The Exchanges

Q No, listen, not bad is always actually brilliant. But I do want to finish today on the most recent publicly announced investment for you. And why did you say yes, Andy?

A So the, actually, and I wrote a blog post about this last night that's going to be going out today, so we announced an investment in a Boston-based company called Fritz about a month or so ago. This is a developer tool, so again, kind of infrastructure, a little bit unsexy, and it's a tool for allowing software teams to optimize, deploy, and then manage machine learning models on edge devices. You know, we've been thinking a little bit about the edge for the last year or so, about where could we make an investment where we think that, you know, that this could be impactful. And the edge really relates to the idea of pushing compute from the central cloud down to various devices like mobile phones, drones, cars, robots, IOT. And there are, if you look at the big teams inside Snap and Facebook who are building computer vision models to run inside their apps to do stuff like, you know, putting dog ears on, et cetera. You know, these are computationally intense and very hard problems to solve that need large, expensive teams. And, you know, a little bit like LaunchDarkly and kind of other software products like that, I love the idea of Putting the power and the expertise and the tooling that these teams already have into the hands of, of absolutely everybody else. Plus, I think, you know, the, uh, this kind of sits at the intersection of two super hot topics, one being edge computi…

AI assessment note: “I love the idea of Putting the power and the expertise and the tooling”

Q No, absolutely. And then the final concern Before we move into the quick fires, the element of regulation. Often, unsexy industries carry a large amount of cumbersome regulation. How do you think about regulation and kind of your willingness to engage with opportunities that really are in the midst of it?

A Yeah, I mean, I think we stay clear of anything which is too highly regulated. I mean, we do a lot of look at digital health. We look at hardware and health, and in any of these areas, we try and find products that don't necessarily need FDA approval, In order to go to market initially, they may do so for a future version of the product or, you know, a future product line, but we don't want that to be a stumbling block. I think on the software side, if we're looking at something that might sell into government, then we'll look at, you know, we'd look at something where they can sell interstate and local to begin with before they need to go through something like FedRAMP to get federally accredited. So yeah, it's certainly an area of concern, but you know, there are a lot of huge industries. I mean, farmer production, for example, you know, you're not really touching the regulatory side there, especially if you're just doing software for it. Manufacturing is another one where, yes, there's a little bit of security regulation, but nothing more than selling fintech software. So I think it's a great question, but it's absolutely manageable.

AI assessment note: “we stay clear of anything which is too highly regulated”

Q Now, absolutely. And if you're a super nerd, buy the Kindle edition, because then you can also do Command F and find the keywords. Clearly, I need to get out more. But anyway, how do you assess the current state of seed funding in the Bay, Andy?

A I touched on this just a second ago. There, you know, there are now two and a half thousand plus seed funds operating in the U.S. with a large focus on being on the Bay Area. What that means is, you know, there are probably too many dollars chasing too few deals, uh, Which has driven the cost of both living and the cost of running a business up crazy high. I think that, you know, that's why we are completely comfortable with and actually really like the idea of having teams where HQ is here, the CEO is here, sales and marketing might be based here, but R&D could be based somewhere else in the country or even somewhere else in the world. And when I think about, you know, some of the standout businesses from our portfolio, certainly kind of my own personal portfolio, Intercom being a great example, Pipedrive being a great example, you know, these are businesses that have built really big High-performing teams in other parts of the world. It's hard work, but it can work well.

AI assessment note: “there are probably too many dollars chasing too few deals”

Q Both of whom are brilliant first-time founders, but a lot of people are unwilling still today to back the first-time founder and CEO. I'm intrigued. How do you stress test that durability, that mental fortitude of the first-time CEO? What are the signs that excite you?

