Sept. 10, 2020

#Revenue 8: Why Venture Firms Invest in the Team w/ Victor Gutwein

When you’re courting investment from venture firms… 

Do you know what they are looking for? 

Well, if you ask them they’ll tell you:

Great teams.

At least, that’s what Victor Gutwein, Founder and Managing Partner at M25, a firm investing in early-stage tech companies across the Midwest, will tell you.  

In this episode, we discuss:

  • How Victor identifies a great team
  • What early-stage founders should prioritize
  • The importance of mentorship

You can find this interview, and many more, by subscribing to the B2B Growth Show on Apple Podcasts, on our website, or on Spotify.

Transcript
WEBVTT 1 00:00:06.360 --> 00:00:10.390 So at this stage really comes down to the team right. This is the 2 00:00:10.509 --> 00:00:14.910 biggest variable and I think a lot of people just say, you know, 3 00:00:14.990 --> 00:00:18.070 I like that team, or sometimes it's there's a lot of bias. Now 4 00:00:18.070 --> 00:00:20.269 I like that guy, he's kind of like me, or something like that. 5 00:00:20.429 --> 00:00:24.980 We we really try to dig into what makes a great team. Welcome 6 00:00:25.100 --> 00:00:29.940 to the Revenue Series on BTB growth. I'm your host, John Grispin, 7 00:00:30.260 --> 00:00:35.299 founder and sales coach at early revenue. So let's get going. Today I 8 00:00:35.420 --> 00:00:41.689 am here with Victor Gutwine, founder and managing partner at m twenty five. 9 00:00:42.170 --> 00:00:46.369 Welcome, thanks for having me on the show, John. So let's level 10 00:00:46.409 --> 00:00:52.520 set. Our guests are venture firms like yourself. We also have revenue leaders 11 00:00:52.560 --> 00:00:58.240 and CEOS, and our purpose is to provide early stage tech founders and their 12 00:00:58.320 --> 00:01:03.079 sales leaders insights and best practices on two topics that are top of mine for 13 00:01:03.159 --> 00:01:10.069 everybody, how to grow early stage sales and fundraising. So thanks again for 14 00:01:10.230 --> 00:01:12.269 being here today, Victor. Why don't you start off by telling us a 15 00:01:12.349 --> 00:01:15.909 little bit about yourself in your background? Yeah, well, I'm excited to 16 00:01:17.349 --> 00:01:23.260 talk about meeting sales and iner price sales here today. We are a early 17 00:01:23.340 --> 00:01:26.019 stage and intuer firm. I founded it in two thousand and fifteen, five 18 00:01:26.019 --> 00:01:32.180 years ago. We have since and in best seen out of three different funds 19 00:01:32.219 --> 00:01:38.530 across the Midwest region into early stage tech companies. Now we invest pretty broadly. 20 00:01:38.890 --> 00:01:44.129 BBB and BBC, Sassycommerce in digital market places our biggest categories, but 21 00:01:44.489 --> 00:01:49.799 have a majority of our portfolios made up of bb software and we have a 22 00:01:49.879 --> 00:01:53.200 lot of experience and investing at the earliest stages and then helping our companies grow. 23 00:01:53.719 --> 00:01:59.560 We are based in Chicago and we invest from Pittsburgh to Minneapolis to Kansas 24 00:01:59.599 --> 00:02:05.390 City and typically in companies with lesson million and revenue, you know, occasionally 25 00:02:05.670 --> 00:02:09.509 prerevenue. The companies are typically raising five hundred eight free million. We can 26 00:02:09.550 --> 00:02:15.300 lead or Colead or just participating around and we really like to be augmenting a 27 00:02:15.419 --> 00:02:21.659 founder's growth. As say, probably have some of the basic skills and some 28 00:02:22.099 --> 00:02:24.740 compelling experience in industry knowledge and we just want to be able to augment that 29 00:02:24.900 --> 00:02:31.090 with connections and network and whether it's capital or talent or even just other advisors 30 00:02:31.129 --> 00:02:35.169 and friends that they can go to. So that's kind of us in a 31 00:02:35.169 --> 00:02:38.810 nutshell. We have been called the most active investor in the region and are 32 00:02:39.370 --> 00:02:43.849 really excited to be on the show today that kind of share a little more 33 00:02:43.849 --> 00:02:46.719 of what we learn, what we've seen across our portfolio and across our investing 34 00:02:46.840 --> 00:02:52.520 experience. Great, great background, great introduction. You know, I also 35 00:02:52.520 --> 00:02:55.639 want to mention you all have been named by by CB inside say as part 36 00:02:55.680 --> 00:03:00.229 of the United States of venture capital. You're one of the most active investors 37 00:03:00.270 --> 00:03:05.189 in multiple states. I think that's that's a that's a unique quality to have 38 00:03:05.349 --> 00:03:09.030 them. Now we have invested in twenty four different cities across eleven states. 39 00:03:09.629 --> 00:03:14.419 Now a third of our investments are in kind of our home state of Illinois, 40 00:03:14.460 --> 00:03:17.500 and Chicago is the the biggest area there. So with the most act 41 00:03:17.500 --> 00:03:22.099 investor in Illinois, we're also the most act investor in Nebraska and there's probably 42 00:03:22.219 --> 00:03:25.300 ten different cities or investment three, four or five or more different times in 43 00:03:25.340 --> 00:03:30.169 different company is actually just did a pretty major milestone within our firm. Five 44 00:03:30.210 --> 00:03:36.090 years we've now invested in our a hundred company, which is a really exciting 45 00:03:37.129 --> 00:03:39.250 that really exciting piece of news for us. You know, we're not stopping 46 00:03:39.289 --> 00:03:44.800 there. We have we haven't set down on our checks checkbooks yet we are. 47 00:03:44.960 --> 00:03:50.159 We're still active and still sourcing, still investing and really excited for for 48 00:03:50.240 --> 00:03:54.599 the next two hundred so that's exciting. So do you have folks outside of 49 00:03:54.639 --> 00:03:59.150 the Midwest knocking on your doors? We get a lot of deal foo from 50 00:03:59.150 --> 00:04:01.270 all over. We are very intentionally focus on this region. We think there 51 00:04:01.310 --> 00:04:06.270 are some unique advantages and attributes of companies here. We also feel like we 52 00:04:06.349 --> 00:04:13.020 have an advantage and source seeing and in helping the companies that have specific problems 53 00:04:13.060 --> 00:04:15.459 here. Capital access has been along a problem for companies in the middle of 54 00:04:15.459 --> 00:04:19.620 the country, as well as talent, experienced tech talent. We just don't 55 00:04:19.660 --> 00:04:23.699 have as much as the coast does. So we're trying to fill some of 56 00:04:23.779 --> 00:04:28.569 those gaps and also bring together a community of our of founders, so people 57 00:04:28.610 --> 00:04:32.569 that are are similar in some ways, happening different problems, maybe similar industry, 58 00:04:32.689 --> 00:04:39.120 different problem or maybe just suffering from how do I scale up this point? 