Um, so so that transition turned out to be harder than I thought I thought it was oh, it’s just code or it’s just technology but turns out um, having a saas company is an architectural change both in the product but also in the Dna of your company. You know in one world you don’t have devops in the new world you have devops and sres um in one world. Um, um, you care about? Ah, you know installation. Um, and then you support that installation with your sales engineers ah in the other world that is given you push button and you get it.
Nikita Shamgunov: And so and so the composition of your ah of your company is different and you start with your management team. Um, one of the one of the books and I was voraciously reading at the time one of the great books I read ah was only paranoid survived by Andy Grove where Intel was going from memory to cpu and Andy was coming into his management team looking around the table and realizing that he doesn’t have software people on the staff team and then once the decision of going hard off the cpu was made. Um, he had to change his management team and then such people changes are always hard because you know somebody could be you know in that case was a hardware you know memory expert and the the new Dna should be software expert. And you need to to forge new partnerships um with software companies and before that you had to forge company partnership with with hardware companies. So very very similar um process when you transition your company from on-prem and to the cloud. Your partnerships are different. Your team Dna is different your staff your staff team has to be different. Um and it took longer. It took longer. It took single store longer than I thought I thought it would be like a quick one year transition? Um, but it took years.
Nikita Shamgunov: Ah, today single store is decisively a cloud saas company. But again it took a long time to get there.
Alejandro Cremades: Now obviously it sounds like you were doing the right things because I mean you took the company from seven million to forty million ah but at what point I mean things were working out the way that you you know had hoped for so at what point do you realize? hey you know maybe it’s time to. Take a look at what’s next and and how you how do you end up landing on the other side of the table as an investor.
Nikita Shamgunov: Yeah, great question. Um, so um, at some point I hired um ah a um a co ceoo at singles store and um I was looking for president to to run the go to market. So so I I spent. A good amount of time nerding and go-to market and driving the revenue up and then I realized I also need a part a goto-market partner. Um, and I was looking for president but ended up hiring your co-ceo um and and and ah and the great leader Raj Burma ah so we we partnered up and then I shifted my focus back so from go-to markete ah back to um, ah back to product and engineering and in there I realized that I also need to bring a new leader and and and broad chief product officer. So. That was the first time in my in 10 years that my calendar emptied up. Um and of course as a founder I I knew that you know it’s only a matter of time. It is like start creeping back up and as a founder There’s so many things that you can. You can do that a high leverage to your business. Um, but it also had been ah, almost ten years by then in 9 years um and I was craving to to um to get to to certain amount of breath.
Nikita Shamgunov: Um, because when you build a company you’re looking at the world through this? Um, ah, ah through the keyhole of and what everything that’s surrounding you is is is your company and your team and and and whatnot um your team obviously gives you a ton of leverage. Um. But you’re missing on the breadth because um, ah basically it’s your technology your ecosystem your customers. Um and your competition. So and you live in this world ah day in and day out versus my thesis was ah that as you go into venture. You will see much. The world from a much broader angle you see a wider set of technologies and you’ll have an opportunity to to learn some of them deeply and that’s certainly deliberateed. Um, ah you know ah vi node funded memsql. Um, and Kosla Kosla ventures was instrumental through the um, the cte cto to Ceo transition. Um, and um basically getting the company into the the next rounds of funding ah and and through that the relationship got stronger and stronger and stronger. so um so viil invited me to the table um and um so I decided to join ah costla ventures as a partner walking in I said hey vi knowde I have good.
Alejandro Cremades: So so like yeah know I was just going to ask you so so so obviously here you are now you know in Costsla. Ah and you know it’s a different It’s a different angle right? on the way that that you’re seeing things and I’m sure that. You’ve had the opportunity to learn a lot you know because you’ve had you know a bunch of investments you know about 8 investments that that you’ve done but I guess now you know that you are in Kosla. How do you think about categories and then also category winners. You know I’m sure that you know you’ve been able to really have an insight. You know into and and and and a court side ticket you know on what it looks like you know when it comes to pattern recognition.
Nikita Shamgunov: Yeah, definitely? um I think there’s there’s many ways. Um, and that’s the beauty of a venture There are so many ways to look at the world. Um, and and one of those ways is um, splitting and I’m on the enterprise team. Basically ah working with with founders with enterprise founders with a lot of kind of business to business or business to developer or b two c to b type type companies. Um the way to look at this world is you can split it into categories and so in in like the database category there. Operational databases and and their analytical databases or data warehouses and in each category they’re typically 1 2 3 4 category winners um and in the modern day and age the number of real winners is like 1 or 2 in every category and if you squint at the world and you start seeing it not not necessarily just in enterprise software but everywhere. Um you start seeing you know 1 or 2 winners in every category and then either a lot of nothingness um or like a long tail of. Products and companies that don’t each make a ton of money and and in software that’s even more pronounced ah than in the real world. You know in the real world is like you know Pepsi Cola and Coca-cola right? and Coca-cola is like 50% pepsicola is another 25 and then it’s like a long.
Nikita Shamgunov: Tale of stuff but none of them is gigantic. Um, but in software it’s worse um in software is there is a winner there’s an uber there’s a lyft and then there’s just nothing. There’s iphone. There’s Android and then there’s nothing and so what this means for venture. Um, and there are particular reasons for for for um, for this dynamic in the technology world and the reason is mostly because of the um, the incremental cost of an extra copy of software or service is 0 right? And so once someone. Someone is winning. They can suck all the oxygen out of the category and and and kind of completely proliferate and dominate the category and and and there is a book that’s called play bigger about creating new categories that talks about um, um. Ah, about the dynamics in in the um in in category definition and in category domination by um, ah, by technological products and companies. Um, and so once you take that lens on the world. Um, the question is. You know is it a category leader and is as an opportunity is there an opportunity to become a category leader. Um always always comes in and usually every now and then there’s also a technology wave that is coming in and and sweeping through all the categories and giving. Um.
Nikita Shamgunov: You know our world The the world of entrepreneurs an opportunity to redo things from scratch um and previously that world was Cloud previously that world was um, ah mobile previously that world was social. Um, and then you know.
Alejandro Cremades: Got it.
Nikita Shamgunov: Previously that world was like the internet. Um, and if you think about um and so ah, you know this Enterprise World. It lives in the predefined existing categories. Um, and then again periodically either a new category gets created Cloud or mobile or whatever. And it comes either certain technology or or ah or innovation or disruption. Um that that really ah gives you an opportunity to change the architecture of each category and once you change the architecture. It’s a new product can be built and if I think.
Nikita Shamgunov: What’s kind of exciting is there’s always something like this like this technology platform transitions and we’re in the dawn of the next one which is ai and large language models which I think will will architecturally change a whole.. Basically every category um and each incumbent either takes advantage of this or will be disrupted by something that that puts this ai capabilities in the center of of the product. So That’s that’s super exciting.
Alejandro Cremades: Now in your case, you know you’re now at Kosla but you’re also you know working you know on neon right? So how does the idea of neon come about and and I mean obviously see in this case is a little bit different to single store because rather than starting you. Incubated you know neon you know as part of um, you know the costla you know, endeavor that you’re that you’re taking on and that you’ve taken on and and and how did that come about I mean it’s a little bit different of a journey here you know incubating and and and bringing it to lunch so tell us about this.
Nikita Shamgunov: Yeah, starting incubating is different and and and obviously I had an opportunity to do either here. Um, one of the ah competitors for single story snowflake and snowflake was an incubation from a firm from a venture firm called Southter Hill ventures and it’s. Particular individual called called Mike Spiser um and through that competition. Um I I learned and obviously snowflake is much bigger than single star. Um through that competition I learned ah about about some of the incubation playbooks obviously observing from the outside in. Um, but recently I actually ah you know met Mike and we sat down and we had a conversation about incubations as well. Um, so there is a particular playbook if you go online and Google my spiser incubation playbook you will. You will find ah some information about it. And the shiniest incubation out of solder hill is snowflake. Um, so um, I actually thought about this idea and this company incubation or starting um doesn’t matter for for about 5 to 7 years at least 5 and and and I was finding myself in a in a similar place as I know Tony Fidel as he was thinking about building nest thermostat but he was busy. He was busy building ipod and then iphone. So obviously Tony was on the on the journey of of changing the world with Apple.
Nikita Shamgunov: But he had this idea about the nest thermostat and the and the back of his head and he was hoping that somebody will go and build it. Um, but no one did and so with nian I I was in a similar abode I was thinking about? oh you know, unlike this um enterprise focus ah of. Um, single store and and chasing scale out workloads like big scale workloads. Um, which bring a lot of dollars but they’re not as many of them. Um, can we build a developer firstt technology that people start building their applications with and I couldn’t. I couldn’t build it at a single store because it just didn’t make sense for single store to do that. Um, the architecture of the product and the company was already set um and with Meon. Um, it’s another database company. But um, yeah, yeah, you know the architecture of the product. But also the architecture of how it goes after after its users is very very different. Um and it was um, you know again, it was impossible to to change that at single store. Um, so I walked in into coastline and said vi no we should incubate this. Um. And and the node is like yeah um, you know what do you need Um, and just ah, a few months later we um I put together first a slide deck then a team. Um the difference between starting and incubating um is um.
Nikita Shamgunov: When you incubate um you you can so really engineer. Um, ah your your founding team and in the process of that engineering of the founding team. You have the the power of the venture firm behind you ah and that comes down to recruiting. That comes down to to continuous debate about you know should we do a versus b versus c and how um, ah and um, ah you also have a brand behind you. So um, so engineering the the company Dna.
Nikita Shamgunov: Um, and and Viot likes to say that the team you build is the company you build not the other way. Um, was our kind of joint ah effort and joint endeavor in the beginning in the early very very early stages of the company. Um, in return. Ah, costla ventures has an unfair ownership compared to all the other funders ah into the company and and that’s what the tradeoff of of the incubation ah versus starting ah versus starting is ah since neon raised $54,000,000 um, you know codeslip with 5 initially.
Alejandro Cremades: Got it.
Nikita Shamgunov: Um, and now the company has raised ah but you know $54000000 from you know, Kosla founders fund a lotgill um, general catalyst ah and ggv and and each one of those investors and and a long tail of angels as well. And each one of those investors is fantastic and and bringing a lot to the table. Um, but again the original kind of hatching the company and you know engineering the company Dna ah was happening here at gula ventures.
Alejandro Cremades: So Nikita Imagine you go to sleep tonight and you wake up in a world where the vision of neon is fully realized what does that world look like.
Nikita Shamgunov: Well, um, so um, there there are a few things there. Ah first um, every app in the world needs a database and it’s a no brainer and no regret move to create that database on neon. And so what is neon is serverless postgres ah postgres is that you know very popular database technology that existed for for many many years that is incredibly popular in developers and outside of the top 5 databases in the world postgres is the only one that’s growing so everybody else is shrinking. Mindshare and and market share so mysqloraclesql server those are the top 3 then postgres and mongo out of the top 5 only posts is growing and postgres doesn’t have a home like there’s no company that’s behind postgres. It’s kind of like linux. It’s a truly community led effort. As a matter of fact, these ah even more so decentralized than linux. So linux has linus and postgres has a group of committers that are decentralized and um, you know they’re making decisions at what goes in and what goes out um and the developer experience. Ah, is what makes that a no regret move to take your when you need a database to go and create one on ion. Um, and and that’s a combination of how easy it is um what the economics are how how how cheap it is well not.
Nikita Shamgunov: Necessarily cheap but like how economical it is um how convenient it is and how reliable and robust it is um so you also might be thinking you know we had git as a source control system. Um, but it is an absolutely no regret move. To put your git repo on github right now, right? And so this is what we’re building. Ah we’re building a github like both experience. Um convenience. Ah, and um, ah, kind of economics of putting your postgs workloads on yeah on onion. Um, and it has been you know doing very very well. Not only we raised fifty four millions ah um in in sixteen months ah but you know raising this much money is only possible if you demonstrate traction. Ah so there’s already Eleven Thousand Thousand five hundred as of today databases on the platform. Growing rapidly lots of partners are coming on board. Um, so unlike singles storere we having this kind of groundswell um, coming in. Um there’s a big question. How much money we’ll be able to generate. Um, but we have so much cash and and so much growth. So we can stay in that state for a long time to just kind of proliferate around the world. Um, again driving towards that kind of github-like vision of becoming the default platform ah for postgres workloads to start, but then for every database workloads in the future.
Alejandro Cremades: Nice now. Obviously here we’re talking about the Future. So now I Want to talk about the past and learning from it. So if you were to go into a time machine and then let’s go you know bring you back in time you know perhaps to that moment that you know you were thinking about starting this. If you could go back and give yourself I mean starting starting single store. Sorry your previous company if you could go back in and give that younger self a piece of advice for launching a business. What would that be and why given what you know now.
Nikita Shamgunov: I Think the hardest lesson of single store was um, um, building hybrids versus building the future. Um, So I think that you know eventually we we founded ourselves realizing that the business is in the Cloud. Um, and the hybrid and the on-prem part of the business um is more of a liability than an asset. Um, but we had to treat it as an asset because most of the revenue was there. Um, and and that transition is is a is a really really tough transition. Um. You will either stay Forever hybrid and that’s the right thing to do but in technology it rarely is once the technology gears shift you find yourself in this like absolutely new world. Um, you know, um, and so you don’t want to find yourself selling pagers in the age of Iphones. Um. And in every category there you have your own pagers and you have your own iphones and and it means something different. Ah for every category and for every product that you’re building. So um, yeah I mean the the biggest The biggest realization is is to build new and build the future and.
Alejandro Cremades: Yeah, so.
Nikita Shamgunov: Um, be uncompromised on the purity of what you’re building. Um, ah you may get the future wrong. You may get the timing wrong? Um, ah, but if you want to succeed and in a very very big way. You got to build the future. Um and and kind of only the future. And the rest will kind of um you know, pull yourself if you if you get the if you got the future right? And if you execute um you know, kind of relentlessly if you do that you’re not wasting time in various hybrid architectures. And you’re not building transitional technology. You’re building the future technology you’re building Tesla’s you’re not building priuses in a way. Um and and numerous examples I can name where where this approach is the right approach and because the world is so big there there you know there there are counter examples for that as well. Um I think just just it’s a lot more fun to build a future too.
Alejandro Cremades: Yeah, no kidding now for the people that are listening. You know that will want to reach out and say hi. What is the best way for them to do so.
Nikita Shamgunov: Um, so Nikita at costlaventures.com as well as Nikita at neon dot tech um are the the best ways to to to get me I’m also on Twitter yeah I’m also on Twitter so do follow me on Twitter.
Alejandro Cremades: Amazing! Well hey Nikita So.
Nikita Shamgunov: Dm me on Twitter dms are open ah Niki database. So it’s like a combination of of of my name and the recognition that I spent the last fifteen years building databases.
Alejandro Cremades: And what’s the handle on Twitter amazing! awesome.
Alejandro Cremades: Love it. So Nikita. Thank you? So so much for being on the deal maker show today. It has been an honor to have you with us. Thank you.
Nikita Shamgunov: Really happy to be here. Thank you for for great questions.
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The post Nikita Shamgunov On Building A $1 Billion Business And Now Raising $54 Million To Create A Cloud-Native Database Service appeared first on Alejandro Cremades.
Elli Kaplan has already raised tens of millions of dollars to take on one of the biggest and fast-growing healthcare challenges we face today. Including investments from top investors like Peter Thiel. Her venture, Neurotrack, has acquired funding from top-tier investors like AME Cloud Partners, Rethink Impact, Sozo Ventures, and SOMPO Holdings.
In this episode, you will learn:
- Elli Kaplan’s top advice for other entrepreneurs
- How Neurotrack is tackling Alzheimer’s
Alejandro Cremades · EP 561 Elli Kaplan On Raising $60 Million To Keep Your Mind Sharp And Memory IntactSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Elli Kaplan:Elli Kaplan is Co-founder and CEO of Neurotrack, a digital health company dedicated to the development of a digital cognitive assessment test that will enable earlier and more effective evaluation of patients who may be at risk for cognitive decline and help advance research and treatment of cognitive diseases like Alzheimer’s.
Neurotrack is also building a cognitive health product that brings together the best scientific research shown to reduce the risk of cognitive decline and improve overall cognitive health.
Elli has two decades of experience in the public and private sectors, including positions at the White House, the State and Treasury Departments, and the United Nations Development Program.
She also held positions with AIG, Goldman Sachs, and multiple startups, and has an M.B.A. from Harvard.
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Read the Full Transcription of the Interview:Alejandro Cremades: Already hello everyone and welcome to the dealmaker show. So very excited about our founder today I mean she’s on this rocket ship. You know we’re going to be talking a lot about health care stuff. You know, very much needed by the way you know the disruption in this space and. And I think that you’re going to find you know the story of her founder very inspiring so without further ado. Let’s welcome our guests today eie kaplan welcome to the show. So originally, you know you were born there in themver obviously very cold.
Elli Kaplan: Thanks for having me.
Alejandro Cremades: But damn by yeah, so how was life growing up, give us a little of a walk through memory lane.
Elli Kaplan: Denver was great I didn’t when I was first born there I didn’t live there for very long. My dad joined the indian health service as a pediatrician really to escape the Vietnam war and so I spent the very early years of my childhood living on. Indian or native american reservations in Washington State and in Oklahoma and it was an incredible experience. I lived there until around seventh grade and what I saw was how healthcare at the most basic level is delivered and it really shaped my views. In terms of thinking about what’s important to me and the role that health care can play in. Someone’s life. Ah from an access perspective and and just in terms of what an impact it can it can have
Alejandro Cremades: Was there like ah maybe like ah a specific event that maybe you remember that they gave you that push to think you know what I think I’m gonna do something in Healthcare one day. Yeah.
Elli Kaplan: Yeah I mean it was a few things one was I remember a few different times where my dad you know was treating some incredibly sick kids. And in 1 and in 1 case ah it was a kid who who probably would have died had he not um, been treating him and the family was so grateful but they had no way to pay him. Um, and so I remember one night late at night that child’s father came over to our house and he had brought one of his cows that he had slaughtered and and cut up into steaks for us and that was his payment and. Um, it was you know it was an extremely expensive contribution for him. But um, the only way that he could and it really stayed with me. Um, and ah so that was kind of the first impetus and then the second was when I was in business school. My grandfather who was also a physician started to show signs of alzheimer’s disease and you know I was pre-med in college we had you know lots of doctors and healthcare workers in in our family.
Elli Kaplan: And despite that it was really difficult for my grandfather to get a diagnosis and to really understand what was going on with him and then to get any kind of treatment and um, you know I think what was clear to me was. That if it was difficult for us to get this kind of information about his health. Um, you know where we were So You know had such a deep understanding of how Health care works and you know get access to the very best in Care. What was it the experience like for for people who didn’t have that and then you know, thinking back on my time seeing how Health care operated at the most basic level on these Indian reservations really shaped what I wanted to do. With my career after after I graduated shortly after I graduated from business school and so um, that’s that was the genesis of of starting this company.
Alejandro Cremades: So and and we’ll talk about that in just a little bit. You know I’m wondering then you know like what got you into the direction of politics you know, which is what you ended up studying I mean do you think? maybe it was like something about navigating policy or ah, how to you know pass regulations or new laws or.
Alejandro Cremades: But got you into politics.
Elli Kaplan: It was um, it really was this belief which I still hold though I think I’m a little bit more cynical or jaded now that you could take an idea or a set of ideas. Um. And very often that set of ideas came from a person and put them into a position of power and then have an impact on society and so you know if you think about um, ah the role that policy plays in in shaping industry in shaping you know social services. Ah it ah it comes down to people and what what they believe in and so um, it really was this idea of um of working to put someone into a position of power in order to change systems. And so I you know I worked in my last year in college I worked on Bill Clinton’s presidential campaign. Um, we ah helped get him elected and then I went into the white house after graduating and it was just this sheer excitement of having accomplished. That together with this team of unbelievably smart talented energetic people and then having you know to a certain degree. It felt like the world was our oyster in terms of thinking about what our values were and how to then take those values and and turn them into law.
Elli Kaplan: Now That’s not exactly how politics actually works I mean there’s um, you know and I think I now have a a more sophisticated or or cynical depending on how you want to slice it view on on it. But you know it has a lot of applications to what we as entrepreneurs do as Well. You take an idea and that idea may be in the form of a product or a technology and and birth it and bring it to ah fruition and and and to markets.
Alejandro Cremades: Now it’s quite the jump. You know going from government you know to to business right to to to really the private sector and and in this case I mean for you, it sounds like the going to business school. You know what’s a really nice shift of gears I guess. You went to to Harvard business school. But at what point do you realize hey I think that maybe it’s time for me to go to business school and why did you decide that that was the right decision at that point in time in your career.
Elli Kaplan: Um, you know and as we discussed the early part of my career really was spent in in governments in government I worked at the un for a a couple of years I had I did have some time in in finance and private equity. But what I was really interested in after having spent so much time understanding the role that policy and large governmental or or multinational organizations can play in in design and development and and and. Creating of markets was then the flip side of that was the role that the private sector actually plays in in the world and specifically when I was. At the United Nations I was the Deputy Chief of staff for the United Nations Development program which is the largest un agency and the role of Udp is to go into these developing or emerging markets and to put in place organizations and and help governments create policies in order to. Shape the economy and um and so what was what I saw during that experience was how government or or these large international organizations interacted with the private sector in order to do that and that was really um, what got me very excited as well as.
Elli Kaplan: Looking at at the role of entrepreneurs and early stage private capital to then supplement and fuel that and so it was wanting to have more experience on the private side doing that work but recognizing that um I didn’t. You know I really didn’t have the experience that I would need in order to to get jobs doing that and so that was that was the focus of going to business goal was to sort of give me that those private sector um tools and skills in order to make that happen.
Alejandro Cremades: So entering startup world. So what was what was that you know you finish your your your your graduate degree at Harvard and then you know startups. How do you get into startups.
Elli Kaplan: Um, so I started by by first so we had moved to Atlanta Georgia at that point and um I was very interested in learning as much as I could about sort of the startup. Um, ecosystem and in Atlanta at that time it was really ah in its infancy. Um, there were a few successful startups. Ah but it wasn’t what you know Silicon Valley was um, you know today or even then. Um, but there was a lot of ah, a lot of the sort of components that you need in order to create that ecosystem so we had Georgia tech that was right there that was producing all these really brilliant. Um. Engineers and and product people we had the beginning of a sort of a venture capital network and um and a lot of you know the other sort of components that you need in order to to help. See a strong startup community and so um I was really interested in sort of understanding what was needed in order to take those different components and and help build more and so um.
Elli Kaplan: Worked at georgia tech with a few people to create. Ah the very first accelerator incubator program right in downtown Atlanta and we brought in young.
Elli Kaplan: Ah, startups from largely out of Georgia Tech and we taught them how to be startups so I had to learn What was what was really valuable and what would make a startup successful as part of starting and running that program and then once I kind of had a bit more insight into what was required I and. Had you know the personal experience of of having a loved one be impacted by Alzheimer’s and a deep understanding of how health care worked and wanting to do something at long last in Health Care. It was then that I actually transitioned to to starting neurotrack.
Alejandro Cremades: So Then let’s talk about neurotrack because obviously you know as they say I ideas you know they take time to incuate. They’re there. We don’t even know they’re there. But obviously there is certain events that push us over the edge to really take Action. You know it sounds like you know for you? The incubation of this idea you know was really personal. And team and basically you know like I I Want to ask you here I mean at what point do you realize? hey you know what? I’m I’m going to take action here. You know I’m going to I’m going to go for it.
Elli Kaplan: Um, you know it was the encouragement of a lot of people that I was talking to who said, um, you know this is something that is so deeply needed and if you don’t do it who is going to do it. Um, and so. It was a leap I had never you know I think um had I known then what I know now about about starting a company but also starting a company in the health care space and certainly um, you know for a disease that is. As complex as Alzheimer’s is I still would have done it. But I you know I think it would have um my eyes would have been a little more open. Um, but it really was this view that the world needs this and. Um, no one else is doing it and so why don’t I give it a try and you know as you as you know so often you you start these things and you don’t really have a sense of where it’s going to go? Um, but in this case, all of the important trends. Were there So You know we had an aging population that it was clear was was going to continue grow to grow at at um at a very rapid rate we saw where technology was going and it was early days of Digital Health and really this.
Elli Kaplan: Understanding that ah technology was going to play a different kind of role when it came to to both Healthcare products and health care services.
Alejandro Cremades: So so in this case for you I mean what were the early days like because I mean building a company like this is is very complicated. You know I think that you know first and foremost I guess for the people that are listening to really get it. Why didn’t that up being the business model of neurotrack. How do you guys make money and then also. What were the early days like
Elli Kaplan: Yeah, so the business model has shifted significantly over time as the alzheimer’s space has grown and changed. Um early days. We started with a digital. Diagnostic or assessment tool. So the first iteration of our product was ah a digital test and and it still exists but in a slightly different format a digital test that uses eye tracking to assess impairment in. Part of the brain called the hippocampus that stores memory and so because we could identify this impairment and um, ah you know, really be able to find people who were at the very earliest stages of of alzheimer’s. Um, it was clear that the market for us would be working with pharmaceutical companies who at that time had very robust alzheimer’s programs or cognitive programs and trying to you know to develop drugs that were considered what they call. Disease modifying so that would actually either stop the disease or significantly slow its progression and so early days of the company and go to market were completely aligned around working with biotech and pharma to help them.
Elli Kaplan: Better developed drugs for for Alzheimer’s Disease What? um, happened shortly after a lot of those contracts kicked off was that the drug started to fail and in fact, every drug every drug that was in the pipeline and every company that we were working with their drugs failed. So We were suddenly left with this very Great. You know, strong Diagnostic tool but no, no Market. Um, and you know the the pharma companies shut down their programs. It was you know they were done and and what. Resulted was us really sort of taking a step back and thinking about okay if there is no therapeutic market for our diagnostic and and you know in Healthcare What is needed to scale a diagnostic tool is a therapeutic program. Um. What else might exist and it was ah then that we started doing work around the role that Lifestyle can play in slowing the progression of of Alzheimer’s disease and um. And the science is now very well established I mean we were part of some of those very early studies that was looking at the role that diet and exercise and sleep and stress play in mitigating mitigating risk for Alzheimer’s and ah built a product and so essentially created our own therapeutic.
Elli Kaplan: Um, but you know that was that was that was what caused that that breakthrough. So.
Alejandro Cremades: Now in your case, you know you guys have raised quite a bit of money you know, sixty sixty million and you’ve had you know like incredible investors jumping in I mean legends legends like for example, Peter Thiel um how has been the capital raising. Um, side of things here I mean what? how how has been that journey going from one cycle to the next to raising you know this amount of money and also from such great investors too.
Elli Kaplan: Yeah I mean um, fundraising is never easy right? We have phenomenal investors with very deep pockets who really believe in what we’re trying to do but also understand. Just how complicated it is I mean you know in health care alzheimer’s is really considered the greatest unmet health care need and so there’s this understanding that if you win in this market which we believe we will then you know it’s worth. Ah. It’s worth the time that it will take and and sort of the complexity of that path to to ah to to to go for um and so I would say you know fundraising is always challenging. Um, but I think when you find the right set of investors who who understand and take the time to really dig into the problem. It makes absolute sense and and now um, we’re at this moment when that you know honestly we’ve been waiting for. The last ten years I mean I would say that where we are today is um, we’ve been planning for for the entire lifetime of the company and we can talk a little bit about that. But that certainly changes ah the the um.
Elli Kaplan: Environment for fundraising. Um, you know I won’t lie like at times it has been challenging. Ah, you know alzheimer’s is a scary disease. It’s a complicated disease and all we have seen is failure I mean the road is littered with drugs that have failed with other diagnostics that have failed. Um. So not for the faint of heart. But if there is 1 thing I have it is a grit and perseverance and um I am not going to stop until until we are successful.
Alejandro Cremades: So give us a little of um of of an insider you know, lens here you know when it comes to fundraising you know I know that when you met 1 of the first investors there Peter Thiel you know founder of Paypal early investor in Facebook I mean like incredible legend in the in in silicon valley how is it like to get someone like that. You know that caliber to literally just go for a short meeting and then all of a sudden this person clears. The calendar for the remainder of the day. How do you do that.
Elli Kaplan: Um, you know I think first and foremost I will say you know when you are fundraising. Do do your research and understand who you’re pitching to and what they care about. We went into that meeting with with Peter knowing that he was. Deeply interested in longevity that he had been making some investments in in this that space. It was early days for him from an and both an investment and an understanding perspective and you know alzheimer’s is a huge barrier. To living a very long and full life and um so when we went in we were initially scheduled to to meet for 30 minutes um vcs are often very busy and he was a little late and came in and sort of you know said, give me your pitch and what was.
Elli Kaplan: Fascinating was watching him while we were pitching because it was clear that a light bulb went off for him kind of midway through and what that revelation was was um, the fact that. If you’re in the mode of developing drugs and he had been making some investments in in early stage alzheimer’s drugs that if you’re in if you’re if you’re developing a drug. You need to be able to test that drug on the right type of individual so you know you’ve you’ve. You’ve got to very carefully select someone who is the appropriate candidate for that drug trial and I think the epiphany for him was in recognizing or realizing that the development of alzheimer’s drug drugs hinged on. Finding people who were early enough in the progression of the disease such that the drug could really have an impact and that that wasn’t happening and so it was an um, an important parallel investment so you know in order for the drugs that he was investing in. To be successful. They they needed our tool and so our 30 minute meeting quickly went to a full day and he brought in his partners and you know 24 hours later it was a classic iconic Silicon Valley story you know 24 hours later we had a term sheet and we were off to the races and you.
Elli Kaplan: Bring in somebody like Peter Thiel and and it doesn’t it’s not very hard to then fill out the rest of the round and have a successful launch.
Alejandro Cremades: So now I guess for for what you guys are apt to do you know when it comes to you know taking a look at what’s going on and and the market you know there’s concerns about the ah growing you know size of the senior you know folks in the in the Us.
Elli Kaplan: Um, yeah, um, well you know the seniors are the baby boomer population. It’s the fastest growing part of our population every single day 10000 people become medicare eligible.
Alejandro Cremades: Why is that the case.
Elli Kaplan: Alzheimer’s disease is a disease of the aging and it has a high prevalence among people over the age of 65 so you take a a large group of people who are suptible susceptible to this disease without any real solutions. That becomes ah a huge problem from ah both a cost cost and a care management perspective. So um, you know I think it’s It’s a problem but it’s also an opportunity and I think it has taken the fact that. Um, this moment where Alzheimer’s you know where there’s such a large population and Alzheimer’s is such a significant portion of ah of the cost related to caring for that population to really create the the Healthcare Market. That we’re now going after um and that is one of diagnosing and managing this disease better. Um, and to to do so at scale. Such that anyone anywhere gets access to the kind of information and then treatment that they need in order to to manage the disease.
Alejandro Cremades: So as worth thinking about now neurotrack for the people that are listening to get an Iv on the scope and size I mean anything that you can share in terms of number of employees or anything else that you feel comfortable sharing.
Elli Kaplan: Um, you know we keep that pretty quiet. Ah, but um I would say you know we’re still small at this point less than 100 people but working hard to to. Ah, to scale and and grow as is needed to in order to really you know tackle the size of the problem that we’re going after.
Alejandro Cremades: So I was worth thinking about the size of the problem scale growth. You know, obviously that has to do a lot with the vision right? So if we if I was to give you the opportunity of going to sleep tonight and you would wake up in a world where the vision of the company is fully realized.
Elli Kaplan: Yep.
Alejandro Cremades: What does that world look like.
Elli Kaplan: Um, what it looks like is that neurotrack is the new gold standard for how we assess diagnose manage and and treat ah people who are at risk for cognitive decline in alzheimer’s disease. And from a tactical perspective that means that we are working inside the primary care offices of anyone who is treating a patient, a patient population of older people. Um, and ah, we’re having an impact. And that impact is in actually improving outcomes so people are understanding what their risk level is where you know their memory is not at all times but frequently. And they have the tools that they need in order to to manage that condition. Um, you know you think about where diabetes or cancer was ten fifteen twenty years ago and where it is today. You know you get at a diabetes diagnosis and. 1 you find out that you have diabetes you get that diagnosis and then two you get everything you need in order to manage it same with any other significant health care condition that doesn’t really exist for alzheimer’s today you know we like to say that um that ah.
Elli Kaplan: That you know, standardizing cognitive health care. There is no standard and we will become the standard um and and so the vision or what we’d like to wake up tomorrow morning and I’m I’m really hoping Alejandra that that ah this does happen tomorrow when I wake up but that um. But that that has changed dramatically and that people when you get a diagnosis of alz summer’s it doesn’t feel like idescent. It feels like something that you and your family are are able to manage.
Alejandro Cremades: Wonderful now we’re talking all the future here. So if we are able to talk about the past and talk about the past with you know some reflection because I mean you’ve been at it now you know with this company for 10 years you know 10 years startup you know years? that’s like.
Elli Kaplan: With that.
Alejandro Cremades: Like dog years right? I mean it’s absolutely unbelievable, right? A lot of battle I mean a lot of battles you know constant battlefield for 10 years that’s incredible now if I was to give you the opportunity of going into a time machine and you’re able to go back in time you know you’re able to go back in time to.
Elli Kaplan: But I should be like yeah eighty years old at this point.
Alejandro Cremades: You know, perhaps that moment where you were experiencing. You know that challenge you know with with with Alzheimer’s you know in the family and and you were able. You know, let’s say you know at that moment where you were thinking about like what to do about it if you could go back in time. And have a sit down with that younger eie and give that younger Elie one piece of advice before launching a business. What would that be and why given what you know now.
Elli Kaplan: Um, oh gosh. So I mean so many lessons right? Not just one piece of advice. But I think um, it would be a team matters more than anything else. It’s all about the people. And having a team that is completely aligned around the same vision. Um, never compromising on that and so you know if there’s somebody who’s not working you got to move on and move on quickly I would say to have your. Um, have your village in the last I would say 3 or 3 years um I have slowly developed a network of other female ceos and founders who are working in health care. And we have each other’s back like nothing else and you know when there’s a problem. They’re the first group that I reach out to because as you know, being a a Ceo and a founder is a really lonely job and um, historically there haven’t been as many women. Founders and Ceos particularly of healthcare startups and so it’s taken a little while to pull that village together. But now that I have it I think it’s it is game changing and so to the degree that I could have told myself to get that group together sooner. Um, you know I think that would be be very valuable.
