The Exchanges

Q absolutely fine to be confident in your beliefs, Harry, as long as your beliefs are a hundred percent right. Okay. Thanks for that one. That's great. I do have to ask kind of subsequently, as I said, many boards, many board members you've worked with. This is a favorite of mine to ask. Who's the best board member you've worked with and what do you think made them so special?

A There's so many, but just pick a couple. I mean, I mentioned Byron from Bessemer, just really deep knowledge about software as a service and willingness to teach others. And then, yeah, guys at Foundry, obviously, you know, Jason and Brad Feld, Jason Mendelsohn, just terrific, you know, high EQ people. So this is a big part of it. It's not just the business acumen, but it's the interpersonal relationships. And they're just so strong with those and helping CEOs navigate challenging situations of PR crisis, you know, even change in leadership and sort of how to talk to the team about it and just being there for them. I learned so much from, you know, the guys at Foundry on that one.

AI assessment note: “I mentioned Byron from Bessemer... And then, yeah, guys at Foundry”

Q on the SendGrid board for seven years with, with kind of the changes that everything happened on the board that does often happen. I'm intrigued because you yourself will change over the seven years with the wisdom and knowledge that you pick up. How have you seen your style of being a board member change over the many years now that you've been in VC and been a board member?

A I'll tell you, Harry, when I was first in board meetings and learning how to do that and what I was doing, I was a big listener, right? I would Really try to listen and understand and speak less often, which I know CEOs generally appreciate, by the way. If you're a person who says few things, but those things are impactful, that's probably the best dynamic from their perspective, and so that's what I always tried to do. And then I, I sort of evolved and realized that really the value of these board meetings is the strategic value, and there should be healthy debate and conversation between people. So back to the Sengred case, right? Byron, as an example, and Ethan, his partner there, Incredible masters of software as a service, right? And really understood dynamics and how to grow the business and very good taking companies public. So I was learning a lot about those things from them, but when it came to the product or the strategy, I think it's having those healthy debates and being willing to challenge each other in public and in the room there with the staff and with the CEO is very healthy. And I think I do that more now than I did early on where I thought my role is to drop a wisdom bomb once in a while.

AI assessment note: “I think I do that more now than I did early on”

Q And how was the fundraising for, for fund one bullet time ventures?

A So, you know, I, I put in some of my own money that always helps. I was angel investing around the system and before tech stars, you know, even outside the system. Um, so I had a little bit of a track record, maybe 10 or 12 companies, you know, by that point I went out and said, you know, five million is my absolute limit. Um, it was self-imposed. I, the last thing I wanted to do was lose more than five million dollars of my friend's money. Um, these were probably going to be Friends, mentors, you know, around the system. Um, I raised two and a half million almost instantaneously a couple of weeks. Um, intros from Brad, people that understood tech stars had, had maybe been investing around the system. This was in 2009. And those of you that, you know, were in the industry then, you know, know that, uh, it wasn't necessarily the, it wasn't the greatest time. Um, and so it raised the two and a half and I just started investing in it. I said, great. Two and a half million dollar fund sounds fine. You know, The first investment I made was, was in a company called Twilio. Fourth investment I made was in a company called Uber. And so it was pretty easy. It became clear that those companies were something at least interesting, you know, in early, you know, I went up to that limit of five million, you know, that was the original plan and the market had turned a little bit. So that help…

AI assessment note: “I raised two and a half million almost instantaneously a couple of weeks.”

Q I'm intrigued. At what moment did you realize the real rocket ship that it is? Was there a realization as to actually the scale that it's achieved?

A There were a couple for me, and this is what's so gratifying about being an investor. You know, I would ride around in an Uber or wherever I went as it was launching in the early cities, and the drivers would tell me the stories of how it changed their lives. How it enabled them to have a business and an income and support their family in a totally new way. And that they were hiring, you know, drivers and building their own little companies, um, around this platform. That was one of the moments early on that I thought, you know, wow, this is, this is really impactful. Um, and then I remember, you know, the sort of million, million drivers mark, um, right. Where there's a million people now doing this and, you know, now it's much higher and, and, and, You know, I think around the time that it hit that three and a half billion valuation, you know, everybody said, well, it's really overvalued, but, but you knew that, that it was a company that had gravity and meaning, and it's just an honor to be involved with stuff like that.