A I think you're often looking for some kind of evidence of determination, hard work, and intelligence, and, you know, there'll be different things that you see in different people. I think, you know, we talked a little bit earlier about the ultramarathons. I mean, that to me shows just this Incredible grit to work through pain and hard times to get to where you want to get to. I think another example would be one of our founders here, Brian O'Connell from Huckleberry Insurance. Brian, you know, ticks so many of the boxes that, you know, you think about a typical founder. You know, he is an HBS grad. He worked at McKinsey. But the thing that I loved about Brian that I actually had to dig in a little bit to find out was Brian was also a professional poker player. And that to me says calculated risk. It says crazy stress. And it says kind of working all hours. To, um, to be successful. And so, I, I think, you know, there's no kind of one-size-fits-all view for what we look for. I just think you'll meet people and something in your gut will kind of tell them that they're special. I think as well, with the state that we invest in, given it's so early, you often don't have a ton of metrics and data on the business itself, you know, to show, is this working really well? What you're really going on is the quality of product that people have built, the size of the opportunity that they'r…

AI assessment note: “Brian was also a professional poker player. And that to me says calculated risk.”

Q So, what's the favorite book and why? What must I be reading on my next trip out to you?

A So, I'm going to go with the boring answer, and I'm going to say Venture Deals by our friend Brad Feld. I had had this on my bookshelf For probably four years. And it was one of the things where I was like, I will always read it. I don't think it's very easy as a, an operator to NBC to, uh, to get involved in deals and to kind of see the way that deals are structured and just to be like, okay, that it's done that way because that's the way that it's done, which, you know, which is fine. And that generally are the way that things are done. But what I loved in this book was actually getting a deeper understanding of why things are done that way and kind of what are maybe some of the flex points you can use when negotiating a deal. You know, if you don't want to go down the typical garden path, And, you know, it's, it's pretty funny and irreverent in places as well.

AI assessment note: “I'm going to say Venture Deals by our friend Brad Feld.”

Q You have now arrived at your destination. Now, Andy, I'd love to get the ball rolling today, so start off by telling us, how did you make your way into the entrepreneurship and technology industry?

A Sure, so, um, I'm a, uh, a massive nerd, uh, I've always been a massive nerd, and I think it was probably inevitable that I'd end up working in tech. My first job after university was I worked for a telco where I ran all of their online systems, so the, uh, I was able to convince the, uh, the MD there to give this, um, Kind of unseasoned, 21 year old, um, amateur, a chance at You know, take them on to someone who was in their thirties who probably would have been far better equipped, but he did, and it worked out really well. Um, I then went to work for a, um, a consultancy putting in business process and document management systems, and that's what really gave me the idea for a company called Huddle that I founded in 2006, at the very end of that year with, um, my friend Alistair. Um, Huddle's now, uh, a big company, offices in San Francisco, where we're sitting today, in Washington DC, because we do a lot of business with the US government. And then a big team in, in London. So business has raised about eighty five million dollars in venture capital over the last, um, last few years. And yeah, you know, it's, it's a, um, it's a, it's a great business. Um, but I'm a small, a small business guy. I'd always loved working with startups. I've been in that very active engine investor from about 20 11 onwards. Invested in, um, companies you might know like, uh, Postmates, where I wa…

AI assessment note: “My first job after university was I worked for a telco where I ran”

Q In terms, I'm, I'm really intrigued by developer tools, so that's just latched you onto an interest of mine. In terms of developer adoption, are you seeing, as an investor now, developer adoption happening much more from kind of the grassroots ground up in the SLAT model? Or are you still seeing the top down?

A Um, I, you know, you really see both, and there'll be companies which will probably try and sell into both business models. Grassroots is great because it can just spread like wildfire inside an organization. It can move from org to org very virally, but I think, you know, to make real revenue, you kind of need to, um, you need to be kind of selling top down. So GitHub is a great example of this. You know, GitHub being adopted on community projects, being adopted by small businesses all over the world, but it's that GitHub enterprise model where they're, you know, they're selling, you know, Something that goes across the entire organization. It can be deployed on premise. It's highly secure. Talks through active direction and all of that good stuff. You know, that's the real moneymaker for them.

AI assessment note: “you really see both, and there'll be companies which will probably try”

Q Brilliant. Ok, that's on the reading list. Um, and then the most challenging aspect of your role as VC at SoftTech?

A Definitely the fact you have to become an Insta expert on companies and spaces that you, that you, you know, think about. I mean, we will see, in an average year, anywhere between two and a half and 3000 companies, and we'll invest in 15. So, you know, you do the math, about 99.5% of the businesses that we see, we won't invest in. You have to be able to make a very quick decision about, you know, whether something is interesting from a market, market standpoint, And are the founders credible? And, you know, does the product look like it has legs to compete with? Because there will always be other people doing, doing something similar. And then kind of having to say no after that is, is really tough.