Elli Kaplan: And then you know the last one is ah is to not ever compromise on on what is most important to you and I and I have never compromised on what’s most important to me and you know what I think is most important to. To the patients that we will be helping in terms of you know, having clinical products that are deeply scientifically validated and developed and that was something that. That we never compromised On. We never will compromise on but it’s it’s harder when you when you have to take the time and put in that investment to make that happen. So know what your values are and stick with them.
Alejandro Cremades: I Love it now. Italy for the people that are listening that will love to you know, reach out and say hi. What is the best way for them to do so.
Elli Kaplan: Yeah I love it. They can email me Elli eELL I at neurotracck dot com.
Alejandro Cremades: Amazing. Well Elli thank you so much for being on the deal maker show. It has been an honor to have you with us today.
Elli Kaplan: Thank you! This has been a lot of fun Alejandra. Thank you.
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The post Elli Kaplan On Raising $60 Million To Keep Your Mind Sharp And Memory Intact appeared first on Alejandro Cremades.
Bharath Krishnamoorthy has gone from a young rebel to working for one of the world’s top M&A law firms, to a startup entrepreneur. His venture, Denim, has attracted funding from top-tier investors like Crosslink Capital, REFASHIOND Ventures, Anthemis, and Trucks VC.
In this episode, you will learn:
- The importance of sleep for founders, and the impact it can have on your success
- Finding the courage and rationale to launch your own venture
- Debt versus equity capital
- Non compete agreements
- When your larger competitors try to sue you out of business
Alejandro Cremades · EP 560 Bharath Krishnamoorthy On Raising $165M To Simplify Payments In A $10 Trillion IndustrySUBSCRIBE ON:
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Your email address is 100% safe from spam!About Bharath Krishnamoorthy:Bharath Krishnamoorthy is CEO and co-founder of Denim, a payments automation and financing platform for freight and logistics. A graduate of Columbia Law School and James Madison University, Bharath worked as a mergers and acquisitions lawyer at Gibson, Dunn & Crutcher before starting Denim with his longtime business partner and friend, Shawn Vo. Bharath serves on the advisory board of the Gilliam Center for Entrepreneurship at James Madison University.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So I’m very excited today with our guest. We’re going to be talking about building scaling pivoting racing money on the depth side on the equity side. You name it. You know you’re going to find this interview quite inspiring. So. I guess without far ado let’s welcome our guest today. Let’s see if I say is right? Barat Krena Morey welcome to the show.
Bharath Krishnamoorthy: Um, perfect man. Yeah, perfect. Thank you for having me here I’m excited to be on.
Alejandro Cremades: Amazing. So let’s do a little of a walkthrough memory lane here. How was live growing up because I know that you moved to quite a bit.
Bharath Krishnamoorthy: Yeah, growing up was great I think it was more fun for me than my parents. They both worked full-time jobs that three kids to raise and I was definitely a handful. Um I was a bit of a nightmare child got into a ton of trouble growing up was always a really bad student. Um, so I think that was tough. You know I think probably a lot of entrepreneurs can relate to this where it feels like this system is designed for a certain type of person and you know I wasn’t that person and so it caused a lot of issues for me and and sort of conflicts generally. But. Overall things are good. You know I’m I’m I’m happy with how everything turned out I had a lot of fun growing up. Um you know, looking back on it. Wish I probably didn’t I Probably probably wish I didn’t put my parents through so much stress but overall was good.
Alejandro Cremades: So your case I mean what would you say that ended up triggering you know going into the law you know path you know because obviously you ended up working at 1 of the top law firms actually in the country probably in the world. You know when we’re you know, talking about different types of practice. But. But in this case, why becoming a lawyer.
Bharath Krishnamoorthy: Yeah, so funny story I actually got into a lot of trouble in high school and I was 17 when I graduated so I wasn’t legally allowed to take out student loans by myself. So my parents conditioned them co-signing my loans on me. Agreeing to go to law school so it was it was very much a a sort of top-down decision. You know I think from my perspective it was also like I really didn’t know what I wanted to do I always had this sort of entrepreneurial itch but I hadn’t really thought about it as ah like a viable career path like oh this is something I can actually just go do. Um and so yeah I got into Columbia. It’s great school. Figured it can’t hurt to go there and and get this degree I think yeah part of the issue is that when you’re 20 years old and you’re making decisions about borrowing hundreds of thousands of dollars those numbers are really abstract right? You you don’t really know what it means and so um to me the decision was like all right I get to move to New York ah make my parents happy and get this cool degree and so it it kind of seemed like a good move.
Alejandro Cremades: Definitely. It’s a cool degree. You know, also coming from a lawyer turn entrepreneur. So I guess here you know the question for you is what and what department were you? you know doing there in in Gibson done I mean what was the kind of practice.
Bharath Krishnamoorthy: Um, so I bounced a lot bounced around a lot while I was there but it was primarily I did work in the M and a and private equity groups.
Alejandro Cremades: And when we’re thinking about deal making right? you know because I’m sure that you did see quite a bit of things there on the on the deal making side. You know, especially like negotiating stuff I mean what were some of the key ingredients that you saw on good deals really coming together.
Bharath Krishnamoorthy: Um, yeah, that’s interesting. So I think one thing I took away from that is the quality of work product that Gibson done produced where. You know there’s just no mistakes in these documents right? They proofread things a hundred times. They were very precise about the way things were done that an extremely high bar for quality and that was very new to me, you know, coming from someone who really didn’t care much about the work product. He’s producing for school. And and that’s something I’m trying to carry over into my work at denim making sure that anything we produce and and share with an external party is like the best possible work that we can produce and it’s also thing that you know I look at when we’re evaluating people to work with right when we see law firms. You know we work with a bunch of different law firms when we work with firms that are like sloppy. You kind of assume that like all right if they’ sloppy with this stuff who knows if they’re handling the important stuff and so we’ve we’ve always tried to work with people who take that same sort of care with their work product.
Alejandro Cremades: Now it sounds like you had made it happen. You know you made your parents. You know, very happy you know by now being a lawyer city. So why you know what point you realized I don’t think this is for me and they.
Bharath Krishnamoorthy: Ah, yeah.
Alejandro Cremades: And at what point do you realize you know that is time to obviously you know like take the leap of faith and and going at it and more importantly, you know how was that process of really coming to the realization that your time had come to really bring a company to life.
Bharath Krishnamoorthy: Yeah that’s a great series of questions so you know I mentioned this earlier but I think I always had this entrepreneurial itch from the time I was very young through high school college I was always starting random businesses either by myself or with friends. Um I remember when I was like seven years old me and one of the kids in the neighborhood went around trying to play Violin for all the neighbors charge them like ¢25 a song which was a you know bad business because we were horrible. But I think it reflected this this internal itch that that I had to do something like that and. I guess it was around the time that I had graduated from college early in my time at law school where I realized that like this is this is like a viable career path right? like people just go and start companies and that’s kind of how the economy works right? That’s where all these businesses come from and so by that point. I think I knew like when I was in law school I think I knew that ultimately I was going to go start a business and it’s something that me and my cofounder Sean who’s my high school best friend had been talking about a lot you know throughout college while I was at law school. Um and and afterwards. And those conversations became more and more concrete that like yes we should really do this It’s not as crazy as it seems um, one of the big open questions for me is like when can I do this because yeah, by the time that I was in law school. It became clear that I was going to graduate with yeah two hundred and fifty thousand dollars in student loans.
Bharath Krishnamoorthy: Which is a pretty daunting position to be in as you know 23 year old and my initial thinking was like okay I will probably have to work for like 5 to 10 years to pay off the bulk of this debt before I can be in a position to take the kind of risk that’s required to start a company. Ah and. Actually had this one conversation that completely changed my perspective on this I I met Andrew Yang who um, you know a lot of your listeners probably know from his his campaign to run for president and he gave me this this phenomenal advice which was basically that you know girls don’t know how much debt you’re in. And it’s kind of a cheeky way and of communicating that ah regardless of how much student debt you have you’re still in a position to do things like go on dates right? You can still read books. You can still find work that you really enjoy you can take risks and the government’s not going to come after you and arrest you or something right. People use it as an excuse that they have a student debt to be like oh because I’m $200000 in that I can only do x y z and I can’t do it when I really want in life and he’s basically saying like that’s not the case right? you can. You can go out there and take risks and you’re going to have to adjust your life accordingly. But it’s possible. And and that one conversation really changed my thinking to the point where I was like okay I don’t need to pay off my loans the point at which I’m ready to quit my job and start a company is when I know what that company is going to be right? And so um.
Bharath Krishnamoorthy: Around this time. It also became pretty clear that if if I was going to start a company. It was definitely going to be with Sean and so Sean and I were ideating on different businesses and testing out different ideas by yeah, whenever we landed on ah on ah and an idea we talked to a bunch of people in that space to try to ah understand like is this viable doesn’t have legs. Um, and and 1 of these ideas was this idea for bus bot which was a pricing and scheduling solution for interity buses if you think about greyhound megabus there’s dozens of smaller regional operators. Um that essentially operate like low-cost airlines but they are making these pricing and scheduling decisions by hand so we figured hey we can build software. To automate and improve that process for them and we had gotten some early indication of of interest right? We got effectively like a letter of intent from 1 of the bigger operators on the the dc to New York corridor and we had just gotten our bonuses at Gibson. Um, and I figured like you know what now is as good a time as any so I quit my job um a few months later shan qui his job. He moved in with my and moved into my apartment I had like you know I put an extra mattress on the floor he was sharing my 1 bedroom inside a 3 hree -bedroom apartment in queens um, and you know that that was a whole interesting situation. But that that’s sort of how it happened you know it was like because we have this opportunity. We figured. Let’s go for it.
Alejandro Cremades: So then what happened next.
Bharath Krishnamoorthy: Um, yeah I mean so we we tried to make it happen right? So we we lived very modestly Sean made us lentils and eggs for dinner every day we had soilent for for lunch every day which is you know it’s effectively like a protein shake. Um. We shared our 1 bedroom took turns thing over at our girlfriend’s places while the the hillfriend’s girlfriend came to visit there. Ah and we we tried to to get that business off the ground and you know it it kind of did get off the ground like it within six months it was doing about $8000 a month in revenue. Um, but we realized it wasn’t going to get much bigger because the in intersity bus industry is very small right? And so even if we knocked it out of a park and execute it perfectly and everything went our way the the potential for the business was just not that large and um so we we sort of came to that realization. Right around the time that we started the techstars mobility program in detroit this is like mid 2017? Um, and so we spent the full three months in techtars basically figuring out how to pivot the business into something else and you know we landed on something which is basically a solution to crowdsour demand for long distanceance transportation. Ended up raising just over $1,000,000 at the end of the techtarch program to to pursue that idea that one didn’t work either. We pivoted again. The next idea didn’t work pivoted again. The next idea didn’t work and it was basically a process of 2 years of us just pivoting through different business ideas.
Bharath Krishnamoorthy: Broadly in the transportation tech space before we landed on something that really clicked.
Alejandro Cremades: And and and what would you say that kept you guys going from trying so many different ideas for 2 years you know until you were able to you know, come ah come across denim you know which is this rocket ship that you guys are on now. But. But what do you think you know kept you guys going and and why you know denim you thought that he was the one.
Bharath Krishnamoorthy: Yeah, um I think Sean and I have very different personalities in a lot of ways. But 1 thing that we both have in common is that neither of us is ever going to quit. Um, and so it was never really a question that came to our minds like should we stop doing this. It was It’s just like how do we make it work in terms of why did denim ultimately work. Ah there’s a lot of things rights like over the course of this two years we got much better at understanding what would make an attractive business right? We started thinking about it more. The way that an investor would look at it rather than the way that a college kid would about like what sounds like a cool business idea right? and and looking at it from the perspective of if this product actually got traction. What does it look like at scale right? What does the economics of this business look like in the long run and we were basically looking for something that was. 1 an attractive opportunity in the in the long run that looks like a really big attractive market opportunity to something that we felt really good about ah in terms of like the mission we we felt like we were accomplishing something that was impacting the world in positive way and. Would feel good about devoting the next ten plus five years ten plus years of our lives moving it forward and 3 something where we thought we had some sort of natural competitive advantage and this opportunity in freight payments really checked all these boxes and sort of high-level. The opportunity was let’s digitize freight. Payments.
Bharath Krishnamoorthy: We will start by working with freight brokers and we will automate their core financial operations we will provide them access to affordable working capital and we will help them better leverage their own data and you know it. Check those 3 boxes. It’s a massive market opportunity right? Logistics is one of the only sectors that is measured in trillions of dollars and so being able to capture a slice of that market allows you to build a really meaningful business. It is a it’s a mission we can feel really good about right? We are helping. These small businesses succeed and excel and helping them. Yeah, achieve their own dreams and then last piece is that it’s something that kind of plays to our relative strengths right? We already had by this time built a pretty extensive network in the transportation technology space Sean’s background was in fintech. My background is as we discussed was as a lawyer and so it all kind of played into this. Um, so that’s that’s kind of how you know we’re like this this is the 1 we want to make work if we can make it work. Let’s go for it and then we were able to make it work as we we started making phone calls about the people to to people in the space to try to.
Alejandro Cremades: I Love it.
Bharath Krishnamoorthy: If the idea had legs and you know very quickly. We wound up getting our first customer and we got our second customer then our third customer and you know before you knew it this. This was the thing this is what we’re doing.
Alejandro Cremades: So for the people that are listening to get it. What ended up being the business model of then how do you guys make money.
Bharath Krishnamoorthy: Yeah, we um so like I said we we automate our clients financial operations and we provide them work in capital financing and so we charge a fee on each invoice that’s based on how big the invoice is and whether or not we are financing the invoice.
Bharath Krishnamoorthy: And the nice thing about a usage-based product like this is that it really closely aligns our interests with our clients interests right? We grow when they grow. So when we think about what do we want to do from a product Perspective. We’re thinking about how do we make our clients businesses grow and that that type of alignment works really well from you know, a retention perspective from a marketing perspective and. Ultimately from business perspective.
Alejandro Cremades: And how much capital have you guys raised to date for the company.
Bharath Krishnamoorthy: Um, we’ve raised ah ah hundred and sixty five million dollars in total. That’s forty forty million dollars in equity and one hundred and twenty five million dollars in debt.
Alejandro Cremades: And how has it been the the journey of racing money you know for for this and and what is the difference really between the debt side and and then also the equityities side for the folks that are listening to understand you know why you have that different blend of um, a voice of racing the money.
Bharath Krishnamoorthy: Yeah, So um, you know why do we have these 2 different stacks of Capital Ah the the equity we raise is similar to when other tech companies raise equity right? We’re raising money from venture capitalists this money funds. Ah. You know our team’s salaries our marketing like all the general business expenses. The reason that we are raising debt which is something that some fin text do but a lot of other companies don’t is that we are also providing working capital to our clients and so that money comes from these debt facilities. It wouldn’t be efficient for us to. Sell a big chunk of our company to raise some venture capital and then to just use that venture capital to lend out to clients instead. We can partner with these hedge funds or these banks who have much larger pools of capital and who are willing to deploy that for you know, attractive interest rate.
Alejandro Cremades: And now on the venture side of things you know. Obviously you guys came out of the Pivot. So How was that the you know experience of racing now money you know for a company that had pivoted and and how were you able to continue. You know racing. But what was that experience of going from one cycle to the next.
Bharath Krishnamoorthy: Yeah, um, it was actually a wild experience. So this was early twenty twenty we had um, you know we had something like six plus months of traction on this new business model and it was growing very quickly right? every month Month after month it was growing something like 30 to 50% um, we felt very confident that there was a big opportunity here. We had just started building the team so it was me my cofounder Sean who was owning the product and engineering we had hired a head of sales and we had hired a head of operations. Um, who were both. You know industry veterans and we are going into this fundraise process. It goes phenomenally well, we actually got a term sheet before we formally kicked off the process and then in the process of trying to close it. We get a cease and desist from. The former employer of our headers head of sales basically stating that he’s violating his non-compete and they’re going to sue us into oblivion if we don’t let him go and it’s a tricky situation to be in because you know this other company is worth something like $10000000000 there’s basically 0 chance that we can sustain a legal battle with them because we’re. Imminently about to run out of calf. We aren’t really in a position to let go of our head of sales because he’s a phenomenal salesperson and is a big part of the reason why we were putting over it. But that month over month growth and a big part of the reason why our investors were were backing us. Um, so we.
Bharath Krishnamoorthy: You know we basically called the bluff of this this company and for month maybe a month and a half we’re just going back and forth trying to negotiate a settlement agreement with them. They’re sending us their response every Friday night to ruin our weekends you know like clockwork. Ah. Ultimately, we come to a resolution with them that allows us to retain our head of sales. Um, and you know we’re about to close the deal and then covid happens and you know all the investors are panicking and we’re super nervous that our our lead investor antheus was going to get spoofed and back out. And and to their credit through all of these infamous did not get spooked right? They didn’t try to retrade on any of the terms because of the changing market. They they basically just said as soon as you resolved this legal dispute. We’ll we’ll fund you and then you know we resolve the legal dispute. They funded us deal closed. Um, which yeah was a huge relief.
Alejandro Cremades: Wow now obviously you’re receiving you know those letters from the other party like you were saying on Fridays you know to ruin your weekend. Well why I guess you know that’s quite an uncertain moment because if you guys would have not been able to. Ah.
Bharath Krishnamoorthy: Are.
Alejandro Cremades: Really settle. You know with them then you know everything would have come crumbling Down. So I Guess who do you think you guys needed to be in order to be effective in this situation and then also to to really get out of your own heads you know and not you know, ask yourself too much what if what? if what? if so that you could actually you know. Come to terms and and and get this thing wrapped up.
Bharath Krishnamoorthy: Um, yeah I think there’s a couple attributes that would make someone successful in that type of situation and you know which I would attribute our ability to to persevere in those situations to 1 is that you have to be a little bit stoic right? You can’t. There’s there’s so many hides and lows when you’re building the company and that’s just like 1 great example where we we got the term sheet and it’s like oh god we’re all going to be rich and then it’s like ah you know we’re about to lose our head of sales. Everything’s going to shit and if if you let those swings dictate your behavior. Your. Going to be totally incompetent right? You’re going to be alternating from these periods of like manic excitement to ah just being terrified of of making any decision and so you have to take kind of a stoic approach of keeping an even keel through all of this um part of that is that you need to be able to compartmentalize. And focus on the things that are in your control. So there’s a lot of things that still need to get done during this. We can’t spend all of our time sittinging here and negotiating the settlement because if we do that the business will stop operating and then we won’t be fundable so you have to continue working on the problems that you can do something about even knowing. That there are things that you might not be able to do something about that could kill the business right? And that’s just like ah a fact of starting a company is that there is always going to be a real risk of failure. Yeah.
Alejandro Cremades: Got it now you know in this case for you guys. Imagine you know, like if you were to go to sleep tonight and you wake up in a world where the vision of denim is fully realized what does that world look like.
Bharath Krishnamoorthy: Um, I go to sleep I wake up brush my teeth get on the computer. Ah the the vision for denim is realized because I wake up and Denim is now a universal freight Payments Network and what I mean by that is that every carrier. Broker and shipper in the country is using denim when they need to exchange money or data with these other counterparties. So ah, a broker client for example is using denim to evaluate these other counterparties to onboard their carriers and shippers to. Confirm rates and generate and send invoices to ingest and audit paperwork from their carriers to reconcile disputes to make payments all of those workflows are being done on our platform and because of that we are in a unique position to offer them. Yeah. Analytics services powered by our proprietary data customize financing and insurance products. Yeah, like I said covering the the payments processes credit cards deposit accounts right? There’s a lot of different ways to monetize them once that core Payments Network is in place.
Alejandro Cremades: Now for the people that are listening to to understand you know as well. The scope and size of denim today anything that you can share in terms of number of employees or anything else that you feel comfortable sharing.
Bharath Krishnamoorthy: Yeah, we’re um, we we’re over 70 employees were we process tens of millions of dollars in in payments each month over $100,000,000 in payments each year um and that that payment volume is continuing to grow.
Alejandro Cremades: Now you know you were talking about the um, the the segment the fried segment I mean where do you think the market as a whole is heading.
Bharath Krishnamoorthy: So the the freight markets are in a rough spot right now. A lot of people are describing it like a freight recession. Um, and if if you step back you know why is that the case 1 big factor is that demand in the economy as a whole is down. Right? And so people are buying less stuff so there’s less stuff moving on the roads and trucks and then the second piece is that 2020 ty twenty and 2021 were extremely hot years for trucking and so a lot of new trucking companies came into existence so you’ve got the situation where there’s an excess of supply and contracting demand. So. Market is really dampening. Um, so’s it’s a tough spot to be in. Ah you know as business operating in the space. But when I think about where is it going I think it’s very likely that these freight spot rates will bottom out sometime in the next you know 3 to six months ah you know a lot of people are are tweeting now that it looks like maybe they’ve already bottomed up but you know don’t want to count my chickens there. Um, and and then it’ll it’ll bounce back right? and it’s a cyclical industry so we’ll continue to see these ebbs and flows like we do in many other sectors. Um, but in terms of where the sort of Great tech space is going that seems like something that is you know it’s like once you’ve opened pindorra’s box. You can’t get everything back in there five years ago the industry was very reluctant to digitize. But now you’ve got companies like convoy and uber which are making a really big splash in the industry.
Bharath Krishnamoorthy: And you have all of these other freight brokers who realize that they can’t compete unless they start adopting technology that gives them those equivalent 1 capabilities and so um I think you know 5 years from now every freight broker is going to be tech enabled some small percentage of them. Will be that way because they raised a ton of venture capital and built it software instead. But the really smart brokers are the ones who are using the profits. They’re generating from their business to pay for software that gives them those equivalent capabilities.
Alejandro Cremades: Now we’ve been talking about the future earlier. You know, just say taking here a step out and and you know moment to to reflect? you know if I was to put you into a time machine and you know I bring you back in time you know. Perhaps to that moment where you were still in Gibsondan you know, pushing some paper behind the desk where that’s what lawyers do imagineed you had the opportunity of showing up to to that you know this where you were at you know where you like doing one of those all nighters. You know that you will pull out you know and trying to to close a deal and.
Bharath Krishnamoorthy: And.
Alejandro Cremades: And when you were thinking about that future where you know you were going to do something of your own and and and and put um you know, kind of like a solution on that problem that that it was in front of you if you were able to have a sitdown with your younger self. And give your younger self one piece of advice before launching a business. What would that be and why given what you know now.
Bharath Krishnamoorthy: I would definitely tell my younger self to prioritize his sleep and to start sleeping properly. It probably wouldn’t work because you know I think a lot of people told him that he didn’t listen but hopefully it would be more compelling coming from his future self. It. You know, with respect to why it’s hard to think of any 1 change that I’ve made in my life that has had a greater impact on every aspect of my life. So from the ages of 15 to 28 I slept very little whether that was from you know, partying or working or just. Reading books all night. Um I basically paid no attention to how much sleep I got and the quality of my sleep and just became accustomed to operating with an incredible sleep dad and um, yeah, at one point. In 2019 Sean literally pulled me aside and was like he said something to the effective hey I think you’re getting stupider and I think it’s because you don’t sleep properly which is pretty jarring feedback to get from someone who you know 1 probably more insight into that than anyone else right? because he’s he’s known me since we were fourteen years old and has seen my evolution over that time and 2 someone whose opinion I take more seriously than than almost anyone right? And so um, he was you know as is often the case he was right and I i.
Bharath Krishnamoorthy: Wound up completely restructuring my life paying a lot more attention to normalizing my sleep schedule and ah it’s it’s hard to overstate the impact that had on on everything on my health on my happiness and on my productivity so we went through that period of 2 years We’re pivoting around to different business ideas. Like I said in in 2019 we we landed on the freight payments opportunity I don’t think it’s a coincidence that I normalized my sleep schedule you know shortly before that I I think that the fact that I was now operating at this much higher caliber is part of the reason why we were able to make this last go at it.
Alejandro Cremades: So what’s the minimum you know, sleep that they that yo we shoot for.
Bharath Krishnamoorthy: Ah, so much more successful.
Bharath Krishnamoorthy: Um I I shoot for 8 hours a night sometimes I will get more sometimes I’ll get less. But I I try to average 8 hours a night.
Alejandro Cremades: That’s Amazing. By the way I’m I’m right there with you and I and I fully agree with the importance of sleep and I don’t think that Founders. You know, really think through you know and and and and really understand how important it is so. I Guess for the people that are listening that would want to reach out and say Hi. What is the best way for them to do so.
Bharath Krishnamoorthy: They can reach me by email. So it’s be at denim.com so just the letter b at denim d e n I m dot com.
Alejandro Cremades: Amazing! Well hey bra. Thank you? So so much for being on the deal maker show today with us. It has been an honor to have you.
Bharath Krishnamoorthy: Yeah, thank you so much for having me man. This is great.
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The post Bharath Krishnamoorthy On Raising $165 Million To Simplify Payments In A $10 Trillion Industry appeared first on Alejandro Cremades.
George Mancheril took the leap from working in traditional finance to launching a fintech startup that provides crucial funding for businesses in the cannabis space. His venture, Bespoke Financial, has attracted funding from top-tier investors like Robert Stavis, Cosmic Venture Partners, Philip Barach, and Greenhouse Capital Partners.
In this episode, you will learn:
- Debt versus equity capital for startups
- Operating and scaling in highly regulated markets
- The outlook for the cannabis industry
Alejandro Cremades · EP 559 George Mancheril On Raising $200 Million To Fund The Future Of CannabisSUBSCRIBE ON:
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Your email address is 100% safe from spam!About George Mancheril:George has over 14 years of experience in the financial industry with a specific focus on asset-based lending, off-balance sheet financing of commercial assets, and structured credit.
After graduating from NYU’s Stern School of Business in 2008 with majors in Finance and Statistics, George joined Goldman Sachs as a US Interest Rates Trader, where he managed his own $2bn book of risk.
From 2013 to 2018, he worked at Guggenheim Partners Investment Management’s Structured Credit Group in Los Angeles, where he focused on structuring esoteric asset financing for a variety of commercial assets, including airplanes, container leases, and receivables.
His primary responsibilities centered around underwriting credit risk, negotiating deal structures with issuers, portfolio management of 3 debt funds totaling $1bn AUM, and credit risk management.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the dealmakerr show. So very excited. You know about the guest that we’re going to have today. We’re talk about you know, fundraising scaling billing all the good stuff you know going from the traditional finance more to the cannabis you know side of things. But I didn’t know without further ado you know, let’s welcome our guests today George Manchero welcome to the show I so originally born in India I know that they you know you came here to New York City you know, quite early in your your life. But.
George Mancheril: Um, thanks for having me good to be here.
Alejandro Cremades: But yeah, so give us our little of our walkth through memory lane. How is life growing up. So.
George Mancheril: Sure? Yeah I mean you know I don’t remember a time before I was in New York City grew up is like a regular city kid in the Bronx um, ended up going to and Nyu and you know ah post. College I had sold my soul to finance and wall street at a very young age and so really started my career in New York as well and stayed there up until you know 2013 when I actually moved out to Los Angeles
Alejandro Cremades: So what got you into finance you know I’m sure that they regardless your parents you know were super thrilled because I know that in India you know, pushing for the educational side of things you know is is a big thing I mean they you know they push you to become an engineer or a doctor. So I’m sure that you know them, you know so coming here making the.
George Mancheril: Yeah.
Alejandro Cremades: Sacrifice of coming to the Us and and and and being immigrants. You know here in the Us you know I’m an immigrant and I know that is is not easy. You know to come here I’m I’m sure that they were super proud when they saw you you know going to nwau.
George Mancheril: Yeah, know? Yeah I think that an engineer might have gone over better. But you know finance was good as a second point. But no I mean I you know, growing up even as a child. Um you know I was just very interested in keeping. Ah, pulse on world events and what’s going on. Um, you know both locally nationally internationally and finance just seemed to be an industry that really allowed me to leverage that skillset and that interest. Um, you know? Ultimately I think it’s all about. Having an informed view and an informed opinion about what’s going on in the world and what you expect will happen in the future and so I just thought it was a good complement of my skillset and interests and it was a natural calling for me and one that you know at the end of the day is it’s ah it’s a very.
George Mancheril: Dynamic environment to operate in you know, constantly things are changing and updating and I think just the excitement of all that was definitely a pull for me as well.
Alejandro Cremades: So you experienced the Goldman Sachs you know on the on the finance side of things and then also Guggenheim so why did you go from? you know, let’s say one to the other.
George Mancheril: Yeah I mean I look I mean I loved my career It’s definitely very engaging and and fruitful and also very educational. But I think you know most people when they get to a certain point their lives are in a career. You know you start to get to a place where you want to challenge yourself further and I think you know by 18 having worked in finance for you know, 14 years at that point I really was at a point at a place where I wanted to challenge myself a little bit more you know take on a little bit more of the entrepreneurial role and I saw a tremendous opportunity that lined up at the same time with cannabis legalization going across the us and so. I think it was a mix of really what I was looking for personally and professionally but also opportunity wise what was available.
Alejandro Cremades: Now it’s interesting. You know, like what you’re mentioning there because I mean for you I mean you work for quite a bit in guggenham I mean were you were there for how how long how many years so that’s ah, quite a bit of time you know so why now obviously your your.
George Mancheril: Ah, like 8 years I would say.
Alejandro Cremades: Career you know it has taken a different path you know, different things that you’re doing now from what you were doing at Guggenheim but I guess during those 8 years at Guggenheim what were your major takeaways or your biggest lessons first.
George Mancheril: Yeah I mean so at Guggenheim I focused on structured credit. Um, and you wore a couple different hats there at the same time I was a portfolio manager for structured credit investment mandates. There was an analyst function to my role and also trading and so. Really, it was a lot more informative for my current role than I had anticipated and structured credit really focuses on lending to higher risk borrowers um on the corporate level dealing with illiquid investments and even just structuring loans and so we got. Um, you know a specialty and a focus in looking at funky vanilla off the off the cuff non-vanilla deals which really required you to take a deep dive look into each each sort of but perspective borrower understand what the collateral is there what the assets are how do you structure a deal so that as a lender. You’re both getting an attractive return but also protected as much as possible and so that really did apply 1 for 1 looking at the cannabis space where you’re looking at a nascent industry brand new companies and brand new operators. But ultimately businesses that have assets you know they have value on their balance sheet. And the idea is how do you structure lending deals that allow these borrowers to access capital in exchange for the value of the assets they have on their balance sheet and then how do you monitor those relationships and those exposures on a goforward basis. So there’s a significant amount that I learned um you know I’d say in my past financial career that.
George Mancheril: You know, really just holds true regardless of what industry you’re you’re looking at.
Alejandro Cremades: So as they say you know I the us they take some time you know they’re back there and we don’t even know that they’re there. So how do you come across? you know this and in in Cannabis too I mean you say quite a different turn.
George Mancheril: Yeah, no I mean like I said I moved to l a in 2013 and at that time. Um California only had the medicinal market available in in cannabis but it was my first exposure to having you know any sort of dispensary presence or cannabis presence where I lived. When 18 ruled around California was legalizing adult use sales you know California I’m sorry Colorado and Washington had legalized previously and so they had their own adult use markets and seeing the pace at which states were adopting adult use sales. It just seemed like the green wave was here. In terms of legalization now I very firmly believe in you know the repeal of drug prohibition in this country especially as it relates to cannabis I think the war on drugs has been a failed effort and I think it’s wasted a lot of resources and it’s caused a lot of damage in terms of human capital and so. Repeal of that is you know by nature interesting to me but then to compound it with the opportunity to get involved with this industry at a nascent stage and really you know, try and bring my skill set and see if that could help propel and accelerate the success of this industry. It just seemed. Like a great meeting of you know, 2 different aspirations that I had in my own life and so I think it was it was a right mix of just seeing the opportunity materialize. Um, and like I said you know being at a point in my life where I wanted to take what I had learned and really put it take it to the next level.
Alejandro Cremades: So what was up that moment where you pulled the trigger you know in and you were like Okay, let’s go.
George Mancheril: Yeah I mean I would say it was halfway through 2018? Um, you know legalization had started in California you know a lot of this anyone who started a business knows it’s a lot about networking and meeting people and seeing what other likeminded individuals are out there thinking along the same lines and so. Even just in terms of my my own outreach and you know seeing sort of the energy and excitement that surrounded cannabis at the time I think all of that was what finally resulted in that tipping point where it was just like yeah this is a very exciting opportunity that I wanted to take a chance on.
Alejandro Cremades: So then what happened next? okay.
George Mancheril: I mean what happened next has been you know five ish years of you know just very exciting challenges that anyone has as an entrepreneur you know, um from the day of our founding you know bespoke’s main goal was to provide debt financing for cannabis operators across the supply chain and in the legal space now. That capital fundraising environment for cannabis is very very different than it is for any other industry and for any other you know, sort of segment of the startup world. 1 There’s still the federal illegality of cannabis which means a lot of institutional investors and a lot of sources of capital that you would normally turn to just will not look at cannabis. Um, and so. That pool of where these companies and even ancillary companies like bespoke and access that funding is tremendously smaller and therefore much harder to actually complete and do and achieve within the cannabis industry by itself. Fortunately, however, there, there’s always you know they ah risk adjusted return and there’s always investors with different sort of risk appetites and a lot that actually did see the value in cannabis and and the future potential and so the idea had had always been. You know how can bespoke act as a bridge between. Traditional world of finance and institutional capital and the growing cannabis industry that needed access to that capital and so we we sit in between those 2 worlds and you know leverage our expertise and evaluating these borrowers and identifying good risks and our ability to source capital in order to help these companies grow and scale and so from.
