The Exchanges

Q And then how did Polaris then transition to Resolute? Big decision to leave the security of a firm like Polaris and start your own firm. How did that come about?

A Yeah, so, you know, I had a twelve-year stint at Polaris and lots of great stuff. The highlight of that really was my work creating and building Dogpatch Labs. Which was towards the latter end of my tenure at Polaris. And I realized that was really what I loved was spending time with entrepreneurs in the very earliest of stages. Sometimes even before, you know, they were clear on starting a company and really spending my time doing that in contrast to, and we can talk about this more later, sitting in board meetings. And the other thing that was becoming clear to me is the challenge of doing really early stage seed investing out of a billion dollar fund. And a very large platform. And so, you know, I just was, I was becoming more aware of what I really loved and consequently more aware of some of the challenges of doing that from that platform. And quite literally, Harry, one morning I woke up and I just had this clarity that I was going to start my own seed fund and kind of what it would look like and how we would work. And from that morning forward, I just charged forward.

AI assessment note: “I just had this clarity that I was going to start my own seed fund”

Q For us. At this stage, what do you perceive to be maybe acceptable versus unacceptable risk when assessing those opportunities?

A Yeah. So obviously product market fit. Is an acceptable risk. The way I think about this oftentimes is we really are looking to back teams that we think are exceptionally strong around product, product development, and, you know, product management, and the odds that they are going to ship a product that some niche in the market really likes are pretty high. But our view is that, that those early signs of traction really are not very telling about whether they're ultimately going to have meaningful traction and product market fit. And so we're very comfortable with product market fit risk. Similarly, I think we're very comfortable with market timing risk. You know, in many instances, the market that a seed stage company ultimately ends up serving isn't really even known as a distinct market at the time a seed company is formed. So we're comfortable with those two risks, and we're pretty explicit about that. I would say, not surprisingly, the one risk that we're not comfortable with, and we try really hard not to be wrong about, is with teams. You know, I, I think we really see ourselves in many ways being in the business of picking and backing talent and extraordinary founders, and we're certainly not right all the time, but if there's one thing we could be right about all the time, it would be the founding team.

AI assessment note: “the one risk that we're not comfortable with... is with teams.”

Q friend of mine, Jason Lemkin at SASTA, often says that with new funds, they start off in fund one by getting into any deal they can at any price, so to speak. Ownership irrelevant. Fund two, it's a little bit more prominent. And fund three, we are ownership-focused. How do you think about the evolution of fund and its relationship to ownership? And is that maybe something that you've seen?

A It's something I've seen kind of across the business. It's not something that we've practiced. I think Resolute was started with ownership really being a pillar of our strategy. And when we look at fund one and we have our handful of companies that are the, you know, super performers, I'm really thrilled that our ownership in each of them is very strong. And as a matter of fact, when I raised Resolute One, I initially raised twenty-five million dollars, and quite frankly, that was because that's how much I could raise, but after getting about a year into the deployment of the fund and executing the ownership strategy and the follow-on strategy, it became very clear to me that a twenty-five million dollar fund couldn't execute the ownership strategy that I set out, and so I went back to my LPs and said, we really need more capital to execute this, so we ended up Bringing in another twenty million and being a forty five million dollar fund. And I think that was largely successful in allowing us to, to get what we want in terms of ownership. Not a hundred percent. And I think the evolution of Resolute One to Resolute Four has been fairly modest steps to try and get it just right, to try and have enough capital really to have double digit ownership at exit of our best companies, but not more than that. So we can really maximize the multiple of the fund. And so we've kind of built u…

AI assessment note: “It's something I've seen kind of across the business. It's not something that we've practiced.”

Q No, I mean, I think we absolutely share the thinking around the founding team. With such little traction though, and you know, the proposition being less formed, loss ratio would often maybe expect it to be higher. If we kind of put on that LP conversation, how do you think about loss ratio given the stage where you're really inserting yourself?