AI assessment note: “Definitely the fact you have to become an Insta expert on companies and spaces”

Q In terms, I'm, I'm really intrigued by developer tools, so that's just latched you onto an interest of mine. In terms of developer adoption, are you seeing, as an investor now, developer adoption happening much more from kind of the grassroots ground up in the SLAT model? Or are you still seeing the top down?

A Um, I, you know, you really see both, and there'll be companies which will probably try and sell into both business models. Grassroots is great because it can just spread like wildfire inside an organization. It can move from org to org very virally, but I think, you know, to make real revenue, you kind of need to, um, you need to be kind of selling top down. So GitHub is a great example of this. You know, GitHub being adopted on community projects, being adopted by small businesses all over the world, but it's that GitHub enterprise model where they're, you know, they're selling, you know, Something that goes across the entire organization. It can be deployed on premise. It's highly secure. Talks through active direction and all of that good stuff. You know, that's the real moneymaker for them.

AI assessment note: “you really see both, and there'll be companies which will probably try and sell”

Q And you mentioned also the element of maybe not being ready for that big A. We have Mike Maples on the show, and he said that bridges often lead to peers. I'm intrigued. How do you think about the bridge round and kind of the willingness to really engage with them with the knowledge that maybe things aren't working so well?

A Yeah, and I, and I think the challenge for an investor is to be able to discern between the bridge to nowhere and the added revenue to get them to, to actually break out. And I think especially when you're dealing with companies where there are longer, longer sales cycles, but much higher ticket sizes on the sales side, that's probably where we're comfortable. I think it's when you've got a typical kind of SMB mid-market SaaS company where they raised enough money for, for like, 18 months. They really haven't gotten the traction. You can't see a clear path To how they get to not just series A readiness, because I think you also have to kind of look at the amount of money that's gone in versus where you are in terms of metrics. So it kind of has to be somewhere between series A and series B by the time you've plugged in another two or three million dollars. So when you're looking at businesses like that, you have to have complete conviction that they're going to get there. And so you have to look at it on a case by case basis. But yeah, I think that saying that all bridges lead to nowhere is incorrect, but I think a lot probably do.

AI assessment note: “saying that all bridges lead to nowhere is incorrect, but I think a lot probably do.”

Q Absolutely. In terms of, we mentioned kind of unsexy businesses earlier, if we move from founder to business, You also invest in, as we said, unsexy businesses. Love the combination there. Non-obvious founders building unsexy businesses. But how do you then define unsexy business?

A Unsexy is, I think, kind of sexiness is in the eye of the beholder, because I think a lot of what these people are working on is, you know, is super cool and very sexy. It's just not the kind of thing which I would talk to my mum about, and she'd be like, oh, that's cool. I think it's, it's very easy to get excited about somebody building the next great social tool. It's It's exciting to think about, you know, what the next great consumer, direct-to-consumer brand might be, be it mattresses or shoes or underwear or something else. But, you know, what I really love is the application of technology to help people build better technology. So on the developer tool side, and perhaps even more unsexy is the application of technology to traditional industries. And that could be, for example, pharmaceutical. It could be healthcare. It could be industrial manufacturing. There's been a lot of technology spend in these industries, but the technology is kind of, you know, very much As you'd consider kind of typical enterprise, it's slow, it's unwieldy, it's kind of ugly. And if you kind of think broadly, people want to use technology and products of the same standard in their work lives as they use in their personal lives. The fact that they have to use these kind of like monolithic pieces of junk to get their jobs done is kind of crazy. So I think anything where you're kind of helping an …

AI assessment note: “application of technology to traditional industries. And that could be, for example, pharmaceutical.”

Q Two terrible questions, which you can chastise me for later, one being the runway element. How long is the right time to raise four now? Is it the kind of hailed 18 months? Do you think 24 is much more kind of enduring? What are your thoughts on this?