AI assessment note: “There were a couple for me... the sort of million, million drivers mark”

Q Now, I really want to start today by discussing your entry into VC and how you decided to start with Bullet Time Ventures. What was kind of the moment of realization that this could really be possible for you?

A Sure. Well, TechStars started in, uh, late in the year. We ran our first accelerator programs, which we're known for in, in, in, in, and a few years went by and was working pretty well, and, and lots of opportunities were there, and Brad Feld, uh, and I were talking one day, and the idea was, gee, wouldn't it make sense to have a small fund around this activity so that, you know, we could follow on and some of the companies that were coming out of the program, uh, that were so interesting. So bullet time has really just The Techstars Fund. In fact, today we call it all Techstars Ventures. You know, it's really the first instantiation of it, and simply an opportunity that was in front of us at the time. We were angel investing, and rather than just put our own money, other people wanted to be involved, and so we organized a small fund around the Techstars activity.

AI assessment note: “Brad Feld, uh, and I were talking one day, and the idea was”

Q And in terms of the check size, what's the benefits then of the rigidity and the consistency of 50 K or later a larger check size?

A Well, I think, you know, it's easy to get excited about a company because it's a hot deal, right? It's, it's a natural, you know, human thing to sort of say, oh, wow, this one, I'm more excited about this. I'm going to do 200 K in this one. You know, you're really making one Investments instead of four. And I think shots on goal, um, really matters. You have to have enough portfolio diversification to where, you know, if you're concentrated in just a few companies as an angel, I mean, the stats are pretty clear. You're going to lose. I had a certain size fund, right? I, it was 50 K per check, uh, with a double down. So that's 50 investments, right? That's what I wanted in terms of diversification. I didn't want to have 40 Right. And have sort of triple positions in some companies because ultimately those companies may or may not work. If they do, you're happy about it. But you know, it turns out that the hot deal, something I've learned is, is often the one that doesn't work. Uh, and when you see Uber for the first time, or you see, you know, a company that ultimately didn't do well, you're just as excited about both of them. So it's just having discipline about what your strategy is and what you do.

AI assessment note: “shots on goal, um, really matters. You have to have enough portfolio diversification”

Q And how was the fundraising for, for fund one bullet time ventures?

A So, you know, I, I put in some of my own money that always helps. I was angel investing around the system and before tech stars, you know, even outside the system. Um, so I had a little bit of a track record, maybe 10 or 12 companies, you know, by that point I went out and said, you know, five million is my absolute limit. Um, it was self-imposed. I, the last thing I wanted to do was lose more than five million dollars of my friend's money. Um, these were probably going to be Friends, mentors, you know, around the system. Um, I raised two and a half million almost instantaneously a couple of weeks. Um, intros from Brad, people that understood tech stars had, had maybe been investing around the system. This was in 2009. And those of you that, you know, were in the industry then, you know, know that, uh, it wasn't necessarily the, it wasn't the greatest time. Um, and so it raised the two and a half and I just started investing in it. I said, great. Two and a half million dollar fund sounds fine. You know, The first investment I made was, was in a company called Twilio. Fourth investment I made was in a company called Uber. And so it was pretty easy. It became clear that those companies were something at least interesting, you know, in early, you know, I went up to that limit of five million, you know, that was the original plan and the market had turned a little bit. So that help…

AI assessment note: “I raised two and a half million almost instantaneously a couple of weeks.”

Q led to the option that which you took, as you said, three hundred million now in the management, massive congrats obviously on the recent fundraise, but you decided to move upstream in terms of the funding. So why did you take this decision over other people like Manu at K-Nine or Michael Dearing who stayed with solo GP funds? What was the impetus behind your decision to scale the operations?