A Quite honestly, we don't think about loss ratio, which I suppose is in some that might be the answer that it's less important to us and is likely going to be higher. Honestly, when those conversations come up with LPs, I tend to be very direct in that we really don't worry about loss ratio. And if that is an important evaluation criteria for you, we may not be a good fit because that's not how we operate at all. My mentor in the business from Polaris, John Flint, had a saying that I always remember, which is, You can only lose one times your money, so, you know, losses are limited, and really, for a seed fund, for a sub-hundred-million-dollar seed fund, if you end up having a handful of companies, four, five, six, seven, that truly are venture-scale returns in the hundreds of millions of dollars or more, and you have strong ownership, you know, approximating 10% in those companies, you're going to have a fantastic fund, altogether, you know, independent of whether the other companies tend to be Mostly zeros, or a whole bunch of them are small, modestly successful returns. It's really going to be driven by that core group of companies that are successful and your ownership in them.

AI assessment note: “Quite honestly, we don't think about loss ratio”

Q I promise I will take the LP hat off. Very, very. I do have to ask, in terms of building that ownership and concentrating those dollars, it often doesn't allow for a huge amount of companies within the portfolio itself. How do you think about portfolio construction having enough diversification with significant enough ownership?

A Yeah, so we pretty consistently end up, each fund has a portfolio of 30 to 35 companies, and I think we are very consistent in terms of our initial check, which we think is critical in terms of, uh, getting to 10% on that first check, and then we're, I would say, a combination of vigilant plus creative in terms of our second and third checks, being able to really build up our ownership position, and not necessarily waiting until the classic VC rounds. To do that. There are many, many, many instances where it will be interesting to a founder and interesting to us for a company that's starting to break out to have more capital to really invest in growth, and they're not quite ready to go raise that A, and those are classic opportunities where we see to invest more, get more ownership, and at the same time, really help fuel the company to accelerate its growth so that it can raise all the more compelling venture round.

AI assessment note: “each fund has a portfolio of 30 to 35 companies”

Q No, absolutely. I totally agree with you in terms of that directness. In terms of the fit in that relationship, we had Josh Koppelman at first round on the show recently, and he said that founders today are too much in a rush to pick their investors. Would you agree with him here? I'd love to start with that.

A I think in many instances, yes. I think founders, with good reason, want a very fast process, and they want to get back to work, and are sometimes inclined, really, just to get the best deal as quickly as they can and get back to work. I would personally advise our founders when they're going through a process, and therefore, by inference, founders coming to us, not necessarily to build a lot more time into a process, but to really take seriously the fit with the investor, and to reference investors, talk to other founders they've backed, and, and, you know, ask probing questions, and then just kind of see how you feel interacting with this investor, and see what your gut's telling you.

AI assessment note: “I think in many instances, yes.”

Q No, I mean, I think we absolutely share the thinking around the founding team. With such little traction though, and you know, the proposition being less formed, loss ratio would often maybe expect it to be higher. If we kind of put on that LP conversation, how do you think about loss ratio given the stage where you're really inserting yourself?

A Quite honestly, we don't think about loss ratio, which I suppose is in some that might be the answer that it's less important to us and is likely going to be higher. Honestly, when those conversations come up with LPs, I tend to be very direct in that we really don't worry about loss ratio. And if that is an important evaluation criteria for you, we may not be a good fit because that's not how we operate at all. My mentor in the business from Polaris, John Flint, had a saying that I always remember, which is, You can only lose one times your money, so, you know, losses are limited, and really, for a seed fund, for a sub-hundred-million-dollar seed fund, if you end up having a handful of companies, four, five, six, seven, that truly are venture-scale returns in the hundreds of millions of dollars or more, and you have strong ownership, you know, approximating 10% in those companies, you're going to have a fantastic fund, altogether, you know, independent of whether the other companies tend to be Mostly zeros, or a whole bunch of them are small, modestly successful returns. It's really going to be driven by that core group of companies that are successful and your ownership in them.