A Yeah, I mean, I think 24 is probably the right number. The issue with 18 months worth of runway is that by the time you close the funding ground, you get started, you might have 1011, 12 months before you need to think about fundraising again. And, you know, given that there is such a glut of seed money out there and so many companies being seed funded, yet this, you know, the number of Series A deals is effectively the same, if not lower year on year. What that means is, and I, this is the exact word I say to the founders, is that you are not going out Against every other company in your space who are fundraising for the Series A, you're going out against every other company who are fundraising full stop. A venture fund will have X number of dollars to deploy per fund or per year, and you're going to be valued or you're going to be assessed apples to pairs against other companies. But what they're going to do is probably look at the one thing where you can do an apples to apples comparison, and that's going to be traction, be it kind of consumer traction on a consumer side or revenue traction on a B to B business. And so the longer the runway you have, Hopefully, the better time you'll have to either go faster or sell for longer, which ideally will mean that you're doing more revenue, and therefore, you look better than the other folks who are going out at the same time.

AI assessment note: “I think 24 is probably the right number.”

Q And you mentioned also the element of maybe not being ready for that big A. We have Mike Maples on the show, and he said that bridges often lead to peers. I'm intrigued. How do you think about the bridge round and kind of the willingness to really engage with them with the knowledge that maybe things aren't working so well?

A Yeah, and I, and I think the challenge for an investor is to be able to discern between the bridge to nowhere and the added revenue to get them to, to actually break out. And I think especially when you're dealing with companies where there are longer, longer sales cycles, but much higher ticket sizes on the sales side, that's probably where we're comfortable. I think it's when you've got a typical kind of SMB mid-market SaaS company where they raised enough money for, for like, 18 months. They really haven't gotten the traction. You can't see a clear path To how they get to not just series A readiness, because I think you also have to kind of look at the amount of money that's gone in versus where you are in terms of metrics. So it kind of has to be somewhere between series A and series B by the time you've plugged in another two or three million dollars. So when you're looking at businesses like that, you have to have complete conviction that they're going to get there. And so you have to look at it on a case by case basis. But yeah, I think that saying that all bridges lead to nowhere is incorrect, but I think a lot probably do.

AI assessment note: “discern between the bridge to nowhere and the added revenue to get them to”

Q Some incredible journeys there. How's becoming a father changed how you think about the world and how you invest?

A Patience. I am inherently a very unpatient, non-patient, whatever the correct term is, person. I like to have lots of things going on at one site. You know, if something isn't working, I'll kind of, I'll move on. When my daughter was much younger, you know, when she was nine, 10 months old, we found the trick to getting her to sleep well at night was to ensure that she would drink an entire bottle of milk. And sometimes that might take half an hour or 40 minutes and several attempts sitting in the rocking chair in the dark. But if you could get that milk down her, it meant that you could have a peaceful night's sleep. And so, you know, that I think has given me the ability to kind of put the mental brakes on at times and, you know, when something with one of the companies may not be working, you know, rather than kind of making a rash Decision about what we do about it. Trying to be a bit more patient and thoughtful, and I think that's actually worked pretty well a few times.

AI assessment note: “given me the ability to kind of put the mental brakes on at times”

Q For sure. No, I agree with you there. But I do want to talk about some of the founders, Eve, because you've described them before as non-obvious. So I'd love to start with, what does the term non-obvious really mean to you, Andy?

A Yeah, and I kind of preface this by saying, you know, not every team that we back, you know, falls into the non-obvious camp, and then you kind of see them blossom and grow after you've, after you've invested. And for me, I think non-obvious, and I'm going to quote my friend Bucky Moore, who just joined Kleiner Perkins from Costa Noah, and he described this as teams that don't necessarily come from Silicon Valley's central casting couch. And what that can mean is they have A different experience, you know, highly, you know, deep experience in a kind of, in a, in a weird and sexy industry, and I guess we'll probably talk about unsexy down the line. It could be that they are much older or much younger than the, um, than the typical founder, or it could be they don't come from Silicon Valley itself, or even from North America. And I think if you believe that great entrepreneurs and great businesses can be born absolutely anywhere, but this is probably still the best place in the world to incubate them, then finding those teams and finding those people Who maybe don't look, you know, like they are out of Silicon Valley central casting, and then kind of helping implant them into the ecosystem here is just incredibly rewarding.