A I think just looking at the data and opportunity, right? I think as tech starts really scaled up, I mean, today we have, you know, 25 accelerators that operate every year. Um, we have 3000 mentors who are starting companies, uh, where we have access to invest in and what they're doing. We have alumni who are now starting their second, third, fourth company. You know, clearly we sort of proved early on we're good seed investors. You know, the tech stars funds, you know, perform, you know, return well, uh, The question is, could you then get more capital to work? Maybe with not quite as a sort of return multiple, but an extra a hundred million dollars to work doing, you know, multiple is good if you can get it. And you know, the pro rata that the market was consuming a hundred percent of, maybe we could take 10% of, right? So if you look at, if you look at tech stars companies to date, they've raised 2.3 billion dollars from the venture capital market. We have three hundred million under management of which maybe a hundred million has been deployed. Um, So we're well under five percent of the capital that's gone into our companies. So, you know, the positioning was pretty easy to figure out. Hey, we're a great syndicate partner for the VC community that wants to fund a tech stars company. Um, if you need more capital, we have more capital. Uh, we're not leading those deals. We're…

AI assessment note: “I think just looking at the data and opportunity, right?”

Q Okay. And then I want to finish on a story. Um, and this one's from Brett at V one, uh, and he wants to know, and as do I actually, I have to say, I saved this one for last. How did you meet Ryan Graves at Uber, and how did the Uber deal come about?

A Sure. I think Brett knows his story, so he's pulling your leg a little bit, but it's a, it's a good setup. Ryan was a mentor in the Techstars Boulder program, and he was mentoring on his drive from the East Coast to the West Coast, so Travis tweeted that he wanted someone to essentially operate UberCab, as it was known at that time, You know, Ryan responded on Twitter as the story goes and jumped in his car and drove across the country. Well, Boulder happens to be, uh, in, in the, in the path of where that car would go. And he had heard, Ryan had heard of tech stars and stopped in, met the 10 companies we had that summer. He and I went for a beer afterwards. He gave me feedback on the 10 companies and I thought it was incredibly insightful. I thought he was just, you know, right on about his perception of those companies. And I said, you know, cool. Like, you know, thanks for doing this. You really give first, which I identify with, you know, I, I get that it was a nice stop on your road trip, but it's really helped me a lot. How can I help you? Uh, and he said, you know, I'm actually moving to, um, be really the first employee and operator of this company called Uber cab. We black cars as a service. And he explained it to me. We don't have any cars on the road, but you know, we really want to change transportation and the way it works and make it more convenient for people. An…

AI assessment note: “Ryan was a mentor in the Techstars Boulder program”

Q I'm intrigued. At what moment did you realize the real rocket ship that it is? Was there a realization as to actually the scale that it's achieved?

A There were a couple for me, and this is what's so gratifying about being an investor. You know, I would ride around in an Uber or wherever I went as it was launching in the early cities, and the drivers would tell me the stories of how it changed their lives. How it enabled them to have a business and an income and support their family in a totally new way. And that they were hiring, you know, drivers and building their own little companies, um, around this platform. That was one of the moments early on that I thought, you know, wow, this is, this is really impactful. Um, and then I remember, you know, the sort of million, million drivers mark, um, right. Where there's a million people now doing this and, you know, now it's much higher and, and, and, You know, I think around the time that it hit that three and a half billion valuation, you know, everybody said, well, it's really overvalued, but, but you knew that, that it was a company that had gravity and meaning, and it's just an honor to be involved with stuff like that.

AI assessment note: “I remember, you know, the sort of million, million drivers mark”

Q And I'm really intrigued there. You said Techstars was doing well in the early days there. How did you tell, similar to a fund, Techstars, you know, had portfolio companies coming out of it, But how did you tell that you'd have product market fit?

A Um, well, within a year of the first program in 2007, there were three acquisitions, and they were all relatively small. So out of the first 10 companies, you know, social thing was picked up around ten million dollars, um, and a couple other companies had been bought in that quick time frame. And so, it was sort of surprising to us that that happened. And we tried it again the second year, and very similar outcome. You had, you always had some quick exits that, that Sort of made it all return quickly. Uh, but then you had plenty of companies that were in the portfolio that had longterm upside. In fact, there's still one company today, you know, from that original class in 2007, that's operating, you know, some have failed. I think there've been five or six exits out of that first 10 companies. You could tell that you had a thing that was working for what it was defined to do, which was make the ecosystem better, um, spur angel investing activity and, you know, sort of professionalize angel investing, which was the original idea.