AI assessment note: “Quite honestly, we don't think about loss ratio”

Q I promise I will take the LP hat off. Very, very. I do have to ask, in terms of building that ownership and concentrating those dollars, it often doesn't allow for a huge amount of companies within the portfolio itself. How do you think about portfolio construction having enough diversification with significant enough ownership?

A Yeah, so we pretty consistently end up, each fund has a portfolio of 30 to 35 companies, and I think we are very consistent in terms of our initial check, which we think is critical in terms of, uh, getting to 10% on that first check, and then we're, I would say, a combination of vigilant plus creative in terms of our second and third checks, being able to really build up our ownership position, and not necessarily waiting until the classic VC rounds. To do that. There are many, many, many instances where it will be interesting to a founder and interesting to us for a company that's starting to break out to have more capital to really invest in growth, and they're not quite ready to go raise that A, and those are classic opportunities where we see to invest more, get more ownership, and at the same time, really help fuel the company to accelerate its growth so that it can raise all the more compelling venture round.

AI assessment note: “each fund has a portfolio of 30 to 35 companies”

Q In terms of the boards that you've been on and boards that you've witnessed, and especially boards at Seed, when we chatted before, you said there's an element of counter-productivity to boards at Seed. Can I ask, what did you mean by this, and how are they counterproductive?

A Well, it's kind of what I alluded to a minute ago. First, it ends up, you know, the board meeting leads the founders to dedicate, you know, amount of time preparing for the board meeting and putting together the right deck and doing the analysis, and so that, you know, I think is oftentimes overdone, and then, you know, board meetings themselves, they're typically three or four hour affairs, and you have Uh, you know, the investors there typically these days, the VC will, will bring along a junior associate who's kind of their sidekick and helps with, with various things. Everyone kind of wants to be heard from on everything that comes up. And so you end up having these not very productive dialogues where lots of people are, are sharing their, their own opinions on something, but it's not that critical decisions are getting made quickly and crisply.

AI assessment note: “the board meeting leads the founders to dedicate, you know, amount of time preparing”

Q And then how did Polaris then transition to Resolute? Big decision to leave the security of a firm like Polaris and start your own firm. How did that come about?

A Yeah, so, you know, I had a twelve-year stint at Polaris and lots of great stuff. The highlight of that really was my work creating and building Dogpatch Labs. Which was towards the latter end of my tenure at Polaris. And I realized that was really what I loved was spending time with entrepreneurs in the very earliest of stages. Sometimes even before, you know, they were clear on starting a company and really spending my time doing that in contrast to, and we can talk about this more later, sitting in board meetings. And the other thing that was becoming clear to me is the challenge of doing really early stage seed investing out of a billion dollar fund. And a very large platform. And so, you know, I just was, I was becoming more aware of what I really loved and consequently more aware of some of the challenges of doing that from that platform. And quite literally, Harry, one morning I woke up and I just had this clarity that I was going to start my own seed fund and kind of what it would look like and how we would work. And from that morning forward, I just charged forward.

AI assessment note: “one morning I woke up and I just had this clarity”

Q You said that about Inserting yourself at those moments, maybe pre the, the bigger venture round and kind of almost doing those preemptive, so to speak rounds. One thing that's kind of crucial for that is good relationship and communications with the founder. If we touch on this, I'd love to hear in your mind, what are the ideal attributes of the founder to VC relationship?

A Yeah. The way I like to sum that up is I'd say our aspiration is to be the first call for a founder. And, you know, that means Lots of different things in different instances. It means when something tough is going on, going wrong, that classic, oh shit moment, we want to be that first call that, you know, the founder feels supported, feels, you know, comfortable enough in our relationship that they wouldn't hesitate to share the really bad news. Similarly, when that huge deal gets closed, we love being first call, you know, and I really think it's a lonely exercise to be a Relationship with our founders where it's not always going to be touchy feely, you know, lovey stuff, but it's going to be authentic and they can trust that we're really in the boat with them. I, you know, I think that's what we aspire to.