AI assessment note: “teams that don't necessarily come from Silicon Valley's central casting couch”

Q So, I'm gonna play devil's advocate here, and just pose two concerns that I have with maybe unsexy businesses. First, be it long sales cycles. At Such early stages. I'm intrigued. How do you think about long sales cycles, maybe giving lack of time for kind of product iteration, product feedback, and then the subsequent need then for much longer runway?

A Yeah. I mean, I think on product iteration and product feedback, the, you know, the ways you can mitigate that are through proof of concepts, through land and expand type deals. I think, you know, none of the companies that we work with are going to, you know, a large multinational saying, right, you know, you've got to buy an enterprise license for your entire business. Today, what they're looking to do is kind of chip away with, you know, an initial 50 K, a hundred K, a hundred K contract, and then go from there. You know, and I think most big businesses are fairly comfortable with that manner of buying as well. And I think that the sales cycle piece is certainly the hardest to deal with. You know, we've got a couple of companies, one in industrial manufacturing, one in big data for pharma, where the initial seed round simply kind of wasn't enough to get them to the point where they were doing meaningful recurring revenue. Now, I think what's worked well about the both of these is The, the technology is so deep and so defensible and the market is so big and it's such a hard thing to break into that both the existing investors and new investors looking at this thing, okay, that they may not be ready to raise a full series a, but you know, there's definitely enough going on there to want to put some more money to work because I think with these businesses, they are not your typ…

AI assessment note: “on product iteration and product feedback, the, you know, the ways you can mitigate that”

Q And I want to, I want to zoom out a little to a more macro view of the environment. And as I said, everyone is on the pessimistic run, um, What is your take on this? Is it a, is it a time to raise the war chest? How are you feeling towards the overall macro tech environment now?

A It's going to be harder to raise funding right across the board, but the, the really good news is that great companies always do well in downturns. Great companies can always raise funding. Great companies prosper because they have access to the very best people. They have access to, you know, cheaper office space and cheaper services. You know, the, the tourists who were just doing this because tech was sexy will go, will go back and do whatever they were doing And, um, which leaves the really hardcore entrepreneurs to, to really kind of focus on what they're building and give, give them access to the very best people, um, and talents available. There will be casualties and there will be, you know, good companies who, who, you know, for whatever reason, struggle to raise that next round. And it could be because their last round was done at too high a price. It could be because they've never managed to get their sales and marketing costs under control. And, you know, and there will be, you know, there will be some tears before bedtime before this is all done. But I think the, um, For, for great companies, this is, this will be a great time to build a business.

AI assessment note: “It's going to be harder to raise funding right across the board”

Q And was that the key factor for you in moving to the VC world in terms of staying with the very early roots for our seed stage companies rather than progressing with Huddle?

A Yeah, you know, with Huddle, you know, Alistair was, you know, he's, you know, he was there. I, I felt by the time that I left that I was really just getting in the way, you know, that when a company gets past a 150 people and, you know, start getting up towards, you know, 200, they don't really need the kind of hustler Founder there anymore. They need people who are going to adhere to processes and, you know, get stuff done and not trotting people's toes. And, you know, and as much as, uh, you know, I love the team and I love working there. I definitely felt like it was just a natural point to step back. And, you know, we tell our founders all the time that the, the initial team they hire isn't necessarily going to be the team that takes them all the way. And I think as a founder, you can have to remember that, that, you know, that you, that that can be you as well. You know, just because you were there at the very beginning, it doesn't give you cop launch to be there. All the way through. And if at some point, if you need to step back and hire people who are better suited, then you should absolutely, you know, feel, feel that you are empowered to, to do that. And yeah, you know, and given that I love the early stages, given that I, I love working on lots of different things, you know, I, I find it very hard to focus on, on one thing for a long, a long period of time. So being…

AI assessment note: “given that I love the early stages... it's a perfect fit for what I love to do”

Q And we spoke about kind of runway managing burn a bit prior. So what is your take on whether, say you've got 12 months runway left, and, you know, there's a potential storm coming where we keep on hearing. What, what's your suggestion? Do, do you manage burn, or do you look to go out to raise another round?