AI assessment note: “within a year of the first program in 2007, there were three acquisitions”

Q And as you said, you were, you were valuation sensitive and you're also very rigid on check size. So I want to talk through this and you know, some people said before valuation doesn't matter as long as you have a seat on the rocket ship. So, where do you stand on that? Because you were valuation sensitive. So, why do you not agree with that statement?

A Where I still am, um, I think there's plenty of great companies that are being built and funded at reasonable prices. And, you know, with all of the capital in the market today, it's, it's particularly difficult to maintain that discipline, um, to just say no to something that's just out of price range. So, the You know, the sort of pace and consistency of it really mattered, and the price really mattered. So the average pre-money valuation of an investment in my first fund is 2.8 million dollars, which is quite sane. People today starting a company are offended by such a low price. Um, don't forget, it does include all those companies we were mentioning. Um, there are certainly many companies in there that I've already mentioned that were under that in pre-money when I first invested. You know, they're doing quite well, and they're quite happy they took that money. You know, had the price been twice as much, the return would be half as much, right? So I think it does matter.

AI assessment note: “had the price been twice as much, the return would be half as much”

Q And with the portfolio scaling as it did in the beginning, um, How did you adjust your time management and your value add to that? I think it's often something we forget as investments grow, your time actually becomes more limited. So how does that affect you?

A Yeah, well, you know, we're fortunate, um, at Techstars, you know, today, you know, so we went from that five million dollar fund today, we're over three hundred million dollars in, in managed capital, but, you know, we have a 150 people in the organization. Um, we have 35 people that, you know, used to be CEOs, right? That are, that are totally capable of helping You know, these companies, so we've been able to scale our infrastructure along with the growth and capital. So unlike a typical three hundred million dollar VC, that's, you know, three or four partners, right? We're 150 people, a person for every two million dollars we're managing. And I think that helps us. It's not just my time that matters, right? For our seed investments, our managing directors are on the ground in New York and London and Berlin and Los Angeles and so on and can actually be helpful. But I think, you know, it's, it's like anything you focus on the things that Um, begin to show value and, and begin to work and where you have the most capital. And that's, that's how I've scaled my time.

AI assessment note: “we've been able to scale our infrastructure along with the growth and capital.”

Q And the next part of the interview can either be considered me being lazy or me being insightful and interesting. And it's cause I crowdsource questions from your friends and colleagues at tech stars, uh, which I think is insightful. So we'll stick with that one. Um, so we're going to start with a question from Ari Newman. Uh, and he says, what do you think about uncapped notes?

A Uh, Uh, I've done one in my life, and I plan to do no more. By the way, the one that I did worked. And so, you know, no matter what your point of view, there's always exceptions in this industry, which I love. You know, if you go back and play the data that I have, and, you know, we do this sort of retrospective analysis all the time. Had all the investments we've done been uncapped notes, it's something like a five X, you know, lower return. Like it's a huge multiple of worseness. Um, and you know, plenty of companies raise that next round at 25, thirty million where the cap would have been three or four or five. Um, and so I just don't do them.

AI assessment note: “I've done one in my life, and I plan to do no more.”

Q That's insane. And then let's finish today on your most recent publicly announced investment, David. And why did you say yes?

A Sure. So that would probably be order mark, which came out of our accelerator program here in Boulder, actually. It's a Los Angeles based company that is infrastructure for ordering food online. You know, there are so many systems out there that help us order food, but if you're a restaurateur, it's, you know, you got to deal with all of them to Be in the market. So I love, love what the business was. I love infrastructure. I've been a big investor in that type of business where it's really infrastructure for something that I think is a huge trend. And of course, you know, you just sort of love the founders and you love the hustle and you want to work with people. So it had all those characteristics.

AI assessment note: “I love what the business was. I love infrastructure.”