AI assessment note: “our aspiration is to be the first call for a founder”

Q Yeah, absolutely. No, I couldn't agree with you more in terms of that gut element. If we take it one step further, though, we mentioned the element of boards earlier and kind of reference to be at less formative stages. There's always a lot of debate on boards at seed stage. When do you think is the right time to establish a board?

A Well, I think it's around the Series A. I think when you're raising a Series A level amount of capital, I think that the investors have an understandable interest In governance and as a company is starting to mature and build out its organization and its management team, I think a board can also be very valuable in addition to governance and helping an entrepreneur think about building a senior team. But during the seed stage, it's a very, very different exercise. And I think too often having a formalized board, an investor led board during the seed stage brings a lot of the trappings of From the post-series A board dynamic into the seed stage, where there's some degree of formality, there's a fair amount of preparation that goes into board meetings, and there's a lot more discussion around things that come up because everybody around the table wants to be heard, and it ends up being a drag on the founder's time, and so during the seed stage, I really personally prefer there not to be an investor-led board, um, and really just to work Directly with the founders to help them get to the next level.

AI assessment note: “Well, I think it's around the Series A.”

Q friend of mine, Jason Lemkin at SASTA, often says that with new funds, they start off in fund one by getting into any deal they can at any price, so to speak. Ownership irrelevant. Fund two, it's a little bit more prominent. And fund three, we are ownership-focused. How do you think about the evolution of fund and its relationship to ownership? And is that maybe something that you've seen?

A It's something I've seen kind of across the business. It's not something that we've practiced. I think Resolute was started with ownership really being a pillar of our strategy. And when we look at fund one and we have our handful of companies that are the, you know, super performers, I'm really thrilled that our ownership in each of them is very strong. And as a matter of fact, when I raised Resolute One, I initially raised twenty-five million dollars, and quite frankly, that was because that's how much I could raise, but after getting about a year into the deployment of the fund and executing the ownership strategy and the follow-on strategy, it became very clear to me that a twenty-five million dollar fund couldn't execute the ownership strategy that I set out, and so I went back to my LPs and said, we really need more capital to execute this, so we ended up Bringing in another twenty million and being a forty five million dollar fund. And I think that was largely successful in allowing us to, to get what we want in terms of ownership. Not a hundred percent. And I think the evolution of Resolute One to Resolute Four has been fairly modest steps to try and get it just right, to try and have enough capital really to have double digit ownership at exit of our best companies, but not more than that. So we can really maximize the multiple of the fund. And so we've kind of built u…

AI assessment note: “It's something I've seen kind of across the business. It's not something that we've practiced.”

Q For us. At this stage, what do you perceive to be maybe acceptable versus unacceptable risk when assessing those opportunities?

A Yeah. So obviously product market fit. Is an acceptable risk. The way I think about this oftentimes is we really are looking to back teams that we think are exceptionally strong around product, product development, and, you know, product management, and the odds that they are going to ship a product that some niche in the market really likes are pretty high. But our view is that, that those early signs of traction really are not very telling about whether they're ultimately going to have meaningful traction and product market fit. And so we're very comfortable with product market fit risk. Similarly, I think we're very comfortable with market timing risk. You know, in many instances, the market that a seed stage company ultimately ends up serving isn't really even known as a distinct market at the time a seed company is formed. So we're comfortable with those two risks, and we're pretty explicit about that. I would say, not surprisingly, the one risk that we're not comfortable with, and we try really hard not to be wrong about, is with teams. You know, I, I think we really see ourselves in many ways being in the business of picking and backing talent and extraordinary founders, and we're certainly not right all the time, but if there's one thing we could be right about all the time, it would be the founding team.

AI assessment note: “the one risk that we're not comfortable with”

Q You said that about Inserting yourself at those moments, maybe pre the, the bigger venture round and kind of almost doing those preemptive, so to speak rounds. One thing that's kind of crucial for that is good relationship and communications with the founder. If we touch on this, I'd love to hear in your mind, what are the ideal attributes of the founder to VC relationship?

