The Exchanges

Q What was the most challenging fundraiser and why? We just raised a recent fund in the last couple of months. What was the most challenging fund to raise and why do you think?

A Yeah, so Crosscut Four was absolutely not the most challenging. It was one of the nice smooth ones that I've been waiting for for 10 years. I think that the most challenging... For us was the first thirty million of Crosscut Three, what we were calling our first close. And it was late in 2014 and not so clear that Southern California was a, a quote, real market to LPs yet. I'm thankful Mark Suster was creating a lot of awareness around LA, but I think we weren't quite there yet. And so I, uh, unfortunately I was out on the road, arguably chasing breadcrumbs all over the world. And, um, combine that with, I, I had a heart ablation to stop an arrhythmia and it didn't go so well. So I ended up with a paralyzed stomach, couldn't get food down, lost 20 pounds, and I was literally on planes following leads to family offices throughout Europe trying to find the next chunk of capital. Fortunately, things changed early into 15 and some of the institutional money started to take interest in crosscut and we ended up raising the rest of it from U.S. sources. Easily the most difficult time I've ever faced in chasing down dollars for crosscut.

AI assessment note: “most challenging... For us was the first thirty million of Crosscut Three”

Q What was the most challenging fundraiser and why? We just raised a recent fund in the last couple of months. What was the most challenging fund to raise and why do you think?

A Yeah, so Crosscut Four was absolutely not the most challenging. It was one of the nice smooth ones that I've been waiting for for 10 years. I think that the most challenging... For us was the first thirty million of Crosscut Three, what we were calling our first close. And it was late in 2014 and not so clear that Southern California was a, a quote, real market to LPs yet. I'm thankful Mark Suster was creating a lot of awareness around LA, but I think we weren't quite there yet. And so I, uh, unfortunately I was out on the road, arguably chasing breadcrumbs all over the world. And, um, combine that with, I, I had a heart ablation to stop an arrhythmia and it didn't go so well. So I ended up with a paralyzed stomach, couldn't get food down, lost 20 pounds, and I was literally on planes following leads to family offices throughout Europe trying to find the next chunk of capital. Fortunately, things changed early into 15 and some of the institutional money started to take interest in crosscut and we ended up raising the rest of it from U.S. sources. Easily the most difficult time I've ever faced in chasing down dollars for crosscut.

AI assessment note: “the most challenging... For us was the first thirty million of Crosscut Three”

Q completely agree and understand where you're coming from there. It's funny, though, when I look at the patterns of VCs I've interviewed, Peter Fenton to Brad Feld, very best of the best, they have this intense sense of humility. So starting on the humility element, I know it's something you've thought deeply about before. So how do you view the importance of humility for you as a professional venture capitalist?

A Absolutely. I think humility is an acknowledgement that we are part of something bigger and that the big exits and the success that drive this industry are really just a combination of luck, timing, hard work, pattern recognition, and ultimately from the VC side, it's really about selecting the right entrepreneur. The entrepreneurs deserve all the credit. We are a very minor piece of their story arc. I also think that the path of entrepreneurship is a humbling path, and that entrepreneurs resonate with VCs that understand that plight. The Crosscut Story, the one that I've shared, is a humbling one, and in sharing it openly, I think we build a trust and connection with our entrepreneurs. It sort of knocks us off the pedestal and humanizes us in a way that makes the relationship we have much more enjoyable with our entrepreneurs.

AI assessment note: “I think humility is an acknowledgement that we are part of something bigger”

Q Now I have so many questions off shooting that one. One of the first ones was let's start chronologically. You mentioned that kind of the one track mind of Silicon Valley. It's always my problem with Silicon Valley. Do you not find that still to be the same today?

A I think it happens in cycles, just like the tech cycles that we've seen and You know, Rick and I have been fortunate enough to have been through three of those together, and I think it's part of the experience base that keeps us level-headed across all dynamics. But I think right now we're in a similar framework where it's uber competitive. There's lots of capital. Entrepreneurs or talent within those markets seem to jump from opportunity to opportunity. For me, back in a one, it was simply that there was one conversation. It was How much equity you had in startup XYZ, and I just wanted something broader. I wanted more diverse conversations in my life, and I was lucky that I had friends down here from high school that were teachers, and I have the greatest respect for teachers, but the other beauty of teachers is they do not give a shit that I am a venture capitalist, and that is very refreshing.

AI assessment note: “I think right now we're in a similar framework where it's uber competitive.”

Q then employee. Makes me want to ask you, though, about the relationship between VCs and founders. You've described it before as being, in terms of, kind of, deepening the relationship, moving away from transaction models. My partner, Fred, ascribed success in board meetings to creating board intimacy. How do you think about creating this intimate relationship between founder and VC, and what would you define a successful relationship to be?