59 00:04:39.240 --> 00:04:42.839 They don't have founders just at every doorstep like they do, and so 60 00:04:42.920 --> 00:04:46.959 it can valley and so we are trying to bring that community and are our 61 00:04:46.000 --> 00:04:49.040 founder community is called club and twenty five. If we've invested in you, 62 00:04:49.120 --> 00:04:54.430 you're in the club. So you know, that's that's something that people get 63 00:04:54.430 --> 00:04:58.589 a lot of value out of. Secret Password, the whole thing and handshake. 64 00:04:59.230 --> 00:05:00.470 All you got it, you got to have it. Go to word. 65 00:05:00.550 --> 00:05:08.300 So what are the so with this group of a hundred investments? What 66 00:05:08.459 --> 00:05:11.980 are the characteristics? I'm sure there's been some trends that you've noticed over time. 67 00:05:12.259 --> 00:05:14.500 What are the characteristics of an ideal start up for it? I mean, 68 00:05:14.939 --> 00:05:17.699 so at this stage really comes down to the team. Right. This 69 00:05:17.860 --> 00:05:23.329 is the biggest variable and I think a lot of people just say, you 70 00:05:23.449 --> 00:05:26.410 know, I like that team, or sometimes it's there's a lot of bias 71 00:05:26.490 --> 00:05:28.689 and now I like that guy, he's kind of like me, or something 72 00:05:28.730 --> 00:05:30.490 like that. We we really try to dig into what makes a great team. 73 00:05:31.170 --> 00:05:35.959 Sometimes it's experience at a startup, sometimes it's not knowledge of the industry 74 00:05:36.519 --> 00:05:41.839 and as it's a diversity of skill sets and backgrounds and networks that they can 75 00:05:41.879 --> 00:05:45.319 tap into. And so that is, you know, we look at all 76 00:05:45.439 --> 00:05:46.879 that. We look at the board of the advisors to look at the founders, 77 00:05:46.920 --> 00:05:50.629 we look at the early hires. Those are all those are all key 78 00:05:50.870 --> 00:05:56.029 aspects. there. The other kind of big component is are you starting to 79 00:05:56.230 --> 00:05:59.269 you you know, those initial steps in the market. That's your initial product. 80 00:05:59.269 --> 00:06:02.310 Are you eating some interesting traction? Customers really liking you, or they 81 00:06:02.470 --> 00:06:06.500 engaging or they are they use staying, you know, as a usage? 82 00:06:06.540 --> 00:06:11.300 There's or tension there. It's not always perfect data because these companies are pretty 83 00:06:11.339 --> 00:06:14.180 new. They may only have a couple months of revenue data, but we're 84 00:06:14.220 --> 00:06:16.019 trying to dig into that. We talked to the customers and that can be 85 00:06:16.300 --> 00:06:19.490 something that, you know, along with having, you know, quality team, 86 00:06:19.689 --> 00:06:23.930 can be a huge factor and trying to determine that company's going to be 87 00:06:23.970 --> 00:06:29.050 successful. So those are the two probably big components that we're looking at painting 88 00:06:29.089 --> 00:06:33.000 particular metrics that you seek when you're evaluating, aside from looking at team and 89 00:06:33.079 --> 00:06:39.360 and how they approach, the more I think you know metrics within you know, 90 00:06:39.800 --> 00:06:45.120 what is the metrics that a company is starting to see early on? 91 00:06:45.680 --> 00:06:48.509 We're looking at, you know, and depends on the industry, right, 92 00:06:48.629 --> 00:06:54.470 but month over month and revenue growth is is probably the biggest, the biggest 93 00:06:54.550 --> 00:06:59.750 one that we can see. We also are really interested not just in the 94 00:06:59.870 --> 00:07:04.620 total size of revenue but really the speed of acquisition and is it how that 95 00:07:04.779 --> 00:07:09.699 we're sufied as that customer base right? Is it one customer that you grew 96 00:07:09.819 --> 00:07:15.699 from zero to five hundred K of Arr or is that a couple dozen customers? 97 00:07:15.569 --> 00:07:18.329 How big are your I think it is really big and we'll talk about 98 00:07:18.689 --> 00:07:24.410 with enterprise sales is. What's your inter what's your initial ACV? What is 99 00:07:24.490 --> 00:07:28.810 your you know, what's your contract, and does it grow? And how 100 00:07:28.850 --> 00:07:32.480 are you pricing that? How are you able to actually get the value that 101 00:07:32.560 --> 00:07:35.959 you're telling us? We're pitched on our market size right, and we're pushing 102 00:07:35.959 --> 00:07:41.360 on our markin size. We're expecting in a certain willingness and interest to pay 103 00:07:41.519 --> 00:07:44.949 and by your key customers. And so if you have a really big customer 104 00:07:45.470 --> 00:07:47.470 and they're paying you a small amount, that's going to be tough. Right. 105 00:07:47.509 --> 00:07:49.790 You have to show why. That's just a pilot, that's just the 106 00:07:49.829 --> 00:07:55.269 initial around land and expand. Show that, because if you give them too 107 00:07:55.350 --> 00:08:00.060 much for too little on return, that could be that could be an issue. 