George Mancheril: The outset you know the industry has gone through different waves and different cycles and I think that’s true of any industry but especially true of an industry that’s going from 0 to 1 and really, you know very much in its formative state and for us, you know 1 thing that’s really buoyed us and kept us you know with our eye on a long-term vision has been the fact that. There’s a long-term bullish thesis here when it comes to cannabis and its ramp in in the coming years and regardless of what market you’re talking about. Um you know the trend has been consistent that cannabis consumption. Um, not just recreationally, but also from a pharmaceutical standpoint. We’re just barely scratching the surface in terms of what’s possible and and you know what this can mean in terms of improvement of quality of life for individuals out there. So despite whatever you know short-term near-term challenges have existed over the past five years long term the trend has been very consistent with our initial thesis which has been that there’s there’s a huge opportunity here. So we’re we’re a fintech platform that provides financing services so we offer lines of credit for cannabis operators to really manage their working capital needs.
Alejandro Cremades: And how do you guys make money George.
George Mancheril: Let’s say you’re a manufacturer that you know needs to go buy cannabis flour needs to go by packaging? Um, but ultimately once you produce the goods you sell them to your retail customers who may pay you on day forty five day sixty day ninety after they receive the product. Puts a serious limitation on your own business. You need capital in hand to go source the raw materials and you can’t act as sort of a bank for your customers and so with our financing products that manufacturer can go purchase. Whatever they need for their raw materials. Finish production sell to their customers ultimately collect from the dispensaries and repay our loans but we offer lines that are intended to be churned. Um you know, recycled as you move through production cycle to production cycle but really allows these companies to work towards 1 getting a bigger foothold. You know, growing market share taking advantage of expansion opportunities into new geographies or new markets and improving profitability because you know a lot of these businesses. You need to operate and take advantage of economies of scale in order to have profitability and so doing more with the fixed infrastructure that you have on hand. Puts a greater burden and a greater demand for your own working capital and if you’re strung up and a lot of that’s tied up in inventory or it’s tied up and accounts receivable working with thespoke allows you to unlock value based off those assets.
Alejandro Cremades: And and and I guess you know the other question that comes to mind is you know for an operation like this I mean you need to raise some money So how much capital have you guys raised to date.
George Mancheril: Yeah I would say it’s since inception we’ve raised over you know, $200,000,000 across debt and equity. Um, yeah from over the past five years
Alejandro Cremades: And what is the um, the um, the difference there on equity and debt for the people that are listening.
George Mancheril: Yeah, so I mean Equity Capital we use just like any other startup company does in terms of building the team and investing in the technology and and you know getting all the pieces we need in place. The debt financing is really you know the capital that allows us to go out there and originate loans. Um, and so. It’s a mix of those two because we do have 2 needs for our financing one is just for the business end in terms of developing and the other is actually for our operational end in order to Deploy capital.
Alejandro Cremades: Have you experienced a you know over time kind of like that limitation of perhaps the people that you were able to access to to secure financing you know, just like opening up and being a little bit more flexible in that regard now.
George Mancheril: Yeah I definitely agree with that consensus and it makes sense. You know the longer. The industry is allowed to operate the more of a track record the industry has and companies have the more comfortable investors get with you know, deploying capital into that. So I’d definitely say. The universe of potential capital sources had consistently grown you know since call the Twenty Seventeen 2018 it hasn’t been without its rollercoaster moments but in aggregate I would say the investor class is pretty much. Convinced that cannabis is here to stay as a cpg powerhouse and and a sizable industry going forward. The biggest filter still remains that you know federal illegality that we haven’t seen any movement on from you know Washington Dc and so there’s there’s a lot of I’d say pet up demand that’s sitting on the sidelines just waiting for that all clear. But are really in a position where they can’t move until that legalization or decriminalizing cannabis actually takes place on a federal level.
Alejandro Cremades: And what we’re thinking about also expectations of going from 1 round to the next I mean that’s ah, really interesting area because we’re talking about an industry that is at its infancy. You know is like now regulation is is starting to be implemented. You know you can see like all these states.
George Mancheril: Um, a.
Alejandro Cremades: Allowing you know for for Cannabis to be distributed and and obviously you know the investors that are coming into this segment. You know it’s not like there’s a lot of historical data that they can benchmark on So How have you guys experienced to the level of expectations. Ah. Maturing or transitioning from one financing cycle to the next.
George Mancheril: Um, I would say on our side like you said the industry’s still pretty nascent and it’s still pretty new and so I wouldn’t say that there’s been a significant period of time where that’s materially changed. But for us, you know, evaluating ah a business in a standalone business is the same. Regardless of whether there’s you know, 5 years of of history or 3 years of history at the end of the day what you’re looking for is really what are the fundamentals that you’re dealing with here. What are the operations and what’s the overall macro climate look like I would say the macro environment is definitely huge. Factor to consider in any of this consideration right? It’s like 2020 2021 vastly different both for cannabis and not and you know the world outside of cannabis than 2022 or even this car and year are and so you know I would say those factors have been more relevant than any sort of. Historical track record because again the industry today is in a vastly different position than it was even three years ago and so you know the macro considerations are ah, really paramount to make sure you you understand what’s going on with the business and teasing out what’s tied to macro versus what’s tied to micro.
Alejandro Cremades: And also you were alluding to it earlier on the perhaps the negative connotation that for some people you know this industry has how do you see that consciousness opening up so that perhaps that negativity that is attached to it. You know becomes a little more.
George Mancheril: yeah yeah I mean look at the end of the day like I don’t think there’s any any product out there that has 100% of everyone’s support across the board and it definitely is an evolution and an unlearning of a lot of what was.
Alejandro Cremades: It disappears you know and there is more of openness towards it. So.
George Mancheril: Parroed out in during cannabis’s prohibition phase but I think really the proof is in the pudding right? You have so many markets now you have over 50% of the states of the us that have some form of legalized cannabis whether it’s medicinal or adult use you have about I’d say 2 thirds of of you know the. Us population that believes that legalization should happen. So I think there’s definitely been a lot of you know, living with cannabis proving that this isn’t going to be the end of times or the end of civilization that a lot of a lot of individuals just need to see in practice right? and now even on the financing side. You know New York has just started. You know their adult use. Sales’s very limited. It’s running behind schedule. But what we’re seeing even from the first couple days is that there’s huge pent up demand and I think there’s a little bit of seeing cannabis and the cannabis industry thrive in your locality and within your state that does a lot of the convincing right? there just so and then. Add on to it. The benefits that your local community or your state can enjoy from the added tax revenue that it’s getting from this new industry the job growth that it offers to your community I think all of these positives are you know, very hard to really visualize. The abstract. But once you see it in practice. It. But it just becomes that much more real and that much more convincing.
Alejandro Cremades: And as you’re thinking about growth too and and and how things tend to change. How will you say that you guys have developed and and scaled up the technology side of things.
George Mancheril: Yeah I mean I think you know on our side. We’ve seen technology play an increasing role over the past two years just within our own operations and you know one one exciting part about cannabis is growth and ramp is that you know it’s happening now in the modern era. And it’s and it’s a cpg industry that can really take advantage of technology and really how the modern consumer operates in a way that other previously existing industries had to unlearn past ways of operating and then learn new ways and so for us we’ve. Prioritized you know how can we be more efficient remove friction points. You know, really be a financing partner. But also you know a true just tool and and service for this industry and the operators within it to scale their growth and I think when we look back at what we’ve done over the past two years it’s understanding both on a. Macro level. How the industry’s progressing what supply is doing what’s happening on pricing there’ve been a lot of different micro shocks that each state and each market have had to encounter and really I think the exciting thing for cannabis operators is that the fact that there’s so much technology that has been. Built out around cannabis really what? this ultimately does is empower them to make smarter decisions and that’s something that we’ve leveraged when it comes to making our application process as simple as possible and you know getting financing in a very short period of time out to the borrowers who need it all of these are.
George Mancheril: Directly enabled by technology and that’s really where our focus would be going forward to understand how we can make this more convenient and more broadly available for other markets.
Alejandro Cremades: Now you guys are combining 2 areas that are you know, quite challenging. You know on a one end. You know you’re dealing with a very heavy regulated space. You know they kind of is space but then also the financing side of things you know also has you know it’s quite a regulation so you got double the trouble here. So so how ah, how how have you guys you know, really thought about that you know from the beginning.
George Mancheril: Yeah I mean it’s that’s a good question because you’re right? Um, cannabis regulation is a state by state consideration each state sets up its own rules because again federally it’s illegal and financing rules. Follow the same framework. It is a state by state consideration in terms of. How you have to operate as a lender whether they’re licensing requirements and you know sort of other limitations on what lenders can or cannot do and so for us when we look at a new market you know and by market we mean state. It requires a lot of due diligence on our side both in terms of understanding both spheres and really making sure that our products work. Ah, process works. Um, you know there is that there’s enough of a cannabis market there that you know can actually benefit from financing and benefit from scaling up and so a lot of this a lot of that analysis happens before we go live into any any state and as of today you know we have borrowers in over 18 states across the us and so. It’s a process that we’ve gotten very used to running through as the opportunity presents itself. But the good news is that you know because of our growth and because of our brand. Ah you know presence within the market now a lot of our geographic expansion is driven by reverse inquiry. You know we often get approached by operators and states. Where we haven’t been active before um to see if there’s any way for us to work together and so that’s been a good evolution versus you know the early days of our our existence where we would really just focus on which markets we should prioritize from an opportunity standpoint.
Alejandro Cremades: And now for the people that are listening to get an idea on their scope and size anything that you feel comfortable sharing maybe like number of employees or anything like that.
George Mancheril: Yeah I mean we’ve always run I’d say pretty lean over here. But you know we’ve we’ve basically increased our head count by 50% last year you know it’s about thirty thirty so employees at the company right now and for us, you know it’s not really a question of of headcount. It’s more about you know what? we’re able to do and so. This is where our technologies really helped us sort of scale operations in a really efficient manner for us. You know growth is all about how much financing we’re doing and you know just by last year you know we had. We had financed over. You know one point eight billion dollars in in cannabis gmv since our inception and so that was definitely. Ah, big milestone and reflective of a lot of years of of hard work and for us you know we just see the opportunity set growing. Um, you know the amount of cannabis that consumers are buying is only increasing even in quote unquote mature markets like California um, you’re seeing that there’s actually more demand for the product than there was last year and so for us. The pie is just getting bigger and for us the idea is how do we make sure that we’re there to service an increasing portion of it. Um, just given that there is so much growth on both ends.
Alejandro Cremades: That’s amazing now. Imagine if you were to go to sleep tonight George and you wake up in a world where the vision of the company is fully realized what does that world look like.
George Mancheril: I don’t know that there is ever a final point. Um, you know everything does kind of build and evolves and you know the work that you do does open up new opportunities I mean even for us when we you know first started our operations. The idea was you know, address this working capital financing need in the industry and. After 2 years of of doing this in a pretty manual way what we realized is there’s an opportunity here incorporating technology and going with a more scalable effort and I think as the industry matures the needs of that industry are going to evolve and change even beyond financing and so for us. A lot of a lot of our brainstorming and our ideas are driven by what we hear from our borrowers and from our our clients really, it’s just like what are they trying to take advantage of what are we they seeing in terms of changes within the industry and so you know realistically um I don’t have a final form in my mind but what would be very very. Good would be for us to really execute in terms of what our core mission is and really we look at ourselves as a partner for the cannabis industry. So if we’re out there enabling entrepreneurs to really capitalize on their vision and actually scale their businesses and grow. Then. We will have done everything we wanted to do from our mission statement and that can take the form in a variety of different ways even beyond just strictly financing products.
Alejandro Cremades: Amazing now as we are you know here? we’re talking about the future a little bit but if we’re looking towards the past and we’re able to reflect from it. You know, imagine you had the opportunity of having a chat with your younger self maybe that younger self that is still you know in the in the finance. You know, um, segment you know working still at Guggenheim and you were able to you know just have a chat with your younger self and being able to give that younger George 1 piece of advice before launching a business. What would that be and why given what you know now.
George Mancheril: It’s a loaded question. Um in in the effort of making this more relevant for more of your audience I mean for me I think one of the biggest lessons has been you know strength of conviction. Um, you know, really just understand what’s most important, what are the goals and. What are you trying to achieve in a very clear framework and really using that as a way to prioritize because look There’s always going to be volatility. There’s always going to be. You know the the consensus opinion about what the right thing to do is or what to prioritize? um or what reality even looks like right and I think. Especially going into into you know cannabis during what was you know I would say a boom market across the board when when it comes to startups. There’s there’s a general optimism and consensus that oftentimes goes unchallenged where internally we’ve always been slightly on the more pessimistic side in terms of There’s real challenges in growing any business from 0 to 1 and growing an industry from 0 to one and I think it behooves everyone to keep that in mind and so for the first couple parts of our our existence. You know we always kind of felt like the Debbie Downers in some conversations like you know, hey maybe the future is not going to be as. Perfect or as rosy or as easy as as people are expecting and a lot of those challenges have materialized um, a lot of unexpected challenges have materialized. But I think ultimately that doesn’t diminish from the core optimism that we have in terms of what this industry will ultimately be and even what it’s gone to today and so.
George Mancheril: I think just having strength of conviction in terms of your best educated guests and at the same time being open to new data new information that better informs you as things change. It’s something. That’s very hard to do especially when you’re in what could be a bull market what you can be in now which is a very bare market where everyone’s pessimistic I think we’ve actually. Flipped our roles where general consensus is pretty bearish and pretty bleak and for us this is where I think the silver linings of the optimism really shines out on our side where we know there’s a future and so the opportunity remains you know it’s it’s going to be It’s always it was always going to be a challenge to get from point a to point b but. The the fact that we’ve actually been resilient as an industry and continued to grow for us. It actually makes it more exciting now to like retackle just based off of the experience. We’ve built up over the past few years
Alejandro Cremades: I love it so George for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
George Mancheril: Yeah I mean I would say you know go please go to our website. Bespokefinancial.com um, and you know there’s easy options to reach out to us or where our team is happy to get back to you and you know please do reach out. We like to take a very you know. Consultative approach and a partnership approach when it comes to working with cannabis operators within the space and so anyone who’s interested in learning more about our services. You know, reaching out is always the first step and then we’re happy to get in front of you and get you the information you need and ultimately you know work towards getting you as many. Financial tools is possible for you to scale your business.
Alejandro Cremades: Amazing. Well hey George thank you so much for being on the deal maker show today. It has been an honor to have you with us.
George Mancheril: Thank you Alejandro.
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The post George Mancheril On Raising $200 Million To Fund The Future Of Cannabis appeared first on Alejandro Cremades.
Barrett Bilotta raised hundreds of millions in capital for his energy company in the past year alone. Today, they are enjoying hypergrowth as they expand from the northeast into other parts of the country. The venture, Agilitas Energy, has attracted financing from the top-tier investor, CarVal Investors, and has recently acquired New England Battery Storage.
In this episode, you will learn:
- How Agilitas Energy is building the infrastructure of tomorrow’s clean energy
- Picking the right investors for your startup
- All the employment they are creating in the process
Alejandro Cremades · EP 558 Barrett Bilotta On Raising $350 Million To Accelerate The Transition To Clean EnergySUBSCRIBE ON:
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Your email address is 100% safe from spam!About Barrett Bilotta:Barrett is the President, Chief Executive Officer, and co-founder of Agilitas Energy. In addition, Barrett is a co-founder and Managing Partner of Madbury Capital, the private equity affiliate of Agilitas Energy. He also serves on the Board of Directors and is a member of the Investment Committee.
Barrett leads the overall strategy of Agilitas Energy and oversees all functional business units, including development, EPC, asset management and operations, with a focus on deal structuring, project development, finance, and general management.
Barrett graduated from the University of New Hampshire and the Tuck School of Business at Dartmouth College. He retired as a Captain from the U.S. Army National Guard.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show. So very excited about our guest today I mean it’s a pretty remarkable journey. you know again you know I’ve seen a lot you know of people that go into the army. You know that they that the discipline the the work ethic is absolutely. Mindblowing and I think that the story of our guest today you’re gonna find it super inspiring and again you know when it comes to building scaling financing all the good stuff that we like to hear so we without farther do let’s welcome our guest today bear it biotta welcome to the show.
Barrett Bilotta: Thank you so much Aleandro It’s great to be here.
Alejandro Cremades: I so originally born you know and raised there in Massachusetts you know you grew up in out of the suburbs. You know out of a Boston so give us a little of a walkthrough memory lane. How was life growing up.
Barrett Bilotta: Sure, absolutely so yes I grew up in a ah small town called Westford Massachusetts I’m an only child ended up kind of getting into sports at an an early age and primarily hockey. As a goaltender which you know looking back on. It was one of the the most important things in terms of being able to deal with a lot of the stress and in the environment that exists within within running a business ended up going to ah u and h um getting a degree in in political science. But during my. Tenure at uandh between my freshman and sophomore year I ended up enlisting within the coast guard reserve went down to New Jersey for basic training during that in between summer and. Got a lot of discipline and and and saw a lot of new people from all over the country that that really gave me a lot of perspective on on on the good people of the us and and a lot of the counterparties that wanted to go ahead and serve the country because again that was just a couple of years after September Eleventh then
Alejandro Cremades: And what? what? what was the trigger for that buried I mean what trigger you to say I wouldn’t list. You know what? what? what was that the you know the sequence right.
Barrett Bilotta: Yeah, absolutely I mean so I have come from a a family that has a long lineage of military service and I think it was definitely something that my father had encouraged and I had always looked up to individuals that have served their country. Ah, whether it was a career or just doing the four years and felt that it was. It was the right thing to do um both from a personal standpoint as well as you know from a patriotic standpoint at the time and. I I Also had the thought after you know coming out of boy scouts and being an eagle scout that this was just kind of a natural progression in terms of a lot of the skills that I had learned in the scouts and um, wanted to kind of go ahead and and put those to work and kind of continue on with that with that that service aspect.
Barrett Bilotta: And and I ended up. You know when I got back from basic from the coast guard that next year I ended up actually transitioning into the army national guard and ah Rotc primarily because at that time they they were offering a. Much better deal in terms of financing for college. You know it was it was one of those things where I had to pay my own way whether it was loans or savings or whatnot and it was just a kind of an offer that I was like well I got it I got to do this this just makes too much sense and so throughout my college. Time for sophomore through senior year I was in the national guard as well as in the ah rotc program and then in ah and then in 2007 I when I graduated I was commissioned as ah as a second lieutenant in the army and from that point on. Um. You know, started to do some active service and and get trained up as a logistics officer and while that was all going on I still had a proclivity specifically to business and always had an interest in kind of making money in doing doing deals so to speak and so. Towards my junior senior year of college and then right thereafter I ended up acquiring a bunch of a bunch of units that were around the university of New Hampshire to rent as student, housing and.
Barrett Bilotta: That was back in the day when it was the subprime loan. Go-go days and they were just giving out money to pretty much anybody and the the good news was is that all of those all of those deals were able to pay the mortgage. It was. There was no failure. There. Even though believe it or not the interest rates on those properties were close to 13% which is which I think about that now and it’s it’s it’s crazy to think about and so I always had you know while I was in the army kind of this ongoing property business with a few units helped to pay the Bills. You know, just trying to.
Alejandro Cremades: Wow! yeah.
Barrett Bilotta: Build a little bit of equity in everything and what what ended up happening is when I was done my active portion of service with the army and had transitioned full time into the national guard I ended up joining a small tech company called dexrex out of Amherst. Um, Massachusetts with 2 close friends that I went to high school with and this was all about archiving instant messages and text messages and those types of things and then converting it into like an email format primarily for archiving and in doing that. I ended up meeting my my business partner today named Ken Rubin who was at that time a senior vice president over at iron mountain um, on the digital archiving side of the business who became on our board of directors around 2010 and when dexrex ended up winding down and we sold that company towards mid Twenty Eleven ah Ken and I were just talking and he was asking. He’s like hey what do you What do you want to do like what? what What’s your plan and I said I don’t know I’m I’m really kind of interested in the student housing. It’s made. It’s you know it’s always paid the bills all the way through the recession I feel like it’s a really good asset class to continue to invest into and Ken was like hey this sounds great. Let me go ahead and raise some money from some friends and family I’ll get the money you go ahead and run it.
Barrett Bilotta: And so we ended up acquiring several properties in Durham new hampshire between that 2011 to 2013 timeframe and then frankly ended up stumbling on a really big opportunity in downtown Durham New Hampshire that ended up becoming a property called madbury commons which was at a 225000 Square foot ah redevelopment of of downtown Durham and so that was actually the precipice. For us getting into the energy business because as that construction of that big project was going on around 20142015 that was when some of the solar initiatives and programs were becoming you know law in New Hampshire and so all of a sudden we started to have these solar developers. Approach us and say hey can you lease us your roof. We’d like to lesh your roof and and we said what? what? geez okay that that sounds interesting. We weren’t going to do anything with the roof otherwise so this is kind of like found money and it made us go ahead and do a deeper dive into that business model of of solar energy.
Alejandro Cremades: And that’s a ideally touch and we’ll talk about that in just a little bit I want to double click here on a few things you know that you mentioned because I think bare they are like really interesting. So one is you know one that comes to mind is what kind of obviously when you are in the army. You know you you develop this Absolutely incredible discipline.
Barrett Bilotta: Um.
Alejandro Cremades: How do you think that that discipline you know translates into being an entrepreneur and running a business.
Barrett Bilotta: Great question I would say the the first thing is that number one the military definitely goes ahead and starts to format. You know what? your daily routine is going to be based on a variety of. Aspects of of the job that you’re in and so in in being an officer and specifically being younger than a lot of the individuals that you’re going ahead and in in commanding or in charge of number 1 you need to. Learn how to communicate with people that are more your senior and be able to listen to their ideas and their points of view as they’ve been in the military longer than you but at the end of the day you still have to have that. The the authority to go ahead and say this is this is what we’re going to do and so that was like a huge learning experience. Um in terms in terms of being able to deal with people that have their own points of view that are coming from all different walks of life and have had many different experiences than you’ve had in your life. And being able to kind of traverse that environment was was hugely important in terms of helping me become like more of a dynamic individual. Um, because at the end of the day you know in business and and you’re well aware of this. You know we’re meeting so many different people that.
Barrett Bilotta: Have all different experiences all different points of view. They have different personality types and you have to be able to kind of mold and mend things together to get the mission done and I would say that the military number one had made me. Able to do that at a very young age. Um, and you know the other thing is just getting into that daily that daily kind of routine and cadence to be able to take on the day and take on new things that are going to get thrown at you that you have no expectation that they’re coming out with you know. That also was really learned in the military at least from my perspective being able to be calm, cool and collected and deal with the issue that you had no idea was going to be an issue today but guess what now it’s an issue and now we have to deal with it and we were’re going to tackle the bull by the horns I would say that had had been instilled in me. Number 1 by my father and then number 2 confirmed by by my military experience.
Alejandro Cremades: So Let’s talk about that tackling the bull by the horns I mean I find that in business you either succeed or you learn you know period because I mean really when things don’t fall the way that you want them to be. You know is like where you really you know, get to learn you know and get to grow and you typically don’t learn anything from your successes. But you know I guess you know with your experience with the instant messaging company with x-rigs you know, Obviously you know it didn’t unfold the way that you had hoped for. But what was the takeaway you know from that I mean what? what did you really learn from from that experience. So.
Barrett Bilotta: Absolutely great question. What I would say my number 1 takeaway from that was to have a clear strategy invision in particular with a software company and with clients of a software company. They’re always asking for new features more things. And we just had the experience there that we were trying to do everything to please everyone and at that in that resulted in kind of scope creep and trying to to do too much with too little and that was just that’s what really became a problem there. Um, trying to integrate with all these different platforms having a development team. That’s obviously very small. Um but trying to keep them on a you know, certain task and path and I think that that kind of gets back to like we have the things that are important. And then we have the things that are urgent and the client’s always going to say all of these things are urgent but they may not actually be important to the business and the strategy of your organization and so I was really young. You know I was I was in my my. Early 20 s mid 20 s at that time and I had never done anything like that and I also don’t envision myself as as ah as a software guy per se and that was just something that in looking back from ah where.
Barrett Bilotta: You know where we came from that’s something that I would have changed and and one of the things that I focused on in going going forward on my other ventures and then the other thing that I would just go ahead and say is that all Capital is not the same.. There is definitely a huge amount of value. And making sure that the investors within your company or the investors that were seeking you know have other value just other than money because money is is fluid and it’s interchangeable and lots of different people or organizations have that. But there’s particular people that can add value to the business and we should have sought those individuals out harder at Dex-rex to go ahead and kind of smooth the edges and probably provide some of that guidance that you know would have helped us succeed. Versus having to to go ahead and shut it down.
Alejandro Cremades: Now with a with madbury you know which is the operation that you have going on for the real estate I mean obviously you know it has been developing over the years since you were at the army and you started getting a few properties and and now I mean you guys are like managing hundreds you know of them. Ah, you know, really nice operation and obviously this operation led to what you’re doing now you know with aggilitas you know which is like this a a rocket ship. You know that thing that you guys are building you were alluding to it earlier on how you know you listen to the market. And by listening to the market and listening to the inbound you know queries that you were getting around the the interest in using you know some of your properties for solar. You know, development and and things of that nature. You know it made you think it made you think that there was something else that you guys could be doing that you were not doing so. So what was that thought process of figuring things out and coming to the realization that hey I think that we got something of value I think we can realize more out of this. But most importantly, there is an initiative here that we are not really capitalizing on right.
Barrett Bilotta: Yeah, absolutely great. Great question, big picture. You know in thinking about real estate development and solar energy development. We could understand even with having no knowledge on how solar energy works in a development process. Solar energy that it’s pretty synergistic in terms of the skill set to go ahead and get say an apartment building approved through the municipality and all the various authorities having jurisdiction versus a solar array getting approved through that same municipality right? and so we were. You know when you think about real estate development. It’s obviously a very dynamic industry There’s always a lot of people that are opposing development for whatever reason and there’s construction costs that need to be dealt with there’s other problems with like easements or title or what have you. As with any type of item that’s getting built on real property these these issues are all over the place and so solar energy in a lot of ways is very similar to that skill set. That makes a successful real estate developer. It’s just that the product in particular that we’re selling to the marketplace is different. We’re not renting ah units anymore. We’re now selling Kilowatt hours and so that was the original thought process in terms of why this was interesting.
Barrett Bilotta: And then when we started to dig a little bit deeper. We started to understand that number one at the time the state of New Hampshire was putting in place a net metering program that allows Kilowatt hours to get sold at what we would call the standard retail rate. In the marketplace. So whatever your utility is charging. We’re getting paid that same amount coupled with the investment tax credit from the federal government that also just added more fuel to the fire and when we started to run some of these performas and dig a little deeper. We started to see that. Wow this is starting to get very attractive similar to finding a good real estate deal and no one else is really doing this in New Hampshire so we should probably go ahead and and take a really hard look at it and and that’s when we started to go ahead and partner with some other companies in that marketplace. Ah, to do some solar development primarily in New Hampshire and that was around 2014.
Alejandro Cremades: So I guess for the people that they that they are listening to really get it. What ended up being the business model of agilityittas. How do you guys make money.
Barrett Bilotta: Absolutely so so this is yeah fast forwarding to today we develop which is we permit um solar energy energy storage projects and then solar plus energy storage projects primarily. And when I when we say permit we bring them to what so a status of shovel ready meaning ready to go ahead and start construction. We also buy a lot of projects that are either pre-shovel ready. Or are shovel ready and that we just know that we can make it better than what the current developer is doing we also and so that that that obviously has inherent value those those permits those entitlements those rights for those projects have have value because most of the projects that we’re doing are coming with. What’s called a power purchase agreement or a state type program in which the utility is buying all of the energy that your solar array can produce for the next twenty Twenty five years and so on and so forth. So you already know who your counterparty is from the revenue perspective which is one of the great things. At least with with the majority of solar projects that we’re doing. We also internally in our company have our own Epc group which stands for engineering procurement and construction. We do all of our own designs and engineering all the procurement of like the solar panels and the other major capital equipment and then wze actively manage.
Barrett Bilotta: Construction of our projects and so we earn fees in doing that as well and then the third leg of our business is the asset management group which is in a lot of ways some of the most dynamic in terms of the day-to-day operations because that group is primarily number 1 operating. All of our operating fleet on a day-to-day basis. But they are actually also in what we would call the merchant electricity markets like Iso New England or New York Iso which are the actual transmission operators bidding and forecasting. Our battery systems in and out of the marketplace There’s there’s multiple different markets just think of it just like ah like a stock market exchange if you will just for electricity and where we’re trading electricity. We’re inf frequencyquency regulation which is a a different type of ah. Market where we’re stabilizing the fluctuation of the grid on any given hour because the the grid itself needs to go ahead and maintain a frequency that that’s carried throughout the entire grid. Otherwise you start to have a lot of problems with rolling blackouts and and things like that and so you know. Those are the 3 main pillars and then of course we go ahead and we also put in place all the financing for these projects which unfortunately is very complicated for energy projects because there there are tax attributes or specifically this product called tax equity where we have.
Barrett Bilotta: Large corporations or banks that just want to invest in a deal to buy the tax credits to offset their tax liability which is a lot of structuring and in things like that. So those are the main pillars in terms of how agilota energy earns money and then of course on the projects that we do. End up ah bringing to fruition in terms of completion. We own a substantial portion of those projects with our investor so when we think about agiitas energy unlike a lot of the market that exists today. We really look at ourselves as a clean energy company trying to take in. Be in all areas of the value chain where most companies in the marketplace that are of similar size to ourselves are only in 1 particular aspect of the value chain whether it’s just development meaning they just want to go ahead and get those permits and then sell those permits to somebody else. Or just Epc or just asset management. We’re trying to go ahead and create something that is doing everything clean energy for these types of projects and ideally we’re soup to nuts in terms of of how we monetize them and and create value.
Alejandro Cremades: Now in terms of the capitalizing the business I mean how much capital have you guys raised to date for this.
Barrett Bilotta: So yeah, so big picture our equity investment that happened may of last year was around $350,000,000 um, and that’s bifurcated between what we would call corporate capital as well as project equity. Capital and I would just differentiate that by saying when we have a project that is shovel readyady. There is a much lower cost of capital that wants to get into that project versus taking the development risk that exists or taking construction risk that exists within the marketplace. So in a lot of ways the way that we go ahead and and recycle our capital is primarily by by spending the money at risk to develop a project and then once that project is shovel ready. We’re then selling that into a specific project holding company. Where that holding company has a lower cost of equity than say our development capital and then that project um, is then financed through our debt our tax equity which we’re we’re in the marketplace raising all the time. Um, and so. What that really does is it goes ahead and it it allows for the investor which is in both segments of the business on the development side with us as well as in the project holding company with us because we own a substantial amount of that project holding company. It allows them to go ahead and diversify.
Barrett Bilotta: What they’ve invested in as well as allocate investment capital from their investors that maybe are’re looking for more of a clipping a coupon type return versus a bigger return on investing in the actual say equity or cap table of Ailitos Energy Inc which is which is much more. Like ah like a startup type ah multiple effect in terms of what we’re trying to do here and and I would just say that you know over the course of of the several years because we are truly an infrastructure type company in dealing with building these projects which are expensive and suck up a lot of capital. You know we’ve raised hundreds of millions of dollars of project level financing as well over the past years. Um, you know that but that being construction debt permanent debt tax equity and everything in between um, but really the investment that happened in 22 is kind of hitting that 5 to 7 year horizon and adding fuel in the tank that allows us to be able to do hundreds of Megawatts per year in getting them through the the lifecycle that that exists today in terms of development to construction to turn on.
Alejandro Cremades: Now now 1 thing here that that I know you know has been very important to you guys as the experience of raising money is the you know putting that that the highlight on relationships. So why were relationships so important to you.
Barrett Bilotta: Um, it’s been. It’s been quite exciting.
Alejandro Cremades: As part of this fundraising journey.
Barrett Bilotta: So we started out in call it the tail into 2021 figuring out that we could not go ahead and grow a jillitas energy on organic equity anymore. It was one of the things that the real estate business. Had been funding the energy business and we had sold off assets that were operating in 2020 made a good profit on those assets but reinvested all the proceeds back into the business of agillitas energy. To go ahead and work on the next portfolio and that next portfolio was growing so fast and getting so large that we could no longer spoon feed it anymore. It was just too difficult and so we went out and did a small syndication of talking with. Variety of investors all institutional a lot of the big names looking to see what was the appetite to invest in a jillotos energy and what we were doing and you know Alejandro I’ll tell you I was blown away in terms of the reception that we got we everybody wanted to do a deal. It was at a peak type moment for clean energy in 2022, you could just see that people were just not as excited about oil and gas anymore and people had energy dollars that they had to allocate somewhere which still exists today on on the ah on the back of the inflation reduction ass.
Barrett Bilotta: Excuse me inflation reduction act that was passed in August so it was just it was just the right time to get out there and when we were doing that we had sold our portfolio of operating solar projects to carval in 2020 and I had always. You know had a great relationship with one of the individuals over there that was the lead on that deal and so Derek and myself had continued talking um have a very cordial relationship and I had mentioned to him that we were looking to raise money and that we were. Looking to go ahead and make a big time. Go of this and explain to him what our current portfolio looked like he was obviously extremely excited and in any type of deal where there is a a buyer and a seller. That’s that’s you know a large deal and is super complicated. There’s people that do what they say they’re going to do and then there’s people that say 1 thing and don’t end up living up to their word and I can just tell you that that was we had ah such a good experience that first time around that that really meant a lot to us because look as an entrepreneur.