A I think, you know, you, you go out to raise a round when you, when you're ready to raise, because there's no point in going out to raise a Series A if you're kind of well short of the, of the kind of expected benchmarks, unless you have, you know, some kind of unfair advantage, you know, it's, you, perhaps you have a past relationship with a Series A firm, and they would back you regardless, or, you know, you're, you've been building some kind of, like, incredible technology that you haven't monetized yet, and, um, And, you know, it's, it's going to be done on the strength of the IP. So assuming that that's not the case, then, um, you know, you could, and you could end up spinning your wheels and spending a lot of time trying to fundraise with, with, um, with no joy, in which case you then have to go to the second option, which is thinking about kind of, um, reducing your burn. And I think what you have to do is look at your business and you say, you know, where is the, where's the fact that we can begin to cut into, you know, and that will often start. And we saw today, you know, Zenefits laid off 250 people. And those are generally the, probably the poorest performing salespeople in the organization. Large cost, and unless they're, and unless they are bringing revenue in, it's a cost center. You know, sales should be there to generate revenue, not to, not to affect the, uh, t…

AI assessment note: “in which case you then have to go to the second option, which is thinking about kind of, um, reducing your burn.”

Q And I want to, I want to zoom out a little to a more macro view of the environment. And as I said, everyone is on the pessimistic run, um, What is your take on this? Is it a, is it a time to raise the war chest? How are you feeling towards the overall macro tech environment now?

A It's going to be harder to raise funding right across the board, but the, the really good news is that great companies always do well in downturns. Great companies can always raise funding. Great companies prosper because they have access to the very best people. They have access to, you know, cheaper office space and cheaper services. You know, the, the tourists who were just doing this because tech was sexy will go, will go back and do whatever they were doing And, um, which leaves the really hardcore entrepreneurs to, to really kind of focus on what they're building and give, give them access to the very best people, um, and talents available. There will be casualties and there will be, you know, good companies who, who, you know, for whatever reason, struggle to raise that next round. And it could be because their last round was done at too high a price. It could be because they've never managed to get their sales and marketing costs under control. And, you know, and there will be, you know, there will be some tears before bedtime before this is all done. But I think the, um, For, for great companies, this is, this will be a great time to build a business.

AI assessment note: “It's going to be harder to raise funding right across the board”

Q Speaking of some of the incredible founders you've backed, some include Edith from LaunchDarkly, Timo at PipeDrive. I'm intrigued. How do they behave, maybe act, think, present differently to maybe the Stanford central casting element?

A I think both of those are, you know, incredibly obvious in their own ways. I mean, Edith, for example, deep, deep product experience. Having been a product manager for years across a bunch of different areas, you know, and also, you know, investors talk about wanting to invest in athletes. Edith is an ultramarathon runner, and if you follow her on Twitter, you'll see her posting photos most mornings of doing kind of crazy, twenty-five-mile runs before most people are even awake. I think maybe what was a little bit non-obvious about her is she's a woman building a developer tools company. Unfortunately, you know, that's still relatively rare, and it's still an area which seems to be dominated by men. And I think what I found with Edith was That she's coming at this from a product manager standpoint. So she's building a highly technical product built to serve the market that she understands very well. And it's the same with Timo. Timo and a bunch of his team all come from a sales background. So, you know, would you imagine that a guy who had done door to door book sales would be the CEO of, you know, one of the fastest growing SaaS CRM companies in the world? Possibly not. But when you think about the real world experience he had of Both doing the selling and then managing a sales team, and then, you know, being lucky enough to hook up with a bunch of ex-guys from Skype to actual…

AI assessment note: “they come from a place which is maybe, you know, a little bit more naive”

Q Absolutely. I think we share that ADD. Um, but I want to dive straight into it now, and soft tech operates at the very seed stage, correct?

A Yeah, so, um, you know, seed has, is definitely been a, a moving term, and, you know, back in the day, seed meant the first, you know, 250, maybe even a 150,000 dollars that went into a company, but seed rounds have really, really gotten a lot bigger in the, um, in the last three or four years, to the point now where you have a pre-seed Round. So you might have a friends and family round of, you know, 25 to 50,000 dollars to get you off the ground. You then do a pre-seed round of 250 to 450 or 500,000 dollars, and then you go out and raise a seed round that could be anywhere from 1.5 to 3.5 million dollars, which is kind of like a series A was not that long ago. And of course now series A's are looking like more, more like, you know, anywhere from six to 12 million dollars. So it's kind of the same terminology, just the rounds have got bigger and everything's kind of moved along one stage.