108 00:08:00.100 --> 00:08:05.100 We know we really need to see market potential here. So velocity is 109 00:08:05.139 --> 00:08:11.339 important, repeat sales are important and what percentage of those that are in the 110 00:08:11.939 --> 00:08:18.569 the evaluation cycle per son of those are founders that are participating in the sales 111 00:08:18.610 --> 00:08:20.290 like a founder led set. So we're pretty early, right, we are 112 00:08:22.209 --> 00:08:26.959 something as I mentioned. Sometimes pre revenue is one invest but generally I'd say 113 00:08:28.040 --> 00:08:31.120 eighty percent of our companies are between FIVEZERO dollars a month, that Fiftyzero a 114 00:08:31.159 --> 00:08:35.039 month and revenue. So if you look at that, most of that is 115 00:08:35.080 --> 00:08:39.600 still founder led sales, especially on the earlier side of them. And and 116 00:08:39.720 --> 00:08:43.549 that's not all bad, right, you know, that's that. That means 117 00:08:43.990 --> 00:08:48.950 the team from the very beginning is going to have strong in our action with 118 00:08:48.070 --> 00:08:52.669 the customers at the at the top of a leadership, at that CEO position. 119 00:08:54.029 --> 00:08:56.220 And and that's great because that's going to help with the product, the 120 00:08:56.220 --> 00:09:01.820 initial product, with the initial features that they're prioritizing. You're getting that straight 121 00:09:01.940 --> 00:09:05.500 back and it's not, you know, it's not coming through a sales team 122 00:09:05.779 --> 00:09:09.820 to the product team and having having some communication gaps. Of course that's not 123 00:09:09.980 --> 00:09:15.450 going to scale. Ultimately. Most of our companies either either. Sometimes before 124 00:09:15.490 --> 00:09:20.450 we invest and usually shortly after we invest, are switching to where they're hiring 125 00:09:20.529 --> 00:09:24.759 their first sales leaders in the organization. They a lot of them maybe had 126 00:09:24.159 --> 00:09:30.399 bedr with to, you know, setting up some SDR setting up leads, 127 00:09:30.559 --> 00:09:33.440 you know, maybe doing some or on the other end on the customer success 128 00:09:33.519 --> 00:09:37.879 path. They may be hired that before US getting involved, but now they're 129 00:09:37.879 --> 00:09:41.590 trying to get that, you know, a vpis sales or a couple of 130 00:09:41.950 --> 00:09:46.269 account executives and handing off at least some of the more repeatable and smaller ACB 131 00:09:46.389 --> 00:09:52.100 opportunities to be led within that as it is a big struggle. So one 132 00:09:52.139 --> 00:09:56.980 of the questions I always got is which is better to bring on a couple 133 00:09:56.019 --> 00:10:01.980 of AE types to go and just chase down those sales, or do you 134 00:10:03.059 --> 00:10:05.899 bring in someone that's more of a leader for to have? You're going to 135 00:10:05.980 --> 00:10:11.370 have two different answers from everyone. Everybody's going to get you into tough one. 136 00:10:11.409 --> 00:10:15.649 It's like it's a nuance answer, I think. I think John like 137 00:10:16.529 --> 00:10:24.279 if the founder is from more of a sales background with head degree, versus 138 00:10:24.360 --> 00:10:30.120 maybe be more product oriented, then maybe they can set the tone of the 139 00:10:30.159 --> 00:10:33.919 sales organization a lot better in bringing what you might have had if you brought 140 00:10:33.960 --> 00:10:39.470 into vps sales and they can instead go for, you know, somebody more 141 00:10:39.549 --> 00:10:45.509 than middle count of the executive level or something that might be preferred and initially 142 00:10:46.070 --> 00:10:50.820 because the founder retains a lot of control and knowledge of the sale cycle is 143 00:10:50.860 --> 00:10:54.100 not reliant on an expensive person. was sometimes long ramp up periods. I 144 00:10:54.139 --> 00:10:58.820 mean that can be hard for VP sales to come into a pretty new thing. 145 00:10:58.139 --> 00:11:01.059 Not a lot of not a lot of existing infrastructure. You know, 146 00:11:01.100 --> 00:11:05.450 you're talking about twenty, thirty, forty k a month and revenue that's not 147 00:11:05.570 --> 00:11:09.210 allowed to go off sometimes, and so that can be hard for somebody that's 148 00:11:09.610 --> 00:11:15.090 coming in at the top. That being said, they may need that leadership. 149 00:11:15.450 --> 00:11:20.559 If they are not at that CEO or somebody on the founding team is 150 00:11:20.679 --> 00:11:24.080 not super sales ing, it doesn't have a huge history with that, they 151 00:11:24.159 --> 00:11:28.759 may need to bring in somebody. If they haven't in their early, you 152 00:11:28.840 --> 00:11:31.720 know, founding team. They may need to bring somebody in after that first 153 00:11:31.759 --> 00:11:35.029 round. We've seen that work, you know, the varying theories of success 154 00:11:35.070 --> 00:11:37.990 to I think it is a step right because there's a lot for that sales 155 00:11:39.029 --> 00:11:41.909 leader to set up. They have to be properly inson advised, probably with 156 00:11:41.990 --> 00:11:45.950 a decent equity package, because you want them to you know, want them 157 00:11:45.950 --> 00:11:48.539 to be kind of like thinking as a founder would at that early station. 158 00:11:50.019 --> 00:11:54.419 So and what percent to those. You see, whether it's investments or not, 159 00:11:54.700 --> 00:12:00.019 how many of them have a sales background versus they're focused on product and 160 00:12:00.299 --> 00:12:03.129 and the Vision for the company? On the founders? Yeah, you know, 161 00:12:03.250 --> 00:12:07.210 we this is why we like diversity in the founding team. Right, 162 00:12:07.250 --> 00:12:09.570 we like that diversity of skills. If you want, you almost want they 163 00:12:09.610 --> 00:12:15.129 call a hacker and hustling. Right, you kind of want one of each, 164 00:12:15.490 --> 00:12:20.200 right. Usually the seeos one more the sales background usually, and there's 165 00:12:20.200 --> 00:12:24.759 a the CTEO with more the product and development background in sometimes you have three 166 00:12:24.799 --> 00:12:30.230 persons findings as well. That the if there isn't and