Barrett Bilotta: And not having investors in your company and then making that leap of faith to go ahead and take in capital especially institutional capital. You don’t have any idea what that counterparty is going to be like the day after you close you know, obviously they want to get the deal done. But then things change three weeks in when they’re asking you a bunch of crazy questions or they’re going to put enormous reporting requirements on you or they just have a different plan and so that’s ah, that’s a lot of trust to go ahead and do that. Um, and so when we were. Evaluating essentially the five offers that we got I would say the number one most important thing between myself my Cfo and ah the the 2 other major owners of the the company Ken and amen who were both my our partners in and madbury put relationships as being one of the top. Ah, things that we wanted to have is that we know that we have a counterpart party that is trustworthy that’s going to do right by us and that we’re not going to be in this tumultuous relationship where the company wants to do 1 thing but the investor wants to do something different and so we ended up picking carval. Ah, enclosed with them about six months later in may of of 2022 now with that being said, they hit all the numbers that we wanted to do too so that was the added benefit. They did the deal we wanted to do and we knew that we had the benefit the benefit the benefit of having gone around the track with them once before and 2020.
Barrett Bilotta: And I can I can tell you you know in February of 2023 I couldn’t think more highly of the team over there and how our relationship has grown and I just think that you know again getting back to to making the selection based on relationships. You know we we have a shared vision. And they are the type of organization in their actions that are going to support everything that we want to do as a company and they do truly believe in us which I think in general is sometimes harder to find within the private equity market specifically because like look we’re all getting out of bed. In the morning to make money especially on the investor side they want to go ahead and they want to hit their hurdle rates. They want to get investors return of capital and meet expectations and all those types of things and and so to go ahead and have to deal with that I’m saying from from a car vile perspective. But then also go ahead and think about what is the best thing for a Jillotas energy is a balancing act. Um, and it’s it’s been working out great so far so I I can just you know tell you that the relationship matters and the counterparty really does matter.
Alejandro Cremades: Love it now for the people that are listening to get an understanding on the scope and size of agility test today I mean anything that you can share in terms of number of employees or anything else.
Barrett Bilotta: Absolutely so we’ve we’ve always kept a very lean headcount so you know in 2021 we ended the year with 17 employees by the end of 2022 we were 30 employees. We’re going to grow to about 50 employees. Um.
Alejandro Cremades: Wow.
Barrett Bilotta: This year and we’re doing projects you know all over the country. We’ve got projects under construction pretty much in every state of new england as well as New York we’re working on on our first few Texas based assets as well as we expand our national geography. And we’re actually also looking at um, entering into new asset classes specifically hydroelectric power which we find to be very synergistic with ah energy storage and so you know in general. We’ve been growing without getting into specifics and in terms of the actual dollars. But yeah of revenue we’ve been growing revenues probably about 400% year over year um because we’ve just again continued to explode. With the amount of projects and volume that we’re doing in this year based on our fy 23 projections which can always change. We know how projections are we’re going to have a banner year in terms of the growth of the company and in terms of everything that we’re doing so you know we’re just. From my standpoint we just want to go ahead and continue doing good deals 1 by 1 building the fleet of operating projects incrementally because there’s never it’s very rare. You find the grand slam home run deal. Although I’d like to think we have a couple of them. But.
Barrett Bilotta: When we go ahead and we amalgamate enough of those projects and we continue to expand everything that we’re doing outside of of New England through the rest of the country and have that repeatable business model that we’re already doing just in new places. You really do end up having an an organization that has tremendous value. Ah, whether it’s to the public markets or to another energy company that exists in the marketplace like we we like to envision ourself as as being the experts in energy storage and how we can be dynamic and connecting energy storage with all these clean forms of of power Generation. So. That’s you know we’re just getting. We keep our heads down and that’s what we keep focusing on to go ahead and and grow the business with with the right people in the right roles.
Alejandro Cremades: Now as we’re talking about growth Trijeoryy here you know, thislips me to believe into you know the next question that I wanted to ask you and that is if you were to go to sleep tonight and you wake up in a world where the vision of aggilita is fully realized what does that world look like.
Barrett Bilotta: Wow! So I’ve never been asked that question before that that vision is that we are either continuing on as a larger private company or a public company continuing to bring. Renewable Energy assets to the marketplace to go ahead and transition our grid from Fossil Fuels to to clean energy and we’re doing it in a way that is responsible meaning that we are. Figuring out how to deal with the intermittent nature of clean energy generation by using batteries or other technologies to go ahead and smooth out those Peaks of generation when there is no generation so that the grids the utilities and most important the consumer. Not need to worry about whether or not there’s going to be a rolling blackout or whether or not power prices are going to shoot to the moon because there’s a scarcity that’s that’s really what we want to go ahead and do um and also we want to put people to work with all of our projects. You know we. Talk about the head countunt of Agillitas energy. But we are hiring hundreds of electricians site work labor other things throughout these projects because we are truly building putting steel in the ground and building this infrastructure which is always a benefit not only to those.
Barrett Bilotta: Ah trades but also to the communities that they’re getting put in and that you know these are property taxpaying entities you know or or projects. They’re not sending more kids to the school or requiring too many more services from police or fire. They’re just one of the things that exists where we’re able to take a valuable asset to the whole grid in the whole community but also able to share in that value creation with the local community as well and we’re able to do that both from a taxpaying perspective but also with a lot of our projects. We’re able to offer discounts on electricity on our community solar projects and that’s primarily going to to local residents in small business. Um specifically in Massachusetts which a bunch of the programs. Um incentivize that.
Alejandro Cremades: Now you know we’re talking about the future but I want to talk about now about the past with a lens of reflection if I was to put you into a time machine and I bring you back in time you know back in time. Maybe to that point where you were still in the Army. You know you were. Hey you know I’m going to buy some properties. Do some stuff on my own if you were able to have a sit down with your younger self and being able to tell that younger bear it one piece of a device before launching a business. What would that be and why giving what you know now.
Barrett Bilotta: So interesting I think if I was going to go ahead and and talk to my younger self I would say don’t get distracted. Don’t follow the shiniest new object all the time and I don’t mean that in terms of looking at real estate and and going into solar. But every day we’re presented with opportunities. Um and the grass always looks greener with the new opportunity and for whatever reason at least this is how I view myself as an entrepreneur I’m super self- motivattivated I’m a self-starter I get excited I’m passionate. About about things that that I want to do and the issue with that is that can sometimes be a double edged sword where you’re working on a project or you’re working at the task at hand but something else kind of comes across and you get excited about it. You know why? because it’s new. It’s unknown it’s It’s just kind of that. It’s almost like a first date if you will and that sometimes is a detriment and I was I think about myself today where I’m extremely disciplined I’m extremely focused I know what’s the most important thing to focus on almost every day that is a. Total that’s totally different than how I was in in my in my twenty s and just starting out I was always the most excited about about the new thing whether it was like I was trying to refinance one of my my properties in Durham but then someone said hey there’s like a hotel for sale in Florida.
Barrett Bilotta: You’re like Wow I Want to go look at that and that’s that’s not that’s not the way to go ahead and do it. That’s what I’d be telling myself.
Alejandro Cremades: Now for the people that are listening bear it that will love to reach out and say hi. What is the best way for them to do so.
Barrett Bilotta: Oh they can go ahead and and and send me ah an email um or which is b ballata I mean I don’t know how we the best way to give that out Alejandro um, but yeah, so so my email is b.
Alejandro Cremades: But you can’t you can just you could just share the email. What’s the email.
Barrett Bilotta: B I l o t t a at agillitasenergy.com
Alejandro Cremades: Amazing and are you also active on social media like Linkedin or anything else.
Barrett Bilotta: Yes, and I’m also on Linkedin and of course is barettbalata and then agiotas energy has its own Twitter account as well. So you can follow us there for for updates and agiotas energy also has its own Linkedin page as well. So so to the extent you want to see all the new. Activities we got going on. We’d we’d love to have you along for the ride. And yeah, of course I’m I’m always happy to answer questions. Love to help aspiring entrepreneurs. Um, that’s one of the things that I want to give back the most is is continuing to help other individuals achieve what they want to achieve in in business. So. Happy to happy to to lend an ear and give advice to the extent I’m valuable.
Alejandro Cremades: Amazing, well bear it. Thank you so much for being on the show today. It has been an honor to have you with us.
Barrett Bilotta: Thank you so much. It was great meeting you and and really appreciate the conversation.
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The post Barrett Bilotta On Raising $350 Million To Accelerate The Transition To Clean Energy appeared first on Alejandro Cremades.
Nicolaus Radford has now launched three startup ventures. Including a marine robotics company that has raised over $100M through its IPO. The startup, Nauticus Robotics, has attracted financing from top-tier investors like Schlumberger Limited, AeroVironment, Transocean, and Iain Cooper.
In this episode, you will learn:
- The two other startups Nicolaus Radford has been working on
- How big and important the ocean is compared to space
Alejandro Cremades · EP 557 Nicolaus Radford On Raising $125 Million To Develop The Future Underwater RoboticsSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Nicolaus Radford:Nicolaus Radford is the Founder, President, and Chief Executive Officer of Nauticus Robotics. He previously worked at NASA as a Principal Investigator. Nicolaus Radford attended Purdue University.
Inspired by his 14-year career in spaceflight robotics at NASA-JSC in Houston, Nicolaus enjoys building companies and teams and is a pure industrialist at heart. Nicolaus sees opportunity everywhere and believes there’s more to great companies than apps. He says that if we’re going to do some big things in this world, we’re gonna need to build some greater things.
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Read the Full Transcription of the Interview:Nicolaus Radford: And it’s alejandro right.
Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So super excited about the founder that we have today you know we’re going to be learning quite a bit I mean he’s a company. He’s taking his company public. You know quite a ride you know and and definitely interesting. The kind of stuff that they’re doing so I guess. Without fardo. Let’s welcome our guests today Nicholas Radfor welcome to the show. Thanks.
Nicolaus Radford: Thank you Ah quick question can I use profanity. Nice. Okay.
Alejandro Cremades: You can let’s go. So so let’s do a little of a walk through memory lane. So how was life growing up in Rural Indiana
Nicolaus Radford: Wow. Okay, we’re going you’re going back there You’re starting you’re starting pretty starting pretty fresh I got it. It was you know, phenomenal childhood right? So grew up in the eighty s night writer ah hugely influential obviously since our our stock ticker is kit. Loved that show. But you know just I grew up in ah in a fairly rural area so you know out in the middle of Indiana farmland where we have basketball hoops on our barns. And a lot of fond memories of doing that but it was ah it was. It was pretty cool. You know so my my I grew up in a I’d say lower to middle class family. Um, you know parents actually didn’t go to college I was actually one of the first ones on my dad’s side to go to college so it was kind of a big deal. And our family and so that that’s you can imagine that even though my parents I think were incredible. They just had certain limitations that I I didn’t really become aware of until you know later on as you get more exposed to things. But. You know, love them dearly. But you know when you when when I got to high school and then realizing that I was not part of the rich kid crowd. Um, you know I think that really candidly I think that’s one some of my serious motivation is is really this just.
Nicolaus Radford: Kind of created this fire that has just stuck with me forever that I cannot shake but you know I’ve got three kids and and although yeah I want them to struggle a little bit. You also want them to have lots of opportunity available for themselves and but. Getting back to the heart of your question though I loved it. I loved Indiana there’s a very special place in my heart for for that area.
Alejandro Cremades: And you also have the ah the competitiveness in you I mean you were doing track and field as well. So how do you think that you you you see to be quite a competitive guy. So do you think that that track and field is just fuel that even more or what.
Nicolaus Radford: Yeah I was fortunate enough to ah to compete as a decathlete at a big 10 school that again was pretty influential on me I did pretty well in high school as well as ah as a track and field athlete. I am extremely competitive I’ve actually had some health problems here recently. I’ve got a bad arthritis I got stricken with arthritis probably fifteen years ago I’ve had tons of surgeries I’ve had my ankle replaced so I have a titanium ankle and. Um, but I’m still pretty damn competitive and I think that comes out in my entrepreneurial take no prisoners kick. Everybody’s ass spirit I’ve got a lot of things I’m trying to accomplish but but I also play a lot of poker. And when I play poker like I don’t want to just beat you like I want to beat you over the head with the best hand right? And it’s like look. It’s not like oh we’re gonna bluff and I’m going to win the hand. It’s like I want to smack you in the face with a pair of ases because I just want you to know that I had the goods on you.
Alejandro Cremades: Nice now. Now let’s talk about engineering How did you got into that and also problem solving and and yeah, what was that calling.
Nicolaus Radford: Ah, you know it’s kind of funny again. My my parents did not go to college in the traditional sense. My mom ended up going to a vocational school after the fact but um, you know I always liked to. I always had this an affinity for things and and and and technology and and like I said growing up in the 80 s when you’re watching the movie fly to the navigator and um, you know you just get so inspired by that that stuff. But. Frankly I sort of just fell into engineering I was thinking of being a doctor and I got into some schools that had really good premed and med programs but a lot of my friends in high school they were majoring in engineering and I was like all right I guess that’s ah I guess that’s what I’m going to do and ended up getting. Ah, ended up getting in at Purdue and and ended up getting on the track team there and and again was fortunate enough to have some support doing that and and but yeah Purdue is just a phenomenal school I mean just just what you learn the critical thinking as you mentioned. Um, it’s a real hands on school. It’s a research oriented school I just credit so much of of just how I became inspired to want to create came from that school and just I can’t say enough about purdue.
Alejandro Cremades: Now you ended up landing at Nasa so really unbelievable. You know as the as the first thing gig right after school but in your case you know, but there was a really interesting story there that happened we seeing the robotic astronaut in the corner.
Nicolaus Radford: Um, yeah.
Alejandro Cremades: So tell us about that.
Nicolaus Radford: Yeah I you know I was I got down to Nasa right? as I graduated my undergrad at Purdue and produce consider the home of the astronaut so there’s a big There’s a there’s a real big connection to Nasa um. There’s there’s a lot of folks down here in Houston that that have connections in the midwest and specifically purdue and so I was a flight controller right? out of school and you know it’s like little headsets apollo 13 you know Houston we have a problem type stuff. Which was fascinating. Don’t get me wrong is extremely fascinating learning about the space shuttle and all the inner workings and and and being in the back room when there’s space missions going up I mean it was it was a really fascinating side. However I was a designer right? I was an engineer I was a designer I wanted to build and design and create. And break stuff and and rebuild it and make it better and you just don’t really get that do that as a flight controller but one day which I didn’t even know this but johnson space center has an incredible robotics department and. Um, even though I got hired in to be a flight controller in the robotics group in the mission control area. It wasn’t like a design position so I was walking through the hall one day and you know during my lunch hour. The the campus is huge. In fact.
Nicolaus Radford: Johnson space center was designed to look a lot like an academic campus and for a long time. Rice university used to own that the the area that johnson space center was so it was built like an extension campus of a university and so during lunch I would like walk around. Um, early on because it’s still It’s just fascinating to to be at Nasa at the johnson space center the largest space center and so when you’re first you know when you get there. Everything is just awe-inspiring and and it’s really cool so you take a lot of walks, especially at launch and 1 time I found my way into this building. And I’m just walking down the hallway and I I turn to my left and I remember this like it was absolutely yesterday there sitting in the corner was this robotic astronaut prototype called robonnaut and I was stunned I mean I look through the window I press my nose up against the glass. And I’m just like what in the effing f is this thing. How did it get there who’s working on it. What is it doing where is it going and I was just from that moment on I was I was obsessed I’m like I’m going to figure out a way. To get into this lab to work here. These have to be some of the brightest minds you know on the planet and I just I was obsessed with this robot and took me about another six months to kind of network my way around which.
Nicolaus Radford: The power of networking we should get into later I mean it is the it’s the it’s the lifeblood of of everything right? It’s being able to network and and capitalize on those opportunities you know opportunity knocks sometimes but you got to open the damn door and and I think some people forget to to open the door and the way you open the door is. Meet people and and you try to figure out and hustle toward toward your toward your your ambitions. But so I ended up getting into that lab and I left Nasa running that lab.
Alejandro Cremades: So then let’s talk about leaving Nasa because also you know like that was the sick way into you getting going you know with your company. So um, so what happened there you know obviously as they say I ideas you know they take time to to incubate and and marinate and then there is like certain events that. Push us over the edge to really get going. So so what happened there for you. What were those say events that you know led you to? Okay, let’s let’s go with this.
Nicolaus Radford: Well I had been at Nasa I mean I was there for 14 years and I would say probably 2 years before I left I started planning an exit and so I started I started. I’d say aligning my activities that I was working on at Nasa to help me be able to identify what I might want to do next with the networks of people either the agencies we were working with the type of work we were working on equipping myself with another set of skills like helping big. Build partnerships between public and private entities and so I knew I wanted to start my own company and I said okay well Nasa has it’s a very fertile ground for a lot of different things not just technology development but business development and and and meeting people and leering to work with other agencies and other groups. Other companies. And so I inserted myself directly in the middle of that and it was ah it was a heck of a crash course and not only was I leading this robotics group but I was also trying to help Nasa bring in public investment. And which became a pretty useful skill learning how to drive investment into an entity and and there was a ton of different agencies that that Nasa was working with so I just got I got exposure to so many different elements especially in the Dod world.
Nicolaus Radford: Which I’m still working with part of them today and so there was that side the other side was the market. You know so that was the skill of okay I need to have these. Let’s say you work in a government lab you you have a certain set of skills up to. Sort of this limit and then you have to really start broadening yourself personally because you know the government would love to just keep you pigeonholed in this being a designer for the rest of your life but you really have to kind of motivate and actually I sort of woke up one day and I was like I just prefer to realize there’s nobody telling me what to do that I’m I can I can just go off and write my own story within the confines of this sort of government entrepreneurship. Yes I had a boss I had a supervisor but no one was really dictating what I did every day I was just there to sort of make up. However I felt like I could. Have a partner come into Nas and we could co-develop this and that could be applied towards that and so I started just leaning into all these concepts and and Houston being the energy capital of the world. You get a lot of of exposure to energy companies and especially some of them in the maritime domain. And what I realized was a lot of the technologies we had developed at Nasa coupled to my ability to really form partnerships and garner investment ah might make an incredible fertile ground for a new company adapting spaceflight technology in the marine world.
Nicolaus Radford: With my newfound fortune 500 energy company friends and let’s see what happens and that’s what I started contemplating for probably eighteen months before I actually left the government because I wanted to leave with enough inertia that I wouldn’t just face plan on day. 1 Um. It. It wasn’t that it was easy. It was still a struggle you know I I formed the company with a couple partners. You know they actually kept their day jobs while I left the government and um I didn’t get paid for nine straight months you know so I was newly divorced so I had child support. Had a mortgage and I’m not collecting a paycheck I don’t know if if you’ve if you’ve ever been divorced but sometimes you sort of divide up assets and you know a lot of your cash might head into a different direction and so here I am starting a company. Trying and having all these obligations not pulling in any money spending my own money flying around the world. You know trying to get a company off the ground I end up cashing out my 4 1 k end up borrowing money from my dad just to maintain the the essence of keeping this thing going. And ah, you know I was waking up every morning looking in the mirror going I’m financially ruining myself what the hell am I doing um this might become unrecoverable and and sometimes I would think back about my cush government job with government pension and government everything and now I’m i’m.
Nicolaus Radford: Um, naked in the breeze ah needing a warm blanket and and and what you realize is there’s nobody there that’s going to help you and nobody actually Cares. So here’s here’s the thing about being an entrepreneur nobody gives a fuck about you. Nobody. You have to be your own Motivation. You have to be.. In fact, it’s worse than that people are actually cheering for you to Fail. They would be most people that you come in contact with would rather see you fail at what you’re trying to do than see you succeed and and you have to be aware of that and it’s just a reality. I’m not saying that’s about everybody and there are some genuine sincere people out there that that actually want to see change occur in an industry and they want to see you do well for yourself, but the majority of people do not and.
Alejandro Cremades: So what would you say was the what’s the turning point then.
Nicolaus Radford: Oh for sure, it’s easy. Um I I capitalized on one of my relationships that I had developed at Nasa with slumberge and they became very interested in some of the ideas that I were promoting that I was promoting and they thought that some transformational. Ideas with some transformational technology that we had been developing at Nasa might be worth investing in and so we took a series a round for $3000000 on a $10000000 pre-money valuation I like to tell everybody that I had a $10000000 education at nasa. And it seemed to be just about the right number since since we had a company that had a handful of people a handful of people with we had one hundred and eighty thousand dollars in receivables and we got a $10000000 valuation and a $3000000 series a round and. My life changed forever right? after that.
Alejandro Cremades: Now before you know going farther on the financing side because I’d like to ask you about that you know, just so the so that the people that are listening really get it. What ended up being the business model of the company of now takes robotics How now it goes robotics. How do you guys make money.
Nicolaus Radford: So I’ve been in the Robotics world a long time and when I was fortunate enough to be in a government Lab. You got to watch a lot of other robotics companies. Try their hand at the Market. And we had relationships with a bunch of them and I can tell you right now. The quickest way to go out of business as a robotics company is to sell robots Nobody cares about the robot. They don’t want to own it. They just want what it does. In fact, they just want the activity done. They don’t care what you use. If you use a robot great. But if use a person. Great. They just want it done as efficiently as cheaply and as safely as possible. So um, realizing that the business model of naticus is to own and operate our own robotic devices in the Marine economy.
Nicolaus Radford: So We don’t sell these machines we build them for our own purposes and we use them to perform a service so just like you have software as a service and everything as a service. There’s robotics as a service where your in-client does not take ownership of the robot. But they contract to the robot for what the Robot does.
Alejandro Cremades: So what will be some of the examples where you know a naticers comes in and and gets the job done.
Nicolaus Radford: So working underwater is fascinating and right now it’s done in a fairly archaic way that hasn’t changed for the last sixty years if I want to do anything underwater where I interact with the seabed or the or the water column. I’ve got to take out a big boat drop a a large machine I won’t call it a robot but I call it a machine. It’s kind of like a backhoe or a crane and it lowers down into the water on the world’s largest extension cable and this whole operation costs upwards of $100,000 a day to do very simple and rudimentary tasks underwater like take a tool insert it and turn it take a probe insert it and measurement now. There’s a lot of other sophisticated things that happen underwater and that’s cool, but there’s a lot of boring tasks where you use circles squares cylinders. And something that I realized might be fairly um, geometrically conditioned for autonomous algorithms to handle and if that were the case then I could remove the necessity for an umbilical and if I don’t need an umbilical then I don’t necessarily need that big boat. Because I don’t need all the support infrastructure and I don’t need all the people controlling it I can have somebody control it on shore with a mouse and and and maybe we can charge this at $40,000 a day a set of $100,000 a day and turns out the market’s like yeah exactly.
Nicolaus Radford: That’s a great idea and so we’ve been we are building our fleet this robotic navy of ah of an autonomous surface vessel that drops off an autonomous underwater robot without an umbilical and um I think if we get this right. Ah, this might be 1 of the most compelling offerings and in this economy in quite some time.
Alejandro Cremades: I Love it now going back to the fundraising conversation. You know you were talking about your series A obviously now you guys are a public company So before going public. What was the total amount of money raised.
Nicolaus Radford: Well, we had a series a round for 3,000,000 a series b round for 20,000,000. We had some bridge financing in there for probably another 15,000,000 and then we end up raising right? At. I don’t know about another 85,000,000 through the process of of going public. But then we ought ah we had a lot of other government grant structures in there. We worked with government entities where. Would sponsor and subsidize a lot of our r and d development and we probably had another 20000000 in that so you know not an not a ton of money but not an insignificant amount either and um.
Nicolaus Radford: I did I have learned some things I have learned how little $20000000 is it can go kind of quick and um, but.
Alejandro Cremades: And what and what was that experience like of going public to because you know obviously you know ah going from private to public is quite a transition. So so how was that transition like.
Nicolaus Radford: I Don’t feel.
Nicolaus Radford: It was hell um I mean it that you should ask my wife nearly killed me the emotional toll. It takes on you is cannot be overstated. My health was in the shitter. Um. You know you’re working 18 hours a day nonstop on a plane every other week to New York to meet with investors where you’re trying to get the whole thing to close I mean I think you’re completely aware and a lot of your you know listeners are but 2022 wasn’t a really good year for the equities market. And I had friends and colleagues of mine calling me when we closed our deal and announced it in September that we actually transitioned and we listed on the Nasdaq. They were like how the hell did you get a deal done like this is this is was the worst start to the sandpfivehundredandfiftyyears interest rates are skyrocketing. The the capital the equities in capital capital market side are frozen up how in the hell did you guys get a deal done and I’m like it was just a miracle right? I mean a lot of people want to see a company like this succeed. We were fortunate enough to have fortune 500 investors as as large strategic shareholders that also wanted to see the company succeed believe in the product and the technology that we’re bringing to market and you know lot of luck a lot of luck.
Alejandro Cremades: And kidding well lucky. It’s preparation meets opportunity. So so good stuff now now in your guys’ case you know imagine if you were to go to sleep tonight and you wake up in a world where the vision.
Nicolaus Radford: Lot of hard work but a lot of luck.
Alejandro Cremades: Of now tickers is fully realized what does that world look like.
Nicolaus Radford: Wow, that’s amazing. What that world looks like is this blanket network of autonomous machines roaming the ocean that you call up like an uber to do a variety of work all over the industry. It also in my. And my long-term vision I think naicus will also have a consumer facing side to it. Not just a business to business. You know my personal mission is to increase the access of the ocean to everyone and you know I was from rural Indiana about as far away from a coastline as you can get. And I would love to have had a device that maybe I could step into an experience swimming in the ocean being able to um, have that and also I think longer term listen I get space flight. I know why we’re doing it I just kind of get pissed off about how much investment goes in space over the ocean and you know hey I’m going to build I’m going to build a a a satellite servicing robot in you know and the government goes here’s a billion dollars that sounds like a hard problem. And I’m like okay well I’m going to build an autonomous robotic navy to service the the you know the $10000000000000 estimated value of the infrastructure in the ocean and they’re like oh wow um, okay, here’s here’s a little bit of money you know here’s here’s here’s five million bucks let me know when you’re done I’m like.
Nicolaus Radford: Do you realize that this problem is 10 times harder than any problem we’ve ever worked on in space like I’m sorry but it is and and there’s just there’s just no appreciation and I don’t understand why so that’s another particular mission of my is to really highlight this sort of like. The ocean is a big damn deal. It’s a hugely complicated industry. It’s a $3,000,000,000,000 industry. It’s been un innovated in for like the last fifty years and it’s vital to everything we do on planet earth the food you eat the telecommunications. The clothes you’re wearing I guarantee you were shipped. Across the ocean it is it intersects every daily aspect of your life yet nobody thinks about it. Nobody cares about it and going back to my point. Yeah climate change is sort of a big deal. The ocean levels are rising and we should really think about that we should think about how to handle that. Probably the answer is not to ship everybody to Mars the I’m just spitballing. But maybe that’s not the answer. Maybe it’s let’s figure out a way to deal with the sea level rise. Maybe we should form a partnership with Hilton and put it put a hotel in the middle you know on the coastline that goes into the ocean. Maybe it’s not to fly the humanity to Mars. And um, as you can tell I get kind of passionate about this because because it’s just ah, you know it’s vital and nobody really thinks about it.
Alejandro Cremades: I Hear you.
Alejandro Cremades: Well hey you know it’s all a matter of um, you know, bringing awareness and getting that consciousness you know to ah to really activate now now in your case you know like you’ve also worked on ah on a few things. Ah, obviously you know yakovy motors and then also Rad capital.
Nicolaus Radford: Um, yeah, and.
Alejandro Cremades: So very quickly can you just say you you founded these two things. So can you just really quick quickly tell the audience. You know what you are doing or what you guys were doing with those 2 companies.
Nicolaus Radford: Um, you.
Nicolaus Radford: Yeah, well I mean they’re obviously entities that are still vibrant and and going today. But um, yeah, so Jacoby Motor so in my graduate work I I researched and developed out concepts related to variable flux which is how are we going to build electric motors. That do not have the strong reliance on rare earth material and so I was developing out this machine in grad school I got darp at a fund quite a bit of it. The Nasa funded a little bit of it and then um and my first company. I decided to sort of spin it out as its own entity and then raised a bunch of money with ah another fortune 500 company here in Houston that was backing it and and now it’s signing contracts with german car companies and and and I think it’s it’s it’s going to be something quite special. But but electric motors is another passion of mine. My my graduate work was in electric machine optimization and so I get kind of fired up about that and then I don’t know a few years ago I came across this opportunity to form and and formalize investments. Around trading electricity and I sort of had this sneaking suspicion that maybe our electrical grids are going to have a little fight between wind power and the traditional grid and solar and the disruptions that creates in the grid and that creates. Ah.
Nicolaus Radford: In and of itself some some interesting price action that might be profitable and so I organized an effort around that and and have been doing that as Well. So I like being busy I like having a bunch of things going on and and to me the world is just it’s abound with. Crazy opportunity and it’s hard to just sit still and and you know ignore some of them so I kind of go after a lot of stuff.
Alejandro Cremades: So after you know all these different you know initiatives that you’ve been pushing. You know if if I was to give you the chance of getting into a time machine and going back in time. And being able to have a chat with that younger Nicholas that is still in Nasa you know, maybe that younger nichollaas that is now planning that eighteen month you know exit plan you know, kind of thing. You know if you were able to have a sit down with your younger son. Be able to give that younger self one piece of advice before launching a company. What would that be and why given what you don’t know.
Nicolaus Radford: Trust your intuition I would go back in time and I would beat myself over the head and I would say trust your gut that more times than I can count I could kind of see the future knew I was making a mistake. I was pressured from other entities into making the mistake and I knew in my heart. It was wrong and this happened at every level whether it was technology whether it was Strategy. You know it’s not saying be arrogant and and and you know too strong willed. But sometimes when you’re talking to somebody and you’re making a decision and you just know it in the fiber of your being that it’s wrong, but yet you’re quiet about it always fight for what you know to be the right answer and don’t be embarrassed or or don’t feel bad. To push it and trust your gut because it is it was it was when I look back on all the bad decisions that I made I knew they were bad when I was making them I I knew in my I knew in my absolute deepest heart of hearts that that I should have. Done it differently and when I look back and I grade myself and I was right? trust your gut every time.
Alejandro Cremades: I love it Nicholas for the people that are listening. What is the best way for them to reach out and say hi. Thanks.
Nicolaus Radford: Um, oh wow ah, ah on Linkedin.
Alejandro Cremades: Amazing! Well hey nichollas thank you so much for being on the deal maker show. It has been an honor to have you with us today.
Nicolaus Radford: Thank you Alejandro it was awesome.
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Illia Polosukhin has already raised over half a billion dollars for his startup that pivoted from AI to blockchain technology. His venture, NEAR Protocol, attracted funding from top-tier investors like Blockchange Ventures, ParaFi Capital, MetaWeb Ventures, and Republic Capital Group.
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Your email address is 100% safe from spam!About Illia Polosukhin:Illia Polosukhin is the CTO and co-founder of NEAR.AI, a platform that wants to give the power of programming to everyone. How so? By enabling entrepreneurs, researchers, and every other professional to upload their sketches, which will be rendered into designs, receiving a fully functioning mobile app in return.
Together with his co-founder Alex Skidanov, Illia is leading a change within the applications of AI, by challenging the established role of developers and creating value for the end consumer.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So I’m very excited. You know about the founder that we have today. We’re going to be talking a lot about you know good good stuff. You know here. Ah about building scaling financing. You know all the good stuff that we like to hear. And I think that you’re all going to find our guests very very inspi I mean someone that came from the Ukraine to the us you know, went into one of the top companies and then from there you know now you know has launched our rocket ship so without furthertherdo let’s welcome our guests today ilia polosukin welcome to the show. Hey.
Illia Polosukhin: Um, thanks you Ali Handra great to be here.
Alejandro Cremades: So originally born and raiseded there in the Ukraine. How was life growing up, give us a little of a walkthrough memory lane.
Illia Polosukhin: For sure. Yeah I mean obviously it’s very different now than it was thirty years ago but I would say the important pieces have been like 90 s were a pretty tough time in Ukraine I’ve lived through hyperinflation like I remember. Buying a bread for you know a thousand at ten Thousand a hundred thousand and I think there was an at some point at the cost of the million to buy a lot of bread. Um, the you know, definitely. There’s a lot of kind of.
Illia Polosukhin: Corruption and and just general like uncertain data was there in 90 s and kind of it it you know like even after the reset the currency. Ah then there was you know and tried to keep it with a dollar for a while they kind of kept releaing it. So just a lot of ah you know. Things like that I grew up from not you know, very humble means let’s just say and so pretty early on started figuring out how to ah how to get a job so the at the same time I was like really excited about computers I got um. To play with like at some friends first and then we got a very like 89 pretty much really old computer in 2000 kind of at home so was just trying to build games trying to build kind of some cool things around that got really excited that was at page 10 and then yeah since send.
Alejandro Cremades: I mean coding at 10 I mean that’s absolutely incredible now in your case you know 1 thing led to the next and you know your first job. You know literally was a with a company you know where you were still in university but 1 thing led to the next and all of a sudden you find yourself in San Diego right
Illia Polosukhin: Couldn’t stop coding.
Alejandro Cremades: So how was that how did that happen. So.
Illia Polosukhin: Yeah, exactly so so I was in first year of university as I said not not much money so I was looking for a job I knew how to you know, write code and kind of so so actually started looking for it for a software development job right? away. And so friends found this San Diego company that had a small office in harki. Um, that was doing machine learning which I was super excited about I actually went to university to study that I was already doing some like basic neural networks in high school and yeah, so join that. They kind of invited me a couple times for summers to just visit and and kind of seasoned out and then gave me an offer to relocate and move to San Diego which was really exciting kind of to do that obviously beginning in a beginning you know coming in from a. Different culture different language everything so it took took a bit to get my footing around but um, it was a really good experience to learn from that company that company actually was around from seventy s or even like. Early 70 s and so they were doing machine learning before there was a word machine learning so there was a lot of experience doing that at the same time I actually saw kind of deep learning kind of getting getting into fooding and so I was excited about neural networks you know back in like two thousand and six five they were not really working
Illia Polosukhin: And so when in 13 when the cat neuron came out out of Google I was like okay well this is this is happening now and so I wanted to go somewhere where they were doing neural networks at scale and and figure out how to how to contribute to that and all this was excited about kind of human knowledge. Aspect of machine learning. So it was looking for something where I can work with language and knowledge and so that’s how I got and into Google research in 14 pretty much into a research team that was working on natural language question answering and kind of understanding. You know the vast amount of language that’s around us.