Q case where it's necessary is the board itself, which is one of my nerdy passions, probably one of the many reasons I'm still single, David. But you at Techstars have backed many founders across stages, and often it's kind of at the earliest stages. So when do you feel is the right time for companies to establish a board? There's a lot of debate. What's the right time for you?

A Yesterday. I think that companies need to put it in as soon as possible. And, you know, I think entrepreneurs have this tendency to think of the board as this Overlord controlling things and they can fire me and all that, but that's not necessarily the case, right? So even a company that's just a few people and just getting started maybe with a small seed round, I think it's very, very additive to have a board. Now that board doesn't have to have control necessarily. I don't think that has to be the dynamic. So you can appoint board members at your own pleasure, right? That work because you want them there and maybe you're giving them some equity or whatever, but there are people that are independently thinking about the business. They're not living in it every day. And why would you not want to have really smart, experienced people around the table? So I think too many companies wait too long, and I would really do that as soon as possible, even in a very early seed stage company.

AI assessment note: “Yesterday. I think that companies need to put it in as soon as possible.”

Q Can I ask, that's kind of wrong with that. In the cases where it doesn't happen and they don't raise that subsequent round like they said they would, What is the answer that they give, and what answer would one expect for kind of when it doesn't go to plan, so to speak?

A Yeah, well, their answer is usually, well, it's going to happen, and so that's why I don't want to signal price with a note. I'll say, okay, great. Well, let's, since it's going to happen, let's just say that in 12 months, if it hasn't happened, that the cap will be ten million. Does that work for you? And this is where you really find out what's going on, because the natural answer should be, of course. You know, I'm very confident we're going to raise this round at 50, and there's no signal there on the price at 10, because it's only if it doesn't And I have plenty of time to make it happen. So you would expect them to give you a quick yes. If they say, well, you know, how about 40, or no, I really want to go with uncapped, then you're, you're actually reading something in them, which is, they don't actually have the confidence that they're saying they have. And you can do this with things like acquisition, bridges to acquisition. I see the same dynamics. So when you're getting a story from the entrepreneurs about what's going to happen, try to find ways to make the terms match that story and the eventuality that that story may not happen.

AI assessment note: “their answer is usually, well, it's going to happen”

Q I'm always slightly questioning how to determine kind of the right reserve strategy, and one that's often cited It is stack ranking companies quarterly and kind of concentrating capital accordingly. Jeff Fagnon from Accomplice said that at the seed stage, that's ridiculous, Harry, because the data is so kind of inconsistent and unpredictable. How do you think about that theory?

A Yeah, I agree with Jeff at the seed stage. I mean, I think when we're sort of small investors, we have a bucket of reserves, and we just think about that as a big bucket, right? And we try to manage that as our, our companies mature. We don't think about it as on individual companies in our scale. It doesn't make any sense. But again, with the larger investments where we're reserving more one-to-one, I think it's a process of looking at those investments every three or six months and looking at the conditions, right? What is this company likely to need? You know, which ones do we have the most sort of belief in? And you want to hold your reserves for the companies that match sort of where you think the value is over time.

AI assessment note: “Yeah, I agree with Jeff at the seed stage.”

Q As I said, the beauty of the show being to gain advice and wisdom from people like you. Tell me, what would you advise me having just assumed my first board seat? What would that kind of core words of advice be to me looking to grow and develop as a board member?

A Uh, my core advice area would be don't screw it up. No, just be yourself, look to help and recognize the unique value that you bring. What are you bringing to the table that the other board members aren't and really try to take a role, take a job, be active and say, I want to actually go and do that and Help you with that. So if we need to source a new executive, I'm going to own that. I'm going to go do it. That's what's really helpful. And then, you know, recognize what you do and don't know. I think as you develop your career, you'll become expert in some things and you'll be constantly learning about others. And so the worst form of board member is someone with confidently held misinformation, right? Where they, they believe this is the case and this is how this works, but actually it's high confidence, but low accuracy. So, you know, help where you know how to help and own things. I think is the advice I give new board members generally.

AI assessment note: “just be yourself, look to help and recognize the unique value that you bring.”