we've invested in, 167 00:12:30.429 --> 00:12:33.669 you know, I'll calm product or tech heavy teams. It can. It's 168 00:12:33.149 --> 00:12:35.350 you know, that is one of the main questions. How are they going 169 00:12:35.350 --> 00:12:39.029 to get you know, the sales leadership? I mean it's it's a big 170 00:12:39.070 --> 00:12:41.990 factor of risk. Of course, if they're having a lot of success selling 171 00:12:43.070 --> 00:12:46.059 or if they've proven out other factors that we look at when making an investment, 172 00:12:46.299 --> 00:12:50.340 that's a risk we're willing to take. But you know, if that's 173 00:12:50.220 --> 00:12:54.700 if they aren't having sales traction, you know, if they aren't, if 174 00:12:54.700 --> 00:12:58.929 they have other gaps and they don't have experience and that's going to be hard 175 00:12:58.970 --> 00:13:03.129 because they only get so long burning money until you have to raise again, 176 00:13:03.289 --> 00:13:07.049 improve it again to a new set of investors, hopefully at a hire valuation. 177 00:13:09.409 --> 00:13:15.440 It's hard to get those product oriented founders to sell, but some figure 178 00:13:15.440 --> 00:13:20.000 it out. Some examples. Yeah, I mean we've seen no, you 179 00:13:20.080 --> 00:13:24.080 know, not specifically the husband wife team we invested in the they were both 180 00:13:24.639 --> 00:13:31.909 really strong engineers. Initially they taught themselves to sell are the husband did, 181 00:13:31.389 --> 00:13:35.789 and if he has, he's definitely well with it. He's like we're you 182 00:13:35.870 --> 00:13:39.230 know that. That's a huge commitment and it took it took a couple of 183 00:13:39.309 --> 00:13:43.100 years for him to really get ramped up, but you know it bring has 184 00:13:43.139 --> 00:13:48.539 some advisors. He reading and setting up the things like you know process. 185 00:13:48.580 --> 00:13:52.220 He's like crm and use a lot. Yeah, it's a lot. It's 186 00:13:52.220 --> 00:13:58.850 a different, different mindset, but I'm we we actually had him lead a 187 00:13:58.370 --> 00:14:01.490 sales conversation on one of our boundary together because of how, you know, 188 00:14:01.529 --> 00:14:03.649 much he had learned and, you know, been able to implement. So 189 00:14:03.730 --> 00:14:07.490 it's possess I mean people aren't just like don't come out of the womb and 190 00:14:07.649 --> 00:14:13.399 you're like a labeled salesworth and it's true. Still, you know, it 191 00:14:13.559 --> 00:14:20.279 is harder they and they have to learn it anyway, because raising money is 192 00:14:20.799 --> 00:14:24.669 sort of a sales process. So you gotta be able to manage it at 193 00:14:24.789 --> 00:14:28.669 some point in when. He is a sales process. John, a hundred 194 00:14:28.710 --> 00:14:31.750 percent. Yeah, that's that's the biggest conception on for some founders. He's 195 00:14:31.070 --> 00:14:35.470 you need to set up your fund raise exactly as you do. You're, 196 00:14:35.110 --> 00:14:39.539 you know, selling into your customers right, and you just need to have 197 00:14:39.580 --> 00:14:45.019 another pipeline, another funnel, another you know, tracking that good in lots 198 00:14:45.059 --> 00:14:48.179 of leads, lots of leads. So, speaking of that, what is 199 00:14:48.220 --> 00:14:54.769 a typical cycle duration like from the initial conversation to when you get to the 200 00:14:54.850 --> 00:14:58.850 term sheet? It's so the range is really big and I and we are 201 00:14:58.850 --> 00:15:03.250 actually very involved with helping our founders at this process for the subsequent rounds. 202 00:15:03.250 --> 00:15:07.240 So we know, after we invest, to help them prepare in to run 203 00:15:07.320 --> 00:15:11.080 a strong process, fundraising process for around. You know, if we invest 204 00:15:11.120 --> 00:15:15.000 at the sea, maybe the series a round, and so we see the 205 00:15:15.039 --> 00:15:16.519 whole we see the whole game it. Sometimes you have it where you're just 206 00:15:16.679 --> 00:15:22.309 starting to talk to some investors and you hit it nail on the head and 207 00:15:22.350 --> 00:15:26.470 you get a term sheet and others you will run and have hunt over a 208 00:15:26.509 --> 00:15:31.149 hundred conversations, you know, with week these, and you won't get there. 209 00:15:31.509 --> 00:15:35.899 Ors Take so long. Our process we you know, when we're looking 210 00:15:35.980 --> 00:15:39.019 in an opportunity, we try to run it in a in a relatively efficient 211 00:15:39.139 --> 00:15:45.779 screenline manner. We really prioritize transparence and communication with the founder because we know 212 00:15:45.820 --> 00:15:50.929 how frustrating that can be. And so you know, we try to check 213 00:15:50.049 --> 00:15:54.210 in on a weekly basis with where we're at and we are trying to get 214 00:15:54.210 --> 00:15:58.610 up. We're trying to prove trying to get our process from first contact two. 215 00:15:58.610 --> 00:16:00.769 If we're going to issue a term shooter, are commit to invest within 216 00:16:00.929 --> 00:16:07.159 four weeks. We've done that. We've done shorter before to but we want 217 00:16:07.159 --> 00:16:10.679 to average about four weeks because we know, we know that's we want to 218 00:16:10.679 --> 00:16:12.360 be efficient, want to be quick, we want to be a good parton 219 00:16:12.440 --> 00:16:18.039 to work with and get to conviction relatively quickly. There's investors that take six 220 00:16:18.120 --> 00:16:23.110 months, right and we that's not six months to a know. You know 221 00:16:23.350 --> 00:16:27.029 that, which is which is, yeah, the worst. So that's that's 222 00:16:27.149 --> 00:16:33.419 never that's never a fun time. That's yeah. So so let's talk about 223 00:16:33.700 --> 00:16:38.700 some of the successes that you've had, whether it's with those portfolio companies that 224 00:16:38.700 --> 00:16:42.539 have seemed to give you growth, acquisitions, new investments that you've made. 225 00:16:42.580 --> 00:16:45.379 Maybe talk about some of the results that you're really proud of. Yeah, 226 00:16:45.659 --> 00:16:49.009 we are starting to the point where we we're having a lot of a lot 227 00:16:49.009 --> 00:16:52.570 of strong companies that have, you know, the we invested at, you 228 00:16:52.649 --> 00:16:56.769 know, three million, four line, five million for your money, and 229 00:16:56.889 --> 00:16:59.809 now they're over a hundred million. They're they're starting to get over two hundred 230 00:16:59.850 --> 00:17:03.919 millionar value reached them and you know, it's really great multiples for us in 231 00:17:03.039 --> 00:17:07.680 the teams of those companies that growned well over a hundred, two hundred people 232 00:17:07.920 --> 00:17:14.880 that Pong on you. So we're really excited about some of our biggest companies. 