Alejandro Cremades: And now people are talking a lot about question and answering now with all these craziness around chat Gpt. So um, you know it’s just incredible like the the progress now that we’ve seen you know around artificial intelligence machine learning and. And obviously you’ve seen you know this same this space developing. So how have you seen you know that development and also the the acceptance and the consciousness around it because now it it sounds like you know people are talking about I mean chat Gpt you know has been right now I think it’s the first you know. To achieve 1000000 users in literally five days which is absolutely insane. So how have you seen the development you know of of of this segment you know as a whole. So.
Illia Polosukhin: For sure. Yeah that’s a really interesting question. So back when when I was at Google right? I mean we kind of imagined all those things because that that was literally what we’re working on at the same time. It was not working really well yet. And so although we had a really cool systems. They were really expensive to run. Um. And so that’s what’s actually motivation for the transformers for the models that are powering right now. Everything that um, we actually couldn’t ship in production any of the question answering models we had because they were just too expensive and too slow to run and so kind of. Our team and some Google brain teams kind of were working on this idea of transformers and which ended up in the pay attention is all you need and kind of pretty much allowing to like drop um cost of running this and and and speed up the inference like 10 or or even more x. And so that led to you know that model is actually getting into production Google translate improved a lot into 20019 because of that and then Shippio Bert kind of came out to Google and then openai was gpone and and further and so I think the definitely kind of. Interesting things here being that like more bigger and bigger models more and more data fed and it actually is able to infer the structure and the knowledge of the language without being kind of particularly taught specific concepts and so like again we’ve seen that like that’s why I got excited to join Google in first place we’ve seen that.
Illia Polosukhin: Images early on and like in language it was still not clear until something that heard came out to to showcase that at the same time I think now like before I was kind of skeptical is you know like gion musk and everybody else who were coming out and saying hey you know we should be careful about ai. Yeah, yeah, yeah, because it was so early back then it was like actually not really um, working yet. But now we have something that’s actually a pretty you know, powerful tool although it’s like huffed you know most of the time it it says you know something incorrectly but it’s actually now a powerful tool to start kind of dedosing the you know so society in a way right? You can create fake content you can create you know frivolous lawsuits that kind of referencing. For example, case law and you can start doing a lot of interesting. Kind of damage that people are generally doing already. It’s it’s not that it’s something new. It’s just it’s not at the same volume and so I think that’s where we’re going to be seeing really interesting problems and and we actually have you know tools to solve them as well now and so um. Um, really excited about kind of how we’re going to be addressing this in in you know this year and coming years.
Alejandro Cremades: Now in your case you know obviously you were here in mountain view working in in one of the top companies. You know, probably like the dream that I mean if you were like there back in Ukraine and watching Tv I mean the stuff that you would typically see on Tv and in your dreams and. And you had realized it. You know you had realized data and you were making it happen. So why making a change why why did you decide you know, hey you know what I’m going to say goodbye to everything and I’m going to give my notice and I’m going to start my own thing and starting something from nothing right.
Illia Polosukhin: Yeah, great question. So I always wanted to build something on my own. Um, and the honest honest opinion was Ukraine was not the place to do it just because you know at least back then back when I was leaving so like. Early, 2010 S um, like it was still pretty kind of corrupted system and obviously like things actually gotten way better up up until the war. Um, so like ah as I was returning. There was definitely an opportunity to do a lot more interesting things there but ah. I wanted to do something on my own and so I went to Google with this with idea to get to get a lot more experience meet a lot of smart people to work so with later and um, kind of figure out and a network in Silicon Valley to to be able to do something on my own and and Google was an amazing place to do that like there was a ton of smart people there which most of them left now to start start startups and companies around Ai blockchain biotech. Ah like. Even they char in other spaces and so yeah, so it was a really great opportunity to kind of connect with the whole kind of Silicon Valley and the next generation of startups. You know, multiple actually all of my directors have left a started the startup when I was ah like at this point so um.
Illia Polosukhin: So it’s just a really kind of amazing place to start from. But then as I was working there the kind of like there was this feeling that you know you can move faster way faster and because. Ah, various reasons right? The structure. The big organization. The kind of complexity of of coordinating all of this you moving really slowly like I was actually doing 3 jobs in a way in the same time I was managing a team I was individual contributor to Tensorflow. Um. Like 1 of the major contributive tensorflow and I was doing another project kind of with it as a team. Um, so like just to to be able to do like to fill my day in a way right to do things and so that that kind of felt like hey there’s an opportunity here to focus and build something um with a small team. Being way fast and and this is my thesis that as we move into kind of blockchain conversation I do have a tsis that small teams working together tighter and then coordinating more on economic level between each other is a more robust way of. Kind of building large large things than a big one big company that kind of has too much bureaucracy internally and is not able to move as quickly and so so yeah, so with that you know and then my cofounder Alex and we’re really
Illia Polosukhin: Excited about the idea of leveraging sounds’ attentions only need sound as models transformers to ah actually build what github auto ofpilot end up being so we were trying to build that early on in 17 and so we ended up you know I left Google kind of through some. another another adventure we end up starting near i.
Alejandro Cremades: So obviously near Ai you know, went through um, different cycles. You know in your guys’s case you know you did a ah pivot. You know, 2 and and pivots you are are frightening. You know they’re they’re scary. Because they’d say you know you’re dealing with what you knew? Maybe what you knew was not adjusting so well and then it was time to kind of like reshape it a little bit so your guys is you know case, what was that the a I would say journey or or or transition like how do you um. Go to where you were and then at what point do you decide? hey you know this is not working or this needs to be done differently and then how did you guys go about the execution of of that transition.
Illia Polosukhin: For sure. Yeah, so when we started in the Ai we we kind of agreed on a year so we gave ourselves a year to figure something out because and like we we took a very ambitious problem right? especially for a startup of like generating code from language. We said like hey. Need to do a bunch of research. We know that and we’re going to do that. But at the same time when like we give us us a year to get to some product that you know people will be able to use and so we ended up I mean there’s a kind of interesting research came out of that which is cited now by deepmind and openai. Um. In in their work. But um and we’ve tested lots of products we’ve ended up like especially for Ai that this the simplest thing you can do is literally just put an interface in front of the user and just be yourself behind the scene trying to answer or like respond to the questions people ask. Like if you can do that then like at least that shows that you have enough information to answer that then maybe you can train a model to that and so we’ve tried. We’ve tried a bunch of products and we had actually something that was like close enough to a product but it would require a ton of investment and and a big kind of. Team behind the scene to be able to fix things when they don’t work and it was actually a building you could you could draw an interface of with mobile app on ah on a piece of paper or on a whiteboard take take a picture of it and we would generate that and then you can try to describe how it should work and would try to make it all work right? So we’re.
Illia Polosukhin: Trying to build like a completely no code platform for building mobile applications. It was just like drawing and natural language and I had something like reasonable and people wanted that like there is actually an interest in something like this but it would require a ton of like a big team of people who would. 6 pretty much post-factor and stuff when ai was broken but the thing we did end up building kind of as a side of this was a crowdsourcing system so we had because we needed a lot of data for like language to test to code codes. Description for code like comments and like all kinds of stuff and so we ended up building a very like specialized platform where we had a ton of people working and this people were around the world. This is like generally you know paying them like. You know ten cents for a problem that was students mostly from China from Russia from Ukraine from kind of few other countries for whom this was like reasonable money to make doing this work and we had problems paying them so that was like our pain point is that just. Processing transfers to them like they don’t have bank account. There’s no like good. You know it’s not like a deal thing like a guil didn’t exist back then it’s not the like you don’t do payroll for that. So like it was really complicated to just pay and so we started looking at blockchain just to solve our problem like can we process payments on Blockchain so we don’t need to.
Illia Polosukhin: You know deal with all the operations of this and the answer was back then 2018 Densor was known because Blockchain was way too expensive to use like eeum and bitcoin and it was really complicated to use as well. Um, and there was no good like ways to to onboard people. And that’s where we kind of realized like hey that is a problem like we have like a real use case and we need to pay people and like it is a solution. It just doesn’t work. Infrastructure is not there. It doesn’t scale. It’s not easy to use and so we ended up. Actually kind of focusing on that like hey can we solve this problem if we could solve it for ourselves like we know there’s other people who need this as well. So how do we do that and that’s when we brought in a bunch more people who like some of them who were in blockchain space before which we weren’t. And so kind of started brainstorming. How would we address these problems and how would we design something exist.
Alejandro Cremades: And how would you say that it has evolved to what you have to them I mean what is the business model today. How do you guys make money.
Illia Polosukhin: Yeah, so there’s an interesting kind of thing about Blockchain that blockchain itself is not making money. It’s more of an economy right? Like how does dollar make money like dollar itself doesn’t it’s the kind of services around that and things around that and so similar here near itself. The near token is more of a kind of you know, think of it as oil in the machine right? That’s how the whole system works and it’s more of an economy near token itself is used for economic and then there’s companies around near that are providing different services or building companies and and business on top right? So for example, pagoda. Company around is the company that provides infrastructure as a service right? that provides old rpcs. It provides old endpoints and like can be charging for some of the services on top of it there companies that are you know building businesses. For example again, if somebody builds that crowdsourcing business. They will be charging their clients for data labeling. They’ll be paying people and they’ll be making money on on the difference and so the idea here is like you build the protocol the kind of the the core concept. There is a near token which does have economic value that captured from the economy. So. It’s more like gdp style economy than. Then you know pure like revenue and then on top of it. You have businesses that are built that you know, kind of actually produce that gdp on on top.
Alejandro Cremades: So got it and also you know as the um as the process tool for for for capitalizing this you know I mean obviously you guys have gone through different rounds of financing too. So How has been that experience. And I guess you know before going into that you know why don’t you start by sharing you know with the audience. How much capital you guys have raised to date and then also going back to the previous question. How has it been the experience of going through those financing rounds right.
Illia Polosukhin: Yeah, so total we raised over 550,000,000 over this past for something years and but it’s actually started with near Ai so we raised a little bit about 700 ah for Ai company. And that was an interesting conversation where we were pivoting to blockchain to our previous investors to tell them like hey we’re actually going to go in this different direction and they were like well what do you actually know about blockchain that was a very valid question and our point was like well we you know we’re smart. We’ll figure it out and we did. But yeah, so then we kind of went the pivot we and we we pretty much really quickly grew from like 3 people doing ai to like 9 people doing near protocol blockchain and so we ended up going and and fundraising for blockchain and you know, kind of. Quickly finding the network in Silicon Valley of Blockchain investors who you know understand actually the ah the principles of this and and you know first version of our pitch was completely destroyed because we you know we just came into the space and the the people who are like who actually know how these things work. Were you know, kind of very able to pretty much destroy the the things we were. We were thinking through and but that gave us kind of you know a feedback and motivation and so we we talked with zen few more times we talked to those a lot of people and kind of honed in on like a specific.
Illia Polosukhin: Like you know, still the same principle that we started with but hone in on like the design of what we wanted to do as well as the structure of houses should be done and so that that was a really interesting experience because I don’t think you get as much feedback usually from that 2 investors. Um. Um, the technology and all that you building because right now for web 2 you mostly get feedback on like business fundamentals and here it was also like the people involved were very technical and so we got in the first round so meta stable and naval or re vi kant were. Kind of first round for the blockchain already but that and then and but a bunch of folks join like a lecture capital. For example, as 1 of the big funders in that and yeah, that that was kind of the gave us you know time to actually build out the concepts build build the. Ah, like what do we call testnet in blockchain something that you know people can already start building on using and while we still, we’re figuring out a lot of the technical details of infrastructure and then with that. Ah we were doing more fundraised to kind of actually launch this side because there’s a lot more. Um, capital needed to get like I mean this this needs to be global day 1 right? I think that’s one of the bigger differences from many other companies is like a global infrastructure we need cloud editors around the world. We need. We need you know access points we need wallets we need like all the whole ecosystem needs to come in at same time.
Illia Polosukhin: And so that’s when partners was envis um beginning of 2020 and and with a lot of other folks in the kind of Blockchain and and also traditional ecosystem to kind of help ourselves. So as we were growing to to structurals as so yeah I mean ah it was obviously like. You know you never stop pitching. That’s really the the lesson from this and like you know, even if you’re not fundraising. You’re still pitching to everyone and and getting feedback and understanding like how far you are from next funding round and like what do you need to achieve that. But also what would you use as capital to kind of. Um, to propel your growth and to pay to kind of get you closer to the next stage of you know of the growth of the company of or the project in this case. Um, yeah.
Alejandro Cremades: So in your case, you are a digital nomad and you have a remote you know employee structure walk us through this.
Illia Polosukhin: So we were actually all in San Office um up until I guess like um, mid nineteen. So like for a bit over a year and then we started slowly hiring people kind of globally and. Actually by 2020 begin of 2020 we had maybe like twenty thirty percent global and then still people in San Francisco and it started actually like to be a little bit uncomfortable where people who are like not in the office right? would feel. Um.
Illia Polosukhin: Excluded from the you know from the conversations and from the kind of some the in like the decision that were made and so we we started trying this is before covid we started trying to do like like two days in the office three days remote type thing. And so when Khali was just starting and I actually came from China in January Twenty Twenty um ah kind of ah I had some contact that this is happening and so mid-febary we closed our office and we said okay, we’re going to fully and fully remote don’t take public transport. You know. Um, and so and we kind of force ourselves to to switch to this async you know, fully remote mode back then and that also opened up our hiring. We also launched a switchs foundation. So the reality is also because blockchain projects are also not kind of a monolythic company. But actually a lot of different organizations and companies working together in one ecosystem. So this this actually also kind of helped to start structuring this like um, somewhat decentralized organizational structure as well and this to the point about like big companies like Google versus a. A coalition of companies and and teams working together under under 1 roof and yeah, so generally speaking right now I think there’s like 4 or 500 like across very close kind of ecosystem participants.
Illia Polosukhin: Ah, you know near foundation itself is like 90 people and the tagoda the company I run is about 10010 and there’s also like a lot of other um teams that are involved in different aspects of the new ecosystem and it’s like it’s fully remote. You know there is like the. Sometimes time zone spans across you know us Europe and Asia which is really hard and there’s very limited time zone where like people can actually have meetings so a lot more I think a lot more documents shared and kind of focusing on how can we empower people to ah to be more. Ah, independent right? versus versus having like a lot of synchronization and meetings so not not everyone even have like standups. For example, just because there’s like so little time to to like where people intersect and that’s. Time is so valuable for something more like more decision like decision making or discussions or reviews versus just kind of updates and so a lot a lot more. For example, async standups and sync updates um are needed.
Alejandro Cremades: So now tell us about you know the company that you run and and then also how you know it’s a it’s working in parallel with near Ai.
Illia Polosukhin: Yeah, so well. The the company is pagoda which is kind of a successor of the original company that started near protocol so it has the kind of core development team that does the protocol and a lot of infrastructure and. Like because again, it’s all open source. So There’s other people contributing to the protocol. There’s you know, kind of cross company workgroups that are deciding on on pass forward for the protocol as Well. So for people familiar with open source think of like linux. You know there’s. Red Hat obviously is probably the biggest contributor to Linux Kernel and and a lot of fearfrey. But there’s other companies participating as well. So You know what we’re trying to build in pagoda is to be red hat off near and was that you know contribute the protocol contribute to infrastructure but also build end user Consumer products. That are, um, you know in different ways can bring users and and engage them. Um.
Alejandro Cremades: So now imagine in a world where you work to go to sleep tonight and you know the vision. You know both? you know is fully realized of the company that you’re running plus. Also you know the the token you know itself in near Ai you know. If if if in that world that you’re you know, waking up, you know into the vision for both is fully realized what does that world look like.
Illia Polosukhin: Um, well so for near itself I mean the kind of global vision is ah how do we enable people to have control over their assets data and power governance and that’s a very like powerful statement because it kind of changes how the world is structured today. Right? right? Now. Most people don’t have control over their assets right? They you know they’re sent in bank and they don’t have custody them. The banks can go poof most of the world. You know a lot most of the people in the world are like either unbanked or like barely banked right? ah. Outside of western world and at the same time you know all the data right now belongs to the Facebooks to the instagrams to the whatever companies that like provide social platforms for people. Don’t control them people don’t don’t get benefit of that and finally governance is actually even more. Ah. You know, painful because government is not just over the you know digital but else to the physical world and you know there’s a lot of problems with that and so the realization of this vision is really people you know even like a billion people being in control of this means you know the banks kind of. Change their functions. A lot of the like social and kind of media companies will change how they work because they’re now like the users are the owners of this and they ah particip in the economy versus you know this company’s extracted value from them.
Illia Polosukhin: And I mean when we talk about governance like the you know reality is it probably will change how the governments work and this ah again going back to the ai topic. The reality is like we need to do this because Ai will start making the current government and governance systems like legal bureaucratic. Political systems will start showing the problems with them and making you know the current systems somewhat obsolete and so we need to change that and so kind of near and blockchain is a technology to help and aid that and so. I think yeah that that is a vision right? is like people you know in Africa are able to participate in economy and you know they you know can open up their phone and do a small gig or or find a job or you know participate in in some kind of. Opportunity that is only right now available to limited few at and same time like there’s no banks that can just like you know disappear and and take everybody’s money and at the same time. There’s no like dictator who can just like dictate their. Ah. Their decisions to the whole population.
Alejandro Cremades: Now we’ve been talking here about division and looking ahead. You know if you were able to look back. You know, incredible journey that you’ve had and and be able to reflect from that journey and and really look ahead. You know into the future I mean. Think about it this way imagine if I had the opportunity of giving you the opportunity of getting into a time machine and going back in time and obviously you always wanted to start a company back in Ukraine right? and you needed to follow this journey. But imagine you had the opportunity of going back in time and having a chat with that younger self.
Illia Polosukhin: 50
Alejandro Cremades: That younger ilia that is looking at starting a company one day you know if you could go and have a sit down with that younger self and give that younger self one piece of advice before launching a business. What would that be and why given what you know now.
Illia Polosukhin: So I think I mean the the core of all of this is always network right? and so building network early being very um, kind of resourceful about doing this connecting with people. But not not just like because you want something from them but actually like you know, building friendships and and kind of relationships with people I think that’s you know, especially for introverts and engineers. That’s not something that’s like completely natural. And so I think that’s that’s a main advice I would give because I I definitely wasn’t doing that back in college and I only started kind of figuring this out when I kind of at Google really and I think that that is probably the main advice because that’s that’s how you. Like it’s not just about business right? It’s also how you have like a fulfilling life right? It’s having friends is having the kind of connections with people is is supporting each other and finding ways to kind of uplift the whole group and obviously finding people who are interesting who are ambitious who are excited about you know. Innovation or you know, maybe it doesn’t always need to be tech right? It can be kind of broader spectrum. But like people who with whom you feel you will be able to do more and and and be better person and so I think that’s that’s always important at at any age but starting early and kind of really thinking about that.
Illia Polosukhin: In that way versus kind of floating floating like oh I just met somebody in University and that’s my friends like would actually like oh who who are the interesting people I should be hanging out with who are interesting people who are doing something or should be learning from I think is really important. And that’s what be the advice I’ll give.
Alejandro Cremades: Amazing, Very profound out for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Illia Polosukhin: Ah, so Twitter probably is really good. So I l black dragon on Twitter or alienaire to search and yeah.
Alejandro Cremades: Amazing. Well ilia. Thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Illia Polosukhin: Um, thank you.
Illia Polosukhin: In here.
Illia Polosukhin: Um, yeah, sounds like a good plan.
Illia Polosukhin: I Think you need to the recording is still going.
Illia Polosukhin: Ah, but set on my side is still. It’s still so it’s recording interesting.
Illia Polosukhin: So.
Illia Polosukhin: Um, sounds good. Thank you.
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The post Illia Polosukhin On Raising $550 Million To Create A Highly Scalable Blockchain Network That Powers The Open Web appeared first on Alejandro Cremades.
Chris Dean has taken several companies through successful exits. Now he’s working on his biggest project yet. One which has already attracted tens of millions of dollars in investment, and moves billions of dollars each month. The startup, Treasury Prime, has interested investors like The Banc Capital, Invicta Growth, Deciens Capital, and QED Investors.
In this episode, you will learn:
- Fundraising for your startup
- Structuring M&A deals
- Changing the US banking system
Alejandro Cremades · EP 555 Chris Dean On Selling His Last Business For $200M And Now Raising $70 MillionSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Chris Dean:As CEO and Co-Founder of Treasury Prime, Chris is responsible for all aspects of Treasury Prime’s strategy, execution, and operations. Prior to launching Treasury Prime, he served as CTO of “API first” company Standard Treasury.
When the startup was acquired by Silicon Valley Bank, he took on the role of CTO of API banking for SVB. Earlier in his career, Chris founded or co-founded software companies, including Merced Systems (enterprise software), Kyluka (a consulting firm), and Benefitter (an ACA-based health plan.)
Chris started his career as technical staff in the Machine Learning Systems Group of NASA’s Jet Propulsion Laboratory. He studied physics at the California Institute of Technology.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alright, hello everyone and welcome to the nellmakerr show. So we have a very very exciting founder today you know someone that has done it so many times. Oh my god you know I can I can even lose track. So again, you know we’re going to be talking a lot about building scaling financing selling. You know, ah getting a choir I mean you name it. So without further ado. Let’s welcome our guest today Chris Dean welcome to the show.
Chris Dean: Hi Thanks all hanra I’m happy to be here.
Alejandro Cremades: Um, so originally born and raised there in San Diego and I know that the family you know, really likes surfing so how was life growing up.
Chris Dean: It was great. You know we had the world smallest house but it was on the beach and they were all crammed in there and I loved it I and I went in the water every day for years I live in San Francisco now and the water is just a little bit too cold for me, you know, growing up in San Diego it’s warm here. Freezing. But.
Alejandro Cremades: So so obviously you know like the water the surfing I mean what? what got you into this technical side of things into into the engineering.
Chris Dean: I love math I mean I always have I always I don’t understand why other people don’t love it It’s like the funniest thing ever um know so I did well in high school I went to you know university and did well there. Um I you know was a physicist and. And the world of physics I was the best computer scientist and the world of computer scientist I was the best statistician so obviously that pushed me into machine learning because that was great because I was always the person who knew the other side of the problem. You know I did research for a while. Jpl which is um, you know run by Caltech where I went to the university my advisor was head of labs there and that was a great experience and I I just love that that was maybe the best job I ever had sitting in alone in a room with a whiteboard is really great.
Alejandro Cremades: So in your case I mean obviously you go to Caltech and then you eventually move to San Francisco and I know that moving to San Francisco was a little of a shock no on seeing you all the innovation and all the good stuff you know happening around you. So.
Chris Dean: It was it was it was great I mean I was not prepared. That’s for sure I my wife wanted to move up here to take care of her parents and so I thought I’ll do that until I decide you know where I want to go next you know, maybe go down Stanford or you know.
Alejandro Cremades: So how was that experience for you.
Chris Dean: Or more somewhere like that. But I got a job at a startup was my first real job I literally did not know what a startup was I was the first employee there and it was you know something that I was the subject matter expert in um, it was this machine learning ai stuff and we. Built a company around that and it was very very early. This is like dot com days and oh my gosh is this a poorly run company and I love like my peers there but I don’t think the man was really in control you know drugs and sex and chairs thrown across the room and like. Court orders preventing 1 founder from entering the building. It was just no fun except I love the startup part of it I love talking to customers I love building the thing I love figuring out what people actually wanted that was so interesting and i. once once I had done that for like even this the year I was like well this is what I’m doing for the rest of my life.
Alejandro Cremades: And you know there was ah a company that you got going there you know and and and basically what they were doing was ai machine learning I mean ai machine learning back then I mean nobody really talked about this now you know Ai and machine learning is. Absolutely everywhere. Everyone is talking about you know, implementing it from some shape or form but back then it was kind of new. So quite innovative. Yeah.
Chris Dean: Yeah, yeah, it was very at the time I mean I um, ah had the you know Paul and I had the largest machine learning problem ever solved right? or ever worked on like we had these massive networks of computers. We had you know, put together. Um, at the time they were gigantic and now they’re kind of a rounding error. You know it’s like if you look at a modern system there you know thousand times through orders of magnitude bigger than what we worked on and it was super interesting, really fun and. I found the thing that was kind of the aha moment for me was that the quality and amount of the data were the thing and less so the algorithm and over time I spent time looking for more and more data more and more great data and that’s partly what led me to the job is that they had actually good behavioral data and they had a lot of it. And that’s why I thought I could do this.
Alejandro Cremades: So after this one you know you ended up going to babycenter. Ah, now that that was quite an interesting run because the company got acquired but then the company that acquired you went bankrupt So why? So I guess you know.
Chris Dean: Yeah, just fun
Alejandro Cremades: How is it, you know, like really achieving the high. So if everyone’s celebrating hey you know we made it. We made it to the finish line and then all of a sudden boom. You know, like the the whole thing you know comes a crashing down. But.
Chris Dean: It was it was it was a ride for sure so I had loved the work at that first startup that ai startup but I realized it didn’t actually tell me how to run a business so I did what any you know you know scientist engineer would do I flipped some variables around I said okay. Let’s look for another startup but something where the business model is completely obvious and baby center. It’s basically it was a magazine online about you know you’re pregnant. You’re gonna have a baby or you have newborn have take care of them. There’s ads that says at the top of the page say you should buy a minivan that makes sense to me. You know I understand that business I don’t know if it’s a good business but at least I understand it and that was an amazing experience. You know it was run by some really just superb product managers and like you said we got bought by etoysetoys was perhaps less well run. Um. But that ipo day all was so fun I got those friends and family shares it went from $20 a share to $80 a share I sold it in the first day made $60000 that was amazing and the paper is worth many many many times that and I’m running the engineering website group at um.
Chris Dean: At E Toys you know it’s a big busiest traffic site in the world at the time and that was great and then we went bankrupt and I made nothing I made that $60000 that I made on that first ipo day was all the money I ever made out of that company except for my salary and that was. Also an aha experience like oh maybe being rich on paper is not the most important thing here. Maybe we should actually have create real value and that was that was a journey for sure.
Alejandro Cremades: But that for sure you know like gave you access to um to saying hey you know what I’m gonna go at it on my own and I’m going to start my own company. So what happened there for you to say hey you know I think that maybe you know I’m gonna go out it with this idea I think this idea has legs and I think it’s my time.
Chris Dean: Yeah I mean that was exactly what happened um somebodyddies and I from um babycenter Actually who said okay, we’re great working Together. We’re really smart. Um, let’s pick a new problem and we pick more of an enterprise software problem where we could you know help Corporations. Um. Hire and manage people and yeah, it turns out that every company hires and manages people so we picked our particular area and we dominated that area um turned out. It was a very small market but we did dominate it and eventually we sold that company for you know, a good amount of Money. We took very little um outside capital so that was a good exit for everyone. We’re very happy with that good must? yeah.
Alejandro Cremades: And I know that the exit was 200,000,000 so ah least you know as some something along those lines. You know you took little capital so you know I’m sure that you know there was some splurging there that came out of the way you know, ah out of that amazing outcome on your end because I mean that’s a lot of money. So I guess saying.
Chris Dean: Um, gift.
Alejandro Cremades: You know from that time from that experience. You know where yeah I mean obviously incredible outcome right? Your first company first day exit like that. What did you learn from seeing the full cycle of a company you know going the full cycle from idea to product market fit to. Fundraising to scaling to exit I mean what? what was that visibility what that that that that you gain access to by going through that.
Chris Dean: Sure so I found the things I was interested in and so I could focus on those and I also found the things that were important and where you know I realized where those weren’t the same thing that I had to find a buddy I had to find a partner who was good at the things that wasn’t good at right or is interested in things I wasn’t good at and for me, um, things that are important here a you got to have the right problem like if you’re doing a problem that no one cares about no one’s going to pay you any money if no one’s going to use. It doesn’t matter. You got to have that product market fit and then second. Have to surround yourself with the absolute best people like we had a highly productive product team and it was known for in the industry for being the best and the most highly productive and we are also an order magnitude smaller than most of the other folks and why is that because every individual was just outstanding. Just incredibly incredibly good I still you know the? Ah so many of those people went on to found other companies become rich themselves and that like showed me that like my job as a leader is just is to pick the right problem and then to make sure that I have people around me who can execute. There are things I don’t really love right? Um, and but I love managing the people and I love talking to customers and like those are what I ended up focusing on um, fundraising at Mercette was very easy. That’s this company because you know ah we tried to raise money right before 119 is that you know.
Chris Dean: 20 whatever year old company and we got all our term sheets pulled because of that because nine eleven like it was just terrible tragedy hard to get through but we ended up raising money after that we and because of the times we ended up raising just a few million dollars but that was enough to get to started and we ran on that for years. Raise any more capital and for just quite a while and that made it so that you know everyone involved had a really great exit.
Alejandro Cremades: Now in this case, you know the exit. What did that look like I mean how did the exit. You know, come together. You know was it like a process that you guys decided to start you know was say it they you know some inbound that came through and then you know what were the events that needed to upfold for the deal to close.
Chris Dean: Sure I mean like a lot of these things. It wasn’t out of the blue. Really it was. We had the existing partner who was bigger than us in this ah in a similar and adjacent space and they wanted to expand and they knew that we were you know the gold standard. So they approached us at some point and wanted to deepen the partnership and then very soon after that they made a you know and a they made overtures to acquire us and then it’s pretty easy after that you know there was negotiations and you know we wanted a number and they wanted a number but eventually met in the middle and. it was it was easy right? and often these things are easy. This is to contrast contrast that with the baby said during the dot com times where that was very different and during um the baby centerter one and I was not the founder there. So I was not like it’s privy to this but we had an offer from Amazon in hand back at babycenter. And um, etoys came to us and offered us like many many more times that offer so we took the etoys offer maybe in retrospect I wish we’d have done the opposite because you know Amazon still seems like pretty good company and etoys is completely bankrupt. But when the mer said acquisition happened was pretty easy. It was very straightforward. And you know went fast after that I would imagine that if we had said no during for the merset acquisition. There were not there would not there been a second offer we’d still be he. We’d still be running that which I think was smart of us to take the offer.
Alejandro Cremades: Now I Guess you know after the um, the acquisition you know of of of mercered systems. You eventually went on to ah do some consulting you know and you were also semi retired. Ah, but.
Chris Dean: Yeah. It.
Alejandro Cremades: Then you know you came out of retirement now. 1 thing that is very interesting. There is you know as they say an entrepreneur always an entrepreneur entrepreneur and obviously now you know you created another company and we’re going to be talking about your latest baby here. But before that I mean you came out of semi-retiement to be the employee.
Chris Dean: Sure.
Alejandro Cremades: Of another company I mean come on on entrepreneurs are unemployable. So so what happened.
Chris Dean: I ah, it’s true. Um, well, they’re very early. Um, my buddy Dan was renting this company called standard treasury. It’s a banking software company I know a lot about software I know at the time I knew 0 about banking. And a bank account. That’s all, but you know he convinced me in the room and he said basically look they were having some founder drama he was having some founder drama. He needed to replace his technical co-founder what I come in and run the technical group and I’m like no but he could you know. But he did that thing that you know you can do sometimes where he took me out for a 3 hour long um you know cup of coffee and he convinced me in the room. It’s very hard to sell me in the room but Dan did and you know I I love the problem and. The more I learned about banking in you know the us banking system the more I became more interested in it and you know that led me to take the job he had. He had a very small team but it was a great team and that that was a mark of excellence to me like if the people you surround yourself with are great then maybe there’s something here. And so that’s that was the reason.
Alejandro Cremades: So then what happened there because obviously you guys again, you know you go through another acquisition with a Silicon Valley bank and then you know you thought they I’m gonna get out of here. But you stay there quite a bit but this was the immediate step that needed to happen for you to start.
Chris Dean: It take.
Chris Dean: Hundred percent
Alejandro Cremades: Your next company So you know if they say ideas you know they take time to incubate and we don’t even know that they are there but you know definitely the idea was there of treasury prime and and I guess you know at what point do you say? Okay I think that I really got to go with this one.
Chris Dean: Yeah, um, Silicon Valley Bank was our first client and they heard rumors that we were going to be purchased by Wells Fargo and that’ was not true, but they heard rumors and they wanted to buy us to lock us in to make sure that they had access to our software. No other bank. Did. So okay, um I expected to stay for you know a minute couple months while my folks got settled. It was a decent acquisition I mean people bought houses and stuff but no one bought like a brand new plane. It was just it was a fine acquisition. But um I didn’t think I’d stay because. Like you said like I’m an entrepreneur I’m working a bank come on. It doesn’t seem like that’s a thing that I would do I ended up staying there 2 years because a the people at s three b are just really nice and 2 the more I learned about the actual banking system. The more I was shocked by how messed up it was like. Bar was so low that you know we could come in and do something which we thought was trivial and simple from a technical point of view and it would be hailed as like this great achievement and I was like oh the banking system really needs help and you know. Spent a long time. My co-founder Jim and I trying to figure out the right strategy to solve this problem generally and we saw other people start we went. That’s the wrong strategy. They don’t actually know how banking works and we came up with this plan and you know that’s the company I met now treasury print started that.
Alejandro Cremades: So so then know what what were the early the early days of tertiary prime because obviously yeah, at this point you’ve been involved with a bunch of companies. You’ve seen it all So how did you go about surrounding yourself with the right people.
Chris Dean: Um.
Chris Dean: Sure we were very careful about realizing the problem we were solving at treasury prime like banking. The us is different than making to other places in many ways. The us has the you know best economy in the world. I mean does have the best economy in the world and. Um, but our banking system is really lacking in just fundamental operational things like it’s hard to move money around. Um, we have a very fragmented banking system. You know five thousand banks 5000 credit unions depending on how you count you know 4 5 national regulatory agencies. It’s very complicated so we want to make sure we laid out a plan where we could do the the problem we were trying to solve which is to create a brand new dominant architecture for us banks to communicate with each other and how do we do that we said okay. We went and we raised the seed round and that was very easy because we were like I said look we made a lot of money for you before we can make money for you again. We’re experts in the field here’s our problem and that was a very easy pitch. It was very very easy to raise money. Um, and we raised money for that and. I went and reached out to like the best engineers I know and I know a lot and I went out to the best people to manage the banks and I know a lot of those and we started from there and we’ve been going ever since every time we need to go through different transition. The company I use that as an opportunity to raise more capital. It does mean that.