Q terms of that rebuilding, but it's funny because we spoke about the characteristics of a founder. We love to see that. And I've heard you speak before about when it comes to kind of the board or the leadership, so to speak, always wanting to have, as you've called it, the pessimist in the room. So David, what are the characteristics and traits of this pessimist? Let's start with that.

A Yeah, I think it's super key. We were actually just debriefing on a situation that happened where we felt like we didn't have a pessimist in the room. And It went wrong. And what, what I mean by this is not just having a naysayer, someone that says, no, I don't like that because those people are easy to find, but it's trusted advisors who are a key part of your team that have a real seat at the table, have real respect. So it might be your general counsel, your chief financial officer. You know, those are often people that can be pessimists in the room or a board member that just isn't always gung ho about everything, but it's very thoughtful in the company. And this is important because it's You want balance, right? Entrepreneurs, they're very optimistic. Investors tend to be optimistic too. You know, we wouldn't do this job unless we were unreasonably optimistic about good things that could happen. And so not just having a nacer, but having someone that you really trust and believe in that room to have those conversations, you know, should we enter that market? Should we use the strategy and why not is really key. And I've literally seen it kill entire companies by just being too many optimists, hanging out, spending each other up.

AI assessment note: “not just having a naysayer... but it's trusted advisors who are a key part of your team”

Q In my word, what a journey it's been. But I would love to kick off today, David, with the people that really make it happen for us, the venture investors, being the founders themselves. We've chatted before about the founders that you like to back, and you spoke of the moment of integrity. So I'd love to unpack this, David. So what does the moment of integrity mean for you?

A So, you know, people do silly things, Harry, right? They make mistakes. Sometimes they lie, you know, cheat a little bit or whatever. And someone sometimes might be confronted with something. And I think there's this moment I call the moment of integrity where perhaps something's come to light or, you know, you're asked a direct question. And in that moment, that is the moment of integrity. It's the first time you're asked about it. Let's say you're on a board and you're confronting a CEO about something. What they say in that moment of integrity is how you can really tell how a person will behave and their value. And if they Own up to it and say, yep, I made that mistake, and here's what I learned, and here's what I'm doing about it. That's one thing, but if they say, nope, that's not true, and hide from it, and then it comes to light, you know, later through multiple conversations, maybe the third or fifth conversation, or in some other way that actually, you know, yes, that, that is a thing that happened. You're dealing with someone that will actually cover it up and sort of dig the hole deeper, and I think my insight is that in entrepreneurship and in investing, we're all going to make mistakes. And in that moment of integrity, just owning that mistake, talking about what you learned from it is really key versus down the line, dealing with it a different way.

AI assessment note: “in that moment of integrity, just owning that mistake, talking about what you learned”

Q Can I ask, we had Mike Maples on the show, and he said that bridges, 99%, or most often, or to the majority, are bridge to nowhere. Would you agree with that from your experience, and how do you think about bridge financing, per se?

A Yeah, my stats are only a 98%, so I'm not sure if I get it right, but it's somewhere in that zone. No, they often, they often are bridges to nowhere, and so I always try to think of it as if I was funding this company in isolation, and I was doing this today, and there's no other capital around the table, which is sort of how I'm closing with this type of note, You know, what would the terms be that I would want that are reasonable? So I do think as an investor, you have to be weary of these things. And it's, it's much better to participate in the full round that really gives the company the next year or two, at least a runway rather than a few months, because often those go the wrong way.

AI assessment note: “they often are bridges to nowhere, and so I always try to think of it”

Q As I said, the beauty of the show being to gain advice and wisdom from people like you. Tell me, what would you advise me having just assumed my first board seat? What would that kind of core words of advice be to me looking to grow and develop as a board member?

A Uh, my core advice area would be don't screw it up. No, just be yourself, look to help and recognize the unique value that you bring. What are you bringing to the table that the other board members aren't and really try to take a role, take a job, be active and say, I want to actually go and do that and Help you with that. So if we need to source a new executive, I'm going to own that. I'm going to go do it. That's what's really helpful. And then, you know, recognize what you do and don't know. I think as you develop your career, you'll become expert in some things and you'll be constantly learning about others. And so the worst form of board member is someone with confidently held misinformation, right? Where they, they believe this is the case and this is how this works, but actually it's high confidence, but low accuracy. So, you know, help where you know how to help and own things. I think is the advice I give new board members generally.