A Ultimately, that relationship's about trust. Does the founder believe that you are aligned and supportive of all the ups and downs that will surely come along? Are you their first call for both good and bad things? Can you keep your ego or your own personal agenda within your own partnership out of the equation and really be aligned with the objectives that you're trying to achieve and the problems that you're trying to solve? To me, that has to be established in Before the capital is invested and you have to spend a lot of time. We always joke, but it's real. Like, is this someone that I want to go have a drink with and talk about things outside of business and how will they act when things do not go well? Both sides. The entrepreneur needs to get clear on that from the venture firm and the partner within that firm. And the firm has to understand what are your motivations? What's driving you?

AI assessment note: “Ultimately, that relationship's about trust. Does the founder believe that you are aligned”

Q In that relationship and kind of doing a pattern recognition across the chemistries of each of the other relationships that you have, Are there elements that you find founders particularly respond to positively, be it about your personality?

A Yes, I think entrepreneurs are resonating with this concept of, I don't have all the answers, you don't have all the answers, let's go figure it out together. I think entrepreneurs want to be challenged. They're looking for someone that has some insight and some pattern recognition that can help them, but they don't want to be embarrassed in front of their team, right? So again, there are lots of people out there with Low self-esteem, low confidence, and so you need to help them grow and nurture their leadership skills and feel empowered to run the business as they see fit, not challenged and embarrassed and made to look stupid for things not going well or decisions they've made, and that's a tough place for a lot of VCs to come from because they're, they're trying to make things work so that they can rise through their partnership.

AI assessment note: “entrepreneurs are resonating with this concept of, I don't have all the answers”

Q So if we translate that humility to the entrepreneurs themselves and kind of moving to the entrepreneurial class, does humility not go contra the idea of the Steve Jobs light visionary building this dominant rocket ship through kind of brute force and leadership?

A I think that there are definitely numerous stories where that character trait seemed to be the defining trait that led to success, but I think this perception is starting to change given the current environment in Silicon Valley. As I said, there are certainly outliers, but I believe that great company cultures will be built around servant leaders, hiring people smarter than you, building a collaborative culture. I think the joy in getting to the success was Will be as important as the success. And I hope to see more entrepreneurs focused on this dynamic. I've seen it already in Southern California. It's a part of the dialogue. The ability to recruit comes with an element of what are you doing on the culture side that is going to make this a more enjoyable environment for me to work? How, how are you going to empower me? Those are important questions that are starting to rise up in our conversations. That said, it is a fine line between confidence and And arrogance. And we love confidence. My partners look for that element in the entrepreneurs, but I honestly think that confidence is a combination of conviction and self-awareness, right? So arrogance is being tone deaf and believing you have all the answers, but confidence is a self-awareness combined with, I know what's coming and I know how to get us there.

AI assessment note: “I think this perception is starting to change given the current environment in Silicon Valley.”

Q Can I ask, in today's very fast moving world where kind of deals are done very quickly, I'm intrigued. Do you have that kind of relationship on boarding time with the competition that does surround you and most venture deals?

A It's the beauty of Southern California right now. We don't have that speed and urgency. It's definitely changing. There's more capital coming into the ecosystem, but I prioritize it. I only try to do two or three deals a year. And so to rush myself to a decision makes it difficult for me to have conviction about what I'm putting capital behind and what sort of relationship I'm committing myself to. We really try not to get too excited about momentum or a market opportunity or a differentiation in technology, because as we've seen over numerous cycles, at the end of the day, this really comes back to the entrepreneur and their ability to navigate the waters. And so getting to know them at that personal level, I think is a differentiator of our brand in that we spend time to understand these dynamics and try to be going back to the topics, try to be vulnerable with them on why we think we're a good partner for them. Right. And that's never about we're the best or we can do this for you and no one else can, because at the end of the day, most of this is about luck and timing. So it's about, will I be a great partner to you along the way? And that has to be done in a one-on-one setting with some serious amount of time commitment.

AI assessment note: “We don't have that speed and urgency. It's definitely changing... but I prioritize it.”

Q Can I ask, with this kind of very important and complex relationship between founder and VC, I'm interested, where do you think then a lot of VCs maybe go wrong in producing, manufacturing, and distributing their products, so to speak, with this relationship?

A Most of the time, it's about ego getting in the way, or an alternative agenda that's driving their behavior. I have found that the biggest issue I've seen is young VCs believing that they have to speak because they're tasked as a board member, and they're supposed to say important things, and my philosophy is speak when you have something to say, not because you want to be heard, and so I find that they're often quick to react Back to negative information and not capable of consuming and digesting and truly understanding what factors will help solve the problem. They're just a little bit reactive, and I think the best venture capitalists are ones that can stay calm and patient through all and realize that no one single deal is representative of your body of work, right? We're gonna have failures, and to think that you won't have a failure is foolish.