233 00:17:15.400 --> 00:17:18.309 To think about something especially more like in the in the BDB, are 234 00:17:18.349 --> 00:17:23.589 enter price sales. Know, we have a company called branch and Minneapolis we 235 00:17:23.710 --> 00:17:30.779 invested in they sell into retail, into warehousing, call centers. They are 236 00:17:30.940 --> 00:17:41.660 basically a flexible payment kind of benefit for your shift workers. You're you're you 237 00:17:41.740 --> 00:17:45.049 know, lower wage hourly workers sometimes, and so it allows them to get, 238 00:17:45.170 --> 00:17:48.730 you know, for no fee, like he's kind of placing a paid 239 00:17:48.769 --> 00:17:52.769 a loan, which can be very punative, and it allows them to get 240 00:17:52.769 --> 00:17:56.650 paid Sanday or next day early access to the weights they've already earned, which 241 00:17:56.650 --> 00:18:00.759 is valuable, really valuable for people, especially those that have the don't have 242 00:18:00.799 --> 00:18:03.880 a huge amount of savings. That company has scaled, you know, rapidly. 243 00:18:04.839 --> 00:18:08.240 Actually seen a little bit of iteration on their product where they first started 244 00:18:08.319 --> 00:18:15.190 as a communications and kind of shift management platform for these workers and found out 245 00:18:15.230 --> 00:18:21.670 that because of they had access to payment and or payroll data an hour's work, 246 00:18:21.789 --> 00:18:26.829 they could actually provide this product which became their primary opportunity now. So 247 00:18:26.950 --> 00:18:30.619 it's an interesting Tory of a pivot and in some talk about interesting sales cycles 248 00:18:30.660 --> 00:18:37.619 working with some of these really large corporations like target dominants. The another another 249 00:18:37.700 --> 00:18:44.650 really interesting one that has scaled significantly as a company called script drop in Columbus, 250 00:18:44.769 --> 00:18:51.970 and this is a sell into pharmacies, so large chains like Albertson's publics 251 00:18:52.609 --> 00:18:55.490 and also they can work with their interview, with the software that a lot 252 00:18:55.529 --> 00:19:00.000 of smaller chains uses as well. Company has, you know, they are 253 00:19:00.799 --> 00:19:07.559 software for enabling pharmacies to allow same day, in next day delivery, tapping 254 00:19:07.599 --> 00:19:12.910 into courier services, including things like we were and postmates and door dance to 255 00:19:12.990 --> 00:19:19.390 deliver those pharmacy prescriptions. So that is you know, that's an interesting sales 256 00:19:19.430 --> 00:19:25.660 like work with those large pharmacies to get grated. It's been nice because there's 257 00:19:25.700 --> 00:19:30.819 a lot of poll from the market, especially the response to the pill pack 258 00:19:30.859 --> 00:19:36.420 acquisition by Amazon really kind of cause a lot of so imagine, you know, 259 00:19:37.259 --> 00:19:41.170 yeah, exactly. So those are a couple of maybe our highest flying 260 00:19:41.170 --> 00:19:48.529 or or higher valued companies that we invested. Both of those were very early 261 00:19:48.609 --> 00:19:52.279 revenue. It kind of been pilot stages and now have tens of millions of 262 00:19:52.319 --> 00:19:56.839 dollars annualized and in lovenue. So, you know, very excited to see 263 00:19:56.920 --> 00:20:00.960 that growth. Those enterprise sale cycles, you know, different, different. 264 00:20:02.279 --> 00:20:04.960 You know, you compared the two one. You know, branch started with 265 00:20:06.680 --> 00:20:12.190 a product that was a nice to have almost and a something that was getting 266 00:20:12.309 --> 00:20:17.869 some full but not enough, and then found it found that what they had 267 00:20:17.910 --> 00:20:21.500 access to and what they had in ability to provide was a was a really 268 00:20:21.579 --> 00:20:26.779 big value prop and really helpful to the employees and they had kind of caused 269 00:20:26.819 --> 00:20:30.819 some acceleration, some really big acceleration of their demand. The other one, 270 00:20:30.339 --> 00:20:34.140 you know, saw that they were getting from the from the beginning, had 271 00:20:34.140 --> 00:20:37.490 a lot of pull and has just kind of accelerated through to things like pill 272 00:20:37.529 --> 00:20:42.329 pack you two things like a covid demand for seeing bay, for scription delivery 273 00:20:42.450 --> 00:20:47.049 versus going to pick it up has really picked up since then. So it's 274 00:20:47.089 --> 00:20:51.279 just a goodness. Yeah, it's been an interesting timing for them. Huh, 275 00:20:52.079 --> 00:20:55.799 exactly, exactly. So, anyway, those are those are a couple 276 00:20:55.839 --> 00:20:59.559 of our, you know, kind of interesting opportunities, right. That right. 277 00:20:59.599 --> 00:21:02.480 They're obviously dig into more. We have. We have a lot of 278 00:21:02.599 --> 00:21:07.269 companies. Yeah, well, so you brought up a covid. Now is 279 00:21:07.349 --> 00:21:14.029 that impacted either, the pace of deals, and how is that impacted? 