Chris Dean: The seed stage company is very different than the series A which was very different than the series B which is now very different than the series C company right now.
Alejandro Cremades: And in your case I mean going from technical because I mean you’ve been a technical guy all along you know now you are more on the business side of things you know as well. So how was that transition for you.
Chris Dean: Sure.
Chris Dean: Um, you know we’re all good at different things and I think that um I’m you know Jim and I did build the first product I mean we sat in a room and by ourselves for a couple months and just built the product. Um, and so that’s helpful that you know we have that horsepower.
Chris Dean: The business side is um, it’s not that different from how the company runs not a lot differently than how a computer runs a computer system runs that they’re all there have rules bank you know computers are a system. There’s a way they work. Business is a system and there’s a way that it works and if you understand how it works. It’s actually not that hard I can tell you that I’m great at product side and I’m kind of terrible at the marketing side and so I make sure I surround myself who are people who are good at the marketing side and that has worked well like um. You know the person I run the company here with um, ah the Co O O remy carroll and remy’s great at all the things I’m terrible at he’s great at running the gotomark team. He’s great at the level of detail on that you need there and I’m great at the product side so we can make sure that the business keeps running that way.
Alejandro Cremades: So for the people that are listening to really get it. What ended up being the business model of treasury prime. How do you guys make money.
Chris Dean: So that’s a great question. We are a marketplace between fin tax and banks what we do is we connect directly to um, a us commercially chartered bank. We do deep integrations with them like we connect directly to their internal systems their cores their payment gateways. All that once we do that we can do anything the bank can do and then we put a common Api layer across all of our banks and we have a lot of banks and we then go out and help the bank find finte to place. Um at each bank. So we have you know we have a lot of banks and we have a lot more fintech and than banks obviously and we put them together because what we’re trying to do is create an open banking standard across the us and you know we’re doing that one bank at a time but it’s definitely working. We charge the banks to use our software. We tries the fin text to use our software. Um, if you want to open a bank account. We charge you for that if you want to send a wire. We charge you for that. Um, it’s very much a were a platform and you paid to use the platform.
Alejandro Cremades: So in that regard you know the fundraising journey for something like this is is very unusual right. It has been very unusual for you guys. How much capital have you have you raised to date for this.
Chris Dean: Oh see what is it? Um, we’re almost at 70,000,000 so you know not not a ton.
Alejandro Cremades: And why the the process you know racing for something like this has been so unusual.
Chris Dean: Well, you have to go into this problem knowing that the banks are going to be slow is that there’s a lot of players here. There’s the fin tax which are you know tech companies like us like you know that you you and I talked to every day but the banks are slower moving and then the regulators are slower moving than that. And we count each one of these groups as our constituents like we we deal well with each one of them because you can’t make a new system without the regulators. Okay, you can’t actually run the system without the banks and the people who are supplying this new product lines are the fintech. All your interests have to be aligned but every time we raise money every time we went through a transition the company it’s because we were transitioning to the next step of that so in the beginning we had one bank and we didn’t mostly work for the bank with just a few fintech the next stage was. Expanded pretty dramatically our number of banks and you know added um a commensurate number of fin text on top of that and the third stage you know the one we’re at um, you know before that we actually started to build out. Um our marketplace of banks so it was easy to move around. And right now what we’re doing is we’re actually executing on that marketplace. This is you know it’s we’re like 1 step away from the end. Um from our end business model and the business model right now is that we have all these banks we have a lot of very large finntax who use us as.
Chris Dean: A network where they can talk to multiple banks at once they can move money around. Um you know we have you know billions and billions of dollars worth of deposits that we help people control and they move that around between different banks and they do that seamlessly because our platform is the same. Regardless of the bank and our platform makes every bank appear to be the same as every other bank.
Alejandro Cremades: So so I guess say to really get an understanding then on the scope and size of the business Gris I mean anything that you can share in terms of maybe number of employees or where you guys are at with the company. Do they? okay.
Chris Dean: Sure I mean we’re doing really? Well, we’re growing. We have a hundred people at the company now just about um are the measure we usually use to see how our overall health is the active. Um, how active our platform is because the interesting thing is our platform. And you know we are you know we move. Um, you know monthly was it last month like you know four or $5,000,000,000 in in capital in I’m sorry in money movement and then we have um you know about because. $3000000000 in deposits. You know like that last month and month before was more and then next month it’ll be more but our goal here is to make sure that like all of our 16 banks have a lot of deposits have a lot of fin tax and by the time that happens we’ll have. 32 banks and by the time that happens we’ll have 64 banks so we’ll just keep growing.
Alejandro Cremades: So I was here talking about goals and perhaps vision too. If you were to go to sleep tonight and you wake up in a world where the vision of treachery prime is realized what does that world look like.
Chris Dean: Yeah, oh that’s great. That means there are hundreds of banks probably not thousands but hundreds of banks on the treasury prime platform and that there are fintechs that are on top of those banks. Are making a brand new way that the us can actually run its banking system. That’s the goal here. Um, what we’re trying to do is solve a government size problem I don’t think the banks are going to do it themselves I don’t think the regulators are going to do themselves so we will the nice thing about that is that. You know it’s that phrase a rising tide raises all boats that by making the banking system easier to use making making it simpler to do innovation. There’s gonna be things that are invented that we’re not even imagining here that the fintech explosion just going to increase. So if I had all my dreams that. There would be these banks that were running. You know that were controlling no trillion dollars in deposits because that’s about that’s about 5% of the u deposits right now and that seems a very reasonable number for fintech to control and. That leads to a level of innovation that we’re not even matching now in the same way that you know the internet led to level of innovation that we weren’t thinking about that you know smartphones led to uber and things like that we can’t even imagine what’s going to happen but you need a common platform to do that as a side effect whoever runs that platform is going to make an enormous amount of money.
Chris Dean: Which is the pitch to all the investors you know.
Alejandro Cremades: And in this case I mean we’re talking about the future Imagine if you were able to look at the past and and be able to reflect on it to guide you know, perhaps your future. You know if you had the opportunity of going into a time machine.
Chris Dean: Okay.
Alejandro Cremades: And going back in time and and having a chat with that the younger Chris you know, maybe that younger Chris that just had moved to San Francisco and that was takinging a look around and you know thinking how cool it will be one day to have my own company if you were able to have a chat with that younger self and being able to give.
Chris Dean: Um, f.
Alejandro Cremades: That younger self one piece of advice before launching a business but would that be and why given what you know now.
Chris Dean: It’s good. It’s a hard one. Um, so I’d say big alert bigger and simpler yeah bigger and simpler like tell myself that like there’s not a reason to pick a small problem like all problems are hard so pick a big problem. It has bigger effect. It’s easier to attract. Um, great people to a big problem than it is to a small problem. Um in some ways. It’s more interesting to solve the big problem. However, make sure at all times that you are ruthless in making sure that your description of the problem that. The whole thing is very very simple right? You want your solution to be simple. You want the problem to be simple as possible because as you grow it is very hard to manage that complexity if it’s just you know yourself in a room. It’s fine. You can do all sorts of duance. But as you go from ten to a hundred to a thousand employees it’s hard to manage that it has to actually be simple or no one’s going to keep up with you so bigger and simpler.
Alejandro Cremades: I love it and Chris for the people that are listening that would love to reach out and say hi. What is the best way for them to do so.
Chris Dean: Oh I’m easy to find you know on I’m easy to find on the internet. You just look for me, you message with me on Linkedin or Twitter or anything but I’m this I offered to use this as an exercise like if you can’t find my email address like it’s published everywhere then you were probably not gonna have a good time talking. So just. And spend 5 minutes and find that because it’s not hard.
Alejandro Cremades: Amazing! all right? Well Chris thank you so much for being on the dealmaker show to aid has been an honor to have you with us. Thanks.
Chris Dean: Thank you so much I enjoyed it.
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The post Chris Dean On Selling His Last Business For $200 Million And Now Raising $70 Million To Enable Banks To Innovate appeared first on Alejandro Cremades.
Casper Rasmussen has gone from consultant to founder and raised tens of millions of dollars for his fast-growing business, which has already expanded into eight countries in just two and a half years. The startup, Monta, has attracted funding from top-tier investors like Energize Ventures, Pale Blue Dot, Headline, and Creandum.
In this episode, you will learn:
- Preparing for your fundraising rounds
- Finding an effective go-to-market strategy
- Hiring a CEO early
- Casper Rasmussen’s top advice when launching a business
Alejandro Cremades · EP 554 Casper Rasmussen On Raising $60 Million To Power The Infaestructure Of Electric VehiclesSUBSCRIBE ON:
iTunesGoogle PlayStitcherTuneInRSSSoundCloudSpotify For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Casper Rasmussen:Casper worked as the global CTO in MonstarLab, overseeing more than 800 engineers worldwide.
He developed, streamlined, and strengthened the company’s global tech strategy through best-practice sharing and continuous employee development.
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Read the Full Transcription of the Interview:Alejandro Cremades: Already hello everyone and welcome to the dealmaker show. So I’m really excited about our guest that we have today. We’re going to be talking about building scaling financing I mean all of that good stuff. You know going from consulting to. Now you know, being an entrepreneur entrepreneur and and building something repeatable and scalable. You know the good good stuff that we like to hear but I don’t want to make you guys wait any longer guys and girls. So today. We’re gonna be welcoming. Our guest here casper re musin welcome to the show.
Casper Rasmussen: Thank you very much and thanks for having me.
Alejandro Cremades: So originally you know born there in Denmark you know, obviously you were there in out of the suburbs. You know I’m sure it was a beautiful childhood but give us a walk through memory lane. How was life growing up.
Casper Rasmussen: Thank you very much. Yes, correctly I’m I’m born and raised in ah in Denmark and went to school here and then later university started a as i. Started starting electronic engineering that was also the first time I I learned to code and like at a touch and all that.
Alejandro Cremades: Ah why? why? engineering casper out of all things I mean what got you into problem solving.
Casper Rasmussen: So I think like I had I had a really good like I had talent for for math and physics and stuff like that and I’m also from a family of engineers. So where that was what that dragged me into that and but yeah, so.
Alejandro Cremades: That’s amazing. So.
Casper Rasmussen: Started with electronic engineering and then later went more into software. Um, and I figured out it was much easier to ah to kind of debug and troubleshoot on ah in software compared to on a circuit. So I got dragged to that really fast. And then into mobile apps pretty early so was actually building mobile apps already in Android 1.5 so one of the first versions out there and and that was also what landed my my my first real job in my career I started in a small agency a ticket sell agency building. Mobile applications in 2010? Um, and when then I was part about building that agency up. It became mobile lead later cio and partner and we took that to 5 countries in europero hundred and fifty people organically and sold that in 2017 during the time and agency. We also did 2 startups one out of London in which is two with founders factory today and one out of in New York a more technical one is also a little bit of exposure to the startup or there. But then after we sold the the agency. Um. To our japanese firm I stepped into a much bigger group where were 1200 people from Tokyo to New York and and we are a consolidation of getting everything on the same brand and ipoing it and got promoted to Google.
Alejandro Cremades: I Mean that’s um, quite ah, quite a transition. You know there’s a few things here that that come to mind you know because you know your background is very interesting. Me one is the consulting world. You know I find that you know you were at accent before you know when when you’re in the consulting you know world.
Casper Rasmussen: That’s.
Alejandro Cremades: It’s It’s like it gives you access to to a perspective to a way of looking at problems. Obviously you have the jobs of problem solving of of being and an engineer a train engineer but then now you know you blend that too with with the consulting chops of being able to grab you know. Big problems. You know, break them down into smaller problems and then tackle them. So What do you think the blend of both you know, give you access to.
Casper Rasmussen: Yeah, it’s a good question I think like the consultancy will gives you that gives you exposure to a lot of different industries so you learn a little bit about everything and I think that was ah very good at very big advantages when we insert you know in ev charting. There was not a. Like industry. We ever thought about before and but you also get extremely good at kind of doing the first couple of releases like you have done so many times where you build something for a company and release it and then they kind of take it over so the first sprint is like why you’re super strong and. We built more than 500 mobile apps. So why? what’s in yes so a lot of like exposures to that and knowing what works and what doesn’t work and what technologies to go for and watch to what to not go for um, something. Good. Ah good adventures on that. But I think the downside is also that you are used to like swapping to the next thing very early. You never get very deep and as soon as the project starts gaining a little bit they get taken over internally often and. Ah, so I think that’s why you? That’s what you’re missing from that I tried that a little bit for some of the startups we we did but ah, but not to the to the extents we have sustain in it with manta.
Alejandro Cremades: And I guess with a monster lab when when you guys went through the acquisition you know, obviously here you know it’s it’s it’s interesting because you get to also experience you were 1 of the early employees you became a partner there and you got to experience to what the transactional side of. Of of being acquired by somebody else looks like I mean how you do the integration how you blend teams how you blend cultures I mean what kind of disability did that give you into the full cycle of building scaling and exiting a business.
Casper Rasmussen: Yeah I think it. It was a very yeah was a very big learning on the like how you how you sold a company. It was six seven month process it started with us with a few like how say like a. Meetings to see if there was ah a cultural fit. We won the same like journey together as them and and then later gets super incensed with like tutillian’s lawyers up and down which is ah also face you do when you fundraise but here it’s it’s that’s a very big stake. Your company and we also tried it from the other side where we actually acquired companies food agency as well and where it’s ah yeah, it’s it’s great. Learnings. Um, not something you prove you can prepare yourself for I think and. Ah, think the the takeaways are it’s most likely going to take a lot longer than you you Um, you think about when you start the process we had like 1 of the tree partners like that was that was his full time job for six months that was to get this acquisition through and just to deal with all the questions that were coming from from all the drillians. Ah, oh.
Alejandro Cremades: Yeah I mean it’s a no kidding you no kidding. You know we’re going through acquisitions now you know in your case, you know you you stayed you know for that integration and and this was the immediate. You know, step that needed to happen before you actually decided to go at it. You know as an entrepreneur you know as they say. I you know they take time you know, ah for you to even know that they’re there. You know they’re they’re like incubating and there’s like certain sequences of events that push you over the edge to really bring it to life I guess in your case Casper. What were those events that needed to happen for you to say. Okay, you know let’s go.
Casper Rasmussen: Yeah, so I think the most important one was that that we we have built so many mobile apps for startups both in ah in Europe and in Asia and like so many of them like ninety ninety five percent are not making through a year two um so I knew that if I had to go for like a startup idea it needs to be a very good idea like I was not just going for something I felt like strong about one day and and then I think that on the other side going into like startup entrepreneurship where you’re getting. Paid very little and like there’s a lot of hard work for a long time. You need to be set up at home for a way where that can work and I think the acquisition of the agency was was giving that buffer for me that I know that even if if I wouldn’t succeed with with manza. It will still be fine and if we get another job. Um I didn’t do it when I was twenty years old and could live on my my parents basement so I had to kind of make sure that that was a security for the family as well.
Alejandro Cremades: So then tell us about you know, um, really pulling the trigger you know and saying you know I think that Montana you know really has some legs.
Casper Rasmussen: Yeah, so that I think we when we started looking into it me and my cofounder we are. We were having this idea that that what that no one really understood how it build software in a consumer facing manner within ev charting. And we could see all the competition out. There was like utilities electronic companies ah kind of entering and so that was the first like direction to start looking into it. Then we bought a couple of charge points open up to see what what’s say what hardware is actually here. Can we integrate into this is it start to be open protocols and and that was actually starting to her that was starting to align on a few protocols and and then at the same time. It was the market that it took. 6 years in Denmark our home market to go from 1 to 2% of the sales The new sales was evs and then it took two quarters to go from 2% to 8% so it was really taking off that summer and that was the that was the indications um we also knew that we were up against like some pretty big companies which have established themselves over the last ten years and and got very dominant positions in the various markets so we are not going to bootstrap it that was pretty clear from us as well that we have to go out and get external money and.
Casper Rasmussen: And that that was the third indicator then when we succeeded attracting the first prese round then it was like okay that’s let’s do it like ah now’s the time. Yeah.
Alejandro Cremades: I love him and what we’ll we’ll talk about the financing just a little bit but you know for the people that are listening to really understand it. What ended up being the business model of Monta. How do you guys make money.
Casper Rasmussen: So we started with this concept about like let’s make airbnb for chart points. So everyone can kind of connect a charge point decide a price and then sell energy to their neighbors and the ones coming by the the house or hotel office building. Um. Today. It’s it’s a b two b two c model. So we sold to companies which are then putting charge points up. So the model is assess a subscription where our customers are paying between five and fifteen Euros per charge point per month and so that’s how we make money.
Alejandro Cremades: And in your guys’s case you know how much a capital have you guys raised to date. Okay, so that’s probably closer to the 60,000,000 Mark you know in in in today’s conversion but in terms of the um, the experience because.
Casper Rasmussen: Fifty Million euros
Alejandro Cremades: You know you were alluding to early you know like the the earlier round that you did you know the first one and that obviously gave you validation and hey you know maybe we’re into something here. You know when people are willing to put their money behind us. But I know that the European market is not as easy. Um.
Casper Rasmussen: Out.
Alejandro Cremades: You know to to attract money as maybe like in the us you know where it has been you know going for some time you know I find that in Europe there ah things are opening up quite a little bit. You know it’s not as green as it used to be and the ecosystem is developing nicely. But what has been the experience. You know for you guys to raise money. And now it has been. You know that experience going from 1 round to the next.
Casper Rasmussen: Yeah, and so like fundraising was completely new to to me and my co-founder we knew we never tried that before and so we started by by actually reaching out to people. We knew who either fundraisedised or was sitting on the investor side and kind of. Just hearing it out a little bit and I think luckily in the like in the angel investor worlds that they’re also really good at bringing in other angels and meet more people figure out who you are having a good match with etc so to so within a few weeks we managed to talk to to like 10 different ones and. And and I think the the pre the pree round of the first round that was like we had 10 slides in in a presentation and we had idea about we wanted to do rpp for charge points that was more about like ah are you quitting your job and going into this full time. Okay, that’s validation enough. For a lot of the the the early stage investors so that was like it was on on your like on the pay on the on the people who were starting the company more than really like anything else I think we hit a couple of good macro trends within. Like the years like so 1 thing is this ah like electrification there this sustainable take green take all that that that’s ah, that’s a trend which is pretty fundable right now there was also this sharing mechanism in in the early ones as well. And.
Casper Rasmussen: And then I think with within electric vehicles itself that many have been looking into putting bets in but they don’t want to invest in the cars and they don’t want to invest in hardware so waiting for for the the software play to come and that’s not that many actually? Um, so. Fast the the first round went pretty smooth and then we start building the the product and launch it pretty quick and so the first round is like 2 years and four months ago since we raised that and we start building and then we released it around this time two years ago and then. Already at that point we start getting pretty good traction in the home market. So we were pretty foolish about okay, let’s go for the next round now the seat round and that was a lot harder work but but still within three weeks I think we had a term sheet and. And it could. It could kind of say assign that and that was a four point three million euroround as a seed round in the spring of 21 and there then the the kind of mission from that point was okay tight try to take the product out of your home market. See if this works in Sweden or in yeah Uk and Germany some in 1 of the bigger markets so that we we then spent like 12 something like six months setting up a couple of the new offices. Ah markets.
Casper Rasmussen: And then pretty fast there in Sweden and in Uk we actually got pretty. We got good traction especially in the uk market we we came in at very good timing. There was a lot of companies looking for solution like ours. We made some really good hires and and and kind of hit it really hard fast. Um, it so already like in in the was that in the fall of 21 we were like now we kind of validated this actually works outside of the of the market. So we we did an a round there and that was also hard work that took us. Maybe a month of preparation and then like two or three weeks of pitching it on so we had the first term sheet there and and then another month for closing and um so I think.
Alejandro Cremades: And now you know 1 1 1 1 thing interesting. There is that the seriously that you were alluding to you guys did that in I mean in 20 to 22 but also in 2022 you know this were there was like 2 transactions happening in 2022 is that right.
Casper Rasmussen: Yeah, so they they so we did a a round in that. So the closing was in Twenty December Twenty one and then there was ah a plus round in August September Twenty two yes
Alejandro Cremades: And what? what? What do you mean with a plus because I’m sure that that’s going to be a little bit of known for many of the people that are listening that are more used to seed a B C you know all of that stuff.
Casper Rasmussen: Yeah, so we it was a discussion point if we should have called it a B round but we actually it so it was our up round we we increased theluation with more than two X but it was ah we didn’t feel like the non bus was there for what you normally are on a B round in terms of revenue. So We we called it a plus round and and they build it up some some cash fast to invest further.
Alejandro Cremades: So was this a preemptive round. You know that someone came to you or or or an existing one or was it like more you going out to market again and and expanding that existing round for me for.
Casper Rasmussen: No, so they they plus round was someone coming to us so we are not fundraising and they came and were pretty interested in in in investing and we we told them we have we have probably we have a year of runway yet. So if you want if you want in now it needs to be on the. And multiplier us why you’re looking at where will we be in six months so we kind of split the the risk a little bit that way and then after a little bit back and forth. We we landed on our agreement with that and.
Alejandro Cremades: and and 1 thing that is very interesting here to you is your background. You know you are a technical guy you happen to be the Ceo but then also the Ceo of the company. Um you know and obviously the co-founder. But.
Casper Rasmussen: Um, help as.
Alejandro Cremades: But it’s interesting because going from the technical side of things to the business side. You know is not easy. So that’s you know 1 interesting transition there and then the other one is juggling both at the same time. So what does a typical day look like for you.
Casper Rasmussen: Yes, good question. So I think they like the reason why it ended like this is that I think in the when you when you get into a company which gets big and bigger and bigger especially in our consultancy agency world where you you have to go out and sell all the time. The partners are actively selling no matter that that job title on top of that and everything gets more and more commercial. It gets more and more of the same and they I would say like the the roles get closer to each other lay a further further hit. Um. So I was exposed to a lot of the operations of the finance to the commercials over the years and then I think when we when we when I when I started months I I really thought that it was important to have someone superynical in this in this kind of company because it was a very. Technically engineering heavy issue. We are solving and so I thought was a super good matched for my profile actually and then I think it’s then it’s been really much about building all the organization around knowing what you’re not good at and what you don’t want to do a lot of and so we hired our Ceo A. Max here when I was at our seat round already which have been running ah a big portion of the of the business. So besides the operation. He also ran finance legal expansion and the sales team for quite um, quite some time one so we got a Ceo and.
Casper Rasmussen: So I think you can you can make the role what you want it to be if when you know what you get energy from and you know what? you’d like to do and then make sure to get good people around you to cover for all the other parts.
Alejandro Cremades: And now in in your case too. You know something something that I would love to hear is if you were let’s say to go to sleep tonight and you wake up in a world where the vision of Monta is fully realized.
Casper Rasmussen: So a think why? what we’re aiming for is being this like a like platform player the into end platform for ev charting like globally and that and we believe we are well positioned for that. But that means you use manza at home you use manza ya.
Alejandro Cremades: What does that word look like.
Casper Rasmussen: Your fitness at your at your corporate parking at public charting like everything that’s us running it as the backends you might have different apps you might charge for your car. There might be different things there in the future but we are kind of the Mastercard. Running all the transactions behind it. That’s.
Alejandro Cremades: Now in this space. There is a a lot of a lot of Momentum. You know there’s obviously a lot of people a lot of people. You know that is trying to take a piece of the pie I’m sure that you guys have thought you know heart you know and deep into the go to Market Strategy. So I guess From. From that. Go-to Market. What have you learned and what can you share with you know the people that are listening that are wondering how they can also be effective of at their goal are their own. Go-to Markete strategy.
Casper Rasmussen: Yeah, so when we and when we started months and we we start breaking up the value chain to figure out like how is this like how does this work like understanding it. And in the beginning we went for like the the car dealerships and we spent some time on that and failed completely at that Both of Covid lockdown that time but also because it was just like it was not the right strategy The the car dealerships are buying through massive national importers and you need to make. Create deals on on a high like national level more or less so we ah we spent some more time on the value chain then we figured out that the electricians the installers are actually the gatekeeper of this space because in in like most of the worlds. You need a licensed electricition when you need ah whenever a high power voltage ah unit is getting installed and that’s a charge Point. So From that point we decided to say Okay, let’s try to go for the installers. Let’s ah, let’s call all of them. Let’s send them a material. That’s. Let’s figure out what we can do for them So when they install charge points. They recommend our Software. We take them in make sure we revenue share with them. We even make them the option to kind of use our platform to run their business in terms of ah of like selling charge points and subscriptions, etc, etc. And.
Casper Rasmussen: And no one else kind of did that. Um, so that was very unique and like that was like a blue ocean in that sense to go for that and when you land the first hundred installers you you also have enough mandates ah power to actually go for their wholesalers and then to their hardware Manufacturers. So It was the way up there to to land the the correct place there. There was a couple steps and be in in between but ah, which was very successful to to do that in the in the different order. Um.
Alejandro Cremades: And for the people that are listening to you know that will love to get an understanding on the scope and size of Monta to I mean anything that you can share in terms of number of employees or anything else.
Casper Rasmussen: Yeah, so we are 150 employees and we are in 8 countries and Europe we just opened up frames last month and yeah and we we now have 54000 charge points.
Alejandro Cremades: Wow Now Imagine if you had the opportunity of being like going into a time machine and you’re able to go back in time you know, maybe you’re going back in time into I don’t know you know you’re you’re a day consulting. You know, ah, firm. And you’re wondering a world where you could bring a solution of your own ah in if you were able to have a sit down with that younger self and and being able to tell that younger customersper one piece of advice for launching a business but would that be and why given what you know now.
Casper Rasmussen: So so it’s is’s almost like don’t do it on I think it. It’s been super tough right? It’s been some some hard years. There’s a lot of like ups and downs in in doing this. But I think while we are right now. It’s been a very good experience and we are. I’m super happy that I that I that we did that I did it and ah so ah, so think some of that advice have been like that on the way I think we took a lot of like fast decisions and we had to redo it. Ah but it it. Also. That’s also why we’re here today that we have been very executional and and we’ve been moving very fast compared to everyone else we up against and but we have also been like breaking things a lot and so I think some of that will be like the. Maybe slow down a little bit and make the right decisions and like take the take the time to hire the right people first time in in like the very important positions. Um, so I think that that could be 1 and then I think in in terms of like ah.
Casper Rasmussen: And other advice would be ah would be within fundraising as well that the like I think it played out pretty well for us but also have that also a lot which are not doing that right that it. It’s really about preparing a lot for these and there’s a lot of like hundreds of hours spent on kind of prepping them and running them nicely and having good understanding of what the what the fundraising market looks like at the point you start your race. Are we up is it about to crash or is it going very well. Um I think that would be some of the advice.
Alejandro Cremades: And for the people are listening casper that will love to reach out and say hi. What is the best way for them to do so amazing. Boy hey casper. Thank you so much for being on the deal maker show today. It has been an honor to have you with us.
Casper Rasmussen: Um, they can find me on Linkedin.
Casper Rasmussen: Yes, likewise Thank you very much for having me.
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Oliver Kharraz’s health tech startup has not only attracted hundreds of millions of dollars in investments but has become the largest provider of its kind. The venture, Zocdoc, has attracted funding from top-tier investors like Amazon’s Jeff Bezos, Khosla Ventures, and Salesforce CEO Marc Benioff.
In this episode, you will learn:
- Pricing and business models
- Building marketplace businesses
- Growing your business through crises
- Redesigning your company culture
- Sales versus product-led businesses
- Working in highly regulated industries
Alejandro Cremades · EP 553 Oliver Kharraz On Raising Almost $400 Million To Connect You With A Local DoctorSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Oliver Kharraz:Oliver Kharraz, MD, is the CEO and founder of Zocdoc. Oliver is the most recent doctor in a 300-year family tradition. Over the course of his wide-ranging career, Oliver has accrued comprehensive experience affecting change and building efficiency in large-scale healthcare organizations using information technology.
Prior to Zocdoc, Oliver was an Associate Principal at the global management consulting firm McKinsey & Company. During his seven-year tenure at McKinsey & Co., Oliver developed and implemented new patient utilization models for the national health services of a number of governments and major hospital chains.
In 1994, Oliver built and sold his first business – a forerunner of early internet software. He later became a resident doctor at the clinic of Ludwig Maximilian University in Munich, where he earned an MD and a Doctorate in Neuroscience. Oliver also has a Master’s Degree in Philosophy from the Jesuit College of Philosophy in Munich. He is also a member of the Council on Foreign Relations.
Born in Germany, Oliver immigrated to the U.S. during his work for McKinsey & Co. He currently resides in Brooklyn, NY, with his wife and their twin daughters.
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Read the Full Transcription of the Interview:Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So I am thrilled you know with a guest that we have today you know he he and his team. You know they’ve built you know one of the um one of the one of the biggest you know startup successes that we’ve seen you know coming out of New York city you know I have a lot of respect. You know for what they’ve done for what the company has done and and I think that we’re going to be learning a lot about building scaling. You know, adjusting to whatever is in front of you with the markets and yeah and all the good stuff that we love to hear so I guess without further ado. Let’s welcome. Our guest today. Oliver Carraz welcome to the show. So so give us a little of how walk through memory lane. How was life growing up.
Oliver Kharraz: Um, thank you Good to be here.
Alejandro Cremades: So let’s go. Let’s go through it. How was life growing up.
Oliver Kharraz: So I only experienced my dad ever with paralyzed arms and that was an incredible daily reminder how much he had sacrificed. You know to in in his fight and he he erases with this belief that. talent- for responsibility. So I grew up with an uber ego that always told me Oliver whatever I just did. But however much I had sacrificed whatever you know I’d achieved to make the world better. It wasn’t wasn’t good enough and so I think every entrepreneur has some chip on their top shoulder mine ends up being. And I want to live up to that example and you know in many ways it make me the leader that i’ am today just because I was looking for something that can have a big impact on how the world works that can improve many people’s lives and it’s I think created environment. Where other people who feel very similarly want to join me and I always say you’re like you can teach a turkey out of climb tree. But you’re much better. Ah off hiring a squirrel and so is a company full of squirrels.
Alejandro Cremades: Now Now Let’s let’s let’s talk about you know, starting companies too because you know right? after if you know, um, literally. You know, being there and and and seeing what was going on. You know you you even started a company before going into med school. So So what? what did you do there with that company.
Oliver Kharraz: Well, yeah, my dad had this philosophy that with 18 I’m on my own and I should earn my own money and so I started a preternet online company back in the day when emails took five days to get from Munich to Los Angeles and yeah I ran that company completely bootstrapped you know for for profits in cash flow and at some point as saw the internet coming and and you ahead to make a decision whether I yeah know sort of drop out of college and make that company internet ready or you know sort of sell it before everyone else sees the internet coming. Also. I ended up deciding to sell it. It was like in the early early 90 s before Aol sent out all these cds for the internet and yeah I think it was a good decision because it protected me from too much money to early on in life. I made some money on that and I took that to go through med school and then practice as a physician for a few years
Alejandro Cremades: And that’s interesting because you went to med school and then you did practice a physician but you know really in instead of of in what they say you know is that once an entrepreneur entrepreneur Always an entrepreneur right? but but in your case I mean you you.
Oliver Kharraz: Effort.
Alejandro Cremades: You actually went at it again. You know with a perhaps you know like the thought of of of going at it with building a business but you end up blending at mckinsey. So what were what what happened there for you not to go at it again and then all of a sudden you know work for somebody else.
Oliver Kharraz: You know it’s interesting. What I had realized at some point is that I sold my first business far too cheap relative to what what a company should have been ah worth and I said well I want to do another startup but I want to at this point know enough about business to make the right decisions. And thought I already had enough degrees so I wanted to learn this very very practically and I ended up joiningning mckinsey originally with the thought to just stay a couple of years but it ended up being incredibly interesting. So I stayed as state I became a junior partner and it did a lot of health care technology and then someone looking back I would say. That was actually quite helpful because I learned a lot but I also developed a deep expertise and perspective on an industry that allowed me to to start so dark. Yeah, with the right? Ah, you know initial starting point.
Alejandro Cremades: Now, let’s talk about you know this? you know really quickly because being at Mckinsey you know and having that the those consulting chops. You know it gives you also the visibility and the capability of of grabbing a big problem and then you know, kind of like putting it into. Smaller problems and then you’re tackling 1 by 1 so what kind of visibility did that give you into execution into being effective at execution in resolving problems.
Oliver Kharraz: Yeah, it’s it’s interesting, right? So mckinsey even before you know selecting opdog was a big impact because I had a framework on what I wanted the company to be that I was going to start I wanted one that had a great mission I wanted it to have a large market I wanted to have a large. Mode so that you can defend it and I wanted it to be based on a contrarian insight so that we could ultimately have enough time to really dig out that mode interestingly when we first got started and and first began to raise money the mckinsey background. Was actually a bit of a hitance for us. So we we you know got started with the company and then we went to santo road like so many others before us and we pitched and we pitched and we pitched and we got very polite reception. Ah but no offers no term sheets and we didn’t know why that was until. At some point a kind soul took us apart and and said like look the idea is great. You look smart enough but you’re consultants. Yeah consultants can get anything done if we looked at our at each other and we both were wearing khackiess and and buttondown shirts. And we knew what we needed to change so we just sort of walked into our gap ball jeans andt -shirts and and continued our tour from there and and then the term sheet started coming in.
Alejandro Cremades: I Love it now for the people that are listening to really get it. You know what? what has you know the business model of shot dog How it has evolved and what it is it today. How do you guys make money.