AI assessment note: “just be yourself, look to help and recognize the unique value that you bring”

Q And in terms of the check size, what's the benefits then of the rigidity and the consistency of 50 K or later a larger check size?

A Well, I think, you know, it's easy to get excited about a company because it's a hot deal, right? It's, it's a natural, you know, human thing to sort of say, oh, wow, this one, I'm more excited about this. I'm going to do 200 K in this one. You know, you're really making one Investments instead of four. And I think shots on goal, um, really matters. You have to have enough portfolio diversification to where, you know, if you're concentrated in just a few companies as an angel, I mean, the stats are pretty clear. You're going to lose. I had a certain size fund, right? I, it was 50 K per check, uh, with a double down. So that's 50 investments, right? That's what I wanted in terms of diversification. I didn't want to have 40 Right. And have sort of triple positions in some companies because ultimately those companies may or may not work. If they do, you're happy about it. But you know, it turns out that the hot deal, something I've learned is, is often the one that doesn't work. Uh, and when you see Uber for the first time, or you see, you know, a company that ultimately didn't do well, you're just as excited about both of them. So it's just having discipline about what your strategy is and what you do.

AI assessment note: “shots on goal, um, really matters. You have to have enough portfolio diversification”

Q And then another question from Ari, and this is his words. Why do you like big, boring companies?

A Um, I like big, boring industries. Uh, big, boring is, is an area that I've been talking about for a long time. One of my two sort of, if you look at my portfolio over time, um, one of my two big areas, the other being, you know, imbalanced marketplaces, um, Uh, which I think go away on the internet, but the big boring is the idea that there's industries that are not sexy to most of the entrepreneurs that, you know, might listen to something like this, right? It's, it's not consumer. It's not cool, but you know, it's, it's banking and insurance and, you know, transportation, which now is, is, is hot because people have seen what can happen. But the, you know, my first company was in the transportation industry. It was dispatch systems for ambulance, kind of boring, not that sexy, pretty big market. And I just learned that it's often ignored, but a lot of dollars flying through it can be very valuable. And so it's boring to others. It's exciting to me.

AI assessment note: “I just learned that it's often ignored, but a lot of dollars flying through”

Q think the kind of really big and troubling question for me that I always ask myself is how do you balance when maybe assessing a portfolio company from the VC's perspective between really buying into that mission and vision of the founder versus maybe being more realistic as to when something is not working? How do you think about that balance? Are there any leading indicators to suggest either direction?

A I would just separate the two, and I'd say if you don't believe in that optimistic vision and future, then why are you investing? I mean, that's, that's just the ante to the game. You have to believe in that. But I think at the same time, as you move towards that goal, right, that purpose, that long-term vision, having people that can inject some realism, we're probably not going to triple revenue in three months, and we're probably not going to do it more profitably than we're doing it today, is helpful because you can overspend, you can over-resource as you move towards this vision. But I would separate the two and say, don't do it if you're not a believer in that vision and a huge optimist about it.

AI assessment note: “I would just separate the two, and I'd say if you don't believe”

Q founders themselves to the deals that they bring, kind of a dominant theme that I'm seeing definitely a lot more of today is the rising quantity of notes, but then also the valuations on the notes themselves. We chatted before, and you said about the terms matching the story. Can I ask David, what did you mean by this terms matching the story, specifically maybe in relation to the notes?