280 00:21:14.670 --> 00:21:21.140 How the funding approaches? It's been it's been a roller coaster and first deal 281 00:21:21.220 --> 00:21:26.220 activity march, April even some of May seem to really dry up as people 282 00:21:26.220 --> 00:21:30.660 were focused on helping their port boil companies right out this environment plan for the 283 00:21:30.740 --> 00:21:37.250 worst, access PPP or some other maybe you follow on from loses, etc. 284 00:21:37.170 --> 00:21:44.369 We had the companies that were taking off in companies that were doing you 285 00:21:44.450 --> 00:21:48.839 know, very poorly, depending on the industry we're in. We also use 286 00:21:48.920 --> 00:21:52.599 the time to kind of strategically go out to some companies that we had build 287 00:21:52.640 --> 00:21:56.279 relationships pre covid and maybe hadn't been able to do a deal for one reason 288 00:21:56.319 --> 00:22:00.480 another. We went out and use that opportunity to make a deal happen with 289 00:22:00.640 --> 00:22:03.710 a couple of companies that we were excited about and just kind of, you 290 00:22:03.789 --> 00:22:08.430 know, didn't this kind of made it so our capital will be first in 291 00:22:08.509 --> 00:22:14.190 line, I guess, but it's big. Since then the environment has picked 292 00:22:14.470 --> 00:22:17.180 up and so it's a little bit it. A couple couple things, I 293 00:22:17.299 --> 00:22:18.940 think. The first is a little bit of there are, you know, 294 00:22:18.980 --> 00:22:23.019 there's a handful of industries that are just not fundraising because if you're in travel, 295 00:22:23.299 --> 00:22:27.500 you're in restaurant, your event, forget it. It's not what you're 296 00:22:27.539 --> 00:22:32.569 trying to write right out this this period of time. The way I means 297 00:22:32.690 --> 00:22:34.369 is there some though. There's like the halves that have not, if you 298 00:22:34.410 --> 00:22:37.450 are I have, and maybe as fifty percent, sixty percent of the market 299 00:22:37.490 --> 00:22:41.450 that can have some tail ones behind it. All of of these tea still 300 00:22:41.529 --> 00:22:45.559 have capital and they want to they want to invest in the fewer deals now 301 00:22:45.759 --> 00:22:49.240 to invest in. So activity is kind of picked up. Their second thing 302 00:22:49.359 --> 00:22:52.200 is, I think, when you know this is something that you know we're 303 00:22:52.240 --> 00:22:57.079 very much focused on the Midwest. Historically that's been really tough to access capital, 304 00:22:57.200 --> 00:23:02.349 particularly at the preceding seed or even series a stage, has been hard 305 00:23:02.349 --> 00:23:04.109 to access where most of the capitals, which is, you know, California, 306 00:23:04.230 --> 00:23:11.109 Boston and New York. And so now you can access that capital by 307 00:23:11.829 --> 00:23:17.180 bogging into zoom and you're betroom, and you know that's and there was hot 308 00:23:17.299 --> 00:23:21.380 there was a hesitancy from postal investors to invest here early on because they wanted 309 00:23:21.420 --> 00:23:22.420 to get to the team and they they know that they had to sit on 310 00:23:22.539 --> 00:23:27.730 boards and fly out to Des Moines, are staying Louis or wherever, and 311 00:23:27.890 --> 00:23:32.450 that was a huge hassle. And now they're realizing how affective board means can 312 00:23:32.450 --> 00:23:36.609 be all remote and they're realizing that I'm having to build a relationship with a 313 00:23:36.650 --> 00:23:41.559 person down the street and Palo Alto the same way I'm building a relationship with 314 00:23:41.680 --> 00:23:45.119 a person and Lincoln Nebraska. You know, I it's not a big deal. 315 00:23:47.400 --> 00:23:51.880 Imagine that. And so imagine that there's great opportunities everywhere. We've all 316 00:23:52.480 --> 00:23:56.109 they've all known that, but it's just hard. The transactions have been really 317 00:23:56.390 --> 00:24:00.190 hard unless you're riding a finding in our plush chat. And so now we're 318 00:24:00.269 --> 00:24:03.829 seeing, you know, the the world turns eyes on deals everywhere, which 319 00:24:03.829 --> 00:24:06.549 has been, I think, a really great thing. If you're a founder 320 00:24:06.589 --> 00:24:10.539 in the Midwest, had access to not just him twenty five, not just 321 00:24:10.859 --> 00:24:14.779 the handful of firms that are here. So that's that's been really that has 322 00:24:14.859 --> 00:24:18.380 picked up investment, speeding pace a little bit to it. That's great. 323 00:24:18.980 --> 00:24:25.529 What landmines have you observed that you might suggest? Are you got to avoid 324 00:24:25.609 --> 00:24:29.809 this? For an early stage startup founder? That's going to limit your growth, 325 00:24:29.930 --> 00:24:34.049 that's going to threaten your survival. Any landmines you've seen that you might 326 00:24:34.369 --> 00:24:38.200 suggest? Hey, stay away from that. Or here's what we learned here 327 00:24:38.680 --> 00:24:42.480 with this particular situation. I mean there's a lot right and some of them 328 00:24:42.519 --> 00:24:48.279 are just so glaringly obvious, obvious and hindsight. There's the companies that that 329 00:24:48.559 --> 00:24:53.549 scale up really fast, way ahead of revenue growth, meaning that the higher 330 00:24:53.589 --> 00:24:57.710 a lot their expenses, wearing up all their spend. You know what the 331 00:24:57.750 --> 00:25:02.150 forecast says it's that's going to result in revenue three months later, and if 332 00:25:02.150 --> 00:25:06.150 it doesn't or if it's six months later, they could be screwed. Not 333 00:25:06.309 --> 00:25:08.099 have enough to rate. has spent all their money to have enough to raise 334 00:25:08.660 --> 00:25:11.940 our next round. Of course you need to be aggressive in, you know, 335 00:25:12.380 --> 00:25:17.660 in not, you know, be too conservative there and spending capital at 336 00:25:17.660 --> 00:25:22.369 your raise are having the bank. But we've seen. We've seen that and 337 00:25:22.769 --> 00:25:25.650 you know it's result the results in doubt, if you're lucky, really can 338 00:25:25.730 --> 00:25:27.809 result in the down round because it's hard to raise it down round. Right. 