Oliver Kharraz: So we started out as a saas business where you know doctors would come on the platform and and pay us a monthly fee to be found in this marketplace and that business worked in in a number of ways for the patient was great. You know the the experience. Ah, for the patient was if you pick up the phone and dial for doctors. You have to wait nearly a month tilll you can see one but doctors have last minute cancellations. No showss rescheduls right? in like any other industry where there’s perishable inventory. You know there is marketplaces that match you right? Whether it’s flights or stays and and. So actoc is that market pay for healthcare now we decided you know that doctors would pay us a flat monthly fee. But you know the obstacle we could overcome is that some doctors would get lots of bookings some of them tens of thousands a year and some of them would. Get 10 and so whatever price you would pick that you charged everyone would be way too high for some and and a fraction of what others should pay and so you couldn’t get that right and we scaled socog for a long time. With this inadequate business model and you could say maybe nearly too long.
Alejandro Cremades: Now you know on this you know it’s it’s interesting too because you know it’s um, building marketplaces like that you know where you’re getting like the doctor and the also the the I mean the the chicken and the egg right? So they supply and the demand connecting both. How did you guys go about that because that’s like building 2 companies at the same time. So.
Oliver Kharraz: Um, yeah, it is. It is very hard and quite frankly, we brutefored it. Yeah, we went from doctor to doctor to doctor and walked in and pitched them on this idea when it was really you know questionable. Yeah, how much demand was really on the other side but we we started out with the doctors now we did a number of things that I think helped us make the successful um, the most important one is that we constrained it to a really small geographic area so that we could create density and we ended up. Putting up a big map of Manhattan in 1 of our offices and we would plan flags literally only in downtown only with dentists and we would Mark the different insurances that these dentists accept to create. Ah yeah, critical mass and and you know sufficient options for consumers that would come. Into into that specific area and I think that will set us apart from others that had tried to do the same thing early on that were signing up. You know a dentist in Boston to one in Las Vegas and really delivered value for none of the users as a result. Think that that’s one of the things we did right now we did wait a long time to rethink the subscription part of the model which ended up being the unlock for. But first octrack is a business and it’s something that we started doing really in 20017.
Oliver Kharraz: And and it’s been a step change on every single metric in the business.
Alejandro Cremades: Now in this Regard. You know when it comes to um to obviously you know this kind of business. You know you you need money right? you need money and marketplaces. You know they take money to have the um. Networking effects you know going in the right direction and and making sure that the you know the supply you know and the demand you know are matching and there’s liquidity in the marketplace and all all of that good Stuff. So How did you guys go about you know, financing the company. How much capital you know first and foremost how much capital have you guys raised to date.
Oliver Kharraz: Yeah, so we’ve raised several $100,000,000 in a number of equity rounds. But interestingly we raised our very first round all the way back in 2008 and if you remember these times right? This is when the rest in peace memo was circulating and so we have from day one. But extremely prudent about how we spend our money and money we spend. We always look at as a tax on our ingenuity to replace this with some good idea and I think that’s yeah, very different experience from a lot of companies that sort of grew up in ah in a time when money was 24 so I think we’ve been. Ah, extremely capital efficient over time and because of our strategy of focus on just a handful of markets early on these markets actually sort of overcame the critical mass and started generating. Cash to partially fund yeah know other parts of the expansion of other parts of the business and and that’s been sort of a pattern the most very very helpful for us as we had to go through the business model transition.
Alejandro Cremades: And in this case I mean I mean you were mentioning you know several hundred you know hundreds of millions I mean close to 400 you know, according to um to public sources. But my question here is how has it been you know going from 1 financing round to the next. You know for you guys? What? How how you seen you know to the expectations you know from investors maturing and and and also going you know the business you know from from one cycle to the next.
Oliver Kharraz: Yeah I think again, it’s it’s important to think about what’s the milestone that you want to deliver for the next financing and you should start thinking about this really before you have the prior financing closed so that you know what you can promise and how you position yourself I think the biggest break in that. Stre was certainly having to go through the business model transition right? That is something that we hadn’t anticipated was going to be necessary and and it sort of was a break in the story arc but it was also sort of increasing our work in capital requirements somewhat so that was ah was a. Difficult time to manage through. But you know again, it is all about you know all the expenses you know over is discretionary and in times like this we tend to forget this or or think that the only thing we can do is is sort of thinking about the team. But you know I think this is my two cents for for leaders in general rethink everything that you’re doing right? and when you approach business like that and you have positive unit economics on on everything. You do all? you do is change the dial on how quickly you grow. And you’re complete control of your profitability and we’ve been running ourselves like that you know for a long time now I think that’s what’s really helped us because we’ve always been in a position where we didn’t need to raise money when we did.
Alejandro Cremades: Now in your case. Um you know? Obviously you know there were say a bunch of events. You know that led to another and then all of a sudden you know the board you know, um, decides that it’s time to hit reset you know and because of you know, certain aspects of the business and certain you know, ah things that that you had in front of you guys. And then you had to step in you know because you started as the Ceo you know then you step up, you know I was the Ceo and then you know you’re faced with a bunch of challenges. You know, including culture. You know how did you go about? you know that transition. What did that transition look like.
Oliver Kharraz: Yeah I think that that was one of the most you know, important excruciating things to do with Zocar we had grown very aggressively with a very aggressive outbound sales culture and if you go back and and Google some of the. Articles were written about us back then they didn’t necessarily get everything right? but they also didn’t get everything wrong either and so there’s something that needed to be fixed I realized that in order of it to be the company you wanted to be. We need to transition from a sales led culture. To a product led culture and so we repattformed ah all of our core values right? We we went from a very aggressive competitive culture to one that stresses collaboration in a you know, safe, psychologically safe working environment. And curiosity. You know the the long-term thinking and innovation right? and so that was there was work that required the tyre leadership team sort of to pull through like have these big anchor events and and make sure that all the folks that are on the bus. On board with that being our culture. Go forward and and I think doctor is in that sense unrecognizable today from what it was 7 eight years ago
Alejandro Cremades: I Mean fixing culture is not easy right? because a you know culture really starts with the founders and and really transitioning that is is pretty difficult. Um, obviously you know this has been a work of ah of multiple years now and I guess you know as part Of. Of this Journey. You know what kind of what what would you say were like the 3 key things that you were keeping an eye out for you know when making sure that that transition you know like wouldn’t break.
Oliver Kharraz: So I think culture was actually ah 1 thing that was that I had the most confidence and we’d be able to pull off because there were yeah a sufficient number of people that were really at Zcok that were there for all the right reasons that were very mission driven. And that would see through sort of a rough patch. Yeah with an eye on the long-term vision that that we want to deliberate I think the the financial part of the turnaround was was much more scary because we needed to have a model where we can charge. Doctors more closely related to the value that they’re getting right in in the old bottle. The doctors that got 10000 patients from us a year were literally just paying cents per patient that wasn’t going to be a sustainable business model for us going forward and in some instances we had to go in. And charge these doctors a hundred times more than what they had originally been paying us and now I get upset when Netflix chooses their price by $2 yeah like leave alone by a hundred x and and so those are were set of very very. Challenging conversations to have and it was made more challenging by the fact that when we talk to pricing experts about wanting to change our model. The first thing that came out of everyone’s mouth was but whatever you do don’t charge your best customers more which is obviously the exact opposite of what we had to do now net.
Oliver Kharraz: Over half of the doctors on the platform were actually paying less as a result of the business model transition. But obviously the the squeaky we also were the ones that were paying more sometimes even only modeerably more so that was a very difficult part of the transition. The the third part which was. Maybe the most daunting one to begin with well the fact that it required regulatory clarification. So I spent a couple of years in Dc talking to regulators talking to politicians creating bipartisan consensus that octorg is an important. Piece of healthcare infrastructure that we need bought in this country. That’s actually helping everyone the patient the doctor, the health insurers and and and the employers and and funders of the system all benefit. Yeah from socok’s existence and that can only be scaled. And this new business model and um, it’s a point of pride for me that we were able to convince the regulator to clarify that sock dock and and Zotter specifically has the right to operate the way we do today which is charging the doctor on a per booking basis.
Alejandro Cremades: And at what point you know, Obviously you know a tough um I’ve tough trend tough transition tough responsibility. You know that you’re faced with at what point do you realize hey I think that we’re we’re turning a corner here I think we’re going to be all right.
Oliver Kharraz: Yeah, it’s it’s interesting. We were finished with this business model transition in December of 2019 and we had a fantastic january and a fantastic February of Twenty Twenty right we saw the growth rates. We saw the unit Econs. We realized that we could now start marketing to patients to to make more patients use the service and we’d have yeah an attractive payback period on this and then in March Twenty Twenty covid happens right? The Cdc tells patients. Well don’t go to the doctor if you can avoid it. Was obviously a tough time to have transitioned to a use usage-based pricing model. Our revenue you know broke sixty seventy eighty ninety percent in some weeks so it was a very very difficult time we had board meetings a couple times a week. The board was asking me to consider to to lay off. You know. Part of the employee base to make sure that we match our expenses to our rapidly banishing revenue in the case I said no, we can bet on ourselves. We can add the things that consumers want now to the marketplace and make it resolve and and i. Asked for and got eight weeks to put telehel on the platform. Which yeah, we had prior to the pandemic but it was a rounding error less than 1% with yeah and we we started all this and in early April by late April we had teleoff live by.
Oliver Kharraz: You know, ah mid-may we were the largest tele elth network in the country and by June we had sort of our revenue return and and we were able to actually eke out some growth in 2020 overall despite a really wipe out quarter in q 2 so we ended up being very much. Okay, but after surviving something as devastating as the as the initial covid wave I knew that this business had the resiliency to really go all the way to the top when our execution attorney 1 and 22 and you know the beginning of 23 really points towards this being a correctly sort of correct assessment. Um, we now see very healthy growth. We’ve seen the doctors side of the network actually. Change in quality. Dramatically it used to be that we had ah many many people outbounding calling doctors asked them to join the network now doctors are coming to us they fill in their information on the web they put their credit card in on the web themselves and and can really sign up without ever talking to a human being. And to give you a sort of a sense for the scale of this in just 2022. We signed up more doctors in the first eight years of our existence combined.
Alejandro Cremades: Wow now now in this case, you know for you guys too. I mean there’s a lot of employees. How many employees do you guys have today? Wow and now you know when it comes to um, you know to when when when you know obviously that’s how a lot of employees. You know I wonder like for the.
Oliver Kharraz: A little bit over a thousand.
Alejandro Cremades: People that are listening to to get the you know a size a little bit of a size you know like scope and size of the operation today of so dock I mean anything that you can share in terms of like users or doctors or anything like that.
Oliver Kharraz: Yeah, so we we have over ah 200 different specialties where in every major city. Yeah, we have roughly 50,000,000 appointments available in every given month and and we deal with over. Ah, 120,00 different insurance Plans. So It’s a pretty comprehensive platform at this point that’s growing that’s growing at a very rapid clip and we are sort of I think the default Marketplace in Healthcare At this point.
Alejandro Cremades: Now when you have you know it’s amazing like when you have the the the fly wheels you know and and the network effects you know going you know for for a marketplace like this I mean little, you have to do to really mess this thing up. I mean it. It kind of like goes on its own right.
Oliver Kharraz: Well, it’s actually it’s actually slightly different than many marketplaces right? So healthcare is hyperlocal people in New York Bone even cross central park to go see a doctor so you end up having to manage tens of thousands
Alejandro Cremades: Okay.
Oliver Kharraz: Zip code specialty insurance-specific micromarkets and it’s something that is that we’ve had to learn over the years that is very very complicated and and isn’t completely on autopilot but you know we’re. Proud that we I think are mastering this on behalf of our patients and that we’re getting better at this every day and it’s obviously no regret you know platform for a provider to join so I think it’s getting easier and easier to do this even though it’s a very very hard thing to do well.
Alejandro Cremades: Now imagine if you had the um you know you if you were to go to sleep tonight Oliver and you wake up in a world where the vision of shock dock is fully realized what does that world look like.
Oliver Kharraz: Yeah I think it’s it’s easiest to think about what sort of the ideal future. Looks like when you think about how broken the present is right? if you think about what what’s the patient’s experience today right? when when you start getting sick. Yeah, in your most most vulnerable state you go to an insurance. Directory. That’s largely incorrect you you start dialing down the list for doctors waiting on hold for a long time to then you know, ah play scheduling tetris to get an appointment that’s weeks out into the future now to then go in there fill out. Information that you’ve provided many many times before to just then sit in a waiting room had to be seen and ultimately then you wait some more you get a surprise bill that you never expected in the entire process that is a really uniquely broken system. That we wouldn’t accept in any other industries right? Whether it’s e-commerce or you know stays or flights. Yeah, we always expect that there are marketplaces where you can choose between hundreds of transparent options with clear upfront pricing and where information. Travels seamlessly between the different players that actually they’ll provide you with with services right? You don’t need to tell your your address to ups and Fedex separately now that’s all that’s all here on and I think ultimately we need to have a similar experience in healthcare where there’s.
Oliver Kharraz: 1 place where you can compare the different treatments with their effectiveness where you see the prices upfront where you know that your clinical information travels with you and it’s going to be there for the provider and I think. The the company that that will transform this complex and really uniquely broken healthcare system is going to be a dutiier at its heart and and that’s what zockok is I think optimally positioned to the look.
Alejandro Cremades: I love it now if I was to obviously here we’re looking you know towards the future if we had the opportunity of looking you know towards the past obviously with like um, you know, big lens of reflection there and. And by doing so you know let’s say I put you in the situation of putting you to a time machine and I’m able to bring you back in time you know, maybe back in time to that moment where you were still in school and figuring out. You know, maybe like doing something of your own as an entrepreneur if you had the opportunity of sitting down that younger. Oliver. And being able to give that younger oliver a piece of advice before launching a business. What would that be and why given what you know now.
Oliver Kharraz: I Think there’s a number of things that that are really important and they are you know I think bespoke to the person because you want to make sure that you’re surrounded by ideas that are complementary to you right? think you you want to have that diversity. Of capabilities and the diversity of thought early on I think that that is yeah probably the single most important advice I think the other bit that is is very clear is that you know making important decisions quickly is I think that the. For you know, capability and the core competitive advantage of an entrepreneur and and sometimes we we get stuck in and sort of things that kind of work but don’t work quite well enough and and we’ve experienced that certainly at Octrark with sticking with our old subscription model for too long. Quite frankly and I think there was a very instructive period for me to to say no when you see something is not working then change it and change it radically to what you think is the best solution or what you need to do and accept the obstacles that you need to overcome to get there. Um, yeah I think there’s a lot of other things that we learned about ourselves on the way and and how we manage ourselves with others and and the last thing and this was advice that I got from but of our board members and I think it is really really valuable Advice. You know every entrepreneur I think has to be.
Oliver Kharraz: Very confident in their own skills right? Otherwise whyly would you ever take the risk of doing something completely new and it leads sometimes to the inability to delegate and and one of my board members told me once look you may think that you can do everything 20% better than your team members and maybe you can. But you cannot do all of their jobs 20% better. So you need to be able to accept the way that other people do things and you need to be able to delegate jobs completely and entirely to others and I think that’s something that really opened my eyes and and changed the way. That I manage others and manage myself. It’s been a key unlock to becoming an effective Ceo for larger organization.
Alejandro Cremades: Amazing! Well Oliver for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.
Oliver Kharraz: Just send me an email it’s it’s easy it’s all over at doctor.com or if I’m be on Linkedin and you know I I try to respond as quickly as I can I can probably say always go to be very very fast but you know. This is a super interesting journey I think it’s good to connect with me but it’s even more important to connect with yourself and and and find out what it is that you uniquely bring to the table on this entrepreneurial journey and and find the right ah people and the right advice to compliment you and it’s ah it’s. As hard as it may be at times. It’s a wonderful and very very rewarding thing to do and and I congratulate them for going down that path.
Alejandro Cremades: Amazing! Well Oliver thank you so much for being on the deal maker show. It has been an honor to have you with us today.
Oliver Kharraz: Thank you Za much good to be here.
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Karl Siebrecht not only helped take one company through a $6B acquisition to Microsoft, but has gone on to raise almost a quarter of a billion dollars for his latest tech startup. The venture, Flexe, has attracted funding from top-tier investors like BlackRock, Prologis Ventures, Madrona Ventures, and Activate Capital.
In this episode, you will learn:
- Karl’s top advice when launching a business of your own
- Building marketplace businesses
- The future of logistics and warehousing
Alejandro Cremades · EP 552 Karl Siebrecht On Building A $1B Business By Offering On-Demand Warehousing SpaceSUBSCRIBE ON:
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FREE DOWNLOADThe Ultimate Guide To Pitch DecksMoreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
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Your email address is 100% safe from spam!About Karl Siebrecht:Karl is a seasoned technology executive, with leadership experience in both startups and large, global corporations. Prior to co-founding Flexe, Karl was CEO of AdReady, a Seattle-based advertising technology company.
He is also a founding Board member of EnergySavvy, a SaaS-based solution for energy efficiency management. Previously, Karl was President of Atlas at aQuantive, before its $6B acquisition by Microsoft, and earlier in his career he was a Manager at Bain & Company in Boston and a Diving Officer in the U.S. Navy.
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Read the Full Transcription of the Interview:Alejandro Cremades: Hello everyone and welcome to the deal maker show. So super exciting founder. You know that we have today you know he’s quite a deal maker himself. You know he’s done multiple transactions today. We’re going to be talking about you know building scaling and you know this rocket ship that he’s in you know, right now. As the founder and and and I think that you’re all going to find you know his journey very inspiring. So I think that without farther ado let’s welcome our guest today Carl cyrek welcome to the show. Thanks.
Karl Siebrecht: Um, thanks Allhandra Appreciate being here.
Alejandro Cremades: So so you were raised in Houston Texas so give us a little of um you know, walk through memory lane. How was life growing up. Okay.
Karl Siebrecht: Memory lane in Houston so it was really more growing up in a typical us suburb than growing up in a culturally unique environment that is Houston and it wasn’t until after I left there. Got a little perspective on on other places that I started to realize Houston’s actually a super cool place. You know there was that element of being a texan a little bit of ah, a little bit of pride there and uniqueness about being from Texas but really it was kind of like just growing up in a suburb.
Alejandro Cremades: Now in your case I mean what what got you into into business economics. You know all of that stuff. So.
Karl Siebrecht: Yeah, so it’s family. You know my dad is a marketing guy. He started his career at Coca-cola foods which is why we were in Houston it was the home of minute-made orange juice.
Alejandro Cremades: A nice.
Karl Siebrecht: Ah, Maryland Club Coffee probably some brands that maybe people don’t recognize out there so I grew up kind of asking him what he did for work and he’d talk about brands. He’d talk about consumers. He’d talk about competitors how to be different. That’s what got me into it.
Alejandro Cremades: Now for you. You went to duke you know you studied there. Ah and you know, really interesting here I mean you paid for that you know with you serving as a Navy officer as a diving navy officer. So so what did that inta like being a diving. Navy officer and.
Karl Siebrecht: Yeah, it was a tremendous experience. You know for me. Ah I wasn’t going to be able to go to duke and pay for it myself so finding ah an rotc scholarship was initial just a means to to fund a college experience and I came to. Really understand and appreciate and value the navy and what I was learning from it so it turned out to be ah, a really pretty amazing. 4 year job being a diving officer is kind of all about grit. You know people in tech like to use that word. Um.
Karl Siebrecht: You know, let’s have the grit olympics here I could tell you that walking around in the bottom of the ocean in mud and muck with 0 visibility. That’s pretty gritty so it was a humbling experience. It was super hard physically intellectually um, great. Great experience. Figuring out what it really means to be a part of a team to build a team to lead through adversity. Just ah, you know so so appreciate what? so many of our fellow men and women do to serve for our country and other countries but it was a great experience. I I um. I wouldn’t be the the person I am today if I hadn’t gone through that.
Alejandro Cremades: So let’s talk about adversity. What did you learn about adversity and how to deal with it.
Karl Siebrecht: Well I mean the first thing is you know it’s it’s kind of cliche it feels this way but it’s it’s your team. It’s your teammates. You know when stuff gets hard ah you rely on the people around you and you pull together as a team. You try to cut through um everything that is not critical to the mission. You know jettison everything extra figure out the 1 thing to go focus on pull together. Um. With whatever your team looks like and go after that 1 thing to deliver that 1 thing could be you know pulling a helicopter up off the bottom of the ocean or that 1 thing could be you know solving a customer’s immediate crisis. Um, and if you can get through that. Um you can come out the other end stronger with a customer who who really values how you focused on them. How you got them through something hard so you know again, it’s kind of I use that comparison you know which was top of mind just to sort of draw some of the similarities between. You know, serving the military on ah on a tight team and serving you know with my current teammates at flex on on a tight team as well.
Alejandro Cremades: And we’ll talk about flexing just a little bit now after you did the 4 years in the Navy you decided it was time to go back to study and especially business school. so so so why why business school. Okay.
Karl Siebrecht: Yeah I mean you know the the founding elements were were what I’d said earlier you know, being curious about business from my dad mainly um, but the other thing I recognized is I mean I’d learned a lot in the military things that are you know, maybe that’s one of the best places to learn them. But. You know when you get into sort of how does a business work and what does a p and l look like and you know how does finance actually well I had knew none of that stuff. You know I went to business school and I was like you know in a class with a bunch of ah folks who had been at investment banks for 4 years or consulting firms of 4 years I had never even opened a spreadsheet before like you know. I had this amazing runway of stuff to go learn and I just devoured it it was it was like kid in a candy shop. You know stuff I had that was an economics major and in in college. So I’d had a taste but this was kind of going all in on. Learning about businesses and markets and and how to think about customers and how to think about differentiation. It was awesome.
Alejandro Cremades: Now for you, you decided to go into private equity and you know it’s interesting like many of the people that I that I speak with that are super Successful. You know they either have come from private equity from consulting from investment banking those are like the 3 areas where I see people with amazing. Ah, backgrounds that they’ve developed perhaps on on Pattern recognition or whatever that is but in your case being able to um experience being on the other side of the table more as an investor I mean what do you think that that gave you and what what opened up from that experience.
Karl Siebrecht: Yeah, well well actually you know I was at Bane and company on the consulting side and our customers were private equity funds. Ah so I was doing the consulting work but our customers you know that that that.
Alejandro Cremades: Got it.
Karl Siebrecht: Business on the consulting side started because they started doing work for Bain Capital who was a private equity company and after working on different projects for Bain Capital helping them do diligence on on prospective investments. You know the the entrepreneurs on the consulting site said hey we can go sell this service to other private equity firms. It seems like There’s a need out there and they just built this what what came to be the largest practice area of the entire global consulting firm was the private equity practice so being in on kind of the ground floor that it was just crazy hard work I mean we were running one hundred miles an hour for years. Um, but it was. Learning at hyper speed because what it basically boiled down to was these firms would would hire us to go deep on the 1 or 2 hypotheses that the deal. The investment hinged upon so if the hypothesis was hey we think we can be a lower cost competitor. We would go super deep on proving that out. Can this target prospect be the lowest cost provider or if the deal hinged on hey we think we can be a premium priced product or offering. We would go super deep on proving that out. What are the. What are the factors that would have you believe that this can be a premium price solution and again it it. It. It taught me a lot about how to do a lot of analysis and a lot of work but it really taught me again the value of focusing in on the 1 or 2 things that matter most.
Alejandro Cremades: And obviously for you you know, essentially you um Seattle comes knocking so you move to Seattle and right I mean obviously before before Flex which is what you’re up to now. Um you you were part of 2
Karl Siebrecht: Um, yeah.
Alejandro Cremades: Initiatives I mean 2 companies that ended up going through acquisitions. So I guess let’s let’s like double click on that. So acquintive right? So it was the company that that you started working there in Seattle it ended up being.
Karl Siebrecht: Um, yep.
Alejandro Cremades: Selling to Microsoft for 6,000,000,000 so wonderful transaction and I’m sure that was an incredible experience in your case, what disibility did it give you to the full cycle of the life of a company.
Karl Siebrecht: Yeah, it gave me tremendous visibility I joined I came out to Seattle on ninety nine to join this company. They had just closed their series b round this was in 9099 and within a few quarters we went public so this was the the internet bubble. Ah, version 1 and things were moving incredibly fast. We were growing at just ridiculous rates. Um got public thirteen days before the Nasdaq crashed thirteen days before the Nasdaq crashed right? So what that means is. You know had we had a few more corrections on the s one. We would never have gotten out and we would would have died as a company had we raised capital you know several quarters earlier we probably would have burned through it all because that’s what you did you spent as aggressively as you could to grow as fast as you could and so. You know from that initial bang of an ipo and trading at crazy lofty valuations within a year we were trading below cash as you know half our customers went out of business. You know the the tech ah multiples cratered you know. A lot like they have recently actually in ah in a far more exaggerated way than they have recently and and then we had the opportunity to go actually built from this core which was a strong core business to build a company that was durable and you know it was just.
Karl Siebrecht: It’s kind of the best opportunity you could ask for to see that full lifecycle to go through the very very high highs very low lows I mean when we were trading below Cash We had investors saying. Let’s just fold up tent fold up the tent give the cash Back. It’s going to be the best performing thing in our portfolio. But of course we didn’t want to do that. We we believed in the vision which was you know eyeballs are going onto digital media ad dollars have to follow and the market the world needs a scalable technology platform to build all these transactions on top of it’s just it’s. Like that core belief was so strong and we had a position to build that company and and we did so it was tremendous.
Alejandro Cremades: And then also with with at-ready you know after you finished up the integration with Microsoft where you were for a few years then you moved on you know the next day chapter was at ready where you were leading the operation there and. And again, another exit. No. Um, so you guys slow that to ah to another ad network. So I guess from that experience which was you know about you know the same time you know it’s about you know 6 to 7 years What was your main takeaway. You know on the as ah as ah as an operator.
Karl Siebrecht: That’s right.
Karl Siebrecht: Yeah, you know here’s my main takeaway that you got to have a great strategy got to have great Product. You got to have great Team. You also got to have some luck I mean. I’ve learned humility several times in my life and you know when I reflect on the aqua of experience which was a tremendous outcome. Um, you know we had a great team A great strategy A great product. All those things and we had luck along the way I gave the example of going public just at the right time you know if. The better we can do to recognize that. That’s an ingredient I think the the more effectively we can kind of stay humble. Ah, you know in contrast with the ad-ready experience. Um, you know we did not have a great outcome. We sold the business. Um, but it wasn’t a great financial outcome and ah. In some ways you know? Ah we we were quote unquote Unlucky In other ways we certainly could have executed better but it’s a humbling experience right? And so yeah, you take these things with you and and 2 13 we decided to start this company and that’s been. You know that’s been in in the mindset as well that we got to. We got to do all the things we can control and be prepared for the things we can’t control. You know whether it’s good luck bad luck. Whatever you know some people don’t like the word luck you know things beyond your control. You know.
Karl Siebrecht: Know that they are going to happen and you’ve got to factor that in to how you execute.
Alejandro Cremades: And also as they say I mean I Yes they take time to incubate. You know they’re there. They’re doormant. We don’t even know you know that they are there now in your case you know I’m wondering like why were this? What were the sequence of events that needed to happen for you to be like.
Karl Siebrecht: Um, yeah.
Alejandro Cremades: Wow You know I gotta bring this company to life.
Karl Siebrecht: Yeah I mean you know back to the luck thing. Let’s call it serendipity I mean the serendipity behind the idea for flex was was tremendous. So as I already said I’d spent I don’t know. Twelve plus years in advertising technology right? helping to create a category. There was no thing called there was nothing didn’t exist the word Adtech didn’t exist when this company was formed. There were other companies that started to get created around the same time to go after the same opportunity. But Adtech wasn’t a thing so we were part of this journey of creating a whole new industry category advertising technology and in doing that the business we built was fundamentally a tech platform that connected buyers of digital media with sellers of digital media. And they could all transact buyers and sellers could transact on this common technology platform. That’s the core of the business we built at a quanative and then sort of we were part of the the next generation of that with ad ready only because I’d had that experience for so many years in ad tech. Did the idea for flex resonate so strongly with me the idea came from an entrepreneur a guy I met at a party. Um, who was building had have built a very nice business here in Seattle who had a need and his need was around warehousing and he sought us out and said hey I’ve got an idea for you know.
Karl Siebrecht: Businesses are very dynamic but warehouses are very static multi-year Leases. So I have to sign a fixed financial obligation for multiple years based on a forecast that I can’t you know it’s ridiculous I can’t forecast. My business with any degree of certainty I’m growing very very rapidly I’m participating in this e-commerce thing and that was the core kernel like if you could create a technology platform that could allow for the sharing of warehousing services and warehousing capacity. And monetize that through a flexible model sort of pay as you go instead of pay for multi-year leases and big fixed chunks of capital that would be really tremendously valuable and again only because I had had this prior experience in ad tech did that idea really really resonate with me. You know to that you look back on your economics background. You think about you know the area under the supply curve and all that technical wonky stuff and this just seemed like one of the best ideas I had ever heard.
Alejandro Cremades: Nice. So then let’s talk about the execution of this idea I mean what ended up becoming the business model flex right.
Karl Siebrecht: Yeah, the business model was ah build a 2 sided marketplace type of business ah to offer customers a consumption based model for warehousing services. Do that by building a software platform that is used for managing warehousing services. The core technology is warehouse management software or Wms in industry parlance right? So build that technology in a way that any customer could plug into it on the one side. And all the different operating service providers those who lease buildings and provide warehousing labor could offer their services on this same platform. So you could aggregate supply provided in a shared model. To customers who could take it down in fractional bits. Those fractional bits could be a portion of a building or they could be ah fractional units of time.
Alejandro Cremades: And how difficult was to build the supply and the demand side of things because obviously when you are putting together. You know something like this I mean it’s same is definitely challenging because you know people talk about Marketplaces like the chicken and the egg.
Karl Siebrecht: Yeah, yeah.
Alejandro Cremades: Mean I’ve I’ve built marketplace in the past like the 1 ne-sided The 2 wo-sided and and obviously and I my end I mean when I think about the the chicken and the egg I Just want to shoot the chicken and step on the egg I mean it’s just like super frustrating. But. But I guess in your case, How did you go about tackling this and really you know addressing the supply Demand issue.
Karl Siebrecht: Yeah, it’s such a great question as I love that expression and may have to borrow it so you know look when you’re starting from scratch and it it was myself and my two co-founders they were engineers. They had done early stage startups as well. So they knew how to build. Kind of scrappy v 1 product. You know it was just the 3 of us though. So how you you know we had I mentioned there was a guy who brought the idea. Well we went back to him and said hey ah if we built this would you buy it so he was prospect customer number one. So I guess if you call the customer the chicken. And the suppliers the egg so we had a chicken. So now you needed eggs you know or maybe it’s the reverse doesn’t matter. So then what do you have to do go find a warehouse operator who had capacity wanted to make extra money like it’s kind of simple when you boil it down and so what do you? do you get on the phone you start cold calling. You know you drive down to the warehousing kind of district south of Seattle and you go doorknocking you find somebody and the value props pretty good like hey you have space you want to make some extra money like let’s try this thing and so you start small. We found a warehouse operator and you know this is actually worth a quick story. Ah, this company is a supplier of Halloween costumes and other holiday novelties to huge retailers including Walmart but Halloween’s the big category. So guess what their warehouse looks like on October thirtieth
Karl Siebrecht: It’s like there were guys skateboarding around this huge warehouse that was filled to the brim two weeks earlier and it was just massively seasonal business. So we walked in there and we’re like hey you want to make some extra money they say yeah you know I’ll give that a shot. So then you have a warehouse operator. You have a customer. And that’s working and then you go back to the warehouse operator and say how about if I bring you more customers. He says yeah, bring it on. So now you start cold call on to find more customers so we really bootstrap this thing in a very very kind of analog basic way to get the business off the ground and then you know sort of. Many many years later we’re doing that at a much much more sophisticated level trying to balance. You know the supply side with the demand side and set expectations appropriately but that’s that’s how you start you start by being scrappy.
Alejandro Cremades: And oh kidding I mean you were you were alluding to the bootstrapping you know component I’m wondering you know obviously now you know you guys have raised quite a bit of money. So um, 2 questions here. So how much capital have you guys raised to date. And then also what has been the experience. You know of going from one cycle to the next right.
Karl Siebrecht: Yeah, we’ve raised about two hundred and forty million dollars total through a seed round through series d which we completed last summer. Um, do you know this. Experience has been pretty thrilling I guess is one way to put it. You know we we bootstrapped for like literally funded self-funded. That’s the more accurate term for the first year then we raise a little bit of seed capital and we did not raise our series a for 3 years after the founding of our company. Because we were. We were iterating on the business model. The pricing model even the segments we wanted to go after are we going to try and build this for the snb midsize market or for big enterprise customers and we ultimately chose the latter. Um, but we raised our series a and in September of ah, we’re sorry the summer of 2016 you know the b round came almost three years later and then we’ve accelerated the timing between the c rounds and the d rounds since then as the as the business is really really. Ah, accelerated so you know each time is a pretty thrilling experience. You know we’re a um, we’re kind of a unique business. We’re a lot like other businesses but we’re not exactly like any other business. We are a marketplace model but we’re kind of a unique type of marketplace because we’re b two b.
Karl Siebrecht: And we’re actually enterprise customer focused. So. It’s not really about you know going out and finding hundreds of small or thousands of small customers and building up a demand side that way. So we’re kind of a special type of marketplace very curated and less. You know, specifically automated. Um. We are a payas-ougo ah value prop. So we’re kind of like a consumption-based tech ah model from a pricing perspective. You know like a snowflake or an aws so we’ve kind of we we have some traits in common with saas but we’re actually more like consumption based so. You know we’re a little bit like a lot of other things and we are sitting in the center of one of the largest markets that has yet been transformed by digital technology. It’s the logistics market logistics is over 8 Percent of gdp about that. It’s over 8% of gdp. It’s larger than financial services like financial services all up including consumer investment banking lending you know logistics is larger than that and if you think about. You know the digitization of the of the enterprise you know you go through ah hr systems you go through fintech you go through sales and marketing and the digital you know digital platforms that now run a lot of logistics is one of the last departments of the enterprise to go through a digital transformation and.