AI assessment note: “Most of the time, it's about ego getting in the way”

Q Now I have so many questions off shooting that one. One of the first ones was let's start chronologically. You mentioned that kind of the one track mind of Silicon Valley. It's always my problem with Silicon Valley. Do you not find that still to be the same today?

A I think it happens in cycles, just like the tech cycles that we've seen and You know, Rick and I have been fortunate enough to have been through three of those together, and I think it's part of the experience base that keeps us level-headed across all dynamics. But I think right now we're in a similar framework where it's uber competitive. There's lots of capital. Entrepreneurs or talent within those markets seem to jump from opportunity to opportunity. For me, back in a one, it was simply that there was one conversation. It was How much equity you had in startup XYZ, and I just wanted something broader. I wanted more diverse conversations in my life, and I was lucky that I had friends down here from high school that were teachers, and I have the greatest respect for teachers, but the other beauty of teachers is they do not give a shit that I am a venture capitalist, and that is very refreshing.

AI assessment note: “I think it happens in cycles... right now we're in a similar framework”

Q completely agree and understand where you're coming from there. It's funny, though, when I look at the patterns of VCs I've interviewed, Peter Fenton to Brad Feld, very best of the best, they have this intense sense of humility. So starting on the humility element, I know it's something you've thought deeply about before. So how do you view the importance of humility for you as a professional venture capitalist?

A Absolutely. I think humility is an acknowledgement that we are part of something bigger and that the big exits and the success that drive this industry are really just a combination of luck, timing, hard work, pattern recognition, and ultimately from the VC side, it's really about selecting the right entrepreneur. The entrepreneurs deserve all the credit. We are a very minor piece of their story arc. I also think that the path of entrepreneurship is a humbling path, and that entrepreneurs resonate with VCs that understand that plight. The Crosscut Story, the one that I've shared, is a humbling one, and in sharing it openly, I think we build a trust and connection with our entrepreneurs. It sort of knocks us off the pedestal and humanizes us in a way that makes the relationship we have much more enjoyable with our entrepreneurs.

AI assessment note: “I think humility is an acknowledgement that we are part of something bigger”

Q then employee. Makes me want to ask you, though, about the relationship between VCs and founders. You've described it before as being, in terms of, kind of, deepening the relationship, moving away from transaction models. My partner, Fred, ascribed success in board meetings to creating board intimacy. How do you think about creating this intimate relationship between founder and VC, and what would you define a successful relationship to be?

A Ultimately, that relationship's about trust. Does the founder believe that you are aligned and supportive of all the ups and downs that will surely come along? Are you their first call for both good and bad things? Can you keep your ego or your own personal agenda within your own partnership out of the equation and really be aligned with the objectives that you're trying to achieve and the problems that you're trying to solve? To me, that has to be established in Before the capital is invested and you have to spend a lot of time. We always joke, but it's real. Like, is this someone that I want to go have a drink with and talk about things outside of business and how will they act when things do not go well? Both sides. The entrepreneur needs to get clear on that from the venture firm and the partner within that firm. And the firm has to understand what are your motivations? What's driving you?

AI assessment note: “Ultimately, that relationship's about trust. Does the founder believe that you are aligned”

Q Can I ask Brian, what is your thesis around this kind of importance of relationship building and onboarding that relationship? Has it always been there or have you kind of changed and adapted styles over time?

A Absolutely. Changed over time. I came into the industry knowing nothing and I was very lucky to have some great mentors early in my career, but what I have seen is as my own sort of, you know, spiritual journey in understanding who I am as a human and what makes me tick. I look for those qualities in entrepreneurs, and I find that not only do the companies tend to have greater success, but I enjoy the process a lot more, and so it's been a new filter for me over the last Four or five years, you know, as I stopped being a full-time operator while running CrossCut, and have been able to focus a hundred percent of my attention to my craft. Again, it is a product that we put out there. CrossCut puts out a product, I put out a product, and I'm always fine-tuning that, trying to figure out what resonates and what works.

AI assessment note: “Absolutely. Changed over time. I came into the industry knowing nothing”

Q In that relationship and kind of doing a pattern recognition across the chemistries of each of the other relationships that you have, Are there elements that you find founders particularly respond to positively, be it about your personality?