339 00:25:27.930 --> 00:25:33.170 So, so's that's a common issue and we see that with both experienced 340 00:25:33.289 --> 00:25:37.720 and new founders. They both have experience. Founders maybe that were often because 341 00:25:37.839 --> 00:25:42.079 they're more, you know, selfconfident. Got To not not staving as much 342 00:25:42.079 --> 00:25:48.559 in the bank. MORLS converts sometimes even more resiverse. So and then, 343 00:25:48.680 --> 00:25:52.549 you know, there's other things, like like what to spend money on. 344 00:25:52.789 --> 00:25:56.789 Can Be so confusing for founders at what time. I mean it's like, 345 00:25:57.029 --> 00:26:00.950 do you do to spend money on the PR firm at this point? Do 346 00:26:02.069 --> 00:26:04.980 you spend money on these conferences in trade shows? Do you spend money on 347 00:26:06.940 --> 00:26:10.019 do we need to hire a fulltime CFO at the stage in our business and 348 00:26:10.220 --> 00:26:15.259 sometimes you just you know, we know what the average compody is spending money 349 00:26:15.299 --> 00:26:18.049 on. We know what you know has has been successful or not. They 350 00:26:18.089 --> 00:26:22.089 have a lot of that sharing happen. Naturally what we're founders that have on 351 00:26:22.210 --> 00:26:26.769 through a stage are going to share that advice with founders that are kind of 352 00:26:27.049 --> 00:26:33.240 that stage and basing those decisions. So I think like having happening to mentors 353 00:26:33.279 --> 00:26:36.440 and advisors that are actually doing what you're doing or maybe just one or two 354 00:26:36.480 --> 00:26:40.559 steps ahead, not versus, not always just happening the person that did it 355 00:26:40.720 --> 00:26:44.640 in a big way twenty years ago. You know, like sometimes having that 356 00:26:44.880 --> 00:26:48.950 live footprint of what's you know, like hey, this person tested this and 357 00:26:48.990 --> 00:26:52.190 I can tap into that knowledge. That's that's good because you're going to avoid 358 00:26:52.230 --> 00:26:59.750 some of those frivolous expenses or unnecessary moves. Yea, also sounds like you 359 00:26:59.789 --> 00:27:02.660 provide that sort of an environment for sharing best because, I mean, that's 360 00:27:02.700 --> 00:27:07.619 that's a big part of the twenty five. I mean sometimes would be compared 361 00:27:07.660 --> 00:27:11.099 to like an accelerator that you know you're going through this co where you have 362 00:27:11.099 --> 00:27:14.420 a lot of this peer learning, but it doesn't always those, those relationships 363 00:27:14.500 --> 00:27:18.529 and that peer learning doesn't always last. We're trying to emulate having a continuous 364 00:27:18.890 --> 00:27:22.569 network you can tap into and the relationships with and it's kind of on the 365 00:27:22.650 --> 00:27:29.329 same side as you. Whether you're preseader serious be right. So that's that's 366 00:27:29.369 --> 00:27:33.079 a little bit, maybe less intensive at any one time as an accelerator, 367 00:27:33.319 --> 00:27:37.440 but maybe kind of more you can be helpful over a long period of time. 368 00:27:37.160 --> 00:27:41.920 One of the thing I'll say is a common, common issue is chasing 369 00:27:41.279 --> 00:27:47.910 the bright and shining object and or getting too distracted versus trying to execute. 370 00:27:48.430 --> 00:27:52.630 Like some of the best, some of the best companies are executing on a 371 00:27:52.829 --> 00:27:56.910 relatively narrow market opportunity, knowing, and I could be they're getting hounded by 372 00:27:56.910 --> 00:27:59.140 other opportunities. But like we're going to do this, we're going to spend 373 00:27:59.180 --> 00:28:02.900 ninety five percent of our time and effort on this and will maybe dabble a 374 00:28:02.980 --> 00:28:06.700 little bit just to exports people warm. Maybe it's so we can show some 375 00:28:06.859 --> 00:28:10.339 examples for what will spend our money on our next fund raise or something, 376 00:28:10.420 --> 00:28:14.089 but they know they need to get to that next milestone and grow here. 377 00:28:14.809 --> 00:28:18.210 And then there's the other founders that are all whatever comes to the door, 378 00:28:18.369 --> 00:28:22.890 whatever tunity. A couple of years ago was like Oh, we're going to 379 00:28:22.930 --> 00:28:25.650 raise an ICO and I'm like that was not part of the business plan. 380 00:28:25.849 --> 00:28:27.799 You know, why? Why are we thinking about tokenizing one thing? And 381 00:28:29.799 --> 00:28:34.119 you know, really distracted on that and the short term shiny object and that's 382 00:28:34.920 --> 00:28:40.160 that's hard because you know, you know something. You know sometimes people think 383 00:28:40.160 --> 00:28:42.470 it's season day or being aggressively going after a specific thing, but you know, 384 00:28:42.509 --> 00:28:48.349 it takes some wisdom and some peers and some advislutive. Yeah, it's 385 00:28:48.029 --> 00:28:53.029 the lutrue efforts. And remember this is a competitive space or in so yeah, 386 00:28:53.150 --> 00:28:57.819 anyway, those are just a few fewings. It's so I'll change of 387 00:28:57.900 --> 00:29:03.539 questions. or so what's different about in twenty five now versus when you started? 