A Yeah. The way I like to sum that up is I'd say our aspiration is to be the first call for a founder. And, you know, that means Lots of different things in different instances. It means when something tough is going on, going wrong, that classic, oh shit moment, we want to be that first call that, you know, the founder feels supported, feels, you know, comfortable enough in our relationship that they wouldn't hesitate to share the really bad news. Similarly, when that huge deal gets closed, we love being first call, you know, and I really think it's a lonely exercise to be a Relationship with our founders where it's not always going to be touchy feely, you know, lovey stuff, but it's going to be authentic and they can trust that we're really in the boat with them. I, you know, I think that's what we aspire to.

AI assessment note: “our aspiration is to be the first call for a founder.”

Q Yeah, absolutely. No, I couldn't agree with you more in terms of that gut element. If we take it one step further, though, we mentioned the element of boards earlier and kind of reference to be at less formative stages. There's always a lot of debate on boards at seed stage. When do you think is the right time to establish a board?

A Well, I think it's around the Series A. I think when you're raising a Series A level amount of capital, I think that the investors have an understandable interest In governance and as a company is starting to mature and build out its organization and its management team, I think a board can also be very valuable in addition to governance and helping an entrepreneur think about building a senior team. But during the seed stage, it's a very, very different exercise. And I think too often having a formalized board, an investor led board during the seed stage brings a lot of the trappings of From the post-series A board dynamic into the seed stage, where there's some degree of formality, there's a fair amount of preparation that goes into board meetings, and there's a lot more discussion around things that come up because everybody around the table wants to be heard, and it ends up being a drag on the founder's time, and so during the seed stage, I really personally prefer there not to be an investor-led board, um, and really just to work Directly with the founders to help them get to the next level.

AI assessment note: “Well, I think it's around the Series A.”

Q passionate and obviously now invest with Resolute. There's confusion, though, around the naming today of early rounds from seed to seed plus to post seed to bridges. When we chatted before, though, you said to me that at Resolute's day, you like to invest at old seed stage. Tell me, what did you mean by this? And maybe kind of what stage of development traction are these companies at then?

A Yeah, so what I meant by that was really pre-tractioning. I think today it's become rather conventional for seed funds to be looking for early indications of traction, and therefore companies that are mature enough to be in market enough to show traction. Our MO, what we really like to do is to be backing teams we fall in love with, with ideas that we fall in love with, and just that, and so we really do not necessarily look for traction at all. Now, in some instances, when companies approach us, they happen to have had traction, but our model is And really our preference is to go before traction and, and really be thinking about the team and the idea.

AI assessment note: “what I meant by that was really pre-tractioning.”

Q No, absolutely. I totally agree with you in terms of that directness. In terms of the fit in that relationship, we had Josh Koppelman at first round on the show recently, and he said that founders today are too much in a rush to pick their investors. Would you agree with him here? I'd love to start with that.

A I think in many instances, yes. I think founders, with good reason, want a very fast process, and they want to get back to work, and are sometimes inclined, really, just to get the best deal as quickly as they can and get back to work. I would personally advise our founders when they're going through a process, and therefore, by inference, founders coming to us, not necessarily to build a lot more time into a process, but to really take seriously the fit with the investor, and to reference investors, talk to other founders they've backed, and, and, you know, ask probing questions, and then just kind of see how you feel interacting with this investor, and see what your gut's telling you.

AI assessment note: “I think in many instances, yes.”

Q In terms of the boards that you've been on and boards that you've witnessed, and especially boards at Seed, when we chatted before, you said there's an element of counter-productivity to boards at Seed. Can I ask, what did you mean by this, and how are they counterproductive?