A Yeah, the Dynamics That's out there is obviously notes, convertible debt, safe notes, things like that are being used a lot more frequently. And the challenge is that they're often described as a bridge, right? A bridge to somewhere, which hopefully is not a bridge to nowhere. They're trying to get to that next round, but they need a little more time to do it, a little more progress on the business. And often, you know, the story comes in, if you're an investor, you know, well, we've got this big round, we're going to raise 10 or twenty million soon. And people are really interested in that's happening, but just need a couple months of Runway to get there. And so we're raising a note for a million and those situations, which I'm seeing more and more, I think it's important that the terms match that story. Right. And so, you know, one of my approaches as an investor is try to look for inconsistencies in the story. And so if I say to them, well, that's great. I don't really do uncapped notes. Let's put a cap on it. You know, something reasonable today, maybe it's a ten million dollar valuation, but they're talking about raising ten million at fifty million valuations. Well, it's hard for them to accept those terms because they see it as some kind of signal, right, on price, and so they're often looking for uncapped note. And so one solve I've used for something like this is to us…

AI assessment note: “use the terms to make sure that they match the story, meaning if you don't”

Q So say the moment of integrity doesn't prove to be that positive outcome that you thought, and they have maybe a more defensive denying approach. What do you maybe as an investor or a board member, what's the right response Then in terms of subsequent actions, is it to address up front straight away? Is it to let them come to their own realization? How should that subsequent action be?

A Well, I think, I think you have to measure the response based on what's actually going on. So without getting into specifics of a particular situation, you know, sort of hard to know how you want to behave. But, you know, I think I've used phrases like it's, let's just talk about it now. If this is something I need to know something about. And if they tell me now, it's not true. That didn't happen. Or, you know, that's not the case. Then I tend to believe them. Because I, I sort of lead with trust. And if I find out later that that trust was violated, right, that's a challenge for our relationship. So I come back and I say, I asked you about that. And I feel like that was the moment when you could have said, yes, this is what happened. And this is how I'm dealing about it. But you chose to backpedal or be defensive or deny. And that causes me to trust you less. So again, we all do things wrong, but if I can trust that we're going to be able to talk about that openly, especially in a board or investor context, or this works in personal life as well, Then I think it's easy to rebuild almost no matter what the transgression was.

AI assessment note: “if I find out later that that trust was violated, right, that's a challenge”

Q Sure. But kind of speaking of capital allocation there, I spoke to one of your fantastic partners, Nicole, before the show, and she asked a great question being, when you let Now at the Techstars journey, if resources maybe weren't an obstacle or weren't a thought, what would you have done differently, David?

A Yeah, well, I have a generally negative reaction to sort of looking back and saying, what would I do differently? But I guess I'll do it in this case. I don't think you should look back. I think you should always look forward. But, you know, if we'd recognize the scalability of the model that we created, I think we probably would have tried to have more capital formation in a more consistent way early on. We'd Today have sort of unified capital structure at tech stars where it's just tech stars. We have capital and we put it in the accelerator level at high velocity and then fall on. But I think, you know, separating that a little bit more and sort of owning the accelerator piece as part of what we do and then positioning to the market that we're more like a normal venture fund with seed and series, a follow-on probably would have been a little bit different way to build the business. We sort of eventually figured it out and got there, but I think that would have allowed us to capture more of the value we were creating early on, and ultimately, you know, again, I don't like to look back, you know, I love where the value has gone to our limited partners and investors that we've been able to create value for, but I think structurally, I might have done a few things differently if I really understood the scale it would be at today.

AI assessment note: “we probably would have tried to have more capital formation in a more consistent way”

Q Now, I really want to start today by discussing your entry into VC and how you decided to start with Bullet Time Ventures. What was kind of the moment of realization that this could really be possible for you?

A Sure. Well, TechStars started in, uh, late in the year. We ran our first accelerator programs, which we're known for in, in, in, in, and a few years went by and was working pretty well, and, and lots of opportunities were there, and Brad Feld, uh, and I were talking one day, and the idea was, gee, wouldn't it make sense to have a small fund around this activity so that, you know, we could follow on and some of the companies that were coming out of the program, uh, that were so interesting. So bullet time has really just The Techstars Fund. In fact, today we call it all Techstars Ventures. You know, it's really the first instantiation of it, and simply an opportunity that was in front of us at the time. We were angel investing, and rather than just put our own money, other people wanted to be involved, and so we organized a small fund around the Techstars activity.

AI assessment note: “Brad Feld, uh, and I were talking one day, and the idea was”