A Yes, I think entrepreneurs are resonating with this concept of, I don't have all the answers, you don't have all the answers, let's go figure it out together. I think entrepreneurs want to be challenged. They're looking for someone that has some insight and some pattern recognition that can help them, but they don't want to be embarrassed in front of their team, right? So again, there are lots of people out there with Low self-esteem, low confidence, and so you need to help them grow and nurture their leadership skills and feel empowered to run the business as they see fit, not challenged and embarrassed and made to look stupid for things not going well or decisions they've made, and that's a tough place for a lot of VCs to come from because they're, they're trying to make things work so that they can rise through their partnership.

AI assessment note: “entrepreneurs are resonating with this concept of, I don't have all the answers”

Q So if we translate that humility to the entrepreneurs themselves and kind of moving to the entrepreneurial class, does humility not go contra the idea of the Steve Jobs light visionary building this dominant rocket ship through kind of brute force and leadership?

A I think that there are definitely numerous stories where that character trait seemed to be the defining trait that led to success, but I think this perception is starting to change given the current environment in Silicon Valley. As I said, there are certainly outliers, but I believe that great company cultures will be built around servant leaders, hiring people smarter than you, building a collaborative culture. I think the joy in getting to the success was Will be as important as the success. And I hope to see more entrepreneurs focused on this dynamic. I've seen it already in Southern California. It's a part of the dialogue. The ability to recruit comes with an element of what are you doing on the culture side that is going to make this a more enjoyable environment for me to work? How, how are you going to empower me? Those are important questions that are starting to rise up in our conversations. That said, it is a fine line between confidence and And arrogance. And we love confidence. My partners look for that element in the entrepreneurs, but I honestly think that confidence is a combination of conviction and self-awareness, right? So arrogance is being tone deaf and believing you have all the answers, but confidence is a self-awareness combined with, I know what's coming and I know how to get us there.

AI assessment note: “I think this perception is starting to change given the current environment in Silicon Valley.”

Q Can I ask, in today's very fast moving world where kind of deals are done very quickly, I'm intrigued. Do you have that kind of relationship on boarding time with the competition that does surround you and most venture deals?

A It's the beauty of Southern California right now. We don't have that speed and urgency. It's definitely changing. There's more capital coming into the ecosystem, but I prioritize it. I only try to do two or three deals a year. And so to rush myself to a decision makes it difficult for me to have conviction about what I'm putting capital behind and what sort of relationship I'm committing myself to. We really try not to get too excited about momentum or a market opportunity or a differentiation in technology, because as we've seen over numerous cycles, at the end of the day, this really comes back to the entrepreneur and their ability to navigate the waters. And so getting to know them at that personal level, I think is a differentiator of our brand in that we spend time to understand these dynamics and try to be going back to the topics, try to be vulnerable with them on why we think we're a good partner for them. Right. And that's never about we're the best or we can do this for you and no one else can, because at the end of the day, most of this is about luck and timing. So it's about, will I be a great partner to you along the way? And that has to be done in a one-on-one setting with some serious amount of time commitment.

AI assessment note: “We don't have that speed and urgency. It's definitely changing... but I prioritize it.”

Q Can I ask, with this kind of very important and complex relationship between founder and VC, I'm interested, where do you think then a lot of VCs maybe go wrong in producing, manufacturing, and distributing their products, so to speak, with this relationship?

A Most of the time, it's about ego getting in the way, or an alternative agenda that's driving their behavior. I have found that the biggest issue I've seen is young VCs believing that they have to speak because they're tasked as a board member, and they're supposed to say important things, and my philosophy is speak when you have something to say, not because you want to be heard, and so I find that they're often quick to react Back to negative information and not capable of consuming and digesting and truly understanding what factors will help solve the problem. They're just a little bit reactive, and I think the best venture capitalists are ones that can stay calm and patient through all and realize that no one single deal is representative of your body of work, right? We're gonna have failures, and to think that you won't have a failure is foolish.

AI assessment note: “Most of the time, it's about ego getting in the way”

Q Can I ask Brian, what is your thesis around this kind of importance of relationship building and onboarding that relationship? Has it always been there or have you kind of changed and adapted styles over time?

A Absolutely. Changed over time. I came into the industry knowing nothing and I was very lucky to have some great mentors early in my career, but what I have seen is as my own sort of, you know, spiritual journey in understanding who I am as a human and what makes me tick. I look for those qualities in entrepreneurs, and I find that not only do the companies tend to have greater success, but I enjoy the process a lot more, and so it's been a new filter for me over the last Four or five years, you know, as I stopped being a full-time operator while running CrossCut, and have been able to focus a hundred percent of my attention to my craft. Again, it is a product that we put out there. CrossCut puts out a product, I put out a product, and I'm always fine-tuning that, trying to figure out what resonates and what works.

AI assessment note: “Absolutely. Changed over time.”