AI assessment note: “Yeah, so, um, you know, seed has, is definitely been a, a moving term”

Q Both of whom are brilliant first-time founders, but a lot of people are unwilling still today to back the first-time founder and CEO. I'm intrigued. How do you stress test that durability, that mental fortitude of the first-time CEO? What are the signs that excite you?

A I think you're often looking for some kind of evidence of determination, hard work, and intelligence, and, you know, there'll be different things that you see in different people. I think, you know, we talked a little bit earlier about the ultramarathons. I mean, that to me shows just this Incredible grit to work through pain and hard times to get to where you want to get to. I think another example would be one of our founders here, Brian O'Connell from Huckleberry Insurance. Brian, you know, ticks so many of the boxes that, you know, you think about a typical founder. You know, he is an HBS grad. He worked at McKinsey. But the thing that I loved about Brian that I actually had to dig in a little bit to find out was Brian was also a professional poker player. And that to me says calculated risk. It says crazy stress. And it says kind of working all hours. To, um, to be successful. And so, I, I think, you know, there's no kind of one-size-fits-all view for what we look for. I just think you'll meet people and something in your gut will kind of tell them that they're special. I think as well, with the state that we invest in, given it's so early, you often don't have a ton of metrics and data on the business itself, you know, to show, is this working really well? What you're really going on is the quality of product that people have built, the size of the opportunity that they'r…

AI assessment note: “ultramarathons. I mean, that to me shows just this Incredible grit to work through pain”

Q Absolutely. I think we share that ADD. Um, but I want to dive straight into it now, and soft tech operates at the very seed stage, correct?

A Yeah, so, um, you know, seed has, is definitely been a, a moving term, and, you know, back in the day, seed meant the first, you know, 250, maybe even a 150,000 dollars that went into a company, but seed rounds have really, really gotten a lot bigger in the, um, in the last three or four years, to the point now where you have a pre-seed Round. So you might have a friends and family round of, you know, 25 to 50,000 dollars to get you off the ground. You then do a pre-seed round of 250 to 450 or 500,000 dollars, and then you go out and raise a seed round that could be anywhere from 1.5 to 3.5 million dollars, which is kind of like a series A was not that long ago. And of course now series A's are looking like more, more like, you know, anywhere from six to 12 million dollars. So it's kind of the same terminology, just the rounds have got bigger and everything's kind of moved along one stage.

AI assessment note: “Yeah, so, um, you know, seed has, is definitely been a, a moving term”

Q And, and, and then in terms of the Series A crunch that we always hear about, what's your perspective on this? I think there's four times as much seed funding as there ever has been before, but it's the same amount of Series A funding, so what is the perspective from your side on this?

A Yeah, I mean, this is some, this is, that's probably the topic that I've been asked most about by our CEOs and, you know, and, and people in the industry, and it's a very, it's a really hard one to answer, because They, you know, they ask what, you know, what are the hurdles to doing a Series A now? And the honest answer is that every Series A will look different, and some Series A's will get done because purely based on the strength of the founding team and the product potential, some will get done based on the revenue traction. Um, you know, there'll be companies that raise a great Series A that have never made a penny, and there'll be, um, you know, some companies that do, you know, are doing like four million dollars in revenue when they do their Series A, and there's an entire continuum between them. And I think really, though, the The thing that Series ADCs are looking for are companies that have the potential to be the winners in a, or one of the winners in a very large market, and they're looking for signals that can point towards Being, being there, and, you know, that signal may be because it's a great experienced founder who's done this before, you know, and she's on her second business, or it might be that it's a young, inexperienced team, but they've had incredible revenue traction in the first, kind of, two years of their, of their life. Is there a crunch, though?…

AI assessment note: “struggle manifests itself in rounds being done at lower prices, rounds being done smaller”

Q Speaking of kind of the brand that you spoke about there, many VCs build it through content, others through value add. I want to discuss the value add elements today are often cited on the show. So I'm intrigued to discuss how many actually practically add value do you think? Let's start with that.