Karl Siebrecht: You know we’re in on the ground floor that so the market is massive. So again when you go through a fundraising process. You know there’s a long-winded answer but it boils down to this some investors look at this business and are In. Incredibly bullish and enthusiastic others look at it with Pattern recognition from other things they may be great at like Marketplaces and they’re like well you don’t really look like a marketplace to me so you know I’m not that I’m not that interested. So. It’s a matter of finding the right match the right fit. With investors and we feel very fortunate that we’ve been able to do that and have a tremendous tremendous portfolio of investors who are helping us build this company.
Alejandro Cremades: And just to expand on that Carl because I thought that that that was very interesting. How do you filter so that you can get to the perfect match that you were alluding.
Karl Siebrecht: Yeah, here’s the trick just be really honest and transparent like this is what we do, but this is who we are you know and and let people self select in. Either What they hear is music to their ears or it’s not you know, let them self select and to do that. Well you got to be your true self and this is like I believe in this from finding your next job your next employer. You know if you’re thinking about going to grad school. You know, like whatever it is. You know there’s got to be a great twoway fit for this to work and the best actionable thing you could do is just show your real stripes and ah, you’ll get lots of people who pass. Um, everybody gets lots of people for the most part who pass but But. You’ll find that you end up with the right partner far more often than not.
Alejandro Cremades: And and also for the people that are listening to get an idea on the scope and size of flex I mean anything that you can share in terms of number of employees or anything else that you feel comfortable sharing.
Karl Siebrecht: Sure yeah, we’re um, about 470 employees now we don’t really share our financials but we’re pretty sizable these days and I think one of the most exciting things about our business is.
Karl Siebrecht: As we’ve gotten larger. We’re actually growing faster. We haven’t done any m and a so this is all like straight you know organic year over year growth but our year over year growth This year was faster than last year ah faster than the year before I mean we have to go back to when we were actually subscale. You know it’s easy to relatively easy to grow really fast when you’re you’ve got a tiny base but we’ve got a really big base now and we’re growing. You know, well over 100% year-year.
Alejandro Cremades: Wow! So as we’re thinking about growth as we’re thinking about future imagine if you were to go to sleep tonight Carlin you wake up in a world where the vision of flex is fully realized what does that world look like.
Karl Siebrecht: You know our vision for the industry is that goods will move relatively seamlessly around the world from their point of origin to their ultimate point of destination and you know this is way out there. You know, call it and and you know a couple of decades from now. Um, and this isn’t necessarily the vision for Flex This is our belief on how things are inevitably going to get built and be Operated. So just as you know. If if you sent an email with an attachment sometime in the last you know week you didn’t sit there and think ah what Router am I going to route this file through and is this going to go over a fiber optic cable or over a you know, wireless connection and which wireless connection which protocol I Wonder what? browser. The the recipient’s Using. You know what email you know tool like you have no idea you hit send your expectation is that message will be received without getting fragged you know and it’ll get received quickly and it’ll be a low price. You know per unit that you’ll send that you and and then and then the the network just takes care of all that. In fact, you have no idea what’s underpinning that I don’t know that the movement of goods will ever become that.
Karl Siebrecht: Automated and that friction free because you know the protons and neutrons are a lot harder to manage than the electrons but it will start to approach that and I say this a lot we you know we talk about this when we onboard new employees and I think some people are like what you know what is that guy smoking like really that seems sort of and I say well listen. Look how does it work at Amazon right now. How does it work at Amazon right? And you think if you’re an Amazon Merchant you call up Amazon and say hey ah could you guys send my little pink fuzzy slippers out from your Dallas warehouse and could you put it on a ups truck because I really like ups better than. You know fedex it’s like no, you have no idea where your pink fuzzy slippers are how many warehouses are they in you don’t know and do you care? You don’t care. What do you care about you care that they arrive in two days or one day. You care what the cost per unit delivered is and you care that that there’s a quality experience. That’s what you care about you care about the outputs and you don’t even know what the inputs are and that’s happening right now for almost 50% of the ecommerce sales. In the us across millions of merchants. So Amazon has already built this in a closed ecosystem and I think that the open ecosystem the other 50% of the ecommerce dollars and then by the way the other eighty five percent of retail retail dollars that aren’t ecommerce and aren’t Amazon.
Karl Siebrecht: That’s going to become more automated more technology drivenn more networked. Ah and it’ll start to look more like people buying the outcomes and technology platforms driven by analytics and data delivering the results. That’s the future.
Alejandro Cremades: I think brought on.
Karl Siebrecht: That that that we expect and and flex is going to be a big part of that.
Alejandro Cremades: I love it so that that that sounds like an incredible future by the way now now if we’re thinking about you know, looking looking at the past you know we we’ve been talking about the future. So let’s look at the past. Let’s say I put you into a time machine Carl and I bring you back in time to that moment where.
Karl Siebrecht: Um, yeah.
Alejandro Cremades: You know you were coming out of business school. You know you were thinking about getting into you know business and and and perhaps even running companies and things like that if you had the opportunity of having a sit down with your younger self and giving that younger self a piece of advice before launching a business. What will that be and why given what you know now.
Karl Siebrecht: That’s such a good question. Ah you know I I didn’t launch my business career with an explicit goal of becoming a Ceo or starting a company neither one of those I launched my career.
Karl Siebrecht: Knowing I wanted to do interesting things in business and finding opportunities where I could really dig in and go deep and and there was sort of the thrill of the challenge. You know, go find the hardest thing that was kind of like one of the. 1 of the impulses behind deciding to be a Navy diver and not a Navy something else which there’s lots of great things to do in the navy it was kind of 1 of the hardest things so go find the hardest thing and and see if you can hack it? Um, so ah, what advice would I give my younger self. Um, boy you know I’d say I’m super happy with the decisions I made you know this decision to leave Bain and company. You know where where I was learning a ton I was having a great experience. You know I had there’s lots more things I could go do there. You know, kind of leaving at ah at a peak. Moment and taking the risk to join this startup in Seattle you know doing internet advertising which was sort of just absurd at some level but it felt like it felt like a risk worth taking and um.
Karl Siebrecht: You know I Guess what? I’d say is like yeah take those risks you know be calculated of course be as smart as you can, but like take those risks. Um, ah you know surround yourself as best you can with really smart people who you like to be around because you know what. You’re goingnna be around them a lot. Ah when things are cranking and and growth is through the roof you’re goingnna be around them a lot if things get tough. Ah and you know there’s layoffs or there’s whatever as that’ experienced in my past like you’re going to be around him a lot so you know. Feel very fortunate I’ve made some good decisions I’ve had as I said before some serendipity along the way and I would encourage my my earlier self to to not be afraid of taking those risks again.
Alejandro Cremades: That’s very very profound a Carl so I guess for the people that are listening that would love to um to reach out and say hi. What is the best way for them to do so.
Karl Siebrecht: Yeah, just um, hit me up on Linkedin or hit me up just send me an email Karl Siebrecht: Siebrecht: at flex with an e.com I love talking to other entrepreneurs and and.
Karl Siebrecht: Talking about business models and I’d welcome I’d welcome questions or other perspectives from listeners out there.
Alejandro Cremades: Amazing! Well hey Carl thank you? So so much for being on the deal maker show today. It has been an honor to have you with us.
Karl Siebrecht: Um, likewise I Really appreciate you asking me to do this. It was super fun.
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Scott Gravelle has now raised well over $200M to forge the future of manufacturing automation and the next generation of the supply chain. His venture, Attabotics, has attracted funding from top-tier investors like Export Development Canada, Teachers’ Venture Growth, Strategic Innovation Fund (SIF), and Honeywell.
In this episode, you will learn:
- Fundraising and staving off takeover attempts in a crisis
- The future of automation in the supply chain
- The difference in corporate governance in the US versus Canada
- Hiring and managing your team
- When to let people go, even when it is incredibly hard to do so
Alejandro Cremades · EP 551 Scott Gravelle On Raising $230 Million To Create The Future Of Supply ChainSUBSCRIBE ON:
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Your email address is 100% safe from spam!About Scott Gravelle:Scott is the co-founder, CEO & CTO of Attabotics, the world’s first 3D robotics supply chain system for modern commerce. He drives the company’s vision, product design, and technical innovation, and has put together a team of relentlessly capable executives to move Attabotics forward.
Over his 25-year career, Scott has been an innovator in the integration and implementation of digital manufacturing technologies, as well as a machine designer and entrepreneur.
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Read the Full Transcription of the Interview:Alejandro Cremades: All righty hello everyone and welcome to the deal maker show. So today. We have a very exciting founder. You know it’s a very very interesting journey. You know that that he’s say taking on you know now he is definitely on a rocket ship and. We’re gonna be learning all about it. You know, definitely a very inspiring story and I don’t want to wait you know make you wait any longer. So let’s say let’s welcome our guests today Scott Gravel welcome to the show.
Scott Gravelle: Um, thank you it says it’s fun to hang out with you.
Alejandro Cremades: So give us a little of a walk through memory lane. How was life growing up there in Canada. Okay.
Scott Gravelle: Um I appreciate you know, warm weather and sunshine. Um, it’s interesting I talk with all of my american friends and growing up in Canada there. Everyone’s afraid of the cold but you can always dress up warmer. But. Almost the same experience as growing up in Texas The only difference is in Texas when it’s too hot. You can’t go to the playground. Um, it makes you it makes you resilient makes you appreciate. You know, good streaming video. Um when when winters are long and winters are dark but it gives you lots of time to work on things. So I’ve appreciated you know. Growing up in a country that gives a crap about its people so that’s been good for me.
Alejandro Cremades: That’s amazing now now in your case. Um you know we see the business side. You know, very interesting how you’ve been pushing it. You know and and that that that that kind of like entrepreneurial spirit too. No I mean did you have anyone in the family or or what did that happen later. So.
Scott Gravelle: Um, no I grew up blue collar middle class I think everyone’s expectation expectations of me were to go be some kind of tradesperson like most of you know my family extended family Uncles and aunts and I did um I used to be a cabinet maker. So I followed that path. But what I found was I was always looking for new ideas and I think it has more to do with satisfying my my Adhd than entrepreneurial spirit. Um I get bored easily so I discovered the best way to deal with that was to learn. And so that’s what you know led me down the path of starting a couple a couple of my own businesses and certainly this one was just.
Alejandro Cremades: Now we’re gonna be talking about what you’re up to in just a little bit you know which is really exciting. Ah, but but what? what? what got you into the arms for into the arm forces. What was what was that experience.
Scott Gravelle: I didn’t have good enough grades to go to university and I was working actually at a hospital I used to set apart lug machines for profusionists back of the day and I worked with a physician’s assistant and I wanted to be ah, a surgeon who wasn’t a doctor like him. And there’s 2 paths go become a surgical nurse or go be a medic in the armed forces. So I signed up and started basic training on my twentieth birthday in the canadian armed forces of eastern canada to become a medic.
Alejandro Cremades: Wow. So what kind of stuff were you doing there.
Scott Gravelle: Mostly washing trucks and rolling bandages when you’re low man on the tote pole you you get to do all the grunt work. But I I got really really good actually at treating warts and doing vasectomies. Um.
Alejandro Cremades: Ah.
Scott Gravelle: I so work that I did when I was in the army. Yeah.
Alejandro Cremades: Ah, that’s incredible I mean obviously after this, you know it gave a perspective I mean you moved to Calgary and and then you study the nursery. So.
Scott Gravelle: Um, yeah, nursing yeah I the armed forces actually did budget cuts in the canadian armed forces and I was. Offered a different job other than the one that I’d signed up for so I didn’t want to do that so they actually laid me off and packaged me out and I took that time and I went and moved to Calgary to go study for bachelor’s of science in nursing because that’s the other path to go becoming a physician’s assistant.
Alejandro Cremades: So so so that’s pretty much what happened so you studied nursing and then you would be helping a ah physician that that’s kind of like the um, the path.
Scott Gravelle: That was that was the goal. But once again, budget cuts you know Canada has socialized medicine. So when I graduated from university they were closing down all the hospitals and it’s a union jobs so that made it difficult to find a role so I went back to what I knew which was to make things.
Alejandro Cremades: Yeah, yeah.
Alejandro Cremades: So so why and why making them in California you know what? what? what got you to move there.
Scott Gravelle: So went back to cabinet making. Girl you know that’s usually what way why you move all over the world is you meet a girl and so I followed down to yeah California and I lived to southset of Santa Cruz and I was really fortunate that I worked with a milwork company that was doing like really high end interior work.
Alejandro Cremades: I.
Scott Gravelle: So I got to do kind of the best of cabinet making them a work down there and you know projects where we’d work on for a year that were incredibly detailed using beautiful stuff and um then moving back to Canada you know I went from doing high end millwork in California to now you know being. Key accounts manager for a mill workshop a kitchen cabinet company. So from building kitchens and and work to designing them and then running a theme of estimators and that was a different switch for sure.
Alejandro Cremades: Yeah, no kidding now when you did the first ride on a long board did that happen in California and did that happen in Canada.
Scott Gravelle: Ah, that happened in Canada um I was actually looking to do some dry land training because I used to be a competitive hand glider pilot I used to tour the world racing hand glidders and I wanted to do something that was active and exciting. When I wasn’t flying so I decided that you know long boarding would be the thing but I bought a longor I was just say I bought a longboard from a company and I wrote it for two days and it broke and they did nothing to support me so I thought that’s kind of crappy that I could build a better one myself. So then I started building long boards.
Alejandro Cremades: So how hot.
Scott Gravelle: And more people wanted long board. So then I started a longboard manufacturing business.
Alejandro Cremades: Wow and that was the first business. The first like a company that you were that you were building. No I mean obviously the other ones you know were more on the contractor you know type of side of things with the cabinets. But but here you went at it. So so what happened with this company.
Scott Gravelle: Um, became the fifth largest long board skateboard manufacturer in the world which is like saying you’re a tadpole in a puddle wasn’t a huge market. Did it for 5 years spent half the time starving because you make a lot of money you know from March until July. And then you don’t make any money. Um, and so I shuttered the company after 5 years and it took all of the experience that I had kind of built up doing a lot of automated manufacturing actually and I spun that out into a consulting business where I was helping companies integrate and into um.
Scott Gravelle: Inject digital manufacturing strategies into the workflows so Mill workshops cabinet shops of course are also bottling and plastics companies and stuff like that.
Alejandro Cremades: So how do you go from consulting now now to to what you’re up to at this point I mean obviously you know the background you know anyone that that would think about it all from from nursing to to now you know being an entrepreneur of of of this company.
Scott Gravelle: Right.
Alejandro Cremades: I Mean what was that sequence of events. You know that needed to happen for you to bring this company to life.
Scott Gravelle: Well I’ve always built things my entire life. You know I grew up seeing my my parents and my uncles and aunts always just making things very incredible practical people so building things all my life and then certainly cabinet making and then. And cabinet making craft started to get displaced by technology and I didn’t want to be displaced so I became very good at the technology so computer computer aided manufacturing and so I can like a doctor do little as cnc machines I could talk to the animals so to speak and. I was doing a consulting gig and needed a buffer at the end of a manufacturing line. So I designed a buffer that had movable storage and so I found a company that actually had robots that move shelves that would have helped in that buffer. So I called them. And they said that they you know? Thank you They’re no longer accepting inquiries and hung up on me and I was like who the hell doesn’t want my money and it turned out that that company was just acquired by Amazon a week and a half before for $775,000,000 and that sent me down a rabbit hole because I started looking at supply chain automation for the first time. Always been in manufacturing automatimion and looking at it I saw that most warehouse automation of supply chain automation was some derivative of a human- centric environment and what I mean by that is human beings are two dimensional. We walk on the ground we drive on the ground we need road hallways aisles.
Scott Gravelle: To access everything. Um and I figured nature probably had a better idea of how to organize storage and I found it when I saw a documentary about leaf cover ants and. Had an aha moment of what threedi dimensional storage could look like and how movement could happen within that storage matrix and started drawing and drafting and then spent 2 years trying to find a legitimate reason not to do this because it’s scared the hell out of me and I never.
Alejandro Cremades: What was scary about it. What what was scary about it.
Scott Gravelle: When you’re selling $5000 with the long boards to a skate shop is 1 thing when you’re selling you know, five million to fifty million dollars projects to fortune you know 500 companies. It’s a very different thing and I would say I failed at longors I shuttered the company after 5 years because I couldn’t really support myself and my family doing it. Um. So the fear of failing again the fear of risking again the fear of now elevating a business to a completely different level. You know $5000 orders with the $5000000 orders is very very different. Um, so I said to myself that. And I’m going to go find the reason not to do this but I wouldn’t let the reason be that I was afraid you know I p wasn’t defensible would work customers wouldn’t want it. The market wasn’t growing to support it. There had to be a real reason I never found it here. I am.
Alejandro Cremades: So then you know tell us about the moment that you’re like screw it. Let’s do it and and also what didn what ended up being the business model aboutotics for the people that are listening to to really get how you guys are making money too. So.
Scott Gravelle: A.
Scott Gravelle: So The the original kind of business model is that we would manufacture and sell as Cap X with recurring revenue and services. Um a fulfillment solution for modern Commerce now. That’s not just robots. That’s not just racking and bins. It’s software and intelligence and integration and insights so we started building off of some unique Ip The the fulfillment engine for Modern Consumer Behavior which is single item pick. With order consolidation. Um in a highly highly dense solution with flexible automation that could be deployed closer to the consumer that was kind of the peace and I bravely or naively probably both and was both Maybe you know. Wise and stupid to bite off a huge chunk of of this piece of the puzzle because building hardware is certainly more challenging the software but building hardware and software and embedded at communications and process and structure was a big big. Piece of this but I felt it was the piece needed to actually make substantive change to resolving a problem and that’s what we’ve been working On. Um since we started I originally thought I was just going to prove it out and sell the Ip Um, but everyone that came that was interested in the I p.
Scott Gravelle: Told us that we were moving faster than they ever could and just to keep going so we kept going and now it’s six and a half years later um over 300 employees you know, been on ah an interesting funding jersey journey close to our series c here. November um, and thankfully that every turn of the world seems to validate the work that we’re doing you know consumer.
Alejandro Cremades: And how did you? How did you go? Obviously your background you know completely you know, ah unique, right for for taking this thing on how did you go as well about surrounding yourself.
Scott Gravelle: Is.
Alejandro Cremades: By the right people that perhaps you know may have the answers that you didn’t have given your background. So.
Scott Gravelle: You know what? every story is about people. Um, and I can say that I have found some amazing people to surround myself with and have also had the misfortune of surrounding myself with some people that were far from helpful. And the biggest learnings that I’ve had is you know dealing with people and I started building robots because dealing with people’s hard and machines are actually kind of easy comparatively? Um, but the biggest part of this journey in this story is. Is about people I think you nailed it I have an incredibly strong team around me right now but that wasn’t always the case and fighting through that and the changes in people. You know as a business grows not everyone grows with the business. And the hardest thing I’ve ever had to do is realize that not everybody gets to be part of the entire journey and that that was hard and disappointing. But I’m I’m glad we are where we are now and I’m glad I’m with who I’m with now.
Alejandro Cremades: So then I guess say as part of that you know because that’s a very important point I mean the company that you know you have today you know is is’s always moving right? and it’s always growing. It’s always you know, different type of skill sets different type of um people that that you need. So I guess. You know, but 2 questions here come to mind to Scott one is how do you go about? now you know, bringing the right people I mean is there like certain you know type of criteria or or perhaps like a question or something that you do to make sure that you’re not making a mistake and then also. Ah, what point do you realize that maybe the company has outpayed certain individuals and how do you go about rearranging things.
Scott Gravelle: Um, so picking people is hard. Um, you don’t at the level I’m looking for for support because I realize that I can’t keep my job as Ceo. Unless I surround myself with incredibly strong people to make up for everything that I’m not you know I think I’ve got the the charismatic startup founder thing kind of nailed but to be a good professional Ceo is a completely differentql skill set. You know one is about passion and fire and drive and and the other one is about communication and consistency and and leadership and they’re different. Um, so what I try to surround myself with is a people to challenge me. Um. I don’t need yes people in my life I have a strong enough opinion. It can stand my own but I want people that challenge me because the best ideas come out of really good passionate discussion and the best idea should always win. Um I have found that.
Scott Gravelle: Hiring from my personality type hiring weak people insecure people is always a catastrophe I don’t want to eat them for lunch but unless you have a strong informed opinion. It’s It’s it’s challenging for me to interact with those people so I look for strength I look for security I look for confidence I look for curiosity but the number 1 thing passion. Do they have a fire in their belly to come do this with me. Because any intelligent passionate person can learn to do whatever they need to do to contribute wherever they need to and that’s what I’ve seen about the most successful people in my organization are people that really give a shit and are smart enough to learn whatever they need to. But also secure enough to admit that they don’t know everything they need to know and when you’re doing something that’s never been done before the most dangerous thing you can hire is someone goes. Oh I know exactly what needs to be done. We’re just going to do it like I did it before that’s that’s goes the hell out of me. And the other part your second part of the question is I the biggest mistake I’ve ever made is not acting um as as quickly as I should haves knowing that people didn’t fit into the ah the way the organization is evolved.
Scott Gravelle: Wasn’t right for them wasn’t right for the company. Um I am the king of second and third chances. Although I have a reputation within some of being a bit of an ahole. Um I care about people and I want to do everything I can to support them. Um. But the worst part is is after they failed on the third chance and you knew it after the first one you weren’t doing them or yourself a favor and so recognizing that if people are changing as quickly as a business needs them to. And they’re not motivated to change and if there’st a different seat for him on the bus the where they can contribute then they need to get off the bus and that’s hard that sucks.
Alejandro Cremades: Yeah, yeah, big sometimes you know you try to to put people. You know where they’re not performing into different seatds. They keep failing and then obviously that has a ripple effect into other employees too now. So cost opportunity for everyone.
Scott Gravelle: Um, yeah, yeah because the business changes so fast like it really does. It’s it’s like when you have little kids you know they seem like a lump for the first six months that doesn’t do anything and then they become self-aware discover their hands like you know they’re walking. You know they’re talking they’re exploring and before you know it they’re graduating high school you know and they develop so quickly that you know use a pair to caregiver mentor to that child. They need different people in different situations in their lives. Because the the child grows and develops so quickly in the business the same way and if you’re not growing and developing even though you might have been here first or 1 of the first 10 or 20 people if you’re not growing and developing to meet the needs of the business. Um, it’s hard to see the business. Growing without you and that’s like people have been the hardest part about building robots by far and my group.
Alejandro Cremades: And now for this for this thing actually I want to follow up on that you know people. Um, you guys have raised quite a bit of money and you know when you raise money you know to I mean you’re getting it from people that you know you’re hopeful that they’re going to be bringing value in addition to the money because there’s no shortage of capital right.
Scott Gravelle: Yeah, yeah, yeah I.
Alejandro Cremades: So so what has been that experience you know too and how much capital have you guys raised and how that has changed over time because I know that the last day round that you guys did tool hours that was massive heavy lifting.
Scott Gravelle: Yeah, the last couple have been heavy lifting hardware is expensive hardware takes time and more time than I originally thought naively and more money than I thought so I’m thrilled that we’ve received the support that we have from people that believe in the vision and share the vision of the Future. So Super thankful for that. But like people the people that invest in you in the early early stages um might not be the same people you need in the later ones.
Scott Gravelle: And the value you need as an early state startup from your investors. Um, those investors might not be bearing in the same value you need as a growth business. But the thing is I’m unlike people that are employees. Um, they all. Investors all maintain an equity position in your business and an interest in your business until you’re in a position to change that so you can’t just let them get go on with their lives so you have to be the the choices you make early on in who joins you on the journey start the journey with you. And who your investors are in the early stage or some of the biggest most important decisions you’ll make and any early stage company thinks that any investment is great and I would caution anyone to think really really long and hard about what vision you have for the business and whether or not that investor. Someone that will help you on the entire journey and um, but you don’t know you don’t know that you know people coming with the best of intentions and the best stories and you know, um, but time time and and situations change.
Alejandro Cremades: And and Scott and how much capital have you guys raised to date. So.
Scott Gravelle: Um, think we’re just over 180,000,000 plus another eighty million canadians about 50,000,000 us in grants. Um.
Alejandro Cremades: So tell us about 2 about fighting a takeover during a fundraising round I mean well come on you gotta you gotta give it give out give us the battlefield stories.
Scott Gravelle: Oh yeah, yeah, well I’ll write a book and I’ll name names. But until the book’s published I’m I’m not going to name too many names but we had an investment we’ll offer from a fortune 50 business. Ah, before covid hit and it was a couple hundred million dollars at a really really healthy valuation and we were kind of arguing about you know how much control a company like that should have as a minority shareholder in the business and then covid hit and. They thought that it was great instead of making an investment and argu about control that they actually try to acquire the business for a couple hundred million bucks which would have been a tragedy and at the same time you know everyone was scared in early covid. Everyone was fearful about what the future looked like. So there was ah there’s a group of road stage investors that you know shareholders that thought liquidity would be safer for them than leaving it in the business. So when you’ve got kind of aggressive kind of. Aggressive investor that wants to buy your business at below market and a group of shareholders that are scared themselves and figure that selling is the best thing for their best interests. Um, it doesn’t make for a warm and fisy environment to figure out how to keep moving the company forward and um.
Scott Gravelle: I Learned a lot about people in that experience on how money can make people pretty shitty and fought, really hard with a very very tight group within the business um to go actually raise the funding the company needed to say No Thank you. That acquisition offer and politely saying No. Thank you to that being in a position. Um, to say we’ve raised money We don’t need to consider your acquisition offer anymore was one of the more satisfying moments of my career. Um I.
Alejandro Cremades: No kidding.
Scott Gravelle: People that know me say that my biggest fuel is a bit of f you energy I love to prove people that don’t believe in me, you know I like to prove them wrong because happiness and success is the best revenge you can ever have I don’t dwell on on bringing any and energy to any of the people that you know have been you know. Detrimental I guess to my my anxiety and mental health. Um, but I do know that success and happiness drives them crazy my success and happiness drives them crazy so it was really really challenging to try to hold your life together your personal life together your family life together. Feeling responsible for the amount of people that depend on me for their paycheck and their family’s well-being in a world that was so uncertain in early covid and you know that in the first the first year of covid like vcs weren’t even answering the phone anymore. They were just desperately trying to figure out how to save their own portfolio companies. So finding um a great group with the the teachers’ innovation function now was called this. Ah the teachers’s venture platform at Ontario teacherss pension plan. That believed in the you know the future of automation and supply chain. Um and made an investment in us at a very pivotal time. Um and weren’t predatory in doing so I have a lot of respect for.
Scott Gravelle: Any venture capitalist now that understands that although there’s deals to be had you are building a relationship with that business and that entrepreneur and if if the if the first interaction feels more like date rate you’re not going to be building a great relationship. And so I am thrilled that every investor that has joined the company in the last couple years sees this as a partnership and not just a short-term opportunity and. Picking like said picking the people they work with I’ve been incredibly fortunate to to find some great people having learned the lessons I learned early on and applying those now like our cap table is getting incredibly strong with some very diverse but helpful. Actually investors that can help build the business and take it to the next level.
Alejandro Cremades: And to that point um about the investors you know. Obviously you guys were dealing there with a very challenging Time. You know it sounds like you know you had this acquisition on the table. Ah you were getting pressure from you know some of those investors that were scared to really go for with that transaction. How were you able to get the enrollment. You know, ah and and and and jumping that future that you were living into so that they would jump with you in order to put this on a hold and be able to bring this other alternative that was actually much better I mean.
Scott Gravelle: Um.
Alejandro Cremades: You didn’t have that at that point So how were you able to get them enrolled to really believe with you in in the fact that there was a better future. Okay.
Scott Gravelle: Um, they didn’t believe they just didn’t have majority and and um had I not taken the other investors and showed them a value for their investment.
Alejandro Cremades: Okay.
Scott Gravelle: Not that group like not the group that wanted to sell but I still had to prove to the other members of the cap table and the board that we had a very viable opportunity and good funding to keep moving it forward to make sure that they didn’t want to sell and. I was able to show that bringing some you know new money and new investors into the cap table because the early stage guys that wanted to sell. Not only did they want to sell but we’re actively having conversations with the acquiring business. Um, at the detriment of the of of my company there was there is a bit like so it’s going to be an interesting chapter in the book. Theres there was a bit of a conspiracy going on there. Um, it was very satisfying to kind of head that off at the table and do what was in the best interests of the business and the best. You know, interests of the stakeholders of the business. Not just what was in the best interest of a small group of you know, real estate investors that wanted some liquidity. Um and I’ve learned you know when I talk about evolving as as a Ceo versus a charismatic startup founder. Um.
Alejandro Cremades: Yeah.
Scott Gravelle: Understanding Canadian corporate governance which by the way is different than us corporate governance and in us corporate governance is what’s best for the shareholders canadian corporate governance is what’s best for all of the stakeholders. It has to be what’s right for the business first and. Leveraging that improving that this decision was what was right for the business. Um, and that allowed that allowed that process to move forward in every contract you have shareholder agreement you have there’s drag along voting. You know if a majority or a super majority agrees to something. Um, then everyone has to go home. Come along for the ride and um, they might not have agreed to what was being done at the time because they desperately wanted their cash out of the business but it wasn’t right for the business to sell at that point at it. And a depressed market at ah at a lower than ideal valuation to basically a kind of a predatory entity that was looking to take advantage of the macroeconomic climate that existed in early covid that was not what was right for the business um prove that move forward. Um. And thankfully covid validated what antibiotics does there was increased consumer adoption to to you know digital shopping digital commerce um, and now inflationary pressures labor pressures real estate pressures are validating what we do even more.
Scott Gravelle: So I am thankful that we’re not a luggage company you know because Covid didn’t really Validate. You know that piece but for us like we keep getting the reassurances and encouragement that we need for our product or solution and the opportunity the you know and the the tam. That exists for what we do.
Alejandro Cremades: That’s amazing now Scott imagine that you were to go to sleep tonight and you wake up in a world where the vision of autobiotics is fully realized what does that world look like.
Scott Gravelle: Um, interior we joke around saying we’re you know Robots building robots to take over the world. Um, our robots are kind of stupid though. So don’t be too threatened. Um, the world.
Scott Gravelle: Supply chain world consumer expectation globalization. The growth of the middle class and emerging marketsney and China um, creating a larger consumer class is putting a burden on the exist supply chains and the environment and the world and the cost like Amazon’s still not making money. Selling stuff. They’re making great money with cloud services but there needs to be a fundamental change to the way we think about the movement of goods and commerce and I take inspiration from the biggest leaps and efficiency. Have happened historically in supply chain and they were all about creating standardization for automation a forklift only works if you have a palette and palette racking and trucks that fit the pallets but a palette is a standardized interface for automation and a forklift is standardized. Move palettes around a warehouse and that changed warehousing um the barcode introduced by Kmart back in the day is a digital way of identifying a product instead of putting individual price tags on cans of beans dramatically shifted but it’s not just a barcode It’s a laser scanner. It’s a computer and network communication.
Scott Gravelle: Vietnam war the us department of defense instituted containerized shipping but it’s not just a container. It’s the ships. The ports the cranes the trucks, the trains and that opened up global commerce for multimobile transport. Because you’re only now having to move containers what you put in containers can be incredibly variable, but everything is optimized for moving containers now and that has changed global economies. Um, there needs to be another transition now to using. Ah, standardized interface for automation and the data intelligence that comesmbs now with aggregated data cloud ai private lte. You know, got for bid I say blockchain ai um, that.
Scott Gravelle: Creates efficiencies in supply chain that have never been possible before my vision for antibiotics is to put a distributed democratized supply chain in every major market to bring goods closer to the consumer which lowers transportation cost which lowers Time. It. Also. If you get stuff same day next day. It Lowers Return rates reverses the burden of of reverse logistics creates more profitability in a shared ecosystem like that. But there needs to be an aggregated ecosystem of inmarket microfulfillment in a broad network that. Utilizes the data analytics as well as shared transportation to democratize fulfillment for both the consumer and and retailers and Brands. So My vision is. To work with our partners that bring all of these different pieces together like I’ll never build a private lte or five G networking business I’ll never build a Cloud company I’ll never build robotic each picking. Um. But our technology becomes a platform where all these companies now can start applying the values of of these emerging technologies in to create efficiencies that have never been seen in supply chain before and that’s my goal. So if I wake up tomorrow. My goal is that I can order a pair of black suede.
Scott Gravelle: Size nine and a half adidas gazelles get them same day and and know that it cost the environment. The planet the retailer and me less in doing so.
Alejandro Cremades: That’s amazing. Well hey that will be a beautiful world now Scott Imagine you know we we just talked about the future. Imagine you know like we take a look at at the past imagine I put you into a time machine and I bring you back in time I bring you back in time you know, maybe.
Scott Gravelle: Um, sure.
Alejandro Cremades: Time where you were thinking about starting a business you know of your own and you have the opportunity of having a chat with that younger self and you are able to give that younger Scott 1 piece of advice before launching a business. What would that be and why given what you know now.
Scott Gravelle: The bigger idea you have the more disruptive the idea you have the more likely you are to find support the less likely you are to and encounter competition and if you’re going to put effort. Into anything pick the biggest idea because it’s the same amount of effort does doing the smallest 1 but you’ll have a chance of making a bigger difference for yourselves. The people that believe in you and hopefully the world. Um, don’t be afraid of big disruptive things incremental. Ideas are not safer than big ones. So think big and believe that if you if you are solving a big enough problem that you’ll find all the support you need to go do it.
Alejandro Cremades: I Love is God That’s so profound now for the people that are listening. You know that would want to um, reach out and say hi what will be the best way for them to do so.
Scott Gravelle: Um, I’m I’m the very first Scott at antibiotics though it’s Scott atadebiotics dot com and I’m happy I’m happy to connect with anybody if if any if in any way I can pay forward. Um.
Alejandro Cremades: Amazing.
Scott Gravelle: Support that I’ve received by helping someone avoid some of the mistakes that I’ve made I’m happy I’m happy to do so. That’s how the world becomes a better place.
Alejandro Cremades: Absolutely well Scott thank you so so much for being on the deal maker show today. It has been an honor to have you with us.
Scott Gravelle: I Really appreciate the time This is a great conversation I really enjoyed it. Thank you.
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