A Well, it's kind of what I alluded to a minute ago. First, it ends up, you know, the board meeting leads the founders to dedicate, you know, amount of time preparing for the board meeting and putting together the right deck and doing the analysis, and so that, you know, I think is oftentimes overdone, and then, you know, board meetings themselves, they're typically three or four hour affairs, and you have Uh, you know, the investors there typically these days, the VC will, will bring along a junior associate who's kind of their sidekick and helps with, with various things. Everyone kind of wants to be heard from on everything that comes up. And so you end up having these not very productive dialogues where lots of people are, are sharing their, their own opinions on something, but it's not that critical decisions are getting made quickly and crisply.

AI assessment note: “you end up having these not very productive dialogues where lots of people are, are sharing”

Q I would love, though, to kick off with a little bit about you. So, Mike, tell me, it's a strange and wonderful world in many ways, but how did you make your way into the world of venture and come to found Resolute?

A Well, there's actually, those are two different questions. My transition into venture, and then 12 years later, my founding of Resolute. So my decision got into, to get into venture. I can pinpoint to a very specific moment. It was in the mid, uh, 19 nineties by 1996. And believe it or not, at the time I was a lawyer for the U.S. Senate Judiciary Committee in Washington, D.C. And we were working on hearings around antitrust in the high tech world in Silicon Valley and specifically around the browser wars, which were quite the rage in the mid nineties. And as a result, I spent a bunch of time in Silicon Valley. And just chatting with a whole bunch of people across the industry that really understand it and get a sense of what was going on. And one of my early meetings was with a VC who I'd never heard of, um, and his name was John Doerr. And I had the opportunity to spend a couple of hours with John learning about VC and the industry where the internet was going. And by the end of those two hours, something clicked in my gut and said that that's what I want to do when I grow up. And so I carried that around with me for the next couple years in D.C., and then in 1998 decided it was time to make that jump, and I put the focus at Polaris and ended up there and coming to Boston.

AI assessment note: “those are two different questions. My transition into venture, and then 12 years later”

Q passionate and obviously now invest with Resolute. There's confusion, though, around the naming today of early rounds from seed to seed plus to post seed to bridges. When we chatted before, though, you said to me that at Resolute's day, you like to invest at old seed stage. Tell me, what did you mean by this? And maybe kind of what stage of development traction are these companies at then?

A Yeah, so what I meant by that was really pre-tractioning. I think today it's become rather conventional for seed funds to be looking for early indications of traction, and therefore companies that are mature enough to be in market enough to show traction. Our MO, what we really like to do is to be backing teams we fall in love with, with ideas that we fall in love with, and just that, and so we really do not necessarily look for traction at all. Now, in some instances, when companies approach us, they happen to have had traction, but our model is And really our preference is to go before traction and, and really be thinking about the team and the idea.

AI assessment note: “what I meant by that was really pre-tractioning”

Q I would love, though, to kick off with a little bit about you. So, Mike, tell me, it's a strange and wonderful world in many ways, but how did you make your way into the world of venture and come to found Resolute?

A Well, there's actually, those are two different questions. My transition into venture, and then 12 years later, my founding of Resolute. So my decision got into, to get into venture. I can pinpoint to a very specific moment. It was in the mid, uh, 19 nineties by 1996. And believe it or not, at the time I was a lawyer for the U.S. Senate Judiciary Committee in Washington, D.C. And we were working on hearings around antitrust in the high tech world in Silicon Valley and specifically around the browser wars, which were quite the rage in the mid nineties. And as a result, I spent a bunch of time in Silicon Valley. And just chatting with a whole bunch of people across the industry that really understand it and get a sense of what was going on. And one of my early meetings was with a VC who I'd never heard of, um, and his name was John Doerr. And I had the opportunity to spend a couple of hours with John learning about VC and the industry where the internet was going. And by the end of those two hours, something clicked in my gut and said that that's what I want to do when I grow up. And so I carried that around with me for the next couple years in D.C., and then in 1998 decided it was time to make that jump, and I put the focus at Polaris and ended up there and coming to Boston.

AI assessment note: “Well, there's actually, those are two different questions. My transition into venture,”