A Well, I think the first thing to say is that everybody talks about adding value. When you're in the early stage VC game, money is money, and I think that, you know, the differentiator for every VC is going to be the amount of and the type of value that they add. I think, though, that each VC will add value in different ways. Some will add none, of course, you know, kind of not naming any names. But I think what we have to look at as investors is to try and figure out, you know, what is it that the founder needs? You know, what are the things that we can be helpful with through either our own experience, our own passions, or our network? Where we can be additive to them and kind of augment the team that they have in place. I think that it's great to have the time to be able to kind of blog and to be able to kind of write think pieces. For us, you know, we're, we're dealing with a large portfolio. We get pretty hands-on with the businesses. You know, we often don't have time to do that. And so, you know, hats off to the people that do find time to do it because I know how much of a time commitment it is, but I think it's not for everybody. And I, I feel there's also kind of a question of authenticity as well. You know, if you're not the kind of person who genuinely enjoys sitting down and knocking out Smart, interesting content. It's not going to seem authentic if you do it, and …

AI assessment note: “Some will add none, of course, you know, kind of not naming any names.”

Q And one kind of way of mitigating this is to raise a very large seed round. Yes. Um, what, what is your thoughts then on the amount of runway that startups should look to gain through the funding process? Is it the kind of hallowed 18 months that we're always told? Is that really enough nowadays?

A Yeah, that's, that's a great question, and I think we're, what we're counselling our CEOs on is to actually consider, and not just consider, to actively try and raise more. You know, the, there are companies in our portfolio who, you know, following the seed round, you know, will have anywhere from 18 to Than the other companies who are raising at the same time is key. Because what you have to remember is all of these series A funds have cash they need to book to deploy. They can't sit on it indefinitely. They're just going to be more cautious about how they deploy it. So when you're going out to raise, you just have to make sure that you look better than everybody else. You know, and that will just mean, you know, in relative terms, you're better in absolute numbers. The revenue is probably going to be higher.

AI assessment note: “what we're counselling our CEOs on is to actually consider, and not just consider, to actively try and raise more”

Q And one kind of way of mitigating this is to raise a very large seed round. Yes. Um, what, what is your thoughts then on the amount of runway that startups should look to gain through the funding process? Is it the kind of hallowed 18 months that we're always told? Is that really enough nowadays?

A Yeah, that's, that's a great question, and I think we're, what we're counselling our CEOs on is to actually consider, and not just consider, to actively try and raise more. You know, the, there are companies in our portfolio who, you know, following the seed round, you know, will have anywhere from 18 to Than the other companies who are raising at the same time is key. Because what you have to remember is all of these series A funds have cash they need to book to deploy. They can't sit on it indefinitely. They're just going to be more cautious about how they deploy it. So when you're going out to raise, you just have to make sure that you look better than everybody else. You know, and that will just mean, you know, in relative terms, you're better in absolute numbers. The revenue is probably going to be higher.

AI assessment note: “counselling our CEOs on is to actually consider, and not just consider, to actively try and raise more.”

Q Speaking of kind of the brand that you spoke about there, many VCs build it through content, others through value add. I want to discuss the value add elements today are often cited on the show. So I'm intrigued to discuss how many actually practically add value do you think? Let's start with that.

A Well, I think the first thing to say is that everybody talks about adding value. When you're in the early stage VC game, money is money, and I think that, you know, the differentiator for every VC is going to be the amount of and the type of value that they add. I think, though, that each VC will add value in different ways. Some will add none, of course, you know, kind of not naming any names. But I think what we have to look at as investors is to try and figure out, you know, what is it that the founder needs? You know, what are the things that we can be helpful with through either our own experience, our own passions, or our network? Where we can be additive to them and kind of augment the team that they have in place. I think that it's great to have the time to be able to kind of blog and to be able to kind of write think pieces. For us, you know, we're, we're dealing with a large portfolio. We get pretty hands-on with the businesses. You know, we often don't have time to do that. And so, you know, hats off to the people that do find time to do it because I know how much of a time commitment it is, but I think it's not for everybody. And I, I feel there's also kind of a question of authenticity as well. You know, if you're not the kind of person who genuinely enjoys sitting down and knocking out Smart, interesting content. It's not going to seem authentic if you do it, and …

AI assessment note: “Some will add none, of course, you know, kind of not naming any names.”