388 00:29:03.619 --> 00:29:07.460 What's the Post that? Well, hopefully we're making a lot law fewer 389 00:29:07.539 --> 00:29:10.809 mistakes. And for first the first thing, I think you know when we 390 00:29:11.369 --> 00:29:18.410 when we first started, we had a relatively simple view of our our approach 391 00:29:18.450 --> 00:29:22.369 to investing. We're going to, you know, buy the best companies stock 392 00:29:22.450 --> 00:29:26.680 that we can, going to be relatively passively involved. We're going to be 393 00:29:26.160 --> 00:29:33.119 trying to optimize around revenue, multiple evaluation, a lot of change. We 394 00:29:33.240 --> 00:29:40.230 are optimizing on growth and speed of growth and speed and potential opportunity. We 395 00:29:40.390 --> 00:29:45.109 are more active in what we can do to help. We are shaping deals, 396 00:29:45.230 --> 00:29:49.470 we are more active in creating the syndicate. We've led a majority of 397 00:29:49.509 --> 00:29:53.099 the deals on our most recent fund, so that's a lot different. We 398 00:29:53.299 --> 00:29:56.819 realize just how much opportunity that was for us to be a leader in these 399 00:29:57.019 --> 00:30:03.299 early investments, I think. I think another thing is there's there's an increased 400 00:30:03.380 --> 00:30:11.130 focus on on capital efficiency. I will say in the sense, not just 401 00:30:11.250 --> 00:30:15.049 if, if you think about it, like we invested in a lot of 402 00:30:15.130 --> 00:30:18.890 different types of companies in our first in our first fund, and a kind 403 00:30:18.930 --> 00:30:23.440 of all over the valuation range and some of them were, I'll call it, 404 00:30:23.480 --> 00:30:30.240 almost the we work type model, where you're trying to force a normal 405 00:30:30.440 --> 00:30:34.710 business to be a software or tech business and a tech multiple and you're spending 406 00:30:34.869 --> 00:30:40.869 like crazy to get there and it just isn't happening. We're a little bit 407 00:30:40.910 --> 00:30:45.789 more judicious on like if a company is a certain type of company, they 408 00:30:45.869 --> 00:30:48.869 need to have, you know, they need to have a certain type of 409 00:30:48.869 --> 00:30:53.539 ratio of capital to revenue or efficiency. You know, efficiency path basically, 410 00:30:55.180 --> 00:30:59.539 and you know for software that you know ideally it's one to one. You 411 00:30:59.619 --> 00:31:03.849 know you're that you're raising if at a certain point you're hitting you've raised two 412 00:31:03.849 --> 00:31:07.730 million. You want to be a million of aarn. You know, it's 413 00:31:07.849 --> 00:31:11.329 really if it gets out of wag of your raised six or ten million, 414 00:31:11.369 --> 00:31:17.769 you get two million of air are. That's maybe need it a flag right 415 00:31:17.890 --> 00:31:23.119 like that's an inefficient fill. Yeah, so, absolutely so. If a 416 00:31:23.279 --> 00:31:27.400 company is feels like a start up, feels like they're a good fit, 417 00:31:27.680 --> 00:31:30.880 what should they do? They should reach out to us. Right. There's 418 00:31:30.880 --> 00:31:33.509 a lot of different ways that you're connected. If you send an email to 419 00:31:33.630 --> 00:31:36.789 me, victor at in twenty five dccom will take a look. We take 420 00:31:36.789 --> 00:31:40.910 a look at all quality as we get. If you're outside of the Midwest 421 00:31:40.950 --> 00:31:44.910 or you're outside of the basic stuff on our website that we focus you may 422 00:31:44.910 --> 00:31:48.220 not get a response because we'd expect you to check out website prior to pain 423 00:31:48.259 --> 00:31:52.819 us. But you know, we invest in early stage technology startups across the 424 00:31:52.940 --> 00:31:56.460 new West. We don't do the deep techt like the life sciences. Almost 425 00:31:56.500 --> 00:32:00.859 all digital tech as what we'll call it. But you know, if you're 426 00:32:00.019 --> 00:32:02.690 if you're in something that will look at, then we'd love to hear from 427 00:32:02.690 --> 00:32:07.809 you. Additionally, you should be thinking about not just reach out to us, 428 00:32:07.849 --> 00:32:10.529 but all the paths to attract capital and to grow. You know, 429 00:32:10.650 --> 00:32:15.410 we want to see some especially experience bounders. You might have gone through an 430 00:32:15.410 --> 00:32:19.839 accelerator or thinking about going through an accelerator. We want you to be working 431 00:32:19.880 --> 00:32:23.680 on other paths of raise capital. Syndicate who've also been the syndicate. We 432 00:32:23.759 --> 00:32:27.519 can be helpful with that, of course, if we're interested in forward. 433 00:32:27.599 --> 00:32:30.549 So we want to see a big sales effort in raising money and we did 434 00:32:30.589 --> 00:32:37.390 that next step. So that's that's the way to connect with us. That's 435 00:32:37.470 --> 00:32:39.589 great and Victor, this has been and great. It's been great to learn 436 00:32:39.589 --> 00:32:44.150 about you. It's been great to learn about your work. You just came 437 00:32:44.190 --> 00:32:49.460 off a successful and twenty five summit, so congratulations for the great work. 438 00:32:49.539 --> 00:32:53.339 They're one of the biggest gatherings across the country in terms of venture firms, 439 00:32:53.779 --> 00:32:57.259 so we appreciate your work that you do it. I'm twenty five and wish 440 00:32:57.259 --> 00:33:00.490 you continue to thanks, Johner. Really appreciate this and I'm glad, glad 441 00:33:00.529 --> 00:33:06.170 that we can share in discuss is what we're seeing. The hopefully help some 442 00:33:06.450 --> 00:33:09.289 some tech founders out there and increase the face knowledge base for all of us. 443 00:33:09.450 --> 00:33:16.079 Not absolutely appreciate it. So thanks for listening to this episode of the 444 00:33:16.279 --> 00:33:22.160 Revenue Series on BB growth. I'm your host, John Grispin, founder and 445 00:33:22.319 --> 00:33:27.750 sales coach at early revenue. Please connect with me on Linkedin. I'm happy 446 00:33:27.789 --> 00:33:31.630 to answer your questions or provide recommendations. You can also email me at John 447 00:33:31.670 --> 00:33:39.430 at early REVENUECOM. Until next time, I'm out. Are you an early 448 00:33:39.509 --> 00:33:44.140 stage tech founder that's frustrated by limited sales? Do you like the time to 449 00:33:44.220 --> 00:33:49.779 dedicate to a traditional sales training program John Crispin's earlier revenue sales program helps early 450 00:33:49.819 --> 00:33:53.380 stage founders accelerate sales in large accounts. He's built a playbook that transfers what 451 00:33:53.460 --> 00:33:58.089 he's learned as a founder and sales leader into a condensed, easy to implement 452 00:33:58.170 --> 00:34:01.930 program. If you're ready to increase your startup sales capacity, visit early revenuecom 453 00:34:02.049 --> 00:34:04.009 to get started today.